If the thought of investing in infrastructure makes you yawn, wake up!
With a resounding "BAM," one of the most compelling investment vehicles in the infrastructure space is growing in all the right areas. Backed by a $1.1 billion investment to recapitalize the infrastructure subsidiary of bankrupt Australian asset manager Babcock & Brown, Toronto's Brookfield Asset Management
The last time I checked in with BAM's BIP, persistent weakness from the subsidiary's timberlands segment continued to weigh upon shares, and my earlier call for the company to acquire assets in transportation and utilities remained just a pipe dream. But after the company gained shareholder approval to proceed with a recapitalization plan for Babcock & Brown assets, that pipe dream has blossomed into pipelines, ports, and railroads.
Brookfield Infrastructure Partners will acquire as much as 40% of the restructured Babcock & Brown entity, which will emerge with a fitting new name: Prime Infrastructure. This portfolio's prizes include an extensive railroad network and a trio of natural gas pipelines in Western Australia. Fools will note that Western Australia is home to significant natural gas resources that feed pipelines through terminals such as Apache's
Prime Infrastructure's energy unit will also include electricity and gas distribution assets in the U.K., the Channel Islands, and New Zealand. In the U.S., Prime will retain a 26.4% interest in a Midwestern gas pipeline operated by Kinder Morgan Energy Partners
Apart from the stake in Prime Infrastructure, the deal will transfer 100% of a major U.K. container port operation called PD Ports to Brookfield Infrastructure.
In case you're still groggy, I've saved the best for last. Positioning itself to profit from burgeoning export demand for Australian coal, the deal also gives BIP a direct 49.9% stake in the Dalrymple Bay Coal Terminal in Queensland. With miners like Peabody Energy
Brookfield Infrastructure Partners L.P. is a Motley Fool Inside Value pick and a Motley Fool Hidden Gems selection. Brookfield Asset Management is a Motley Fool Global Gains recommendation. The Fool owns shares of Brookfield Infrastructure Partners L.P. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of BHP Billiton and Peabody Energy. The Motley Fool has a disclosure policy.