Brookfield Infrastructure Partners INVESTOR DAY SEPTEMBER 27, 2017 - PowerPoint PPT Presentation

Brookfield Infrastructure Partners INVESTOR DAY SEPTEMBER 27, 2017

Agenda for Today A Decade of Growth Sam Pollock, Chief Executive Officer Review of Performance Bahir Manios, Chief Financial Officer Looking Ahead Sam Pollock, Chief Executive Officer 2

A Decade of Growth 3

Starting with the past 12 months… Increased FFO/unit by 20% Over $2 billion of capital deployment Increased capital backlog to $2.4 billion Recapitalized North American gas transmission business Telecom infrastructure sector momentum 4

January 2018 marks the 10 th anniversary of BIP’s inception Let’s review what we’ve accomplished… 5

Polling Question #1 When did you begin following / investing in BIP? a) 2008 – 2010 b) 2011 – 2013 c) 2014 – 2016 d) 2017 6

Over the past decade, we’ve delivered on four key objectives Scale and diversification Solid financial foundation Track record of investment discipline Profitable growth 7

We’ve scaled our global business 2008 2017 • • 4 countries 15 countries • • 4 offices 23 offices • • 1,000 operating employees 26,000 operating employees We’ve become a leading infrastructure investor in five continents 8

We’ve diversified our operations significantly 2008 2017 UTILITIES UTILITIES TRANSPORT Regulated Distribution Electricity Transmission Railroads Regulated Transmission Toll Roads Regulated Terminal Ports COMMS INFRA TIMBER ENERGY Towers Natural Gas Distribution Fiber Backbone Gas Storage District Energy WATER Desalination Irrigation Distribution We own and operate 35 high-quality businesses across five sectors 9

We’ve built up a strong financial foundation INVESTMENT GRADE INDEX INCLUSION DUAL-LISTING CREDIT RATING S&P/TSX NYSE BBB+ Composite TSX LONG-DEBT LINES OF CREDIT MATURITY PROFILE 8 years $2.0 billion Total liquidity today: $2.8 billion 10

We’ve demonstrated an ability to make large value - based investments… NTS ACQUISITION $1.3B April 2017 TDF ACQUISITION UK REGULATED $415M DISTRIBUTION March 2015 MERGER RAIL $525M $17.2 EXPANSION November 2012 $600M MARKET October 2011 CAP ($B) BBI TAKE- PRIVATE $1.1B December 2010 $1.2 11

…and to monetize our mature assets Sold 10 businesses in the past eight years Generated over $2 billion of gross proceeds; average IRR >25% Launched next phase of capital recycling plan We seek to profitably re-deploy capital 12

As a result, we’ve profitably grown the business… FFO AND DISTRIBUTIONS PER UNIT $3.50 $3.00 $2.50 CAGR $2.00 20% $1.50 CAGR 12% $1.00 $0.50 $- 1 2009 2010 2011 2012 2013 2014 2015 2016 2017 FFO/unit Distribution/unit Annualized based on Q2’17 results 1) 13

…and created meaningful value for unitholders TOTAL ANNUALIZED RETURN SINCE INCEPTION BIP (NYSE) 20% S&P 500 Index 8% DJBGI Total Return Index 7% S&P Utilities Index 6% Alerian MLP Total Return Index 6% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 14

Review of Performance 15

BIP Financial Health Check EBITDA margins Balance sheet strength Financial risk management 16

Improving EBITDA Margins 60% 57% Our margin improvement stems from: • Compounding ‘same - store’ growth • Organic growth capex • Acquisition of Brazilian regulated gas transmission business 2017 1 2016 High margins & low maintenance capex = strong cash conversion ratios Annualized Q2’17 YTD results for a full year contribution of our Brazilian regulated gas transmission business 1) 17

Our balance sheet and credit profile are in great shape… $2.8B 30% <15% Corporate Debt maturing Recourse liquidity in next five years debt • Interest coverage ratio at corporate level increased to 20x • 90% of FFO structured at investment grade metrics 18

…and we continue to actively manage our financial risks Further insulated business from rising rates Fully hedged on all developed market currencies 19

This year’s discussion How should investors assess our performance as allocators of capital? 20 20

Polling Question #2 How do you evaluate BIP? a) Balance sheet revaluations b) Cash flow metrics c) Return on Invested Capital d) Accounting earnings metrics e) Distribution yield & growth 21

Return on Invested Capital (ROIC) is a popular metric with investors Useful metric Measures return a company generates when deploying capital However …it is only helpful if measured and analyzed correctly 22

How is it calculated? BIP ROIC CALCULATION OF ROIC (FY2016) Consolidated EBIT/ 2% Bloomberg Consolidated Equity + Debt + Deferred Taxes Net income attributable to LP’s/ CapIQ 7% Partnership Capital attributable to LP’s Net income attributable to LP’s/ 2% Factset Consolidated Equity + Debt Issues with the above: Two of the metrics above utilize a return on assets calculation All of above calculations use accounting-related measures vs. cash flows and paid-in capital 23

How should it be calculated? AFFO 1 NUMERATOR vs. Net Income Invested Capital DENOMINATOR vs. Partnership Capital 1) Adjusted for returns of capital 24

Numerator: AFFO vs. Net Income • Similar but for one key difference – D&A expenses vs. maintenance capex CUMULATIVE 2010-2016 (in US$ millions, net to BIP) Net income attributable to partnership $ 1,621 Add back or deduct the following: Depreciation and amortization 2,631 Deferred income taxes 52 Insignificant Mark-to-market gains and losses (95) FFO 4,209 Maintenance capital expenditures (817) AFFO 3,392 Less: Return of Capital (163) Adjusted AFFO $ 3,229 AFFO is a more meaningful measurement of sustainable cash generated 25

Denominator: Invested Capital vs. Partnership Capital • Partnership capital – book value of the business • Invested capital – capital raised from unitholders PARTNERSHIP INVESTED For the year ended December 31, 2016 CAPITAL CAPITAL (in US$ millions, unless otherwise noted) Opening balance 1 $5,379 $5,452 Items which impact partnership capital: Net income 474 - Other comprehensive income 511 - Distributions to unitholders (615) - Items which impact invested capital Preferred unit issuances - 186 Items which both metrics: Unit issuances 749 749 Ending balance $6,498 $6,387 Invested capital is more reflective of the capital we have been allocated 1) Cumulative opening balance difference of $73 million due to comprehensive income less distributions to unitholders since inception of the partnership 26

BIP’s ROIC Profile Track record of prior years returns and current year profile Actual Pro forma 2017 1 2012 2013 2014 2015 2016 (in US$ millions, unless otherwise noted) FFO $ 462 $ 682 $ 724 $ 808 $ 944 $1,256 Maintenance Capital (107) (129) (131) (136) (173) (206) Return of Capital (3) (35) (36) (41) (48) (124) Adjusted AFFO 352 518 557 631 723 926 Invested Capital 2 $3,725 $4,255 $4,397 $5,101 $5,530 $6,503 ROIC 10% 12% 13% 13% 13% 14% Average ROIC of ~13% 1) Reflects annualized Q2’17 YTD results pro forma for a full year contribution of our Brazilian regulated gas transmission busi ness 2) Weighted average invested capital for the relevant period 27

So what do these results mean? BIP generates a strong return on invested capital • Average ROIC of 13% Growing because ROIC exceeds 13% • Reflecting current cash on cash returns + future growth 28

Returns over past 5+ years Δ in AFFO $574 million = ~ 20% Δ in invested capital $2.8 billion This is an accurate reflection of ROIC as it reflects the embedded organic growth profile of our business 29

Embedded organic growth is built up as follows… Inflation and GDP growth alone are expected to generate ~4-6% FFO/unit growth over the long term 4-6% Inflationary Volume Upside Cash Flows FFO/unit from GDP Price Increases Reinvested Growth + + = Growth (3-4%) (2-3%) (1-2%) (6-9%) 75% of EBITDA 35-50% of EBITDA indexed to benefits from inflation GDP-linked revenue growth 30

…and is reflected by our same -store EBITDA growth SAME-STORE 1 EBITDA CAGR 5% 4% CAGR UTILITIES 6% TRANSPORT 2% ENERGY 4% COMM INFRA 2012 2013 2014 2015 2016 2017 This trend should continue for the next five years 1) On a constant currency and ownership basis and adjusting for the impact of new equity injections in the business since inception 31

BIP has provided investors with compelling risk-adjusted returns on invested capital We have deployed a significant amount of capital Investing at ~20% returns ─ combination of: • Cash on cash return of ~13% • Embedded growth in business Expect to continue delivering similar returns in the future 32

Looking Ahead 33

Polling Question #3 What trends will drive infrastructure investment opportunities in the next 10 years? 34

Trends we believe will shape future opportunities Economic Aging public growth in infrastructure Asia Unprecedented data usage Water Low-carbon, Scarcity thermal energy Urbanization Private investment in Smart infrastructure cities 5G Technologies Self-driving and electric cars 35

We’ve grouped these trends into four opportunity sets Data infrastructure Municipal infrastructure Water infrastructure Investment in Asia 36