Brookfield Infrastructure Partners L.P. (BIP) Q3 2026 Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners LP Third Quarter 26 Results Conference Call and Webcast. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Krant, Chief Financial Officer. Please go ahead.

David Krant: Thank you, Shannon, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' third quarter 26 Earnings Conference Call. As introduced, my name is David Krant, and I am the Chief Financial Officer of Brookfield Infrastructure I am joined today by our Chief Executive Officer, Samuel Pollock and our Chief Operating Officer, Benjamin Vaughan. Also joining us today is Dave Joynt, a Managing Partner in our Investment team and Lief Williams, a managing director focused on AI infrastructure investment. I will begin the call today with a discussion of our financial and operating results. Followed by a discussion of our asset sale initiatives and balance sheet strength. I will turn the call over to Samuel Pollock, who will discuss our capital deployment activity and provide an outlook for the business. Now at this time, I would like to remind you that in our remarks today, we may make forward looking statements. These statements are subject to known and unknown risks, and the future results may differ materially. For further information on known-risk factors, I would encourage you to review our latest annual report on Form 20 F, which is available on our website. Now beginning with our financial and operating results, we are pleased to report that we generated FFO of $717 million or $0.91 per unit. This marks the third consecutive quarter in which we have achieved our 10% FFO-per-unit growth target. The increase was driven by strong organic growth at the high end of our target range, supported by inflationary price increases, strong asset utilization and the commissioning of approximately $1.4 billion of capital projects from our backlog, Results also benefited from contributions from new investments completed over the last 12 months. Which continue to generate returns above the loss yield from asset sales completed over the same period. I will now go through our results by segment in a little more detail. Starting with our utilities. Where we generated FFO of $200 million, an increase of 5% over the prior year. Increase was driven by inflation indexation, and the contribution of approximately $600 million of capital commissioned into rate base. Results also benefited from recent acquisitions including our South Korean industrial gas business and our New Zealand, energy infrastructure platform. These contributions were partially offset by foregone earnings from asset sales completed over the last 12 months. Moving to Transport, where FFO was $315 million, representing a 10% increase over the prior year. The increase was driven by volume strength at our port operations, increased volumes and tariffs on our toll roads, and the contribution from the acquisition of our North American railcar leasing platform. Results were impacted by foregone earnings from asset sales completed in the prior year, including the sale of our Australian container terminal, and a partial sale of our U. K. Port operation. In Midstream, our FFO was $178 million, up 14% compared to the prior year. The increase reflects strong organic growth across the portfolio, particularly at our Canadian diversified midstream business, which benefited from strong asset utilization and elevated commodity prices. Results also reflected a full quarter contribution from our U. S. Refined products pipeline, which we acquired in the third quarter of 2025, compared with the partial close of this year. Lastly, FFO from our data segment was $172 million, representing a 25% increase over the prior year. Increase was driven by strong organic growth across the segment. Including contributions from our partnership with Intel to develop semiconductor foundries in Arizona, following the completion of our equity funding during the quarter. Results also included a full quarter contribution from our U. S. Bulk fiber network which we acquired in the third quarter of 25. I will now turn to an update on our asset sales. On a year-to-date basis, we have secured nearly $1.5 billion of proceeds. We are also nearing binding offers on several advanced sale processes that could generate over $1 billion of incremental proceeds net to the partnership before year end. In parallel, we continue to advance additional monetization opportunities which position us for a strong start in 2027 for our capital recycling plan. In terms of our balance sheet, our approach to financing remains straightforward. Maintain conservative leverage, extend maturities when opportunities arise, and ensure our businesses have the financial flexibility to perform through market cycles. Today, more than 90% of our debt, excluding Brazil, is fixed rate and our debt maturities are well staggered. This provides meaningful protection against movements in rates and allows us to focus on operating and growing our operations. At the corporate level, we have approximately $3.2 billion of liquidity, together with our access to a broad range of capital markets, and limited near term refinancing requirements, this puts us in an excellent position. We have the flexibility to fund our existing growth initiatives and the capacity to pursue new investments, when attractive opportunities arise. And with that, that concludes my remarks for this morning. I will now turn the call over to Samuel Pollock.

Samuel Pollock: Thank you, David, and good morning, everyone. Building on the progress David just outlined, we have also been active in deploying capital. Year to date, we deployed approximately $1.8 billion of equity across new investments, and organic growth projects. And we remain on track to deploy over $2 billion in 2026. 1 of the most compelling aspects of our business today is the growing scale and breadth of organic investment opportunities within our portfolio. Across our 4 segments, we are deploying capital to expand utility systems, increase capacity in our transport networks, enhance our midstream capabilities, and develop data infrastructure to support an accelerating demand for digital connectivity. So far in 2026, we have invested approximately $700 million of equity into organic growth projects. These projects leverage our existing asset base, establish customer relationships and operating expertise, allowing us to deploy capital at attractive risk adjusted returns with greater visibility and lower execution risk. Alongside this organic activity, investment across AI infrastructure continues to accelerate adding to our established pipeline of M&A in traditional sectors. The significant capital required to develop AI factories, deploy compute capacity, and secure associated energy infrastructure is creating new avenues for us to deploy capital, particularly through strategic partnerships with leading global corporations. This momentum is reflected in our recently signed agreement formalizing a strategic partnership with NAVER to develop sovereign AI capabilities including over 200 megawatts of compute capacity for the largest AI factories in Asia Pacific. As part of the partnership, we will finance and own the compute capacity through a dedicated leasing company with contracted cash flows providing a return on and a full recovery of our invested capital over the initial contract term. The first GPU deployment is expected in the first half of 2 thousand 27 with full deployment by the end of 2 thousand 28. This expected equity commitment is approximately $100 million. Now beyond NAVER, our growing pipeline of actual investment opportunities gives us confidence in achieving our forward looking objective of deploying a proxy approximately $500 million of capital on average annually in AI infrastructure. Most recently, we entered into strategic partnership with Drax to potentially develop a large scale AI factory in The United Kingdom. So with that, let me now turn to the outlook. We remain confident in our ability to close out the year with strong financial performance and achieve our 10% FFO-per-unit growth target. A key focus is converting our expanding investment pipeline to new capital deployment. We are advancing opportunities across sectors and geographies, through both traditional M&A and strategic capital partnerships. Providing multiple avenues to deploy capital at attractive risk adjusted returns. Our scale, operating expertise and track record have established Brookfield as a partner of choice for leading global corporations, seeking long duration capital and an aligned operating partner. This position provides access to differentiated investment opportunities that often arise from relationships developed over many years, rather than competitive options. Another key priority is completing the announced corporate simplification. Following the successful BIP unitholder and BIPC shareholder votes, We have now received all required approvals and expect the simplification to close on November 19. Following closing and subject to approval by its board of directors, BIP Bank intends to declare and pay a fourth quarter dividend on its class a shares in an amount consistent with BIP's current quarterly distribution of $0.455 per unit. We believe the simplified structure will make Brookfield easier to own improve consolidated trading liquidity, broaden our investor base, and support increased index demand. This concludes my remarks, and I will pass it now back to the operator and we would be happy to take some questions.

Operator: Thank you. As a reminder, to ask a question, please press 1-1 on your telephone and wait for your name to be announced. Our first question comes from the line of Cherilyn Radbourne with TD Cowen. Your line is now open.

Cherilyn Radbourne: Thanks very much and good morning. I was hoping to get some perspective on what the US midterm mean, if anything. For the value of your in place DC capacity and the development pipeline.

Samuel Pollock: Hi, Cherilyn. Yeah. Guess we expected that question. Yeah. Maybe I will just make a couple quick comments and we have Lief Williams from our AI strategy group here as well. And maybe I will ask him just to get a general sense of what is happening these days in that sector. But I think the 2 obvious things to say is that you know, it is far too early to speculate on changes that might occur to regulation and other impacts to the sector. You know, because we are still in the heightened political environment. But, you know, obviously, you know, to the extent that development slows down, which frankly, we expected it to slow down in any event because of constraints to supplies as well as capital. So I think that a slowdown was expected in any event. But to the extent that there is a lower supply in the coming years, that is going to make existing assets more valuable. And so for businesses like Csquare, where we have it in place, set of you know, data centers, you know, and customers providing compute. We expect rates to get higher, and it should be good for the business. In terms of development, I think for you know, developers who have a strong track record access to capital, and strong local support. And that means having projects in the right jurisdictions. I think they will continue to be successful And in our case, you know, we have been running our business extremely prudently. And maybe just to add to that, that is where I will turn it over to Lief. Just to describe how we have been running the business to position ourselves. For this particular environment.

Lief Williams: Yeah. Thank you, Samuel. I think what I would add from a bipartisan perspective, a big area of focus has been rate payer protection. And really trying to ensure that from a grid perspective, the ratepayer is protected and from a power perspective, there is additionality. Now that is a theme we have been looking forward to for the last 18 months. I would say if you look at the large 3 AI factory projects we have been advancing, so the Edmonton site, the Paducah site, and the Drax site in The UK. All 3 of those hits hit all of those attributes. And so we think that development will continue for the right projects to develop the right way. And that is really been the priority from our perspective.

Cherilyn Radbourne: Great. And for my second question, flipping to a jurisdiction that is a bit more friendly at the moment. Can you talk about what you think build Canada strong and the mega productivity deduction implies for your Canadian midstream business?

Samuel Pollock: Okay. Well, maybe I will start there and if any of my colleagues wanna add, they can jump in as well. Look, I think as we have probably said on previous calls, you know, the tone from the various governments over the last year has been trending positive. And, you know, we have seen, both federally and provincially, a number of governments much more supportive of new projects, particularly projects out West. You know, we think that there is a lot of momentum in the in the energy sector in particular. To you know, expand egress both to Asia and the South. And, you know, I think you know, you know, while we cannot point to you know, a number of projects yet, The direction of travel is positive. And so we remain optimistic that things will get done and that you know, our pipeline today of energy projects has probably never been larger. And continues to be. So our view, our favorable view on the sector has not changed. Thank you.

Operator: Thank you. Our next question comes from the line of Maurice Choy with RBC Capital Markets. Your line is now open.

Maurice Choy: Thank you, and good morning, everyone. Maybe take a even bigger picture as we talk about the changing policy and political landscapes around the world that seems to be quite rapid, not least being The US. Just keen to hear where you think you see the greatest opportunities and dislocations in any of our 4 pillars of business that you have.

Samuel Pollock: Hi, Maurice. So today if we look from a geographic perspective, you know, For the last, you know, you know, couple years, you know, most of the opportunities you know, have arisen out of out of the U.S. And a lot of that was driven by you know, the explosion in, you know, data center activity, which, you know, led to you know, behind the meter, you know, power opportunities, utility opportunities as well as midstream. So a lot of that took place. And as we just said, I think, you know, we can expect that to continue even if it is moderated somewhat. You know, the, you know, the other theme that has been very prevalent has been energy security. And we just touched on that a little bit, I guess, with Cherilyn's question regarding, you know, projects in Canada, which really I think are being developed in response to energy security issues around the world. You know, we have you know, participated in investments, you know, in New Zealand where energy security, you know, was a you know, part of our Clarus thesis. And we are pursuing a number of opportunities in Europe related to that team as well. So I would say energy is still you know, a big component. You know, there are opportunities in Europe in particular, related to utilities. You know, not dissimilar to what we see here in North America. They have issues there as well with raising capital to invest in utilities so that they can expand transmission and distribution. Particular. And so investments into rate base opportunities are quite prevalent. And then on the transportation side, maybe I have Dave Joynt here with me who runs our transportation business. Do you want to comment on you know, where we see transportation opportunities?

Dave Joynt: Yeah. I would probably just make 2 comments on that. I think number 1, despite what you might think, global trade continues to be really strong. And it is not just as direct as it was in the past where we go directly from factories in Asia and go directly into demand markets in Europe and North America. it is actually making many steps kind of along the way. And so I think that overall demand for global trade just increases overall investment requirements. In everything from ports to rail and other sort of like inland infrastructure assets. So I think overall, that is probably very strong. And then I think the second thing that I would comment is another large theme continues to be around supply chain security. So beyond Samuel's comments about energy security. Are also concerned about the security of their supply chain. And there are significant investments being made around the world in order to, whether it is re-shore or simply to create captive supply chains in order to get their goods from their supply destinations to the end markets. A lot of investment in that market as well. it is 5:15.

Maurice Choy: Understood. Thank you very much for that, and if I could just finish off with a question on the corporate simplification. My congratulations to your team for the hard work in getting this across the line, and I just wanted to hear your sense as to when the benefits that you have outlined for the simplification may materialize timing wise over the coming weeks, months, or quarters?

David Krant: Hey, Maurice. it is David. Look. I think in terms of the benefits, it is gonna be. To remind everyone, we think there is there is a number of them. Obviously, the combined company is going to have much larger market cap, a bigger free float, and therefore, better trading liquidity. And so I would expect those benefits to come in from day 1 in terms of liquidity. If people will have access to trade the shares as we noted in our release yesterday from the 20 third onwards. And so I think that is probably more imminent. Some of the other maybe medium to longer term benefits in terms of index demand and flow will be harder to predict and will happen at various times over the next you know, 3 to 9 months based on our estimates. But think that the initial benefits will be will be will be soon. After that. We are really excited to have that chapter behind us. that is great. Thank you very much for that.

Operator: Thank you. Our next question comes from the line of Devin Dodge with BMO Capital Markets. Your line is now open.

Devin Dodge: So I am going to start with a question on Radiant. We started to see more of these arrangements with third parties to fund compute capacity including Brookfield's agreement with NAVER. You know? I know the total addressable market is really large, but just wondering how much of that is currently in discussion with technology companies? And how do you differentiate versus your competitors?

Lief Williams: Yes, sure. Thanks for the question, David. Look, I think you are right. The addressable market is significantly sized. I would say from a sheer dollars per megawatt perspective, the market is about 3x larger than the data center market. So we see a tremendous addressable market, but I would say we are very on the Brookfield side and on the Radiant side sticking to our knitting. And so this is take or pay contracts full return on and off capital over the contract period. No technology risk and investment grade counterparties. The NAVER transaction is a great example of that focus. And I would say you will see more transactions like that from us over the coming quarters. From a differentiation perspective, I think you are starting to see that in the market right now. I think having access to capital in periods of volatility is a difference-maker. Capital is becoming more scarce And I think that strong sponsors like Brookfield with deep access to capital will be able to take advantage of the volatility.

Devin Dodge: Okay. Thanks for that. Second question, is on Arc infrastructure. There were some legislation that came forward in Western Australia involving the renationalization of the freight network. At least to the extent that you are able, can you speak to, you know, where you are in those discussions with the government and what kind of. what is the range of outcomes that are being considered?

Samuel Pollock: Yeah. Hi, David. Yeah. I do not think we can really talk about that at the moment. I think you know, the, you know, the government has put forward legislation that allows them to have the opportunity to buy back, and those are conversations that you know, we are having today. And we will we will see where they end up. Okay. Got it. Thanks for that. I will turn over.

Operator: Thank you. Our next question comes from the line of Bastien with Raymond James. Your line is now open.

Frederic Bastien: Question on the NAVR partnership Your $100 million equity commitment looks relatively modest against the $9 billion project size. Given that you typically invest alongside Brookfield and some institutional partners, can you give us a sense of the total equity commitment at the group level? And perhaps clarify whether $9 billion represents total project costs, including debt financing or equity alone.

David Krant: I can start, Frederic. Hey, it is David. Yeah. So the 9 billion, I will start backwards. The 9 billion is the total capital spend. For the for the GPUs, and so that is the CapEx component. From an equity funding perspective, typical for these structures, you would have a loan to cost in the 80% range, maybe slightly lower than that. So you are probably around $1.75 billion of equity. And so we are estimating here BIP share of that will be somewhere in the 5% to 10%. We do expect to offer equity investments here to potential fund investors. And given we are in the fundraising process, it is hard to speculate on where that shakes out. But I would say the investment. We wanted to put a number just so people had a sense of what to expect. So $100 million, maybe upwards to $200 million would be where we would expect this to be once it is once it is settled.

Frederic Bastien: And can you clarify what sort of investments you would be looking at the group level with including Brookfield and your partners?

Samuel Pollock: it is it is up, you know, plus or minus $1.7 to $1.8 billion is Total. Total equity into the deal.

Frederic Bastien: And that is yours.

Samuel Pollock: Like, that is the group level investment.

Frederic Bastien: Okay. Thanks.

David Krant: that is the group level that. And as David mentioned, a portion of that will go into the fund. The AI fund, and then a portion will go to coinvestors who are partners in the fund. And BIP will participate through the fund.

Frederic Bastien: Okay. Super. Okay. Thanks for clarifying. My other question around. I guess you have been super active in data and certainly feels like investment opportunities are heating up in midstream. How's the opportunity set evolving across your 2 other segments, utilities and transport?

Samuel Pollock: I would say if we had to rank the sort of pace of deployment, you know, you know, data would still be, you know, the most active followed by midstream. I think those are the 2 areas where we are seeing the most deal flow at the moment. And then probably transportation would be next, and then you know, utilities I would say they can be lumpy. So the utility transactions tend to be larger, just less frequent. And so it is possible in any given year, we could have a large utility transaction, and there is some that we are pursuing at the moment. But they tend to be a little bit more sporadic. So whereas the transportation side, tend to be smaller deals, but more often. So that. that is kind of the lay of the land. You know, it is always hard to speculate because we have as you can appreciate, you know, a large number of transactions underway at any 1 particular time, and it is hard to predict which ones will become actionable and which ones you know, might fall away for various reasons. I appreciate your answers. Okay. Thanks, Frederic.

Operator: Thank you. And I am currently showing no further questions at this time. I now like to hand the call back over to Samuel Pollock, chief executive officer, for closing remarks.

Samuel Pollock: Alright. Thank you, operator, for helping us out today. And thank you to everyone who joined the call. You know, I think we would like to wish everyone a happy upcoming holiday season. And, we look forward to providing you our fourth quarter and year end results early in the New Year. Thank you, and have a great weekend.

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.