Brookfield Infrastructure announced its results for the second quarter ended June 30, 2020.
“Our business has performed well during the quarter, reflecting the critical nature of our assets and the regulated and contractual frameworks that support them,” said Sam Pollock, Chief Executive Officer of Brookfield Infrastructure Partners. “We are optimistic that the economic recovery will continue for the balance of 2020. Our strong liquidity position and access to capital gives us confidence as we evaluate a number of attractive investment opportunities.”
For the three months ended June 30 |
For the six months ended June 30 |
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US$ millions (except per unit amounts), unaudited1 | 2020 | 2019 | 2020 | 2019 | ||||||
Net income2 | $ | (61 | ) | $ | 98 | $ | 58 | $ | 128 | |
– per unit3,4 | $ | (0.25 | ) | $ | 0.11 | $ | (0.12 | ) | $ | 0.06 |
FFO5 | $ | 333 | $ | 337 | $ | 691 | $ | 688 | ||
– per unit (split-adjusted)6 | $ | 0.72 | $ | 0.76 | $ | 1.49 | $ | 1.55 |
Underlying results for the partnership benefitted from inflation-indexation, capital commissioned into earnings in the last 12 months as well as the benefit of our asset rotation strategy. These positive factors were more than offset by fair value adjustments related to our corporate hedging program which totaled nearly $90 million for the quarter compared to gains of approximately $35 million in the same period of 2019. This led to a net loss for the three-month period ended June 30, 2020 of $61 million compared to net income of $98 million in the prior year.
During the second quarter, our business generated Funds from Operations (FFO) of $0.72 on a per unit basis, down 5% from the prior year. The single largest impact on quarterly performance was the 27% depreciation of the Brazilian real which reduced FFO by $30 million. Adjusting for this alone, FFO per unit would have increased 3% compared to the prior year. Results for the quarter benefited from our capital recycling strategy. We deployed $1.2 billion of capital over the last 12 months at an average going-in FFO yield of 12%. These new investments were primarily funded with $1 billion of proceeds from asset sales and refinancing transactions. These positive factors were offset by lower market sensitive revenues, which were concentrated in our transport segment because of temporary lockdown measures. Overall, the impact of the economic shutdown reduced FFO by $27 million, with most of this being timing related and therefore not a permanent loss.
Segment Performance
Our utilities segment generated FFO of $130 million, compared to $143 million in the prior year. Results reflected a higher rate base due to inflation-indexation and approximately $280 million of capital commissioned in the last 12 months. This segment also benefited from the contribution from our North American regulated gas transmission business acquired last October. These contributions were more than offset by a delay in the recognition of connections revenue at our U.K. regulated distribution business, the loss of earnings associated with the sale of an electricity distribution utility in Colombia and the impact of the weaker Brazilian real.
FFO from our Transport segment was $108 million compared to $135 million in the prior year. Results reflected higher volumes across our Australian and Brazilian rail networks, as well as the contribution from our recently acquired North American rail operation. These positive factors were more than offset by the loss of earnings associated with the sale of a European port business and the partial sale of our interest in our Chilean toll road operation. Results were also affected by a weaker Brazilian real and lower volumes following government-imposed lockdowns, which together reduced results by $29 million. Among these factors, (i) foreign exchange accounted for $14 million and (ii) $13 million relates to lower volumes at our toll roads, for which we expect to be compensated, based on force majeure protections and ongoing dialogue with local regulators. The true economic impact from the downturn is therefore limited to $2 million (or less than 1% of BIP’s total FFO) in our port operations.
Our energy segment generated FFO of $106 million compared to $96 million in the prior year. Performance was insulated from the current economic environment, as over 75% of cash flows are underpinned by take-or-pay contracts with an average maturity of 11 years. Results benefited from higher transport volumes at our North American natural gas pipeline, over 55,000 new customers at our North American residential infrastructure business and the contribution from the federally regulated portion of our western Canadian midstream business acquired in December. These contributions were partially offset by the loss of income associated with the sale of our Australian district energy operation completed last November.
FFO from our data infrastructure segment was $43 million, which was 43% higher than the prior year. Our French telecom business benefited from inflationary price increases and our build-to-suit tower program, which has added over 200 new sites. Results also reflected the contribution of earnings associated with recently acquired data transmission and distribution operations in New Zealand and the United Kingdom.
The following table presents FFO by segment:
For the three months ended June 30 |
For the six months ended June 30 |
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US$ millions, unaudited | 2020 | 2019 | 2020 | 2019 | ||||||||
FFO by segment | ||||||||||||
Utilities | $ | 130 | $ | 143 | $ | 276 | $ | 280 | ||||
Transport | 108 | 135 | 228 | 274 | ||||||||
Energy | 106 | 96 | 221 | 203 | ||||||||
Data Infrastructure | 43 | 30 | 85 | 58 | ||||||||
Corporate | (54 | ) | (67 | ) | (119 | ) | (127 | ) | ||||
FFO | $ | 333 | $ | 337 | $ | 691 | $ | 688 |
Update on Strategic Initiatives
During the quarter, we made progress on several initiatives:
Lastly, we are very pleased with the market’s response thus far to Brookfield Infrastructure Corporation (BIPC). Not only has there been significant demand for these shares but BIPC was also recently added to the Russell 2000 Index. We intend to support the growth of BIPC’s public float to improve the company’s trading liquidity, and recently completed our first initiative in this regard in coordination with Brookfield Asset Management, who agreed to sell a portion of its holdings in BIPC. This successful secondary offering in Canada increased the public float of BIPC by approximately 15%.
Board of Directors Update
After 13 years on the Board of Brookfield Infrastructure, the vast majority as Chairman of the Board, Derek Pannell has stepped down from his current role as Independent Director and will be retiring. Anne Schaumburg, Chair of the Board, stated, “I would like to thank Derek Pannell for his countless contributions to the Board over the past 13 years. His commitment to the success of Brookfield Infrastructure has been invaluable.”
Distribution and Dividend Declaration
The Board of Directors has declared a quarterly distribution in the amount of $0.485 per unit, payable on September 30, 2020 to unitholders of record as at the close of business on August 31, 2020. The regular quarterly dividends on the Cumulative Class A Preferred Limited Partnership Units, Series 1, Series 3, Series 5, Series 7, Series 9 and Series 11 have also been declared, as well as the dividend for BIP Investment Corporation Senior Preferred Shares, Series 1. In conjunction with the Partnership’s distribution declaration, the Board of Directors of BIPC has declared an equivalent quarterly dividend of $0.485 per share, also payable on September 30, 2020 to shareholders of record as at the close of business on August 31, 2020.
Additional Information
The Board has reviewed and approved this news release, including the summarized unaudited financial information contained herein.
Brookfield Infrastructure’s Letter to Unitholders and Supplemental Information are available at www.brookfield.com/infrastructure.
Brookfield Infrastructure is a leading global infrastructure company that owns and operates high-quality, long-life assets in the utilities, transport, energy and data infrastructure sectors across North and South America, Asia Pacific and Europe. We are focused on assets that generate stable cash flows and require minimal maintenance capital expenditures. Investors can access its portfolio either through Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN), a Bermuda-based limited partnership, or Brookfield Infrastructure Corporation, a Canadian corporation. Further information is available at www.brookfield.com/infrastructure.
Brookfield Infrastructure is the flagship listed infrastructure company of Brookfield Asset Management, a global alternative asset manager with over $525 billion of assets under management. For more information, go to www.brookfield.com.
Please note that Brookfield Infrastructure Partners’ previous audited annual and unaudited quarterly reports have been filed on SEDAR and Edgar, and can also be found in the shareholders section of its website at www.brookfield.com/infrastructure. Hard copies of the annual and quarterly reports can be obtained free of charge upon request.
For more information, please contact:
Media: Claire Holland Senior Vice President, Communications Tel: (416) 369-8236 Email: claire.holland@brookfield.com |
Investors: Rene Lubianski Managing Director, Investments Tel: (416) 956-5196 Email: rene.lubianski@brookfield.com |