Mr. Sam Pollock reports
BROOKFIELD INFRASTRUCTURE REPORTS YEAR-END 2012 RESULTS
Brookfield Infrastructure Partners LP has released its results for the year ended Dec. 31, 2012 (all amounts are in U.S. dollars).
Brookfield Infrastructure posted solid results for the year ended Dec. 31, 2012, with funds from operations totalling $462-million ($2.41 per unit) compared with FFO of $392-million ($2.41 per unit) in 2011. This 18-per-cent increase in year-over-year FFO was primarily driven by significant expansion projects that were successfully commissioned during the year and to a lesser extent, new investments. FFO per unit of $2.41 was flat compared with the prior year as investments made with proceeds from recent equity offerings did not fully contribute to cash flows during the year. Brookfield Infrastructure's payout ratio was 62 per cent, which is well within its target range of 60 per cent to 70 per cent, and it earned a solid adjusted funds from operations yield of 10 per cent.
"Our performance in 2012 highlights the value created in our business from capital investments made over the last several years. In 2012 we strategically expanded our operating platforms by acquiring high-quality businesses at attractive valuations. In addition, we advanced our asset sales program, to allow us to recycle capital, which is a key part of our financing strategy," said Sam Pollock, chief executive officer of Brookfield Infrastructure. "Brookfield Infrastructure is entering 2013 well positioned for growth and with a strong balance sheet to continue taking advantage of attractive investment opportunities."
Brookfield Infrastructure's utilities platform generated FFO of $308-million in 2012, compared with $275-million in the prior year. The increase in FFO was primarily due to the recently completed merger, which doubled the size of its United Kingdom-regulated distribution business, the increased ownership interest in its Chilean electricity transmission system and the acquisition of an interest in a Colombian distribution company. Excluding new investments, FFO also increased due to inflation indexation and contributions from organic growth investments.
Brookfield Infrastructure's transport and energy platform generated FFO of $244-million in 2012, compared with $167-million in the prior year. The increase in FFO was primarily driven by a 110-per-cent increase in FFO from its Australian railway as a result of the commissioning of its expansion program as well as a favourable grain harvest. This platform also benefited from the contribution from the South American toll roads acquired in the fourth quarter. The partnership's North American gas transmission business continues to be impacted by weak market conditions caused by excess capacity and low natural gas prices, however, FFO was flat in this business due to an equity investment that deleveraged its balance sheet.
Brookfield Infrastructure's timber platform reported FFO of $22-million in 2012, compared with $33-million in the prior year. Results reflect soft demand from Asia early in the year, which caused average realized prices to decline by more than 7 per cent, combined with operational restrictions due to a prolonged fire season that impacted its harvest in the second half of the year. For the year, exports represented 41 per cent of total log sales, which was down from 47 per cent in the prior year as demand in the domestic markets strengthened with early stages of recovery in the U.S. housing market.
The table presents net income and FFO by segment.
NET INCOME AND FFO BY SEGMENT
(In millions of U.S. dollars)
Three months ended Year ended
Dec. 31, Dec. 31,
2012 2011 2012 2011
Net income (loss) by segment
Utilities $ 13 $ 56 $ 111 $ 163
Transport and energy 2 (4) 33 47
Timber 51 46 46 91
Corporate and other (16) (44) (84) (114)
Net income $ 50 $ 54 $ 106 $ 187
FFO by segment
Utilities $ 85 $ 71 $ 308 $ 275
Transport and energy 75 44 244 167
Timber 7 5 22 33
Corporate and other (37) (25) (112) (83)
FFO $ 130 $ 95 $ 462 $ 392
Brookfield Infrastructure reported net income of $106-million (55 cents per unit) for the year ended Dec. 31, 2012, compared with net income of $187-million ($1.15 per unit) in the prior year. Net income decreased compared with the prior year as higher depreciation and amortization expense associated with an increased asset base and lower revaluation gains offset the increase in FFO that was generated during the year.
Strategic initiatives update
In the fourth quarter of 2012, Brookfield Infrastructure closed four previously announced acquisitions, completed over $300-million of transactions related to its asset sales program and executed $600-million of financing initiatives.
- In October, Brookfield Infrastructure completed the acquisition of an
additional interest in its Chilean toll road for $170-million,
increasing its ownership to approximately 50 per cent.
- Also in October, Brookfield Infrastructure invested approximately $75-million for a 25-per-cent interest in a district energy system that serves
commercial customers in downtown Toronto, which it acquired in
partnership with institutional investors.
- In November, Brookfield Infrastructure completed the acquisition and
recapitalization of a U.K.-regulated distribution business, investing $525-million and more than doubling its installed base of gas and electricity
connections to over one million.
- In December, Brookfield Infrastructure acquired an interest in the
largest toll road operator in Brazil, in partnership with Abertis
Infraestructuras and institutional investors, for $310-million.
- In November, following the acquisition and recapitalization of a U.K.-regulated distribution business and subsequent merger with its existing
business, Brookfield Infrastructure completed the sale of a 20-per-cent interest
of its integrated U.K.-regulated distribution business to an institutional
investor for proceeds of approximately $235-million.
- In December, Brookfield Infrastructure completed the sale of a 12.5-per-cent
interest in its Canadian timberlands to an institutional investor for
approximately $85-million, which is equivalent to its international financial reporting standards book value.
- In October, Brookfield infrastructure closed a $400-million (Canadian), five-year
medium-term note offering in the Canadian bond market with a coupon of
3.5 per cent, which was swapped into U.S. dollars on a matched maturity basis at
an all-in rate of 2.7 per cent.
- In November, Brookfield Infrastructure increased its corporate credit
facility to $855-million. Subsequent to quarter-end, the facility was
increased to $900-million. This corporate credit facility is available
for investments and acquisitions, as well as general corporate purposes.
During the fourth quarter, Brookfield Infrastructure signed an agreement to acquire an additional 10-per-cent interest in its Chilean transmission system from Brookfield Asset Management for $235-million, effective October, 2012.
The board of directors has declared a quarterly distribution in the amount of 43 U.S. cents per unit, payable on March 29, 2013, to unitholders of record as at the close of business on Feb. 28, 2013. This distribution represents a 15-per-cent increase. For 2012, Brookfield Infrastructure's distribution implied a payout ratio of 62 per cent of FFO.
Distributions are eligible for reinvestment under the partnership's distribution reinvestment plan. Information on this plan and on declared distributions can be found on Brookfield Infrastructure's website under investor relations/distributions.
The letter to unitholders and the supplemental information for the three and 12 months ended Dec. 31, 2012, contain further information on Brookfield Infrastructure's strategy, operations and financial results. Unitholders are encouraged to read these documents, which are available at the company's website.
CONSOLIDATED STATEMENTS OF OPERATING RESULTS
(In millions of U.S. dollars)
For the three-month For the 12-month
period ended period ended
Dec. 31, Dec. 31,
2012 2011 2012 2011
Revenues $ 578 $ 404 $ 2,004 $ 1,636
Direct operating costs (315) (230) (1,094) (899)
Depreciation and amortization
expense (73) (37) (232) (127)
General and administrative expenses (28) (18) (95) (61)
162 119 583 549
Interest (expense) (120) (85) (407) (335)
(Losses) earnings from investments
in associates (8) 38 1 76
Fair value adjustments 219 214 200 356
Other (expenses) (5) (65) (40) (48)
Income before income tax 248 221 337 598
Income tax (expense) (68) (66) (46) (158)
Net income $ 180 $ 155 $ 291 $ 440
Net income attributable to non-
controlling interest in operating
subsidiaries (130) (101) (185) (253)
Net income attributable to
partnership $ 50 $ 54 $ 106 $ 187
Non-controlling interest --
redeemable partnership units held
by Brookfield 13 15 26 51
General partner 4 3 16 5
Limited partners 33 36 64 131
Net income per partnership unit $ 0.25 $ 0.30 $ 0.55 $ 1.15
Basic and diluted earnings per unit
attributable to limited partners $ 0.23 $ 0.29 $ 0.47 $ 1.13
We seek Safe Harbor.
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