BROOKFIELD ASSET MANAGEMENT LTD (BAM) 2005 Q1 法說會逐字稿

Welcome to Brascan Corporation first quarter conference call. [OPERATOR INSTRUCTIONS]. I would like to now turn the call over to Robert Harding, Chairman of Brascan Corporation.

Thank you, Operator, and good afternoon, ladies and gentlemen. Thank you for joining us for our first quarter conference call. Together with me today are Bruce Flatt, President and Chief Executive Officer; Brian Lawson, our Chief Financial Officer; Bryan Davis, our Vice President of Finance; Katherine Vyse, our Senior Vice President of Investor Relations and Communications. Also joining us today are Harry Goldgut and Richard Legault, who run our power operations. And Harry will make some comments on our power business following Brian and Bruce's remarks.

At this time, I'd like to turn the call over to Brian, but just before doing that, I would like to just note that in responding to questions, and talking about our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, I would encourage you to review our annual information form or annual report or refer to our website. Brian?

Thanks, Bob. Good afternoon. I will first cover the financial and operational highlights for the quarter. As is our custom, we've also posted our letter to shareholders and supplemental financial information on our website, which we hope you will find useful. We made progress on a number of fronts in the first quarter. We recorded strong financial results, a 27% increase in cash flow per share over the same period last year. And we added substantial assets to our property, power, and infrastructure operations as we continued to expand our operating platform.

First, the financial results. Cash flow from operations increased to $173 million, $0.62 per share for the quarter, from $136 million, or $0.49 per share for the same period last year. And net income increased to $165 million from $142 million. The strongest contributor to our growth, were our power generation operations, reflecting the acquisition of our New York assets at the end of the third quarter last year, as well as good hydrology and improved pricing. The contribution from funds management also increased substantially due to a higher level activity and strong capital markets performance.

Turning to our property operations, cash flow increased over the first quarter of 2004, which included a significant leasing fee. Setting that aside, our commercial property net operating income grew by 4%, due in large measure to the Washington properties acquired last year. We leased 1.1 million square feet during the quarter, three times the space that was contractually expiring. We are 95% leased in our core markets and our average lease term continues to exceed ten years, giving us one of the strongest office leasing profiles in North America. We expanded our presence in London, England, with the acquisition of 20 Canada Square, 550,000-square-foot office property in the Canary Wharf Estates, in partnership with Barclays Capital. This is in addition to our 17% interest in the overall Canary Wharf Group portfolio, and we're continuing to pursue other opportunities in London, as well as our core North American markets.

Our key residential markets remain strong, and increased -- and generated increased cash flows. Our backlog is now at 75% of planned 2005 closings, and we expect to reach over 90% of closings by the end of June. These are unprecedented levels of pre-sales. As I mentioned previously, our power generation operations contributed the most to our growth this quarter. Our New York operations, which we acquired at the end of the third quarter last year are performing very well, and prices have exceeded our initial expectations. Hydrology was slightly above long-term average, and our water storage levels are in good shape as we head into the second quarter. Harry and Richard will discuss these operations in more detail in a few minutes.

Our funds management operations were particularly active during the quarter. Cash flows increased significantly from 59 million to 86 million quarter-over-quarter, and good returns from our capital markets activities, also assisted this. In addition to some highlights that Bruce will cover in a few minutes, some of the other highlights include the fact that our Real Estate Opportunity Fund acquired a 900,000-square-foot office portfolio in Washington, D.C., and that fund has now invested $300 million since its inception last year. The Real Estate Finance Fund and the Bridge Fund each committed over $250 million of new capital in the quarter, bringing the total capital committed over the past two years by these two funds to more than $2 billion. And our Restructuring Fund team is focused on enhancing the value of its current investments, including Western Forest Products, Vicwest, Concert Industries, and is looking at a number of new initiatives. The fund recently entered into a letter of intent with the Steelworkers of America on a restructuring plan for Stelco. And we also launched two closed-end funds, the Brascan SoundVest Rising Distribution Trust, which is an income trust fund to funds; and a U.S. Listed Mortgage REIT called Crystal River, which has $435 million of common equity.

Noranda delivered another strong quarter of record financial results, buoyed by a strong base metal market and increased production volumes. And the fundamentals in the industry remain strong. Noranda today announced results of its substantial issuer bid for its common shares. We sold 48 million of our common shares and received close to a billion dollars of preferred shares in return. These preferred shares will increase our annual cash flows by $40 million annually. Norbord also recorded increased earnings, as it continues to benefit from very strong prices in production. The Company recently announced a $1 share special dividend, confirmed its issuer bid and redemption of preferred shares, and also announced an expansion of one of its OSB mills. We continue to be extremely pleased with the performance of Norbord, and have no intentions to reduce our current investment, having already monetized approximately half of our position last year.

So all in all, it was a very productive quarter, and we believe that we are well-positioned to achieve our goals for the balance of the year. And before I hand the call over to Harry -- or to Bruce, sorry, I will confirm that we declared our quarterly common share dividend of $0.15, payable on August 31st to shareholders of record at the close on August 1st.

As Brian noted, we had a good quarter, so the balance of the year continues to look strong. I thought I'd just spend a couple of minutes on three quick items prior to Harry and Richard, and it will be -- my comments will be shorter than usual, because we'll spend quite a bit of time talking about our power operations today.

The first item I wanted to talk about was Hyperion Capital. We purchased Hyperion, which is a New York-based asset manager. It brings our assets under management to about $20 billion, it was $13 billion of assets. Approximately half of that is real estate asset-backed securities. And while not a substantial item, approximately $50 million of investment costs for us. And it does enable us to significantly build the relationships with institutions. A number of -- a number of them U.S. institutions, but some outside the U.S., which should continue to assist us in placing our property power and infrastructure purchases through our asset management platform. As a result, in building the operations of our funds management business, the strategic value, versus just the investment value is far more greater. The transaction just closed this week, and we're now in the process of entering -- integrating the operations with ours.

Secondly, on Noranda, Brian mentioned the results of the Noranda transaction. And in essence, we received just under a billion dollars of cash or preferred shares, as Brian mentioned, and we'll continue to own approximately 20% of the company. It crystallizes the value of approximately half of our investment, provides us an attractive yield on those preferred shares until we find alternative investments to deploy the capital, and assisted Noranda in the first step of their two-step transaction of merging Falconbridge with Noranda on a relatively non-diluted basis to Noranda shareholder. On completion of the merger, NorandaFalconbridge will be the largest base metals company in North America, we think extremely well-positioned to benefit from the positive industry fundamentals, as Brian mentioned; and as Derek Pannell talked to shareholders this week about, the tremendous operational enhancements that have been going on in the company, and the expansion opportunities they have in place. So we're quite excited about continuing to be a 20% shareholder in this company, having taken off a substantial portion of investment off the table and crystallized that value.

The third thing I just quickly mention is timber. And during the quarter we did -- and I think we mentioned it on the last call, but we did enter into a $975 million U.S. agreement to acquire Weyerhaeuser's Coastal British Columbia business. It includes 635,000 acres, with some of the highest-quality timber assets in North America. And over the last two years, we have been working to -- spending a lot of time to identify a high-quality timberland acquisition to form the core of a Timberland Fund. So this was a big accomplishment for our team. This purchase, essentially, will be closed into that fund, and the timberlands have a very similar asset profile to the property and power assets that we have in our -- on our balance sheet, generating very low volatility long term and growing cash flows over time.

I point out to some investors that may be listening that aren't familiar -- as familiar with timber, that the timber and the lumber businesses are very different. Timber is a very stable asset, essentially, it's like owning a royalty. We own the land and we collect the royalty for the trees. And, normally, owned, in Canada, by the government; in the U.S., a lot of private owners, just like what we've done, own trees. Essentially, we're collecting that senior payment. The lumber business, in fact, is a highly volatile business, and we're essentially selling logs to lumber producers or lumber users, and that business is much more volatile, and it's essentially a manufacturing operation with both high and low margins. Our timber operations are, alternatively, very stable generators of cash, very similar to our property and power operations.

With those three short comments, I would be happy to answer questions later on the Company, but I will it over to Harry to talk more about our power operations.

Thanks, Bruce. Brascan Power comprises the power operations of Brascan Corporation. We are the largest independent producer and distributor of power in Ontario and Quebec, one of the largest independent owners of hydroelectric facilities in North America, and one of the lowest-cost producers of hydroelectric power in North America. With the growth of our operations, we've become a substantial contributor to the overall Company's cash flows, and as a result, we thought we would spend some time discussing the business with you.

Our power generating operations are predominantly hydroelectric facilities located on river systems in North America, many of which contain reservoirs that enable us to generate increased revenues through the sale of power during periods of high demand. These operations are, for the most part, 100% owned by the Company; although we do share ownership of some facilities with co-investors, including operations which are held through our Hydro Income Fund. Today, we own nearly 130 power generating facilities located on 37 river systems, primarily in North America, with generating capacity that exceeds 2,700 megawatts. The Ontario generating operations comprise almost 1,000 megawatts of capacity, and we own and operate almost 1300 megawatts of capacity in the neighboring jurisdictions of Quebec, New York State, and New England, which are either directly connected to the Ontario grid, as is the case with our Quebec facilities, or indirectly connected through interties.

Our recent business highlights include the acquisition last year of a portfolio of 71 hydro generating facilities in upstate New York, which added almost 800 megawatts of capacity to our operations. In addition, we have recently completed development and construction of five hydroelectric power plants in North America and Brazil, including one in Ontario and one in B.C. And we are nearing completion of two other projects, a 10-megawatt hydro project in Quebec, and $85 million transmission upgrade project in our Northern Ontario Transmission System. And speaking of Ontario, we were pleased to be selected in late 2004, by the Ontario Government to develop almost 150 megawatts of wind power. One of our sites is near Sault Ste. Marie, and the second near Collingwood, and both come with 20-year power purchase agreements.

On the acquisition front, we recently acquired ten additional hydroelectric generating stations with a combined generating capacity of 147 megawatts -- six under Brazil, and one in each of Maine, New York State, Maryland, and Pennsylvania. In addition, we currently have purchase agreements in place to acquire interests in three other hydroelectric generating stations, with a combined generating capacity of almost 650 megawatts. These are the three facilities in New England, which we are acquiring with a partner. On the financing front, we have successfully refinanced about a billion dollars of debt capital on an asset-specific, recourse-only-to-the-asset basis. With this type of financing, we are generally able to achieve ROEs of 14 to 20%, with return on assets of 9 to 12%. With some appreciation, we believe that, for the risk taken, we can generate very solid returns for shareholders over the longer term.

Over the last six years, Brascan Power has more than quadrupled its generating capacity, from 653 megawatts back in 1998 to over 2700 megawatts. And our capacity will increase to over 3400 megawatts as the acquisitions which I just mentioned are completed. Our cash flow growth during this period has also more than quadrupled, from $62 million in 1998, to $283 million at year end, and we're off to a great start in 2005, with cash flow of $141 million for the first quarter of this year. Our results reflect discipline in executing our business strategy, and our commitment to high-quality assets capable of producing sustainable cash flows. Dealing specifically with the sustainability of our cash flows, we endeavor to maximize the stability and predictability of our power generating revenues through the use of fixed-price contracts to minimize the impact of price fluctuations, and by diversifying water sheds and by utilizing water storage reservoirs to minimize fluctuations and annual generation levels.

Over 80% of our projected 2005 revenue is subject to long-term, bilateral, and fixed-price power sales contracts, or regulated rate-base arrangements, which provide a high level of stability to our revenue base. The remaining revenue is generated through the sale of power on a wholesale basis. And as you will hear in a moment, the low cost nature of our hydro facilities provides a significant competitive advantage in merchant power markets over other types of generation, such as gas-fired facilities.

In summary, all but two of our existing generating stations are renewable, hydroelectric facilities on river systems in seven geographic regions, specifically Ontario, Quebec, New York State, New England, British Columbia, Louisiana, and Southern Brazil. So what is it about hydroelectric power that we like so much? Let me spend a few minutes describing the many attributes and advantages that we see. Hydroelectric assets are long-life assets, and are among the most reliable sources of electricity. They require minimal sustainable capital to maintain their value and long life. In addition, they are environmentally friendly, producing power from renewable resources, and from an operational perspective, they are capable of very quick response with the ability to restore power in very little time, as, for example, following a blackout. Furthermore, the operating cost of producing hydroelectric power is lower than competing sources of energy, such as coal, gas, and oil.

Most importantly, there are no fuel costs associated with hydropower. That's why we are generally one of the few groups of people who are quite happy when it's raining. The ability of hydroelectric plants to respond quickly to changes in demand allows them to operate during high-priced, on-peak periods. And this performance can be enhanced when operated in conjunction with our water storage reservoirs. Moreover, the green attributes of hydroelectric power can lead to further revenues from the sale of emission credits or payment of green premiums. Existing hydroplants should enjoy a very bright future -- very high reliability, combined with very low operating costs, with a renewable resource and no emissions. And the availability of water storage and reservoirs for use during on-peak, high-demand periods provides a strong competitive advantage.

The bottom line is that a hydroplant will earn cash margins under virtually any market condition. Our mandate and objective is to continue to grow our power business, and we think there are significant opportunities to do that. We will seek to increase and enhance the cash flow of our current operations by capturing market opportunities and optimizing our operations. We will remain active in pursuing acquisition and development opportunities for hydroelectric assets in North America and Brazil.

And in the coming years, we will also continue to develop our wind business. We've been active over last number of years in identifying significant high-value wind resources, and have been aggressively acquiring long-term leases and land options for development here in Ontario. In this regard, we are pleased to see the Ontario Government moving forward with their recent request for proposals for up to 1,000 megawatts of renewable energy supply.

In summary, Brascan Power is well positioned in the North American power sector, and particularly in renewables to maintain our growth momentum. As a Company, we have a strong competitive position and a great asset base with a long-lifed future. We generate significant free cash flow from our operations, and have considerable liquidity and nearly a hundred years of operating experience to draw on as we continue to make investments in the power industry in a very meaningful way. Operator, that concludes my comments, and we'd like to open the lines for questions.

Ladies and gentlemen, at this time, we will conduct a question-and-answer session. [OPERATOR INSTRUCTIONS]. Our first question comes from Neil Downey of RBC Capital Markets. Please state your question.

Good afternoon, all. While we're talking about the power business, I had a couple of questions with respect to the accounting. You're now consolidating Louisiana Hydro. Could you comment a little more on that, Brian, in terms of the comparative impact it had on operating cash flow and net cash flow and things like interest expense, et cetera?

Sure, Neil. Thanks. You're right. We did consolidate Louisiana Hydroelectric for the first time this year. We previously carried it as an equity accounted investment because we were not permitted to consolidate it at that time, because we didn't have sufficient voting control. And I think as you're aware, they introduced new accounting guidelines that took effect at the beginning this year that did permit us to account for Louisiana on a consolidated basis, which we obviously have done.

In terms of the impact, on our net income, there's no impact. It's -- it's the same under either basis. If you -- you asked, I think with respect to the impact on some of the lines in our financial statements. It would have had a fairly significant impact on our net operating income, and you would see that from our supplemental financial information. In fact, it would have contributed about a $30 million increase in that regard. As we noted, it would have also resulted in an increase in interest expense, and minority interest in respect of the ownership position of 25% in Louisiana that we do not own. So all in all, when you come down to the -- the cash flow, again, it had a pretty modest impact, say, $3 million last -- this quarter over the same quarter last year.

Okay. Now, looking at that business, again, on the consolidated basis the way you're presenting it going forward, that $30 million of operating cash flow, is there any seasonality to that number? I mean, I don't -- I don't have a good understanding, necessarily, of the operating cash flow impact throughout the year. And, secondly, how much debt did it add to your consolidated indebtedness?

Okay. I -- there is some -- there is some seasonality to that business, and I will ask Richard to comment on that. In terms of the amount of debt that we picked up, it was around $600 million of debt in -- in Louisiana. It's quite a substantial asset. It -- I think it's one of the largest run-of-the-river operations in North America, if I'm not mistaken. And, Richard, perhaps if you could just describe for Neil a bit about the seasonality?

And it is the largest run-of-river facility in North America. It's 192 megawatts. A lot of the seasonality comes from the fact that this really is fed by the Mississippi River, which really drains 49% of the Continental U.S. So when you look at the seasonality profile of this facility, a lot of the water comes in, certainly, between the fourth, first, and second -- and probably early second quarter. It would be, certainly, a lot lower output in the summer months, certainly, because of flows in the Mississippi River. So, again, probably higher flows in the last quarter of the year, and then first and probably early part of the second quarter of the next year.

And, Neil, would you have seen that impact in our results over the past several years, because we have owned this investment for the last, I think, ten years, really.

Yes.

And -- and so you will have noticed that our third quarter does tend to be a little bit lighter on the power side, and that's one of the reasons.

Right. Understood. Turning to Norbord for a second. You've, as you mentioned, monetized this for an exchangeable -- or a portion of your investment through an exchangeable. What is the impact in this quarter's income statement from that exchangeable? Is there any material mark-to-market on the exchangeable? If so, what line item is that running through? I mean, does that have any impact that we should be aware of?

No, it's had pretty negligible impact, Neil. I think the figure would be around $3 million, and it -- that will go through our investment income and other line.

Okay.

But if it got to be anything more significant than that, we'd highlight it.

Okay. Great. And the pending transaction with Weyerhaeuser, do you have a date at which you would expect that transaction to close? And where does the Company stand with respect to arranging financing for that transaction?

We're targeting then of May, May 31st to close that. And we are actively pursuing putting financing in place on a -- on a non-recourse basis, specific only to those assets. And we would expect to have that in place at closing. I think we've indicated before that we'd be looking to finance roughly 40 to 50% of the purchase cost, and what you'll probably see us do, similar to what we've done in other situations like this, is we'll put on a bridge financing that we'll then take out with a long-term capital markets financing, either on a public or private basis.

Okay. Thanks, very much. I will turn the line over and requeue if necessary. Thanks.

Thanks.

Our next question comes from Andrew Kuske of UBS. Please state your question.

Thank you. Good afternoon. I think Harry might want to answer this one. And, Harry, if you'd just give us some context and a bit of color on the competition you see for infrastructure assets. In particular, there's been a number of pension funds that have been gobbling up some power assets and then some other infrastructure assets, gas, LDCs, among other things. How have you seen the competitive dynamic change over the last few years from pricing in particular?

You're right, Andrew, there is more interest in the -- in the asset class. To some extent, the returns are compressing. There have been some transactions, mostly on the contracted side, I think, where the -- where there's PPAs in place for the assets that have traded. But in spite of that, I think that there are still opportunities that we see for us in -- in the small- to mid-sized hydro facilities in North America. And we continue to be active in pursuing those.

Now, you've done a recent foray into wind and wind power development. What scale would you like to be in that business? And do you see any additional forays into other generation businesses?

It's Richard Legault, Andrew. In terms of the wind business, the first thing I'd like to say is that it really does compliment really well our hydro business. It has very similar features in terms of cost structure, automation, in terms of really being low cost. When we look at how we would actually enter into that business, we're doing it on a PPA, if you want, a power purchase agreement, that was awarded by the Ontario Government. So, again, this is done under 20-year PPAs.

And in terms of how -- how large would the initial next five years volume of wind generation developments be? I think it really depends on the -- certainly the availability of contracts, and certainly the availability of contracts in Canada, particularly, in Quebec and Ontario. The next RFP is for 1,000 megawatts in Ontario. We certainly believe that Quebec will also follow suit with probably a second RFP. So we have invested a lot of time in the last three years to make sure that we secure the best properties and the best sites. So we intend, certainly, on taking advantage of as much as we possibly can bid into the next RFP in Ontario, and we're trying to secure properties in Quebec in the near future.

Great. If I may ask one additional question. And it just relates to your longer-term interest in Noranda. You've done a fairly good job with the press of taking some of the volatility out of your earnings, and, in fact, earning a higher rate of return. But how do you see your longer-term interest in that company, given the fact that it's not really a core area of your operations?

Andrew, it's Bruce. And I guess I'd make the comment that we haven't changed our view on the fact longer term, what we want to own in this company is -- and we think that we can deliver returns for the shareholders that we promised them as low volatility assets that produce relatively stable cash flows and assets that appreciate in value over time. And I don't think that Noranda, even though the results are outstanding today, has changed its characteristics to be that. Having said that, I guess we're very pleased with the -- with the -- what has come out of the last nine months of Noranda running a process. And we're in a situation where our investment is reduced. We have less risk in it, less capital committed to it, and for the time being, we're happy to own the shares that we're getting out of this transaction. We'll have to look to the future as to when we monetize those, but I suspect in five years from now, I'm sure we won't own that investment. But between now and five years, we'll have to see where we go.

So it's fair to say that you've got a fairly bullish view, a robust view of the metals market at this point in time?

Yes, I -- personally, I'd say I'm not an expert, but I guess if you -- if you look at the fundamentals of the business, demand is continuing to be strong, especially out of China. And on the supply side, these are commodities, which you cannot replicate overnight. And some of these mines take enormous amount of time. And even in the last nine months that we've gone through this process, it has been much more -- become much more positive environment for the Company, and I guess we don't see any disruption in that -- in the short to immediate term. So we're pleased with what we have, and we'll have to see going forward.

Okay. That's great. Thank you, very much.

You're welcome.

Our next question comes from Peter Sklar of BMO Nesbitt Burns. Please state your question.

Brian, in the December 31st supplemental informational package, right at the back you had some underlying value information, which you did not update in the first quarter. And in there, specifically, on the commercial real estate side, you had an indication for 750 million of net operating income. And I'm wondering -- there's been a lot of activity in the first quarter. You've talked about the 1.1 million square feet that you've leased out. Did that 750 million contemplating -- contemplate leasing up that amount of real estate? Or would this be incremental?

I'd say, we would have -- when we arrive at a number like what we put out in the -- in the supplement at the end of the year, it's -- it's based, obviously, on what we see evolving in the business throughout the course of the year, and also looking at what we have on hand at the end of the year. I don't think that I could really say whether that was specifically contemplated or not. We, obviously, always expect to be pre-leasing as much space as we can. So I think it's fair to say that we would contemplate advancing or leasing throughout the course of the year. And -- but do we actually get in the granularity of targeting which leases and that we get pre-leased and not? I wouldn't say that we necessarily go to that extent when we put out a number that's really intended to give some overall guidance, for lack of a better word.

Peter, it's Bruce. I might make the comment that, in general, the property business has been consistent with our plans.

Okay.

In general. I'd say there's nothing exceptional that's occurred. The leasing markets are improving. But we have very, relatively stable cash flows, and, therefore, they don't dramatically change up or down, and they're relatively predictable looking out. So there's nothing significant that's changed in three months, certainly, in the Company.

Right. And would it be safe to say -- would it be fair to say from your comments, that on the residential side, that things have run a little bit ahead of your expectations?

Yes. Brian made a few comments on the residential. And we didn't specifically hit on it in detail, but there's no doubt the residential housing sector continues to be extremely strong. We're 75% pre-sold in lots and houses for the year, which probably would never have been at this time of year. And the markets are extremely strong. So I think that all housing companies across North America will generate extremely positive results this year. And how long that lasts, I can't tell you, but we've been worried about the markets, or at least wary of the markets for three years straight, and the returns are outstanding in the business.

Right. And this -- this supplemental information that you provide, this guidance-type information, is this the kind of thing you're going to be updating annually? Is that your plan at this point?

Peter, we -- as you know, we have discontinued the practice of giving a specific net asset value, for example, which we used to do in the past. And I think what we tried to do at the end of the year was really to bridge over from giving some very specific valuation information, to really encouraging people to -- or to at least not giving a specific management view on that -- of that number. What we've been trying to do at the same time is to provide sufficient information within the supplemental that will, we hope, really make it unnecessary for us to provide that. So we'll have to monitor that going forward. Obviously, we want to make sure folks have the information that they need, but I couldn't tell you whether we're going to put that -- that out -- that specific format at year-end.

Right.

Brian, I might make one comment, and that's for any investor or analyst on the phone. If you have thoughts on the types of things that should be in the supplementary, in addition to what we have in there, we'd be interested in receiving your comments, and we'll try to incorporate it in the future in materials we do put out.

Okay. I understand. Thank you, very much.

Our next question comes from Shant Poladian of Canaccord Capital. Please state your question.

Good afternoon. I've got a few questions. The first one is just with respect to the preferred shares that you're going to be receiving from Noranda. Is there any minimum holding period for that?

There are no conditions on either our common shares or our preferred shares that we receive in the transaction.

So, I guess, if there is a possibility to make an investment, it wouldn't be an issue to be monetizing parts of that, parts or all of that?

Yes, there's, obviously, different ways because of the balancing we have, that we could monetize that type of an instrument. And so if -- so, for the time being, it's a good asset for us, because we don't have any other use for the cash, and it earns a 6% return. But at the time, if we needed cash, then we could certainly look to ways to monetize.

Okay. Would there be a dilution gain that gets booked in Q2?

We would expect that, yes.

And would that have any impact on cash flow per share, or just EPS?

That would just be EPS.

Okay. For the Hyperion acquisition, can you give us an indication of what your ROE would look like for it?

Starting off, we paid $50 million for the company, and starting off, our return on invested capital is around 10%. So if we retain the business that we have there today, we'll be earning a 10% return. But we expect to, obviously, significantly enhance that over the -- over the next year or two, as we build the business up and integrate it with what we're doing.

Okay. And looking at your fourth quarter supplemental, the annualized long-term average cash flow from the power gen business was, I guess, estimated at 360 million, but with the change in accounting for the Louisiana properties, could you give us an indication of what that number would be? Would we just take the 30 million for Q1 and annualize that?

There is some seasonality to that. Frankly, Shant, I'm not sure I can give you that one off the top of my head. So, why don't we -- can we get back to you on that?

Sure. And my last question is related to Canary Wharf. Two parts. The first is, how come there wasn't any income contribution for 20 Canada Square? I thought there was about 20 days in the quarter there. And the second part is related to the 17% ownership interest in the estate. When do you expect to receive, or start to get cash receipts from that investment?

I will deal with the first one, Shant. It was, you're right, it was booked right at the quarter end, and, frankly, there just wasn't anything material enough to work into our numbers. It certainly will have a contribution going forward.

And on the 17% interest, the Company, obviously, we bought one of the properties out of the Company. The Company should stay with probably close to if not -- between 800 million and a billion pounds of cash, or it will be heading towards a billion pounds of cash from asset sales and securitizations that they've pulled cash out of. And as a result of it, it's possible, should -- should the Board of Canary Wharf decide to pay out the cash, they will pay it to us. Our proportion of whatever cash is paid out would be around just under 17% of that amount, which we cost account this investment. So we don't record any income on it, and we'd receive a dividend if that cash was paid out. It's possible that that cash does get paid out. It's also possible that it's retained in the business and used for something else. But it's highly likely that in the next while, given the state of the property markets that that cash would be distributed to shareholders, but I can't really tell you when it will be paid out.

Okay. Would you anticipate setting up a U.K. REIT at some point if you were to get enough assets in that country?

I think it's possible -- it's possible that in the future one of the ways -- we'll either operate privately in the U.K. and just continue to build a private business there with pension funds. It's possible that, should REIT legislation be introduced, that at some point in time we could have assets trading in the capital market in a REIT. But I guess there's really no decisions. We'll continue to look at what the most effective way to get our return on capital up for the -- for Brascan, in doing it. And if it means that we should use a REIT structure in the U.K., we'd certainly use one.

Okay. Thank you.

Our next question comes from Michael Goldberg of Desjardins Securities. Please state your question.

Thanks, very much. First question that I have has to do with your comment at the outset that you had strong capital market activities during the quarter. And I see the increased contribution to NOI from that. Can you give us some color on what was actually contributing to that improvement? And whether this is sustainable, what we should be looking at in the next couple of quarters?

Thanks, Michael. It's Brian. That is a section of the business that, while we are continuing to build the business, and don't, as yet, have the fee streams up to the level that we would expect them to get, where that will result in having a much more predictable and stable source of earnings, it will tend to be a bit more up and down, and as I said, less predictable, in part, because it's driven to a degree by the capital markets and where things are trading and -- and gains on capital market positions, as well as the transaction volume. And those are hard to -- hard to pin down. So in terms of the color, a lot of it -- of the pickup, and there was around $30 million in that sector, was due to favorable performance in the equity capital markets and the capital markets in general. And you've seen us, I think, in the past record similar results like that as well.

Okay. Also, turning back to the consolidation of Louisiana Hydro, could you give us some idea what the 74 million of hydro NOI a year ago might have looked like, if you had been consolidating then? And the 70 million in the fourth quarter?

Well in terms of the -- of the first quarter, I think you would be -- Louisiana, I think was a little bit better this first quarter than it was a quarter before. So I suspect what you would have seen is, perhaps, on a comparable basis, the 74 last quarter would be more like 100. The $30 million increase that you saw, would you have seen the same last year.

Okay. And what about fourth quarter? Or is that what you were just talking about?

No, I was talking --

It was 70 in the fourth quarter.

I was talking about the first quarter. The fourth quarter, I'm not -- Richard?

I couldn't tell you off the top of my head.

Okay. Perhaps you could --

We can get back to you on that.

-- get back to me on that? Might be worthwhile providing just some comparison, given that it is a change there.

Okay. Thanks, Michael.

Thank you.

At this time, there are no further questions.

Thank you, Operator. And thank you, everyone for joining us. We look forward to talking to you at our next conference call for the second quarter. Bye for now. Have a great weekend.

This concludes today's conference call. Thank you for attending.