Brookfield Infrastructure Partners LP (BIP) 2010 Q1 法說會逐字稿

Welcome to the Brookfield Infrastructure Partners conference call and webcast to present the company's 2010 first-quarter results to unit holders.

As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

At this time, I'd like to turn the conference over to Michael Botha, Senior Vice President for Finance. Please go ahead, Mr. Botha.

Thank you, operator and good morning. Thank you all for joining us for Brookfield Infrastructure Partners first-quarter 2010 earnings conference call.

On the call today is Chief Executive Officer Sam Pollock, who will discuss highlights for the quarter and provide comments on our strategy and outlook for our business. Also joining us is John Stinebaugh, our Chief Financial Officer, who will review our financial results. Following their remarks, we look forward to taking your questions and comments.

At this time, I would like to remind you that, in responding to questions and in talking about our growth initiatives and 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 report on Form 20-F, which is available on our website.

With that, I would like to turn the call over to Sam Pollock. Sam?

Thanks, Mike, and good morning, everyone, and thank you for joining us today for our quarterly earnings call.

For those of you who pick up our press release and supplemental, it has now been released, but I apologize for it going out a bit later than usual as we experienced a few technical problems this morning. We will make sure it gets out earlier next quarter.

Since November of last year when we closed our investment in the prime infrastructure recapitalization, we have focused our efforts on integrating these new assets into our operating platforms and developing strategic plans for each of these businesses. As we begin the second quarter, we are pleased to report that we are more optimistic than ever regarding the growth prospects of Brookfield Infrastructure. We own and operate high-quality, long-life assets that generate stable cash flows and require relatively minimum maintenance capital expenditures. By virtue of barriers to entry and other characteristics, they also tend to appreciate in value over time in relation to economic growth and inflation.

Because of economy scales and locations, we are also well positioned to generate attractive returns by investing in the expansion of our assets as demand for their services increase due to economic recovery and the strength of the global commodity market.

While each of our businesses has a strong competitive position, we generate cash flows under a number of different revenue frameworks. In order to better communicate our results to our unit holders, we have re-segmented our operations based upon their underlying economic drivers. Let me take a few minutes to describe these new segments.

Our utilities platform is comprised of businesses that either have regulated returns or long-term contracts. In this segment, we earn a return on an approved or notionally stipulated asset base which we refer to as RAB. Our RAB increases in accordance with the capital that we invest. Depending on the jurisdiction, our RAB may also increase by inflation and decrease by depreciation.

Our objective for this segment is to invest capital to expand our systems and to manage our businesses in order to earn an appropriate return on this RAB. Thus, our performance can be measured by the growth of our RAB, the return on our RAB, as well as our adjusted funds from operations, or AFFO, yield which John will describe a bit more later on as he describes the metrics that we look to run our businesses.

Our fee-for-service platform receives an access fee for transportation, storage and handling of energy, freight and bulk commodities. Fee for service businesses typically have high barriers to entry and in many instances have very few substitutes in their local markets. Our fee-for-service platform is expected to benefit from increases in demand for commodities as well as the global movement of goods.

Our objectives for this segment are to augment them from the throughput of our assets in a capital efficient manner so that we can promptly meet the needs of our customers. Thus, our performance can be measured by our revenue growth, EBITDA margin, as well as our FFO yield.

Lastly, our timber platform consists of high-quality timberlands located on the West Coast of the US and Canada. Our timberlands are predominately comprised of premium species suitable for high-value structural and appearance applications. One of the key attributes of our timber platform is its operating flexibility which allows us to optimize our harvest and harvest levels, as well as the markets to which we sell. Our objective for our timber platform is to operate in a manner that maximizes our long-term return on our capital. Thus, our performance can be measured by our harvest levels, EBITDA margin, and AFFO yield.

One of the hallmarks of Brookfield Infrastructure is our ability to leverage our best in class operating capability to actually manage assets in order to extract additional value from our initial investment. Over coming quarters, we will work hard to drive the performance of our operating platforms. In our supplemental information, we will highlight the key metrics outlined above so that our unit holders can measure our progress.

With that, I will now turn it over to John to review our operating performance for the quarter.

Thanks, Sam. Now, I'd like to spend a few minutes walking through our results of operation. In my remarks, I will focus on proportionate FFO, which is equal to net income plus depreciation and amortization, deferred taxes and other items. This is equivalent to our previous key performance measure, ANOI. We highlight this metric because we believe it is a good proxy for cash flow from our operations.

I will also focus on AFFO yield, which is equal to FFO, less maintenance capital expenditures, divided by partnership capital, which is the measure of how effectively we deploy our capital.

We are pleased to report very solid results for the first quarter of 2010. With the full-period contribution from our investment in the prime recapitalization, we recorded FFO of $45 million, or $0.42 per unit, which was an 83% increase over the prior-year quarter on a per-unit basis. This represents an AFFO yield of 7.9%, driven by strong returns on capital in our utilities and fee-for-service businesses, offset by our timber business. With our quarterly distribution of $0.275 per unit, our payout ratio was 66%, which is comfortably within our targeted range of 60% to 70%. As we look forward, we continue to target dividend growth of 3% to 7% per annum as a result of the growth opportunities that exist within our portfolio.

In our utilities platform, we posted another strong quarter. We recorded FFO of $27 million, which was a substantial increase over the prior year due to the full-period contribution from DBCT, Powerco, and IEG Connections, which performed in line with expectation.

For the quarter, Transelec's FFO was $11 million, a 5% increase versus the prior year. Transelec's improved results are primarily a result of indexation of revenues resulting from inflation and foreign exchange, as well as the benefit from gross capital expenditures.

During the quarter, our RAB increased by 3% to $1.94 billion, primarily as a result of inflation and other indexation. Our return on RAB was 10%, which enabled us to generate an AFFO yield of 13.6%. DBCT and Transelec accounted for 77% of our utility platform's FFO, and both of these businesses generated very strong returns during the quarter.

As part of its periodic rate review, DBCT recently filed a revised Draft Access Undertaking, or DAU, with the Queensland Competition Authority. The DAU has the full written support of all of DBCT's customers and it rolls forward the current weighted average cost of capital formula, including an equity beta of one. Based on current market conditions, the DAU would result in a WACC that is materially greater than DBCT's existing WACC of 8.9%. The QCA is currently reviewing the revised DAU and will make a final decision prior to December 31, 2010.

In addition, in 2010, Transelec, Powerco and Ontario Transmission are undergoing regulatory rate reviews that are at various stages of completion. While we cannot predict the outcome of these proceedings, we have considerable regulatory diversity which provides overall stability of cash flows for this business segment.

In our fee-for-service platform, we earned FFO of $26 million in the quarter, which was generally consistent with expectations. Our transportation businesses, WestNet Rail, PD Ports and Euroports, posted strong volume growth, primarily as a result of the recovery of the global economy.

NGPL's performance was somewhat below expectations due to lower system throughput, lower sales of line-pack services, and a decrease in prices from market sensitive capacity.

In total, the AFFO yield for our fee-for-services segment was 17.1% for the quarter, driven by strong returns from NGPL and our Ports businesses, as well as seasonality which positively impacted IEG distribution returns.

In November of 2009, the United States Federal Energy Regulatory Commission, or FERC, launched a review of tariffs charged by NGPL. On April 23 of this year, NGPL advised that a settlement in principle has been reached which is supported or not opposed by all active participants in the proceeding as well as FERC staff. The settlement terms are confidential and require documentation and approval by the administrative law judge and the FERC commissioners before it is final. The terms of the settlement, if approved, would resolve all issues set for hearing by the FERC.

Our timber platform generated FFO of $2 million for the quarter, consistent with the prior year but ahead of our expectations at the beginning of the year. Our quarterly performance reflected a 12% increase in sales volumes compared with the prior year. Significantly higher sales of lower-margin whitewood logs into the Korean market offset a reduction in sales of our higher-margin Douglas fir logs, as we sought to preserve inventory value.

As a result of this shift in product mix, our EBITDA margin for the quarter was 36% versus 39% in the prior year, after accounting for lower costs from aggressively bidding out third-party harvesting contracts. For the quarter, our AFFO yield was 1.2%.

As we look forward, we continue to see signs of improvement in North American markets. Demand growth from the export market, combined with strong supply-side management, resulted in very low inventories of saw logs in the Pacific Northwest region. Indicative prices for Douglas fir increased approximately 32% from second-quarter 2009 lows and 11% from the previous-quarter price levels. Additionally, demand for whitewood into the Korean market remains strong with realized prices, net of transportation, at levels above five-year averages.

In emerging markets, demand from China for low-grade Douglas fir logs increased significantly during the quarter, causing indicative prices for these logs to rise by approximately 9% over the previous quarter. Since the end of March, log prices have increased substantially to levels last seen in early 2008. Although we are not fully convinced of the sustainability of these prices in light of relatively low level of housing starts, we are extremely encouraged by these developments and expect our timber results to far exceed our expectation from the beginning of the year.

Finally, at quarter end, we had cash of $275 million, including our proportion of cash within our operations. Over the next two years, we will predominately use this cash to pay down debt to target levels in conjunction with refinancings at Prime, NGPL, WestNet Rail, and IEG. We will also use this cash to fund the equity portion of growth initiatives.

That concludes my remarks. Now, I will turn it back over to Sam to walk through our strategy and outlook.

Thank you, John. Now, I'd like to make a few comments on the environment driving the organic growth initiatives that we have within the Company.

As the global economy recovers, we are seeing signs of a sustained growth in demand for commodities, driven primarily by China. To date, China has imported commodities primarily for investments in infrastructure and production capacity to support its export growth. With investment as a percentage of GDP of approximately 40%, China has been investing almost 300% the level of developed countries. As China continues to grow, its emerging middle class will fuel a new cycle of investment as the country urbanizes and internal consumption increases. We believe that this dynamic will support increasing demand for commodities such as metallurgical coal, iron ore and wood-related products for quite some time.

Within our utilities and fee-for-service platforms, we have a number of opportunities to deploy capital as a result of the strong demand for commodities. We are particularly excited about profits for DBCT. DBCT is one of the world's largest coal export facilities, and we've talked about that in the past. It is the critical link that provides access to the export market for metallurgical coal from the Bowen basin, one of the lowest-cost sources in the world.

Due to the global demand for metallurgical coal, the queue to receive coal from DBCT is currently over 25 days. As a result, there is considerable customer demand for us to expand this facility. As a first step, we are surveying the needs of our customers to properly size this expansion, as feasibility studies will be paid for by our customers. Just to put this in context, any expansion of greater than 5% will require building a whole facility at an adjacent location to DBCT with capital expenditures in excess of $2 billion.

We are also very excited about WestNet Rail's growth potential. As it connects bulk commodity customers to ports along the west coast of Australia, WestNet Rail provides these customers with access to their export markets. With the renewed demand for commodities, several large-scale iron ore mining projects in close proximity to our rail network are progressing very, very rapidly.

In 2010, we will begin evaluating the necessary upgrades to our rail network to increase the throughput in order to accommodate these projects. Based on some of our preliminary analysis, these upgrade projects may require capital expenditures in excess of $400 million, all of which we will earn a very attractive return on.

We also believe that China's robust economic growth will provide upside for our timber business. Historically, China has been a significant importer of low-quality logs from Russia. With a phase-in by the Russian government of a substantial export tariff on logs, we are seeing a sizable increase in demand from China for primarily low-grade Douglas fir that is used for structural purposes and packaging.

Recently, building codes within China have been modified, allowing much greater use of lumber in building construction. Due to the cost advantage of using lumber, we believe that this could trigger substantial incremental demand for our high-quality Douglas fir logs.

In conclusion, as we begin the second quarter, the capital markets have normalized. Though the stock market has risen substantially from the lows of a year ago, valuations are still below the peak experienced prior to the credit crisis. Furthermore, the cost of debt is at attractive levels due to the historically low treasury rates. Despite increased competition for high-quality infrastructure assets, we believe we can make investments that earn attractive risk-adjusted returns.

One of our main investment strategies is to target infrastructure companies that have significant embedded growth opportunities due to the competitive positions of their networks. Consistent with our existing operations, we are actively pursuing infrastructure businesses that are well-positioned to benefit from demand growth in commodities. We are fortunate to have a strong presence in a number of the countries such as Canada, Australia, Brazil, Chile and Peru that are rich in commodities where many of these type of companies and opportunities reside.

With the pickup in business activity that we are seeing within our operations and a positive investment climate, we are optimistic that we will be able to continue building our business in a manner that increases unit holder value. As always, we will continue to be disciplined and we will focus on opportunities in which we can leverage our operating capability to extract additional value. We look forward to updating you in future quarters as we continue to execute our business plan.

That concludes our comments. Now, operator, we would be pleased to take any questions.

Thank you, sir. We will now begin the question and answer session. (Operator Instructions). Linda Ezergailis, TD Newcrest.

Congratulations on a good quarter. I don't know if your partners and colleagues have had discussions with the resource companies in Australia post this bombshell that the government dropped with respect to a potential 40% resource super-profit tax, but our mining analyst here at TD is of the view that there could be some serious erosion of competitiveness for resource-based operations in Australia. I'm just wondering how that might affect the expansion of your coal terminal and long-term, potentially, WestNet Rail.

Thanks for your comments. That is a great question. That bombshell hit us just a couple of days as well ago.

You know, obviously the stock market reacted pretty violently the other day in Australia. With these types of things -- and we saw it take place I guess in Alberta a year or two ago when they changed the royalty rates. There was always an initial uproar and then there tends to be a negotiation, between the industry and the government, on implementing some of the rules and making sure that it keeps them competitive.

I think our view today would be not to change our outlook or our view of what makes sense there because I think the industry will sit down with government. I think none of those rules have been actually written into law as far as I understand, and that a rational approach will be put in place to -- as the government has identified, they want to make sure they get their fair share of any super profits. At the same time, they don't want to choke the engine that is driving that country right now.

Well, I guess one of the key caveats to your comment is the assumption of rational decision-making in politics (laughter).

Maybe switching to another continent, can you give us a sense? With some of the recent earthquakes in Chile -- and perhaps there's commentary in your release which I haven't had time to read yet -- can you give us an update on a new CapEx timing profile?

Linda, it's John. First of all, let me start out by saying we were very fortunate with the earthquake in Chile. First of all, from Transelec's perspective, they didn't have any loss of life amongst their employees or serious injuries. From the business' perspective, it was very fortunate as well.

We do not have insurance of lines, but fortunately there was no material damage to lines. We had some damage to substations, but net of insurance proceeds, it is a pretty de minimis amount of expense that we are going to realize over the balance of the year.

In terms of the CapEx program, I don't think, based on what we see right now, that this is going to materially impact the timing of the CapEx program. A number of the projects are fueled by the demand for electricity which, over the long term -- and these projects typically have got two, three-year lifecycles once the generation developers begin building them. So the long-term outlook for the country we think is still very positive and don't think that this will ultimately impact what the CapEx program is going to be.

Great, thank you.

Andrew Kuske, Credit Suisse.

Good morning. If you could just give us a little bit of an update on the assets that Prime was holding for sale, specifically the Cross Sound Cable and then also the AEDT assets, and just what your outlook is for those, in particular Cross Sound. Is there some logic with that asset and your potential future transmission build out in Texas?

I guess the update is relatively short. These are assets that Prime has held for sale on their balance sheet and obviously any realization from those assets they do not benefit from.

In the case of the AEDT assets, any recovery over and above the debt would go to the benefit of the EPS holders. In the case of Cross Sound Cable, if there is any value over and above the book value of Prime, it actually would go to the benefit of Brookfield Asset Management as the call option on those assets.

Today, we don't have any greater visibility that there is in fact any value over and above the debt. As managers of those assets, Brookfield continues to work with the lenders on coming up with strategies to optimize their value. There's a number of efforts that are underway to do that, to simplify them.

In the case of Cross Sound Cable, that is an asset that we have held some discussions with the lender on that particular business about a potential acquisition. I think that will probably play out over the next couple quarters. If we are unable to come to an agreement with them, then the asset will just be auctioned off and sold to someone else.

Okay, that's helpful. Then just in relation to the small investment in the hydro asset within the US, do you see an increasing amount of opportunities to invest in hydro assets in the US? How do you think about that as part of your platform? Will BIP be in the US similar to what Brookfield Renewable is in Canada?

You know, the investment in Hydro Kennebec is a relatively small one. As you are probably aware, the number of investment opportunities in hydros in North America, they tend to come around very rarely. There are ones that we think make a lot of sense.

You know, to the extent we can source similar type transactions in the US, we would definitely look at them. In particular, we are also focused on the wind sector in the US. Again, that's an area that we would consider as well.

Okay, that's very helpful. Then if I may, just one final question? I just want to clarify what I believe I heard. It was a 9% increase in pricing of low-grade Douglas fir logs into Asian markets. Is that correct, or was it thereabouts, in that kind of ballpark?

I think the 9% increase was overall. Maybe I can -- I should probably give everyone a bit of a sense of what has been happening on log pricing in general over the last couple weeks, because we probably have been somewhat restrained in our remarks in what has happened. You know, since the -- I guess beginning of the year, prices started to increase gradually in January and February and then beginning in March, the prices, much like many of the other forest product commodity prices, have spiked considerably. I would say today that the prices that we are currently receiving for our logs are probably as high as we have seen in the last over two years. In fact, prices are probably, in some respects, higher than the underwriting we would've done for many of these species back when we first acquired them.

To give you a sense, just in the last month or so, prices for both Douglas fir and whitewood are probably up over $10 for each species.

You know, I think the one thing we would caution people is that we have not -- and I think John referred to this in his remarks -- we've not seen the underlying demand via housing starts there to support this price increase, and so some of it we can owe to the strength in the export markets, where we, in the quarter, continued to export about 44% of our goods. But a lot of the strength is actually coming domestically, and it may be happening as a result of restocking of inventories at various facilities.

Nonetheless, we are extremely encouraged by the price increase. If they are sustained over the next little while, then we would look to increase our harvest from the levels they are today. We are probably harvesting around 75% of our long-run sustainable yield. Clearly, we are at a level where we would be comfortable taking that back up to our normalized levels.

That's very helpful. Thank you.

Brendan Maiorana, Wells Fargo Securities.

Thanks, good morning. So, Sam, how much more sustainable would this pricing level need to be, for how much longer, before you kind of moved up to that target harvest level that you guys talked about a couple of years ago?

You know, I think what we are looking for is really the depth in orders to determine whether or not we begin the process because, obviously, we just can't turn a switch to increase our production. We have to do a fair amount of planning and do some development work to prepare for the harvest. We have to go out and engage contractors. You know, that's all things we can do in relatively short order, within a quarter or two.

But what we are really looking for today isn't so much signals on the pricing side, because I would say we are at price levels that we would be comfortable harvesting most of our products. It's really just making sure that we could get an order book that would support the renewed increased level of production. We really won't know that for the next couple of months.

Okay, fair enough. Then just listening to your comments, it sounds like you've got a lot of opportunities, external acquisition opportunities, a lot of internal growth initiatives as well. If I look at the returns that you guys have laid out in the supplemental, how should I think about the returns on incremental capital that you may spend for the internal growth initiatives, relative to the returns that you would get, at least initially, on some of the external acquisitions that you are considering?

Maybe I will start off and then John can provide some additional color. You know, we always think that the best investment opportunities are the ones that we can undertake within our existing franchises. They tend to be either situations where there is no competition or there is reduced competition for the outlay of capital and our ability to understand all of the risks involved are far greater than buying a virgin investment opportunity. So, to the extent that we have to allocate capital, scarce capital to alternatives, we will typically always target those internally versus externally.

From a return perspective, I would say that, within our fee-for-service businesses, those are probably our highest-return investment opportunities where we can earn equity returns in the 15% to 20% after-tax range. Within our utility business, depending on the regulatory regime, we can earn anywhere between at the low end maybe a 10% return on equity but in other cases up towards 15%. Again, given the risk profile of those assets, those are very strong risk-adjusted returns.

Just to add one comment to what Sam said. Within our utility business, what we try to do strategically is to allocate the capital that we invest to the businesses that are at the higher end of the spectrum. So to the extent that it is discretionary capital, we want to allocate it to businesses, such as Transelec or IEG connections, where we are earning very attractive returns on that incremental invested capital.

Right. So as I look at it, you've got a lot of growth potential in Transelec. You've got the Texas transmission project. There seems like there's the big opportunities that you talked about previously at DBCT and WestNet Rail. So, it seems like you've got a lot of internal opportunities where, as you say, you've got the best understanding of the risk/return of those projects. So I am just wondering why you are sort of considering some of these external opportunities when it seems like you've got a lot of internal growth, and the return expectations are pretty significant there. Is it still that you feel like you need to build out your platform a little bit more?

I guess the answer is twofold. You know, the first answer is some of our internal projects, they are dependent on customer situations. Linda pointed out earlier in the call that while, at the moment, we are quite confident that there's a number of resource projects that could come our way over the coming year or two, and these projects will take a number of years to complete, they could get delayed now because of extraneous factors, such as new taxes or other developments.

So what we are always trying to do is make sure that we have a steady stream of investment opportunities that some come from utilizing internal opportunities and some being supplemented with external opportunities that we are able to uncover because we are operating in these markets with a number of investment teams. So I think it's a balanced investment approach, but always making sure that we are putting our capital to use in the best risk-adjusted manner.

With respect to just our capital strategy, the organic growth projects, with the exception of some of the very large-scale development projects, what we're looking to do is to fund that with internal capital that's being generated, or internal cash flow.

For new investments or acquisitions that we make, we will largely fund that through new capital. So we will make sure that the returns that we can get will be appropriate, in light of the capital that we have to raise, such that the ultimate landmark or benchmark is whether it ends up being accretive from a unitholder standpoint, in terms of total returns, to make those incremental investments.

Sure, okay. That's helpful. Then just a couple of clarifying questions -- so is your -- per the IFRS, is the value estimate of the Company -- it sounds like around $18 a share? Am I (multiple speakers)?

It's a little bit less than that, Brendan. It's probably about $17.50, in that ballpark. But yes, it's pretty close to what you mentioned.

Sure. That's with the investments in Prime kind of at your basis?

That's right.

Okay, that's helpful. Then just G&A was roughly in line with where it was in the fourth quarter. Is that a reasonable run rate, or should we expect that number to kind of go down just because you had a lot of stuff going on in the fourth quarter and the first quarter?

Well, I think from a run rate standpoint, it basically is going to be the G&A that BIP has, which the number hasn't changed from what we've talked to you about in the past, roughly $6 million per year. Then we've got the proportionate share of prime that now has to be reflected in our G&A number, and then the management fee on our equity base.

Okay. All right, thank you.

(Operator Instructions). Robert Kwan, RBC Capital Markets.

Good morning. Sam, you mentioned earlier that prices are now at levels where you'd be comfortable increasing production. Is that a level where you would get to 100% of the long-run, sustainable yield, or is that at that kind of higher level that you would want to harvest for ten years?

If the demand was there, as I mentioned -- and I just want to caveat my remarks to say that we are still cautious as to the sustainability of these price levels. You know, they are at a very attractive level, given to where they've been in the last two years. However, we are watching to see if they are sustainable over the next couple of quarters. But you know, if they set about at this range over the long run, then we would probably look to go beyond our long-run sustainable yield and start getting into our surplus inventory.

Okay. Just to get a few -- or some comments on the regulatory -- Transelec, Powerco and Ontario Transmission -- I'm not sure if you want to comment specifically on what you think some of the direction is. But if you can't, can you just give some comments, as a group, what you see directionally in terms of a net impact from the three?

Robert, it's John. What I would say is these are all basically regular regulatory proceedings. With Ontario Transmission, the ROE is going to be increased to the 9.75% ballpark, as I think we've disclosed in the past. We are now going through the process with the regulator, interveners, etc., working through the rate base, the costs we are allowed to cover and stuff like that. So it's unclear at this point where all of that is going to net out.

Powerco is in the process of basically, with the regulator, they are implementing a new regulatory framework, where they are going to establish a default price. To the extent that the utilities are not happy with the default price, they've got the opportunity to petition for what is called a customized price framework. So, we think this framework, overall, is very positive because you can either take the default price that the regulator determines for all of the utilities, or you can go in and have a customized price put on the table for you. So it's an improvement over the previous regime, but in terms of it being implemented, it is probably not until some time in the 2011 timeframe before all that is wrapped up.

With -- what was the last one?

Transelec?

Oh, Transelec. Transelec is part of just the regular rate process for the sub-transmission. So at this point, it is too early to really tell, but we don't really anticipate a whole lot of surprises there. It's part of the periodic rate review.

So I'm just kind of understanding that the ROE, as we know, and the generic OEB decision is positive -- or should be. Some positive comments it sounds like from Powerco. Then if it is a regular rate process on Transelec, I don't know if there was a bit of a regulatory lag. It sounds like, directionally, we would expect some positive movement out of the three. Is that fair?

You know, we think that, on balance, we've got constructive regulatory regimes, so too early to tell direction and magnitude and things of that nature, but we think that those regulatory regimes are heading in the right direction, for sure.

Okay, just my last question. Certainly it's not locked in yet and with the potential resources tax, that throws some into question -- but there is potentially a lot of capital needs down at Prime Infrastructure. How do you look at that, first, as your other investment opportunities? Are you happy with your 40% interest or, with respect to the CapEx, would you let them raise the money and would you be happy getting diluted down? I'm just wondering how we should think about that going forward here.

Maybe I will take that question. Look, we view Prime as an important subsidiary of the Company and any Australian investment opportunities that they would look to pursue and to the extent that they would require capital, we would expect to, at a minimum, fund our share of that capital. So we are a supportive shareholder, and we would work with them on developing and pursuing any of those investment opportunities.

That's perfect. Thanks, Sam. Thanks, John.

There are no more questions at this time. I will now turn the conference over to Mr. Pollock.

Okay. Thank you, operator. I just want to thank everyone on the call for joining us today. We look forward to speaking with you again next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.