Brookfield Infrastructure Partners LP (BIP) 2012 Q2 法說會逐字稿

Hello, this is the Chorus Call conference operator. Welcome to the Brookfield Infrastructure Partners conference call and webcast to present the Company's 2012 second quarter results to unit holders. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to answer questions. (Operator Instructions). At this time I would like to turn the call over to Tracey Wise, Vice President, Investor Relations. Please go ahead, Ms. Wise.

Thank you, operator, and good morning. Thank you all for joining us for Brookfield Infrastructure's second quarter 2012 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, Chief Financial Officer, who will review our financial result is. 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 different materially. For further information on known risk factors, I would encourage to you 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?

Thank you, Tracey, and good morning, everyone. In the second quarter, Brookfield Infrastructure continued to generate stable cash flows in a challenging macro economic environment.

As a result of the European sovereign debt crisis and the slowdown of the Chinese economy, some of our operations and many of our customers were impacted reduced trade and lower commodity prices. Our businesses, however, for the most part had been immune from these circumstance is due to the strong contractual and regulatory frameworks. We generated FFO of $0.60 per share, resulting in a distribution [pay out] ratio of 63% from the quarter.

We also announced a number of transactions that will meaningful expand our transportation and utility businesses. Over two years ago we initiated an outreach program to position Brookfield Infrastructure to acquire businesses that might be divested as a result of the environment in Europe. Our two prong strategy focused on developing relationships with European companies that own infrastructure assets in South America, and also identifying potential add-on acquisitions for our existing European businesses. On both fronts, we achieved success this quarter.

As a result of our relationship developed with Spanish toll road operator Abertis, we were invited to participate on an exclusive basis in the acquisition of a controlling stake in OHL Brazil. We also secured a transaction to purchase the remaining interest in our Chilean toll road from the German construction company Hochtief.

And finally, we executed agreements to acquire a controlling stake [in the regulate] distribution business in the United Kingdom, a complicated transaction we've been working on in the past year and one that should be very complimentary with our existing UK regulated distribution business. While these transactions are subject to a number of closing conditions, we are optimistic that we'll be able to successfully complete them later this year.

With that, I'll now turn the call over to John to discuss our results for the quarter.

Thanks, Sam. I'd like to spend a few minutes walking through our results. In my remarks, I will focus on FFO, which is a proxy for cash flow from our operations. I will also focus on AFFO yield, which is a measure of how effectively we deploy our capital.

During the quarter, we generated FFO of $11 million, an increase of $9 million over the second quarter of 2011. Our results reflected strong performances from our utilities and transport and energy segments, partially offset by a lower contribute from our timber segments. Our FFO per unit of $0.60 was $0.05 lower than the prior year due to the impact of our equity issuance in October of last year.

The proceeds from this offering were primarily used to fund the expansion of our railroad, which has just begun generating cash flows as expansion I don't projects are commissioned. Overall, we earned an AFFO of 9%.

Our utility segment generated FFO of $78 million in the quarter, compared to $66 million in the prior year. The increase of FFO was due primarily to greater connections revenue from our UK regulated distribution business, as well as contribution from our Columbian regulated distribution business, which was acquired in January of this year. Our utility segment posted an AFFO yield of 16% in the current period, compared with 15% in the prior year.

Our transport and energy segment produced $53 million of FFO, compared to $39 million in the second quarter of 2011,driven by increased profitability of our Australian railroad. During the quarter, our railroad's FFO increased by 86% over the prior year due to increased volumes from the above average grain harvest and contribution from three expansion projects that have commenced operation.

Results from our energy transmission and distribution business and our port operations were largely consistent with the prior year. Overall, our transport and energy segment generated an AFFO yield of 8% in the quarter, in line with the prior year.

During the quarter, our timber segment posted FFO of $6 million, compared to $13 million in the second quarter of 2011. Our timber results were impacted by weaker demand from China and South Korea, which placed downward pressure on log prices in both domestic and export markets. As a result of a 14% decline in the average realized price for our logs, we reduced our harvest by 8% compared to the prior year. Our timber segment generated an AFFO yield of 4% in the current quarter, compared to 10% in the prior year.

Although we are not counting on recovery in log prices in the second half of the year, we do believe that prices in the export market bottomed out during the second quarter. We expect that timber performance for the remainder of the year will generally be consistent with the first half of the year.

I will now touch on some of our corporate initiatives. Over the past several months we made significant progress on a number of financings that extend our maturities and, on a net basis, reduce our interest expense. In May, our Australian coal terminal issued $335 million of 12-year notes at 220 basis points over 10-year US treasuries in order to refinance its $287 million February 2013 maturities and repay its capital expenditure facility.

We also completed our financing of our North American gas transmission business's 2012 debt maturity. During the quarter, $1.3 million -- $1.3 billion of maturing bonds were refinanced with a five-year $700 million term loan priced at LIBOR plus 550 and a seven-year million $550 dollar bond priced at 9.6%.

Our intent is to reduce debt in this business over the next five years. With this deleveraging combined with anticipating recovery in the natural gas market, we expect that financing cost should decrease significantly when these facilities are refinanced. This business has no other debt maturities prior to 2017.

Additionally, we invested $200 million to repay our share of holding company debt related to our North American gas transmission business. In the fourth quarter, we plan to raise approximately $350 million of corporate debt to refinance the retirement of this debt and $120 million of corporate debt that matures in November. We anticipate our new corporate debt will be issued at a rate of less than 5%.

After the quarter end, we renegotiated our $700 million corporate credit facility to terms consistent with our investment grade rating, reducing or cost of borrowing by approximately 200 basis points and extending the facilities maturity to September 2016.

Finally, on July 30, we launched an equity offering as part of the funding plan for our recently announced investments. We issued 15.6 million units at a gross price of $33.25, a 2% discount to the closing price of our units immediately prior to the issuance, raising net proceeds of approximately $500 million, including the exercise of the over-allotment option. This transaction was over two times subscribed, demonstrating our strong access to capital in the US and Canadian markets as investors seek to owner businesses with sustainable cash flows from real assets.

I will now turn the call back to Sam to walk through our growth strategy and outlook for our business.

Thank you, John. And as John mentioned, I'll review our growth initiatives right now.

This past Saturday, we signed an agreement with Abertis to acquire 60% of OHL Brazil for total consideration of approximately $1.7 billion, consisting of $1.1 billion of equity and the assumption of $600 million of assumed liabilities. On successful completion of this acquisition, we expect to invest approximately $250 million, with the possibility of further investments if additional shares are required as part of a mandatory tender offer to minority holders.

This transaction, as well as the recently announced acquisition of the remaining interest in our Chilean toll road, are subject to customer closing conditions and are expected to close in the fourth quarter. Upon successfully closing, we believe we will own one of the leading toll road platforms in South America, with over 3,200 kilometers of roadways in Brazil and Chile. Our South American toll road platform will have substantial diversity, with a combination of roads that connect major cities, gateway roads, and urban roads.

In addition to benefiting from increases in traffic and high growth regions and tariff regimes that are indexed to inflation, we believe that we are well positioned to capture significant incremental values through organic growth projects related to our network. As congestion on our roads increases over time, we have the ability to propose projects to the regulator to debottleneck our roads and improve their connectivity. For approved projects, our concession agreements enable us to earn attractive rates of return on the capital that we deploy by increasing our tariffs or extending our concessions.

Finally, as one of the largest owners and operators of toll roads in South America, we'll be well positioned to pursue additional toll road projects in Brazil and Chile, as well as Columbia and Peru to additional countries also in substantial need of new road infrastructure.

We also made significant headway on our organic growth projects over the past three months. In the second quarter, we continue to progress the expanse of our Australian railroad on budget and on schedule. We're near completion of works for the [Wursy] project, which is expected to commence service in August. The upgrade of the Midwest segment, the largest component of our expansion program, is now substantially complete, with 100% of the track installed and about 90% of the track operating at full speed. We are projecting to finalize construction of this segment more than two months ahead of schedule, and we anticipate that we'll be in a position to commence services in October.

Finally, the construction of our Texas electricity transition system, consisting of three lines and six substations, continues on schedule and budget. We've now occurred 100% of the right-of-way easements for the first and second lines, and the 97% from the third line. Construction is currently active on all three segments. We've invested almost one-third of the projected capital for this system and remain on schedule for an in-service date for all three segments during the first half of 2013.

As we look forward to the balance of the year, we believe that there will be -- continue to be considerable economic uncertainty emanating from the European sovereign debt crisis and lower growth from China, which will have an impact on commodity prices. Despite these uncertainties, Brookfield Infrastructure should generate sustainable growing cash flows.

Over the next six months, the contribution from our Australian railroads expansion program will continue to ramp up, accounting for a significant portion of this growth. Additionally, the strategic initiatives to bolster the scale of our South American toll road platform and double the size of our UK regulated distribution business will meaningful add to our cash flows in 2013, should we successfully complete them.

Our primary focus for the balance of the year is to close these strategic initiatives and integrate these businesses into our operating platforms. As always, we will continue to work hard to increase the profitability of our operating companies and develop attractive organic growth opportunities. While we may witness a pause in customer-initiated expansion projects due to lower commodity prices, we believe that our businesses are well positioned over the long-term to benefit from GDP growth and the infrastructure investments that will be undertaken to meet this growth.

Operator, we have now concluded our initial remarks here. We would now like to turn the call over to you to open the line for questions.

Thank you. (Operator Instructions). The first question is from Bert Powell of BMO Capital Markets. Go ahead.

Thanks. Sam, in terms of divestures to raise capital, can you maybe give us thoughts in terms of markets where you're seeing prices higher -- or high prices for assets, or assets that you consider mature? And just a little bit around maybe the strategy -- partial sales, full sales -- just now you're thinking about raising additional capital from sales?

Sure. Maybe I'll start on that, then John may jump in as well.

I say the types of businesses where we think we can achieve the best prices today are probably in some of our utility businesses where people are paying -- or looking for lower returns for businesses with very stable cash flows, and secure frameworks. And we have a couple of businesses where we see limited growth, but nonetheless very secured cash flows and as a result, they could be very attractive for particularly pension fund type of investors.

In addition to that, as we've indicated, we're also looking at potentially divesting some of our timber assets. We've seen in recent months some transactions take place at very low levels of returns or low camp cap rates. Given the quality of the assets we have, we may think that -- or there may be an opportunity for us to sell some of our timber at good value.

I think your second question, Bert, was in relation to partial versus full sales?

Yes.

I think what you're getting at here probably is in relation to timber, but I'll just make a comment just on some of our other non-core assets. I think what we've told people in the past is what we define as non-core assets are businesses that have lower growth potential or opportunities for us to deploy limited amounts of cash to grow them organically, and businesses we have low stake. So that's generally how we would define non-core assets. And then on the timber side, at this stage we would probably be looking at selling partial stakes as opposed to full stakes.

Okay. And just lastly, how far advanced are you on any of this this side of the equation?

We're still at the relatively early stages of exploring our options. There's maybe a couple situations that may be able to move quicker than others, but I'd say we're at the relatively early stages.

Okay, thanks.

The next question is from Cherilyn Radbourne of TD Securities. Please go ahead.

Thanks very much and good morning. So it's been a very busy period for you from the point of view of transactions. Can I take from our opening remarks that you're largely done in terms of looking at new opportunities, and primarily focused over the next little while in terms of bedding down the things that you have done?

Hi, Cherilyn. I think in our closing comments -- or my closing comments, you're probably interpreting that correctly. We -- our focus is going to be mostly on bedding down these assets over the next three to six months. Having said that, we do have a number of initiatives that remain underway, both organically -- we are still working on Dudgeon Point, we're still working some at opportunities at our UK port. And there may be some smaller transactions that we think are very complimentary, but I think it's safe to say that there's no major initiatives that we are pursuing at this particular point in time.

Okay. And if I could ask for a bit of color on the toll road platform that you're acquiring. If I've understood this correctly, the Chilean platform primarily captures commuter traffic, and the Brazilian platform is more directed towards long-range transport traffic. So I just wondered if you could give us a bit of perspective on what that implies for GDP sensitivity of the underlying traffic flows and the longer term growth potential of those growth assets?

You're correct. The Chilean road is primarily light traffic, mostly commuter traffic, whereas our roads in Brazil will be mostly used for heavy traffic. I think about 70% of the traffic on those roads are trucks. Based on the work we've done, we believe that the heavy traffic is more affected by changes in GDP, and so in that sense there will be maybe slightly more volatility to changes in growth in the Brazilian businesses versus the Chilean business. Both, nonetheless, have high correlation though to growth in those respective markets, and we think that the growth prospects in both of those markets are very strong for the foreseeable future.

Okay, last one for me. You've indicated that the six expansion project on the Brookfield rail network that is now on hold. What is the implication of that from a [BIP] prospective, just given that you've got take-or-pay contracts underpinning your investments?

Hi, Cherilyn, it's John. The six contracts, you're right. Our customer is in a dispute with their coal supplier right now, and until that is resolved we've basically said that we think that project essentially is on hold. However, as we've indicated, that is less than 10% of the minimum expected $150 million of EBITDA from the expansion program, so we will be able to benefit from more than 90% of that $150 million, and we think we'll be at that run rate in the first quarter of 2013.

Okay, thank you, that's helpful. That's all for me.

The next question is from Michael Goldberg of Desjardins Securities. Please go ahead.

Thank you. I was going to ask about timber, but that in part got asked. I just want to clarify though, is it any specific assets that you're considering selling, or is it, as you said, partial sales of assets that you're thinking about?

Hi, Michael, it's Sam. Look, I don't think there's much more we can say about that. I think, as you know, we have two particular businesses that we own in Brookfield Infrastructure. We have our island, the Timberlands, which is the Canadian operations on Vancouver Island, and we have Longview, which is in Oregon and Washington. I think we'll look at opportunities within both businesses and see what the best opportunities is for us.

Okay. Turning to low natural gas prices. Can you talk about that as either an opportunity or a threat for BIP?

Hi, Michael, it's John.

Hi, John.

In terms of the impact of it, I think we have seen the impact of low natural gas prices on our pipeline system, so that largely we think has bottomed out and should recover over the next few years. In terms of opportunity, we have been looking at opportunities in the midstream space. Over the last couple of years, valuations have been quite high in that sector, in part because the master limited partnerships have had pretty low cost of capital. We do think there may be some opportunities with low natural gas prices, reductions in rig counts where there's a bit more perhaps stress within some of the gathering and processing companies, if they start to not hit the deliverability numbers that they're counting on and things of that nature, where it could lead to some opportunities. So that's something we're keeping an eye on.

Okay. And lastly, assuming completion of all current organic projects and the recent acquisition and financing initiative, in rounded numbers so that we can get an ideal of scale, howmuch potentially does that increase your AFFO?

I think the best way to look at it would be if you take a look at the railroad program, we've given pretty good guidance that we'll be able to generate 90% of the $150 million of minimum expected EBITDA, and we'll be at a run rate in Q1 for that. If you take a look at the capital that has not been committed working commercial operation within our utility business, it is a total of right around, call it $375 million. And I think we would expect to earn AFFO yields that are consistent with our existing business right now, which would be mid teens for that.

And then for the new investments that we're looking at, we haven't given any specific guidance in terms of what the near-term cash flow is, but what I can say is we are underwriting to the 12% to 15% total return that is our stated target. And these are businesses that are in operation, and that they produce pretty solid cash flows, so we think we should get some pretty strong initial yields on those as well.

Okay, thanks very much.

The next question is from Brendan Maiorana of Wells Fargo. Please go ahead.

Thanks. Good morning. Sam, can you give an update on the status of Dudgeon Point and where your customer inquiries, just given what seems to be a bit of a slowdown from some of the mining companies that are operate in Australia, and where you guys stand on that project?

Sure. Brendan, I think the way you've interpreted the situation is correct. There has been -- and I use the expression pause in my initial remarks in these types of projects. I think a lot of mining companies are stepping back and revisiting their expansion projects.

I'd say in relation to this one, we still have a number of customers who are looking forward, I guess beyond the current depressed prices and are looking for capacity, and we continue to have discussions with them. And so I'd say we're still optimistic that we'll be able to conclude some feasibility funding arrangements with certain customers over the next couple of months that will see if continue to progress the project. I think our expectations is that the scale of a project may be smaller initially and then phased up over time, which is something we're quite comfortable with. And obviously that will be dependent over market conditions over the next 12 to 18 months when we're in that stage of really scoping out the project.

We are waiting for assistance from the state in setting the master plan for the site. That's probably one of the key considerings to help us progress this further, and it's been slightly delayed from things beyond our control. Again, we're hopeful that, that will take place over the next coming weeks and months so that we'll have better visibility on what we're building, and with that we'll be able to size it to meet our customers' expectations.

So I apologies, because I can't recall, but the initial customer that you were talking to, that was -- I forget if they actually committed to fund the feasibility study, or if you were just in discussions that they were going to fund the feasibility study. Have they pulled back their commitment or indication that they would fund the feasibility study, which was around $140 million, if memory serves?

Yes, we had one large customer that was funding a portion of that. It wasn't up to the $140 million. It was a smaller amount. What we are in the process of doing is going out to the whole community of customers who have expressed interest, so we've been looking to do that so that we could size up the scale of feasibility project. That customer still is signed up, but we've decided not to proceed with a larger feasibility study until we have the balance of customers on board.

Okay, thanks. John, if I look at the investments that you guys have done, it's I think around $865 million of equity investment. How much is that, when we look through to the pro rata portion of debt added on to that, what's the pro rata enterprise value investment that BIP is making on AVN, OHL and Inexus?

If you take a look at it, Brendan, it's going to be pretty consistent with our existing debt to cap.

So I'd say that's, call it 45 equity --so it's roughly -- call it a little less than $2 billion or so?

Yes, that's right.

Okay, so --

It'll be a little bit higher than 50%, probably closer to 55% debt to cap on those investments.

So if you guys -- so then if you raised $500 million of equity, it's $365 million -- roughly -- equity funding shortfall. If we take that number and let's just for argument's sake, it's kind of levered one to one, it gives a little bit of $700 million of asset level dispositions that are going to happen. Is that of the way that we should be thinking about the dispositions that will go out the door, not the $350 million just to make your equity commitment?

Well, on a proportionate basis, yes, there would be proportionate debt that would be sold along with equity that we sell down. I think the best way to think about it is what we're looking to do here is to sell assets that are in strong demand by either strategic investors or institutional investors, ones that people will bid too low equity returns and be able to redeploy the capital at higher risk adjustment returns. So that's how we're thinking about that, and we think we've identified some assets that fit that bill, and we think we should be able to do some value accretive trades.

So just on a -- if I'm hearing your comments correctly, if we would think about going in cap rates versus going out cap rates, or if you want to take the inverse and say EBITDA multiples, we ought to have -- at least assets that you're acquiring ought to have EBITDA multiples that are in line or lower than the exit EBITDA multiples? Is that a reasonable way to think about it, or do you think there may be illusion from the asset sales, but you've got better growth with what you're buying?

I think you're thinking about it right, Brendan. I think in terms of the AFFO yields of the assets that we're thinking about divesting, we think that they will be pretty low AFFO yields because they're assets that people are building at pretty low levels of return. And we think we will be able to deploy that capital in investments, the $865 million that you mentioned that will have a higher yield.

John, just to clarify that, because I think, Brendan, your last comment was correct as well, where we are taking into account of different growth projects, growth potential of each of the businesses we're buying verses what we're selling. And so were looking at it a value accretion basis, not necessarily as a cash flow accretion basis. So when we look at returns, we're looking at investing at hopeful close to 15% returns and selling equity returns considerable less than that.

That's helpful. Last one, point of clarification on the timber. If I look at your timber book value, I think it works out to like $2,200 or $2,300 per acre. Transactions have been higher than that. Is it fair to say that you guys would not transact if you're going get a number that's lower than what the timber is on the books for?

Let me answer that one, too. The short answer is that's correct. We're not looking to sell at below our appraised values, but I just wanted to clarify one thing. When you look at that -- you state that number, that's a blended number between both our Canadian operations and our US operations, and the price per acre in our Canadian operations is -- from a value prospective is lower than a US operation for a number of reasons.

And it has to go to the margins we can achieve on log sales. We have we have far greater primary growth in our Canadian operations verses what we have in our US operations, where it's all second growth, and the margins are extremely high, and we have a much higher percentage of Douglas fir. So I just want to caution you and others in relation to using blended acreage values for our business.

Sure.

Okay, thank you.

The next question is from Robert Kwan of RBC Capital Markets. Please go ahead.

Good morning. Just on the quarter with the connection revenue, which was quite strong. Just wondering was it one or two specific larger projects where that came through, or was it just very strong across the board? I'm just wondering if you can also provide a shorter term outlook for the connection business?

Hey, Robert, it's John. We won some big projects during the quarter, so that accounts for the higher level of connection revenue that we booked versus previous quarters. So if we look forward, the run rate that we've talked about in the past for the business we think still stands, roughly about $7 million US per quarter.

Okay. So just in terms of the big projects, that all came through in the quarter. Because the backlog also came up a little bit,will some of that spill, say, into second half?

For the balance of the year I think the run rate is probably the best way to think about it.

Okay. I guess at a higher level, when you're looking at the distribution policy in the 60% to 70% of FFO, which you reiterated again this morning, do you see that changing a lit bit with some of the shorter-dated concessions in Brazil and possibly just more of an explicit focus on AFFO payout?

That's something we've been thinking about, Robert. There's no doubt with OHL Brazil we've got a bigger portion of our revenues in FFO that are concessions that have finite lives. We are considering what the appropriate level is, but I think it -- we haven't changed the policy yet, but that's something that we're going to reevaluate. But it may end up coming down to a lower payout of our FFO in recognition of that.

Just maybe one last question, if I could, with OHL Brazil, they had highlighted their potential concessions in the country aside from toll roads. Specifically, there were airports and container ports. Is that something where you see this platform growth, or are those things that you would be shying away from there?

Robert, it's Sam. I think -- it's early days, obviously, we need to sit down with our partner and discuss strategy for the business, but my sense is that the focus will be predominantly if not exclusively on toll roads for that particular business. We may in our other activities in Brazil look at airports and ports in that market, but most likely not through this particular business.

Okay, that's great. Thank you.

The next question is from Tim Schneider of Citigroup. Please go ahead.

Hey, guys, just quick question. How do opportunities on the gas infrastructure side, specifically with the North America, fit in the overall mix at this point? Has this kind of been pushed to the back burner given the large international acquisitions lately, or is that still something that you're actively looking at?

Hi, Tim, it's John. We definitely are continuing to look at opportunities and monitor what's going on in the sector. As I mentioned earlier, valuations to-date have been pretty strong. We do think with low gas prices and someof the other dynamics going on in the sector that there may be some better value opportunities, so we're definitely continuing to look and see if that thesis bears out. But as Sam mentioned in his earlier comments, for the balance of the year the primary focus that we've got is going to be to complete the acquisitions that we had announced and integrate those businesses.

Okay, thank you. Then also a quick follow-up to that, wouldyou be looking at gas utility assets, or more so on the midstream side? Specifically I'm assuming fee-based, gathering and processing, maybe long haul pipe and storage?

In terms of gas utilities, we haven't really been focusing on gas or electric utilities in North America, because the returns that you can get on those assets are pretty low. We do like the midstream sector, particularly fee-based as you mentioned, because you can earn good potential going in yields, and if you buy them at the right price, the CapEx earns quite higher returns, so it's pretty accretive to follow-up on CapEx. But it's all a question of being able to buy those for the right valuation.

Got it. And would you be open to do something on a joint venture basis with one of these midstream players, or is it more something you would prefer to do on your own?

We look at joint ventures. As you saw, we are doing a joint venture Abertis for the OHL Brazil deal, so we definitely consider those types of structures along with buying assets outright. So we look at all types of opportunities.

All right, thanks, guy.

Next is a follow-up question from Bert Powell of BMO Capital Markets. Please go ahead.

Hey, Sam, I apologize if I missed this in your opening remarks, just around OHL. What is the opportunity to extend concessions, the difference between federal and state concessions in the portfolio? Because there is a bit of a difference in terms of what's lapsed and what's still available in each of those kind of two buckets?

The opportunity to extend concessions or to raise tariffs above the rate of inflation really comes down to whether or not you can deploy capital around the roads on approved projects with the regulators. And as we mentioned in our remarks, in particular in relation to the federal roads, which are in ramp-up phase and are experiencing significant growth, we think over the next 20 years there could be considerable situations that arise where there will be unforeseen CapEx that the regulators will want us to deploy and where we'll be able to earn a good rate of return on that. And it will either be in the form of increased tariffs or extensions of the concessions.

In relation to the state roads, I think the opportunities there from a debottlenecking prospective are probably fewer. There may be some minor opportunities available to us. But what we'll be watching over the next number of years is opportunities to rebuy concessions or extend them by doing other things that the government hopefully will give us visibility on as they deal with a number of concession renewals that will be taking place, both in this sector and in other sectors over the next couple of years. So we're going to be watching those very closely, and we think that just represents upside for us, because we didn't ascribe any value to concession extensions in our underwriting.

Okay, thank you.

There are no more questions at this time. I will now turn the call back over to Mr. Pollock for closing comments.

Thank you, operator. Thanks everyone for joining us today on the call. We look forward to updating you again on our progress next quarter. Good-bye.

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