Brookfield Infrastructure Partners LP (BIP) 2012 Q4 法說會逐字稿

Welcome to the Brookfield Infrastructure Partners conference call and web cast to present the Company's 2012 year end results to unit holders. As a reminder, participants are in a listen-only mode. After the presentation, there will be an opportunity to ask questions.

(Operator Instructions)

At this time, I will turn the conference over to Tracey Wise, Vice President of Investor Relations.

Good morning.

Thank you all for joining us for Brookfield Infrastructure Partners' year end 2012 earnings conference call. On the call today is Chief Executive Officer Sam Pollock, who will discuss highlights for the quarter, provide comments our strategy and the 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 web site.

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

Thank you Tracey, and good morning everyone.

In 2012, we made significant strides in solidifying Brookfield Infrastructure's position as one of the leading global infrastructure businesses. During the year, we advanced a number of organic growth initiatives that demonstrate our ability to successfully deliver large-scale development projects, and we closed several opportunistic acquisitions that significantly enhanced our footprint.

It is this formula of organic growth along with M&A executions that we expect will propel our growth going forward. With respect to organic growth, we successfully commissioned our $600 million Australian railroad expansion below budget and ahead of schedule. We also significantly advanced the construction of our $750 million Texas electricity transmission system, which we expect will be up and running by mid-2013.

On the acquisitions front, we closed a number of transactions that were the result of an outreach program that we initiated in 2008. Our strategy was to develop relationships with European infrastructure companies that owned high-quality assets in Latin America. In 2011, we redoubled these efforts, as we thought that attractive investments could surface in this region triggered by the European sovereign debt crisis. During the past year, we deployed $1 billion of capital in European businesses or in assets acquired from European owners as a direct result of this strategy.

As a result of growth in our Business and the stability of our cash flows, Brookfield Infrastructure achieved a significant milestone in 2012, attaining a BBB plus corporate credit rating from S&P. With strong operating results that supported the distributions that we paid out, we provided our unit holders with an attractive overall return of 33% for the year.

In light of the current strong prospects for our Business, the board of directors has approved a 15% increase in our quarterly distributions to $0.43 per unit. This increase reflects the forecasted contribution from our recent commissioned capital projects, as well as the expected cash yield on acquisitions that we closed in Fourth Quarter. Since our spinoff five years ago, we have increased our quarterly distributions from $0.265 per unit to $0.43, a compound annual growth rate in excess of 10%.

With those brief comments, I'll now turn the call over to John Stinebaugh to talk about our results.

I'll spend a few minutes walking through our results. In my remarks, I'll focus on funds from operations or FFO. We highlight this metric because we believe it's a proxy for cash flow from our Business. I'll also focus on AFFO yield, which is equal to FFO less maintenance CapEx divided by invested capital. This is a measure of how effectively we invest capital in our Business.

In 2012, we earned FFO of $462 million compared with $392 million in 2011. This 18% increase in our FFO was primarily driven by expansion projects that we successfully commissioned during the year, and to a lesser extent, new investments. Our FFO per unit of $2.41 was flat compared to the prior year as investments made with proceeds from our recent equity offerings did not fully contribute to our cash flow during the period. Our payout ratio was 62%, which is well within our range of 60% to 70%, and we earned a solid AFFO yield of 10%.

During the year our utilities platform produced FFO of $308 million compared with $275 million in the prior year. The increase in FFO was primarily due to the recently completed merger which doubled the size of our UK distribution business, the increase in ownership of our Chilean electricity transmission system, and the acquisition of an interest in a Columbian distribution company. Excluding new investments, the cash flows of our Business steadily increased with inflation indexation and contributions from organic growth investments. For the year, our Utilities business earned an AFFO yield of 15%, which we believe is a very attractive return in light of the low risk profile of this segment.

In our transport and energy platform, we generated FFO of $244 million [sic - see press release] in 2012 compared to $167 million in 2011. The increase in FFO was primarily driven by a 110% increase in our Australian railroad's FFO as a result of the commissioning of our expansion program, as well as a favorable grain harvest. Our results also benefited from the South American toll roads that we acquired in the fourth quarter. Our North American Gas Transmission business continues to be impacted by weak market conditions caused by excess capacity and low natural gas prices. However, our FFO remains flat compared to the prior year due to the investment of equity to deleverage this business.

Overall, the AFFO yield for our transport and energy platform was 9% for the year. This yield, while higher than the prior year, is clearly below the level that we should expect from this segment over the long-term. In 2013, the AFFO yield should increase with a further ramp up of cash flows from the expansion program at our railroad and a full year results in our toll road business.

In 2012, our timber platform recorded FFO of $22 million compared to $33 million in 2011. Results reflect soft demand from Asia early in the year, which caused average realized prices to decrease by 7%, combined with operational restrictions due to a prolonged fire season that impacted our harvest in the second half of the year. For the year, exports represented 41% of total log sales versus 47% in the prior year as demand in domestic markets strengthened.

Domestically, the US housing market recovery gained momentum throughout the year with seasonally adjusted annualized US housing starts reaching 954,000 in December of 2012, which was 37% above prior year levels, and new home permits increased by 29% year-over-year. In 2012, our AFFO yield for this platform was 4%, which we expect will improve in 2013 due to strengthening export markets combined with the continuing recovery of the US housing sector.

I'll now touch on some of our corporate initiatives. In 2012, we executed a number of successful transactions that further solidified our balance sheet. At the corporate level, we raised approximately $900 million of capital comprised of $500 million of equity from a unit issuance that we completed in August, and $400 million from our inaugural corporate bond issue that closed in October. These two offerings were several times oversubscribed, demonstrating investor's interest in our Company and our access to the capital markets.

In order to increase liquidity for new investments, we upsized our corporate credit facility to $900 million subsequent to year-end. We were able to reduce the borrowed costs on this facility as a result of our BBB plus corporate credit rating.

We also completed several refinancings at our operations, capitalizing on the opportunity to issue long-term debt in this historically low interest rate environment. In total, we refinanced $3.3 billion of debt at an average rate of 4.6%. In the first half of 2013, we will be very focused on executing long-term take-out financings at our UK regulated distribution business and our Australian railroad. In anticipation, we secured investment grade ratings at both of these entities. Once these financings are complete, we will extend the average maturity of our debt portfolio to approximately 8 years, as well as repatriate nearly $400 million of capital.

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

Thank you, John.

As John mentioned, I'll recap our growth initiative and review the outlook for the Company going forward. During the fourth quarter of 2012, we deployed $1.1 billion of capital into investments in our utility, transport and energy platforms, which we funded with the $500 million equity offering and draws under our revolving credit facilities. Within our utilities platform, we completed the acquisition of a UK Distribution business in early November, investing $525 million. This business was merged with our existing UK Distribution company, which increased our installed connections to over 1 million.

Our initial investment in the UK distribution sector was made in connection with the acquisition of Prime Infrastructure in 2009. On closing, the invested capital in the combined business totaled approximately $650 million. However, we believe that the value of the franchise is significantly greater due to its prospects for growth and its market position. We successfully recognized some of this value in November, with the sale of a 20% interest in the combined entity to an institutional investor for proceeds of approximately $235 million.

During the fourth quarter, we also signed an agreement to acquire an additional 10% interest in our Chilean transmission system from Brookfield Asset Management for $235 million effective October 2012. Within our transport and energy platform, we completed the acquisition of an additional interest in our Chilean toll road for $170 million in October, increasing our ownership to approximately 50%. In December, we acquired an interest in an entity with a 60% controlling stake in the largest toll road operator Brazil for $310 million in partnership with Arbutus] and institutional investors.

These roads benefit from long-term concession agreements and proven regulatory regimes with tariffs that are indexed to inflation. In addition, there are significant opportunities to employ additional capital to expand our networks to accommodate increased traffic due to GDP growth. At the end of October, we also invested approximately $75 million for a 25% interest in District Energy Systems that serves commercial customers in downtown Toronto, which we acquired in partnership with institutional investors.

Finally, we are also making excellent progress in executing our financing plan for these investments. In addition to the $500 million of proceeds from our August equity offering, we have raised over $300 million from asset sales. In addition to the sale of a 20% interest in our UK regulated Distribution business, we sold a 12.5% interest in our Canadian timber land for $85 million. With these initiatives, together with the proceeds from the take-out financings that we expect to close in the first quarter, we'll have raised $1.2 billion of proceeds. As we enter 2013, we will have approximately $700 million liquidity to further invest in our business, and we're also considering further timber and non core asset sales to recycle capital into new investment opportunities.

Last year, our performance demonstrated that our Business can deliver strong results, even during periods of tepid growth in the global economy. We believe this resiliency can be attributed to the fact that 85% of our cash flows are generated under regulatory frameworks for long-term contracts, a significant amount of which are of a take-or-pay nature. Entering 2013, we believe that the global economic recovery is beginning to accelerate. Prospects for the US economy have improved as the housing markets finally turn the corner. Also, after a relatively weak year, the Chinese economy is showing signs of strengthening.

With the contractual nature of our Business, Brookfield Infrastructure has demonstrated it can deliver solid results in a variety of economic environments. However, we believe the full potential of the Business will be realized in periods of stronger economic growth and higher inflation.

Going forward, our growth strategy will continue to be multidimensional. Within our existing portfolio of businesses, we should generate meaningful growth that does not require capital investments. Over 65% of our revenues are indexed to inflation, and we have considerable excess capacity in our toll roads, ports, and natural gas transmission systems.

Furthermore, certain of our businesses, such as the Electricity Transmission Operations Distribution business and railroad are well positioned to invest in high return organic growth projects driven by customer demand. Lastly, we will seek to originate acquisitions of new businesses that we can buy for value that strategically fit with our operations, utilizing Brookfield's extensive global asset management platform.

For the past year, M&A activities have been the more prominent activity. While we expect this trend to continue over the balance of 2013, the level of organic growth within our Business should accelerate with the global economic recovery that is underway.

Operator, that concludes our comments. I'd like to turn the call back over to you to open the call for questions.

We will now begin the question-and-answer session.

(Operator Instructions)

Cherilyn Radbourne, TD Securities.

The first question I wanted to ask just related to the transport and energy segment where you do indicate that the 9% AFFO yield for 2012 is below the level you expect long term, so I was just wondering if you could give us some help to think about how that should ramp up over time. I assume that a full year of the new railroad traffic helps in 2013, and beyond that, the toll road's the key driver.

I think you've hit two of the biggest drivers. If you think about the railroad, we've had, from the expansion program, roughly $30 million of EBITDA in Q4. So, on an annualized basis, that's roughly $120 million, and we've indicated that, that should contribute to -- in the $150 million range. So, by the end of the first quarter, we should be reflecting the full run rate from the railroad. And, secondly, the big contributor is going to be the toll roads. We basically had a partial quarter of contribution from OHL Brasil, or Arteris as we're now calling it, and we had a full quarter of contribution from the second part that we invested in AVN in Chile. So, we'll have a full quarter -- or a full period of contribution for those in 2013. And, in addition to that, we should get growth from volumes that increase on the roads and inflationary escalation in a good number of those businesses.

Okay. That's helpful. In terms of the proceeds that you refer to that you expect to realize on take-out financings in Q1, I'm assuming that all of that relates to the railroad, and I'd be curious as to which market you intend to execute that financing in. Is that going to be done in Australia, or are you going to access the US market again?

I guess I'll answer that one, Cherilyn. It's Sam. It's actually a bit of a combined effort, so we will have in place a bank deal to secure the take-out of about 75% of the expected proceeds, and in fact all of what's coming due, so that is in place. And, the expectation is the balance, which will be $300 million to $400 million, will be placed in US private placement market.

Okay. Thank you.

And the $400 million, Cherilyn, that we mentioned does include some up financing from our North American transmission business as well.

Okay. Thank you. That's all from me.

Andrew Kuske, Credit Suisse.

If you could just talk a little bit about the thought process on the partial disposition of the UK distribution business, the 20% stake for the $235 million, and just the thought process around that versus other investment opportunities.

Sure. Andrew, I guess the way we looked at it is there was interest from others in the transaction that we ultimately were successful in acquiring, and people approached us about whether or not they could be partners. We looked at our opportunity to bring in a very deep-pocketed and well-respected investor, and it was on the basis of them recognizing the value of the combined business. And, from our perspective, as long as it was at the right value that reflected the growth going forward, we felt comfortable in doing that. And, as you'll note from the values that we've given, the investment we made in this three years ago was roughly $125 million, and the value recognized on what we sold that is over 4 times that value. So, we felt pretty good about the transaction as a whole. We brought in a good partner, and we've maintained full operational control going forward.

So, was this essentially, just holistically looking at this and through history thinking about taking out your cost base of your initial investment and helping capitalize a nexus with equity on your part from another party coming in?

Well, we looked at it, as you said, holistically. This was a value -- an opportunity to recognize value in the business, solidify it with good partners, and we did recapitalize the Company to an investment-grade basis. And, it's one of the tools we've used to raise capital for our overall investment program in 2012.

Now, was the institutional investor part of BAIF or a successor fund of BAIF or completely separate from either of those entities?

I can't really comment on who it was. It is a party we know well, but I can't really comment whether or not they're part of the funds or not.

Okay. And then, just turning my attention to [lot M], and I'll just -- this will be the last question. On lot M and the OHL Brasil, or Arteris as it is now, is your intention to look beyond just toll roads and to think about the airport auctions that are going on, on concessions, the ports and other things, and really look at that as a bigger broader platform within Brazil, or is it still just going to be focused on the toll roads for now?

Just to clarify, Andrew, are you asking about Arteris, specifically, if this is their strategy, or are you talking about Brookfield Infrastructure's strategy down in South America?

It's a little bit of both. Obviously, you have your own objectives. You have got a big platform now. At least you own a meaningful stake of a big platform with a partner that you do have a majority position. So, do you think about using that majority position to further penetrate into non-toll road areas but infrastructure in a broader sense, or just pursuing that on your own?

Yes, look, I think what I would say is with respect to the strategy going forward for Arteris, that, that will probably be communicated in time by Arteris. I'd rather not comment on that at our level. What I would say is that Brookfield Infrastructure has interests in a number of asset classes in South America. We see the -- Brazilian airports is a unique situation, and the value that things traded at in the past have been at levels that we've not been comfortable with. But, that's not to say that there may not be better value going forward, but we have a lot of interest in looking at the port sector in South America. There's a couple of rail opportunities, and there's also some very interesting distribution businesses that we've been considering. So, we do see lots of opportunities, some of which will -- may be utilized through that platform we have in Arteris, but many others will be done through other means.

Okay. That's very helpful. Thank you.

Robert Kwan, RBC Capital Markets.

Sam, you mentioned that you're seeing China a little bit better here. And, I'm just wondering, have you noticed that in terms of customer interest in some of the projects down in Australia, specifically Dudgeon Point or anything on the rail for port expansion sites?

Hi, Robert. Maybe, to break it into two components, where we see most of the activities in our business, as it relates to China, is in relation to trade flows that come in and out of our ports and also in relation to our timber business, where we see increased demand for wood products. As it relates to customers, other than their ownership of KML and what we see, the activity level with a number of the Chinese companies in and around the iron ore sector and Oakajee Port and various things in the southwest part of Australia, generally they're not customers of ours. As I think of Dudgeon Point, our customers tend to be more the large majors such as Valley, Anglo, BHP, and Peabody, those types of people. I'd say where we get the empirical evidence or sense that things are improving is really on a trade flows front.

I guess just putting it differently, what seemed to be happening mid last year was some of the strength or the customer interest on the expansion activities down in Australia started to weigh in as commodity prices started to fall, and China being a big portion of that. I guess have you seen the customer interests, though, start to pick up to underpin expansion activities at any of those assets?

I would say it's mixed. I think there's still a cautious view regarding the commodity price levels for both coal and iron ore at the moment. There's no doubt, particularly in iron ore, people are feeling much better today than they were three months ago. There's been a huge recovery in prices, but I think there's still a little bit of concern or skepticism that the current price level will be maintained over the balance of the year. I think there's an expectation that it will soften, but I think people are more optimistic, and we are seeing customers talk about proceeding with some of the expansion. Some are more bullish than others.

I think in our western -- southwestern Australian operation, the railroad mainly, the near-term growth in that business that could happen would be a result of the expansion of KML's operations. They're probably the most optimistic and aggressive in regards to discussing expansions. On the east side of the country, in Queensland, I would say the mood around expansions for the coal sector are much less visible. I'd say the -- there are still concerns about the cost levels that have risen in that part of the world, and some of the big projects you hear about, like Carmichael and others, which are in the [gallalium] probably don't impact us as much. It's unclear whether or not they'll get the capital to proceed with those.

Okay. That's good color. Just turning to organic growth opportunities and your comment that they should start to accelerate. Outside of those projects down in Australia, do you see that being more of just smaller capital investment into the existing assets, the types of things that really you've been doing all along, or do you see opportunities for other mega projects, again, outside of your Australian businesses?

I'd say the -- they're generally smaller in nature, the mega projects, in the order of magnitude of $600 million-plus. At this stage we don't have a lot of visibility into those. In the near term, we are looking to progress a bio mass reception facility in our port in the UK, the dollar magnitude of that project enterprise value basis is plus or minus $150 million. Still some work to be done there, but that's kind of the magnitude of the projects we're looking at. There are some opportunities in our Chilean transmission business to participate in some chunks expansions, there are discussions of connecting the north and south. Some of those situations may be competitive, so it's unclear as to whether or not we'll be successful in getting those -- in securing those opportunities. But, those are relatively big dollars and, given our increased stake in that business, obviously our share of that has increased.

Okay. Just the last question, if you can refresh your thoughts on the European M&A activity specifically, just commenting, thoughts around investments on the continent, both core Europe and some of the peripheral countries, in addition to kind of the way you've been executing more so European companies, and then buying their assets outside of the continent.

Well, I guess the way we view the market today, it is an improving situation I guess. Going back a year ago, there was significant uncertainty with regards to the whole financial system, to be frank. And I think that caused hesitation of -- in M&A activity, particularly in the southern European part of Europe, and so people -- we're selling assets in South America and, to a lesser extent, North America. We continue to see activity levels that are fairly robust from the European companies to sell assets to deleverage. But I think we've also seen an increase in the amount of capital going into Europe in relation to European assets. And, I think probably the trend that you'll see taking place over the next couple of years is maybe less a focus on the sale of an acquisition of North American and European -- and South American assets from European companies and more capital actually going into European opportunities.

And, do you see yourself, this improving situation, does it get you more comfortable than deploying capital onto the -- into the continent?

Yes, I think that's the inference, yes. We would start to make more efforts in looking to acquire European assets.

Including southern Europe?

Including southern Europe.

That's great. Thank you.

We evaluate everything, Robert, on a case-by-case basis, so obviously it's going to be very fact specific.

For sure. Thank you.

Timm Schneider, Citigroup.

In the past, you said you'd be very interested in looking at kind of North American midstream assets. If you kind of look at the opportunities you have across your portfolio, across the globe, where do these North American midstream assets kind of rank, and I guess what are you seeing in terms of opportunities here over the last couple of months or going into '13?

Timm, it's John. One of the big strengths of our platform is that we do have a global platform, and we have an ability to look at different sectors. And, as we've looked at US midstream, or North American midstream, we compare what we think the risk-adjusted returns that we can get in those investments versus other ones that we're seeing in different jurisdictions, and we try to focus our capital where we think we can get the best returns. If I look back at last year, we did look at a number of midstream deals, and we felt that, with the low cost of capital that MOPs had in a number of cases, they have synergies they're bringing to the table that we had a hard time thinking that we could get returns that were competitive with other alternatives that we had. We did make an investment in a storage field, and we're seeing that there are opportunities to potentially build upon that platform that we started. And, we think within that sector, there's potentially a good relative value. And, we are continuing to look at gathering and processing and other aspects of midstream, and if we find an opportunity that we think makes sense, we would definitely look to do it. It's a sector we like quite a lot.

Have you guys had any conversations with E&P companies, maybe partnering up with them, easing some of their midstream CapEx needs? Would that be something of interest to you guys?

Yes, something like that would definitely be of interest. And we have had conversations with a number of E&P companies. But, yes, that would be of interest.

Have you kind of quantified what you think the -- an initial investment there, kind of the size or scope of what that could look like?

It's hard to say, Timm. That's going to be very case specific. We -- as we look at opportunities to grow our business, we don't really have targets that we want to deploy in any particular sector. It really is a function of the opportunities we see and whether those make sense for us.

Sure. And then, just briefly, can you give us an update on NGPL, kind of how you think about that asset longer term strategically and how that fits into your portfolio?

NGPL is a great franchise. It's got a very strong position in the Chicago market, and it's got very good connectivity to different basins. So, we think it's an asset that is a critical asset for the midstream infrastructure within the United States. Right now, as you know, it's at a level of earnings that is a depressed level compared to historic periods of time. We think that earnings eventually will recover, but I think it's something that, in light of the excess capacity as well as natural gas prices, is probably going to take a while before things turn the corner there. From our standpoint, we like the asset. We are not looking to do anything unless we think we can get value that would be representative of the long-term cash flow generating ability of that asset.

Got it. And, obviously, there's been a lot of talk about converting pipelines from gas to liquids. Is there any -- could any leg of that pipeline be a candidate for that?

Those are things we look at all the time, Timm, and we're definitely looking at opportunities. As you know, those kinds of projects are very complex projects. But, we do explore those types of ways of optimizing the asset base within that business and other businesses we have.

All right. Thanks guys.

Brendan Maiorana, Wells Fargo.

So, Sam, you guys have done a great job over the past couple of years. It's allowed your multiple to improve pretty significantly, and even if we look at the forward year 2013 estimates, you're probably trading at an implied FFO multiple -- FFO yield of somewhere 7%, 7.5% give or take. So, that's come down, that yield has come down a lot. Has that allowed you to lower your return expectations from the investments that you're looking at, given that asset pricing has moved up over the past couple of years?

Hi, Brendan. To be honest, we don't base our investment return expectations off of where our share price trades at, where the unit price trades at. We actually have relatively rigid return expectations of the 12% to 15%, and we tend not to fluctuate that based on short-term trading or short-term movements in the yield curve. So, that seems to have worked well for us. We haven't adjusted our [under rating] to the market, and we think in fact, that discipline is what gets reflected in our unit price.

So is that going to make it more challenging, keeping your return expectations where they are -- where they've been since you guys have come out, because that number of 12% to 15%, long-term IRRs levered hasn't changed since January 2008, at least not per my recollection. Is it making it more challenging to acquire now that asset prices have moved up pretty significantly over the past couple of years but your return requirements are the same?

The -- I guess our view is, if you're patient and if you have the benefit of what we have, which is a great business that we can invest a significant amount of organic capital into as well as taking advantage of Brookfield's global asset management platform where we can invest in many geographies and many sectors opportunistically, that we can achieve those targets. So, I think that's been the success of our franchise for a number of years, and we would rather stay patient and invest in those opportunities that meet our returns than reduce our return expectations.

And, Brendan -- it's John. I think if you look at the deals we closed in the fourth quarter of last year, that demonstrates that we have been able to deploy quite a bit of capital, and those fit the return targets that we established back in 2008.

Yes, so as I look out, because you had an active fourth quarter, you had an active year overall, you've got some organic opportunities within the business, but it seems like some of those -- the rail has obviously got a big driver in 2013 versus 2012. That's pretty helpful. It seems like some of those organic opportunities, just because it's a bigger base now or maybe slowing down as it adds to the percentage of the bottom line. So I guess I'm sort of trying to drive at, do you think that the -- as you look at the investment pipeline of external opportunities that are out there, do you feel confident that you're going to be able to close a like number of deals as you look out in '13 and beyond as you've been able to do over the past couple of years?

My sense is that our current pipeline of investment opportunities is probably as robust today as it has been for a number of years. Obviously, back in 2009, when we did the Babcock transaction, that was a unique point in time, and that was obviously significant transaction in relation to the size of the Company. But, if you look at last year and the level of capital we deployed, the number of opportunities we see are easily as comparable in size as to what we did last year.

So, that's helpful. So, if I -- excluding external opportunities, which are always hard to figure out when and if those are going to close, if I look at your organic growth trajectory relative to the growth trajectory that's been in the past, it's been high and it's been -- the organic growth has been pretty significant with some of the big projects that you've had, rail most significantly. But then you've had the external growth, too. So, do you think that -- outside of external opportunities that could come up -- do you think, as we get into 2014, beyond '13, where you've got a lot of these projects that are going to be pretty additive, that your growth rate gets to the more normalized sort of 5%, 7% that you guys have outlaid in your long-term projections, or do you think that you can be above that level in '14?

As we get into 2014, the way we look at the business is that we should be able to get inflationary growth on 65% of our EBITDA, and in addition to that, volume metric growth, a number of the businesses within our transport business. And then, we've got pretty recurring growth CapEx that would be in the energy distribution business, in our electricity transmission business and a number of others. And, we think with that, we can probably hit the midpoint of that range. And then, on top of that, you've got the project that Sam mentioned, the bio mass terminal in the UK that's a pretty good-sized project. We're actively working to try to do something with Dudgeon, and there's a number of other projects that are in earlier stages with the railroad in Western Australia. So, those will all provide nice upside if we get them over the finish line to that midpoint of the 3% to 7% range. And then, on top of that, we think we've demonstrated that we've been able to execute acquisitions that have been for pretty good value, which would further drive growth. So, that's sort of the way that I would look at the building blocks of our growth going forward.

Okay. That's very helpful. Then, just last one -- so, John, I just wanted to sort of understand the UK distribution sale and relative to the book value. So, you guys sold $235 million tranche, I think 20% of it implies like it's roughly $1.1 billion, $1.2 billion. You acquired, I guess, $525 million in the quarter. Does that suggest that the prior book value was $125 million, or is that mixing equity and asset base?

No, that's right. The book value of our equity of GTC, which is the old business, the regular distribution business was $125 million.

Okay. And the $525 million, that number -- was that the equity value that was invested or was that the asset value?

That's the equity.

And the $235 million was the equity as well?

That's the equity we sold, yes.

Okay. Great. Thank you.

(Operator Instructions)

Bert Powell, BMO Capital Markets.

Thanks. Just a question, John, on the rate base in the utilities segment. You're up significantly in the quarter. The return on rate base was 12% last year. Given the ramp with the acquisitions in the fourth quarter, is 12% the right way to think about that return on the rate base, or is that biased upwards? Just trying to get a sense of the impact in terms of the return on the rate base going forward here.

Bert, I think the 12% is a pretty good marker for it. We bought an incremental interest in Transelec, and then the combined UK distribution business is a strong generator from a return standpoint as well. So, I think we should be able to maintain that level of return on rate base with those new acquisitions as their run rate is fully reflected in our cash flows.

Okay. Perfect. And, in terms of the take-out financing, can you give us a sense of what -- how you can lower your costs on that? What sort of magnitude does that get reflected through in terms of funding costs? You have an opportunity just to refinance at lower rates in addition to extend.

In terms of take-out financing, we are looking to put long-term financing on both the Australian railroad as well as the UK-regulated distribution business. We have gotten investment grade ratings for both of those businesses, so we would look to execute in the private placement market for a good amount of the financings for both of those businesses where we've got strong relationships. So, I think we should be able to do rates that would be representative of a mid BBB-type rating category for those businesses.

Okay. Now, just trying to think about the business holistically, with this, what does that do for the interest costs going forward relative to where they are today. I'm just trying to get a sense of, all in, what does this look like?

In terms of the interest costs, those financings with our debt portfolio the size that it is it's probably not going to move the needle that much. I think those are going to be pretty attractive executions that we get. I don't think it's going to move the needle of our overall average interest rate that much.

Okay. Perfect. Great. Thank you.

There are no more questions at this time. I'll turn the conference over to Mr. Pollock for closing comments.

Thank you, operator. And, I'd just like to thank everyone for participating on our call today, and we look forward to speaking with you again next quarter to review our progress.

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