Brookfield Infrastructure Partners LP (BIP) 2014 Q4 法說會逐字稿

Thank you for standing by. This is the Chorus Call conference operator. Welcome to Brookfield Infrastructure Partners 2014 fourth-quarter and year-end results conference call and webcast. 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 ask questions. (Operator Instructions). At this time I would like to turn the conference over to Tracey Wise, Senior Vice President, Investor Relations. Please go ahead, Miss Wise.

Thank you, operator, and good morning. Thank you all for joining us for Brookfield Infrastructure Partners year-end earnings conference call.

On the call today is Bahir Manios, our Chief Financial Officer, who will review our performance for the year, and Sam Pollock, our Chief Executive Officer, who will provide an update on our growth opportunities and an outlook for our business. Following their remarks we look forward to take 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 Bahir Manios. Bahir?

Thanks, Tracey, and good morning, everyone.

Brookfield Infrastructure had another successful year. We delivered strong results and established new platforms that will enable us to continue to grow and diversify in the years ahead. We faced economic headwinds in some of our key markets; nonetheless we generated an 11% increase in our FFO per unit on a comparable or same-store basis.

In 2014 we utilized a multidimensional strategy to deliver solid growth on a low risk basis. The first component of this approach was progressing the capital projects in our $700 million backlog. Second, we completed several tuck-in acquisitions into our operating platforms in addition to two larger investments that we made into marquee assets in Brazil and France. We were also focused on risk management within our existing business by continuing to extend our debt maturities and by identifying the next round of assets that we are looking to sell as part of our capital recycling program.

With that said, I thought I would touch on a summary of our key accomplishments in 2014. First, we invested more than $600 million in organic capital projects. These projects will grow our utilities ratebase and expand our transport and energy segments. We also added $900 million of new projects to our capital backlog that we plan to commission over the next 24 to 36 months.

Second, we deployed approximately $250 million into new investments in North America consisting of tuck-in acquisitions that expanded our port, gas storage and district energy platforms.

Third, we invested $350 million into a general cargo rail operation in Brazil. This business complements our rail franchise in Australia and provide significant opportunities to deploy further capital to service the growing agricultural and industrial sectors in Brazil.

We also established a communications infrastructure platform; we committed to an approximately $500 million investment in a leading French communication infrastructure business. This is our first entry point into a sector where we believe there are a number of growth prospects. And Sam will touch on this more during his remarks later on.

And finally, we refinanced approximately $4 billion of debt in 2014, continuing to capitalize on this historically low interest rate environment. The average maturity profile for Brookfield Infrastructure is currently over 10 years, financed on a weighted average basis at less than 6%.

Turning now to our financial results. In 2014, we earned FFO of $724 million or $3.45 per unit, compared to $682 million or $3.30 per unit in 2013. On a per-unit basis our results increased by 5%. However, on a comparable basis, we delivered FFO per unit growth of 11%. This was driven primarily by growth in our utilities ratebase, higher volumes in our transport operations, and inflation indexation realized across most of our operations.

With a distribution of $1.92 per unit, these results translated to a 62% payout ratio which continues to be at the lower end of our long-term target levels.

Our utilities segment generated FFO of $367 million compared to $377 million that was earned in 2013. The decline in our results was a result of the sale of our Australasian regulated distribution business in the fourth quarter of 2013.

On a comparable basis, our results for the segment were very strong and were up 12%, benefiting from record connection activity in our UK regulated distribution operations, the commissioning of projects into our ratebase across all of our operations, inflation indexation as well as lower costs due to margin improvement programs implemented during the year.

Our transport segment contributed FFO of $392 million this year compared to $326 million in the prior year. The substantial growth in FFO was primarily the result of new investments in Brazil, where we increased our ownership in [Arctoros] and acquired a significant rail operation. The segment's results also reflected higher volumes across most of its operations driven by a favorable grain harvest in Australia, an increase in light vehicle traffic in South America and higher bulk and container activity in the UK. In addition to the strong volumes experienced in the segment, we also benefited from higher tariffs across most of our assets.

Our energy segment earned FFO of $68 million in 2014 which was roughly in line with the prior year results of $70 million. We continue to be impacted by a very challenging commodity environment that has negatively impacted results at our natural gas transmission operations. This was largely offset by the increased contribution from our district energy operations.

As mentioned before on previous calls we are very excited by the future prospects of our district energy business. Since entering the sector in 2012 when we acquired a heating and cooling system in Toronto, we have invested in five additional systems in the United States. In the past two years we have focused our attention on acquiring additional district energy networks and using our operating expertise to pursue organic growth initiatives within each one of these systems.

This past year we expanded our scope to other regions where we have an operating presence. We are pleased to report that we recently acquired our first district energy project in Australia and are close to finalizing the acquisition of the second. These projects will give us the opportunity to develop centralized systems to service residential and commercial customers in Sydney and regional Victoria.

This project -- these projects will require approximately $100 million of capital and should allow us to earn solid risk-adjusted returns that are underpinned by long-term take or pay contracts. As part of this initiative, we've also completed a restructuring of our existing energy distribution business in Australia to include its operations as part of our global district energy platform.

This platform will provide for shared services support and act as the regional hub of activities for the sector on a go forward basis.

And finally before turning the call over to Sam, I wanted to give an update on our liquidity and financing initiatives. We finished the year with over $2 billion of total liquidity, and since year end we've taken additional steps to further increase this position in anticipation of the positive investment environment that exists today. We have identified over $1 billion of non-core assets that we are targeting to sell.

In this regard, we have kickstarted the sale process on two businesses and hope to have further news on this front in the future.

In addition, we've progressed plans to issue $300 million to $500 million corporate debentures, capitalizing on our solid corporate debt metrics and our BBB+ rating. We hope to come to market during the first half of the year and we expect strong demand for these bonds in this environment.

With less than 10% of our total debt maturing in the next two years and our substantial liquidity position, our balance sheet is in very good shape, positioning us extremely well to take advantage of this positive investment environment.

And so with that I'll turn the call over to Sam.

Thanks, Bahir, and good morning, everyone.

Last quarter I wasn't able to talk about our French Towers acquisition since it wasn't signed at the time although we did announce I believe probably a day afterwards. So while it may seem like old news, I thought I would nonetheless provide a brief update on this call.

We are progressing this acquisition, which is the largest independent indication tower infrastructure business in France. Brookfield Infrastructure's equity commitment for this investment will be approximately $500 million. We received unanimous Works' Council approvals in mid-January, and subject to receiving EU and French competition and regulatory approvals, the transaction is expected to close by the end of March.

TDF provides us with a large-scale, communication infrastructure platform that has considerable growth potential. We believe that the communication infrastructure sector represents an attractive asset class as it provides essential services and demonstrates utility-like characteristics including long-term contracted cash flows and inflationary pass-through mechanisms. The long-term demand for Tower Networks shows solid growth potential as the data needs of mobile users continues to expand at exponential rates.

This creates organic growth opportunity through densification of power infrastructure to meet consumer expectations for higher speed and quality service.

We are also seeing a trend among existing mobile network operators who are moving away from the physical ownership of tower infrastructure to focus more on the acquisition of spectrum rights. This change provides us with the profit to make investments in physical infrastructure on behalf of these operators.

Overall, TDF should provide us an excellent platform to pursue transactions in the European telecommunications infrastructure space.

Now moving on to our outlook for the business. The two most common questions we get these days is regarding the impact of oil in our business and whether we see opportunities for step change growth. So I thought I would briefly touch on both of those as, in some respects, they are interrelated.

Beginning with the price of oil, it is clear that one of the most remarkable dynamics impacting global markets over the past few months was the sudden decline in oil prices. Since August, the price of Brent crude decreased more than 50% from over $100 per barrel to approximately $50 today.

The sustainability and long-term impact of lower oil prices are difficult to project. We are fortunate that none of our revenues have a direct commodity linkage to oil. Furthermore, furthermore, should oil prices remain low, we anticipate that lower fuel prices will stimulate traffic levels on our roads and reduce cost for mining and shipping customers. This is all positive for Brookfield Infrastructure.

Now with regard to potential large-scale transactions, we have historically been very successful in acquiring large-scale businesses during periods when capital has been constrained. As a result, the energy sector may service investments prospects should oil prices remain low for a period of time.

However, at the moment, there is still a significant amount of private capital following the sector. So while we will be looking at opportunities in energy infrastructure, we will also be carefully monitoring developments across the whole global infrastructure landscape.

As of now, 2015 is shaping up to be potentially one of the most active periods for infrastructure investors. In that regard I wanted to highlight four areas where we are seeing transactions arising.

First is government privatizations. In Australia alone, a large number of state and federal government privatizations have been proposed over the next two to three years that we estimate may total approximately $50 billion. In the coming three to six months, we expect the sale of two high-quality large-scale transmission and port assets to commence.

As we have witnessed this past weekend in Queensland, the timing and scale of these privatizations may be impacted by local elections. Nonetheless, the trend of privatizations in Australia and elsewhere will continue. We have a large presence in Australia in the port space and tremendous expertise in the transmission sector that we will utilize to assess these opportunities.

The second example is Brazilian construction companies. Large-scale asset purchases of South American infrastructure assets from Brazilian construction companies is looking increasingly feasible. Many of these companies are experiencing financial challenges and we were very successful in acquiring high-quality assets from European construction company several years ago. And we will leverage our unique history and expertise of operating in Brazil to serve for similar quality investments.

The third example is corporate deleveraging carveouts. For several years, we have been monitoring opportunities to acquire assets from European utilities and global mining companies with capital constrained balance sheets. European utilities have been active sellers over the past few years and we expect this trend to continue. Mining companies have had to reduce capital programs in response to significantly lower commodity prices and are now more consistently evaluating whether they need to own their own infrastructure.

As I mentioned earlier, we will now also be on the lookout for midstream investments in the energy sector, as a number of E&P companies may shortly face the same challenges as the mining sector.

Lastly, we are seeing that, as the infrastructure asset class continues to mature, a number of investment funds raised between 2005 and 2008 are approaching their expiry. We've started to see the first wave of divestiture us from this ownership group. Since formation of Brookfield Infrastructure we have not seen this level of market activity. Despite the supply of opportunities, we do expect to see competition for many of these assets as the quantum of private capital seeking investments in the infrastructure sector is substantial. Nonetheless we believe that the combination of our well-capitalized balance sheet, significant access to the capital markets, and strong operating presence in key markets around the world will provide us with a competitive advantage to growing this environment.

We will remain disciplined and target acquisitions that will provide Brookfield Infrastructure with the best risk-adjusted returns.

Looking into 2015, our outlook for the global economy is cautious. But we remain optimistic about Brookfield Infrastructure's prospects for success. With the regulated and contractual nature of our assets we have demonstrated that we can deliver solid results in a variety of economic environments. As a result, we are pleased to announce that the Board of Directors has approved a 10% increase in our quarterly distributions to $0.53 per unit.

This is the fifth consecutive year that we have been able to provide double-digit distribution growth for our unit holders.

With that, I'd like to turn the call back to the operator to open the line for questions.

(Operator Instructions). Frederic Bastien, Raymond James.

Good morning, all. I was just curious on -- you mentioned the impact of foreign exchange was felt across the utilities platform. But there was no mention of that with respect to your transport platform. So I was wondering, given that you have a fairly substantial pool of business in Brazil, surely it must have impacted, so if you could provide some color on that, that would be great.

Thanks, Frederic. Yes, you're definitely right. It did have an impact on our transport operations. I would note, though, that for about nine months of the year if you're looking at our results on a full-year basis, our Australian dollar was hedged at very attractive foreign exchange rates. But the decline as a result of FX was -- I would say insignificant compared to the prior year.

In the toll road segment, we have experienced obviously a decline in the Brazilian real and the Chilean peso. But that was more than offset with solid growth that we've seen in traffic, albeit it was lower than prior years. You know, in Brazil we still saw traffic growth of 3% for 2014 and 3% as well as for Chile, and we also get the benefit of the tariff pickup there. On average our tariff is up by 5% in our tollroad business. Our tollroad business went up by 8%, and in addition to having the Australian dollar hedged at attractive rates, shielded us quite a bit from negative FX movements.

Thanks. And with respect -- I understand you edge your foreign exposure on a rolling basis, six to eight quarters out. Are you happy with this strategy? Is that working for you and given the rapid, I guess, appreciation in the US dollar against other currencies, is that proper -- are you comfortable with the whole strategy?

We are currently comfortable with the strategy. We've got 75% of our foreign denominated FFO hedged for the next 18 to 24 months, as you correctly pointed out. We are happy with the strategy because we saw it helped quite a bit with our results in 2014.

We signaled in the prior quarter that, obviously, when we go into 2015 and 2016, our hedge rates will come up as attractive hedges expire and we have to roll them with new contracts. But I would say that on a blended basis, given the hedge -- the various hedges we have for all the currencies, we are significantly ahead of where the current spot prices are. And the outlook for some of these currencies continues to be challenging.

So we are very pleased that at least for the next 18 to 24 months we've shielded ourselves from the more negative movements in our foreign exchange.

That's helpful. The other question that I have relates to the Australian coal terminal operations. Similarly, since the downturn, I believe that you had -- you didn't have any contracts maturing, but just wondering where we are sitting right now and whether there's some contracts that are coming up for renewal right now and what your clients are seeing.

I guess I'll answer that question. You know, we've got a portfolio of contracts in place that probably range in duration there between when they expire at the next regulatory reset, and others that go out probably 12 to 15 years.

Generally, what occurs in DBCT is that these are evergreen contracts, and customers have the right to extend them, and given the fact that it's probably by far the lowest cost terminal option for these customers, they as a matter of course do that as a matter of fact. And so we don't expect that many customers will let their contracts lapse.

The other element of that regulatory framework is that if a customer, because if they potentially shut down a mine, decide they don't need the capacity or are exiting the region, then that capacity will go into the queue, and a customer who's got a -- it's his name in the queue will then pick up that capacity. To the extent no one does pick up the capacity, which has never happened in the life of this facility, then the cost of that person's percentage of capacity would then be socialized across the remaining users.

So from that perspective we tend not to get overly fussed about the contracts. But hopefully that gives you a little bit of color into how the system works.

Thanks. Sticking with Austral -- sorry, the last one for me. I read just a couple weeks ago that you joined a consortium preparing a bid for the Apache assets, of the gas natural business. Not sure if you can comment on that, but if you could it would be great.

You know, we tend not to comment on acquisitions, and that's one that I can't really speak to.

Fair enough, thank you.

Brendan Maiorana, Wells Fargo.

Thanks, good morning. Sam, strength in the US dollar. Is that making Brookfield's currency more competitive as you're looking at these acquisition opportunities? Or are most of the folks are also looking at these in a US dollar base, so it's not really a major impact one way or the other?

Interesting question. I think the investments in US dollars obviously are getting cheaper. But I think when we look at them and as others look at them, the IRRs on the investments probably are not impacted because obviously depending on your view of long-term rates, everything that's adjusted accordingly. And so, I'm not sure it makes a huge amount of difference because most of the people we are competing with for the types of things we do tend to be very large institutions. And whether or not they're in Australia or Europe or North America, they tend to have large pools of capital. And so it doesn't impact the size of deals they can do.

So I think the short answer, I don't think it changes things all that much.

And from your perspective, is there -- do you have a long-term view of the dollar versus maybe the other currencies that you're looking at, and does that have an influence on how you think about deal underwriting metrics? Or are you guys looking at the world in sort of a currency-agnostic kind of view, and just making bets based on where kind of forward curve expectations are, or what have you?

We do have views on all the regions we operate in. And I think you are right, I think it is obviously -- we think a lower risk proposition these days to make investments in Australia and South America, in particular, just to touch on those two regions, with the dollar and the real having re-rated to much lower levels. We see them probably near the bottom end of their long-term ranges.

That's not to say they might not go a bit lower in the short run, particularly if the US raises rates in the next little while and other countries in response to the commodity prices tend to lower them, much like Canada did. So we could see some lower rates, but I think we are -- from a long-term perspective we are at fairly attractive entry levels for those countries.

And you had mentioned looking to sell some assets, you got some stuff in the market now, some stuff that maybe comes out later in the year and also mentioned that it's very active pipelines. An investment standpoint, just near-term impacts sort of going in an exit yields versus going in yields. Do you think that those are roughly in line with one another, or would we expect that there would be a significant difference based on the investment outlook just for 2015?

Our general strategy is to recycle investments where we can sell them at lower returns, lower embedded IRRs than what we can replace them at. So we think obviously we can achieve that. And exiting businesses where we don't have the same level of growth opportunities compared to the investments we are looking to acquire.

So obviously, our whole objective in recycling capital is to create that value positive arbitrage. So yes, I would hope that on a long-term basis absolutely, the returns we are replacing the assets we are selling are positive.

In the short run, sometimes that's not the case. Because we are selling a highly contracted stable asset that doesn't have much growth, and it's possible it could appear to (inaudible) year one, but on a longer-term basis it will definitely be positive for the business.

Just lastly, Bahir, so corporate financing, is this strategy -- just given that you are a bigger company now, and you can support the $300 million to $500 million worth of debt at the corporate level, is it driven by rates that are more attractive corporate financing, and is this something that we should expect to be part of the capital stack for BIP on a go forward basis?

Maybe it's a combination of a lot of the questions you just asked. As you'll recall we've got a corporate rating of BBB+ that's been granted to us with the premise that we don't exceed a ratio of 10% of our total debt in the business at the corporate level. And so given where we sit today, that ratio is about 5% to 6% so there's a bit of room there and given where the interest rate environment -- where interest rates are today, we feel like this is another avenue to explore for us to bolster our liquidity further and whether or not we will become perpetual issuers of corporate debt remains to be seen in the future. But generally we don't seek to issue a lot of this corporate debt.

It's just that today where we sit at with our ratios we feel like there's a little bit of room here, and we can access the markets at good levels.

And if you guys were to issue in near-term, any sense of where rates would shake out?

It's tough to say with the current environment. We think it will be very attractive, it's just that the market has been a bit choppy. But this should be below 4%.

Great, thank you.

Cherilyn Radbourne, TD Securities.

Thanks very much. Good morning. I'm just curious, in terms of the acquisition opportunities that you lay out in the letter to unit holders, how would you rank those in terms of the size of the opportunity, I guess, versus the likelihood of success based on the competition you think you would face?

That's a tough one, Cherilyn. They are all very different. I would say that the first one I referenced, the government privatizations as well as the fourth one I referenced, which was the sale from investment funds, those tend to be more marketed situations. Definitely government transactions. And as a result, there's a bit more predictability around them.

I would say the challenge with them from our perspective is that the ability for us to enter into a bilateral negotiation or use our relationship to give us an inside track is very difficult. And so, they tend to be a little bit more competitive from a cost of capital perspective. So, I would describe those situations as probably the lower returning opportunities but ones with greater certainty.

And they tend to be large. Government privatizations in Australia are massive. The dollars are huge.

So there is some great opportunities to invest capital there. Whereas the second and third examples that I referenced, the transactions with Brazilian construction companies and the corporate deleveragings, those are very much made for our specific capabilities of where we got our teams and our platforms out there in the various markets, and working with people to help solve their own specific situations. And so, they tend to be higher returning but less predictable and usually slower transactions.

So I don't know if that's helpful, but that gives you a little bit of flavor of how everything matches up.

No, that's good color, appreciate that. Hopefully my second question is a little easier. Just in terms of the transportation backlog, can you just give us a sense of how much of that relates to the Brazilian real assets, and should we think about that as analogous to the growth project in Australia, where there is sort of a stepwise change in the cash flow but you actually have to spend the capital first?

You know, that's a good question. I think -- the short answer is yes. Except the one proviso is that, in Australia, most of the projects that we undertook there, particularly the rail projects, they were contracted on a long-term basis. And so we had a lot of visibility into what the cash flows would be, whereas in Brazil there's a little bit more volume risk because even though we have a good sense of what our customers are up to, we are building a lot of these facilities with a relatively much smaller amount of contracted customer volumes, and then looking to contract it on a longer term basis.

So we feel we can achieve higher rates over time with that strategy, and -- but we are taking a little bit more volume risk by doing that. Is that helpful to distinguish the difference between the two?

No, that's helpful. Thank you. That's it for me.

But the growth projections are very similar as far as what they can achieve.

Just on your initial numbers-wise, we've got a total backlog of $655 million in our transport segment, and $240 million of that relates to the Brazilian real acquisition.

Perfect, thank you.

Robert Kwan, RBC Capital Markets.

Good morning. Just on the energy infrastructure opportunities, can you talk a little bit about which kind of subsegments, whether it's gathering processing, pipelines, storage, as you've been active in the latter, are you seeing the potential for the best opportunities?

We are looking at all of the above. We've seen the best near-term opportunities in the area where we are focused on, which is gas storage, and we still see opportunities to grow that business in the near term. So, that's something that we are quite interested in. The dollars aren't massive, but we think the risk-adjusted returns are the best we've seen in the sector.

With respect to the other parts of the midstream sector, returns are still fairly aggressive. And you know, we did bid on a transaction late in the year, and rates of returns that the winning party bid at were still much lower than what we are comfortable at.

So that's why I want to be a little more cautious on the outlook for acquisitions in that sector just at this stage in time, because I think there is still a fair amount of capital. But our expectation is that the winds are changing and that we could be entering a very interesting time to make investments.

And I guess, just following on that, in terms of attractiveness from a geography point of view, Canada, US, I don't know if you want to get into basins, if there's any color on that. As well, historically, you had a cautious approach around area dedication deals. I'm just wondering if that view has changed or whether you're going to be looking for take or pay?

Look, I think -- our approach to underwriting isn't going to change, and I think our views around take or pay versus area dedication, I think, will turn out to have been wise over the next little while as rig counts go down and we see volumes drop across the sector. It may not happen this year as everyone is hedged, but I think over time you're going to see people be disappointed with that type of structure.

So we are not going to change the way we look at it. But I think we're -- we have various areas where we think that are more prolific, both from a gas and oil perspective and we will continue to focus on those markets.

Just turning to the tollroads, you referenced solid light vehicle traffic. I'm just wondering if you have some color as to what you're seeing in terms of the mix with heavy vehicle traffic on your system? I guess the data points have been a little weak in Latin America on that?

Yes. So we are seeing -- I see light traffic growth anywhere plus or minus 5% in Brazil and Chile. And heavy traffic is probably declining plus or minus 2%. So on average, growth 3%. Our Chilean tollroad is mostly light traffic, as it's a commuter road, but there is much more heavy traffic on our Brazilian and German roads.

And do you see that down 2% abating, or is that your expectation going forward that it's going to continue to be weak year-over-year?

I think 2015 is going to be a tough year, particularly for Brazil. But you know, we are hopeful that with some of the changes the government has made with new ministers, and we think a more market-oriented outlook, we would say it's perfect. But we are hoping that things will improve beginning 2016. But the outlook for Brazil in 2015 will be tough, particularly with the water shortages in the country.

Just last question here, you referenced with the [2005 2008] vintage infrastructure funds, just wondering do you have a sense or can you give us what you see as the size of the capital that's still deployed in those pools that could be up for sale?

In aggregate, I don't know. We just know what's for sale at the moment, and there's quite a few investments that are up. But the capital, I would say, is probably in total at least $20 billion. That was raised in that period of time. And it won't all come out this year but it's going to come out over the next one to three years.

That's great, thank you very much.

Paul Tan, Credit Suisse.

Good morning. With the growth of your district energy business, are you seeing synergies with the Brookfield Properties Group especially in cities where there's a large office property presence such as Toronto, Houston and the one that you mentioned I think recently, Sydney?

I guess the short answer on that is yes. We leverage several parts of the broader Brookfield organization. It's not just the Property Group itself because the benefit of the Property Group really only occurs when we have a system in a city where they have buildings.

So obviously if that's the case, then we look for ways where we can turn them into a customer. It's obviously an easy conversation to have.

But I would say the two other areas where we really leverage the Company, one is with our construction division. They are working with lots of developers who are building precincts in various parts of the world. We've seen this in Australia, where the government has encouraged a number of developers who are developing these precincts, and they are looking to install centralized thermal systems, and also water systems, recycling water systems. And those represent great opportunities for us to get introductions and to acquire the infrastructure.

And so, that's really the nature of what's happened in Australia. So, we took advantage of that. And then, as we underwrite new opportunities, we do have a real estate advisory group, and they have been excellent at giving us insight into the development schemes for various cities that we are looking at. So we do wherever we can try and [mine] all the information within the organization to build that business.

And do you look for geographies in that district energy business in cities where the Brookfield Group currently operates in, like the recent Australia one, the Seattle one, you guys -- the Group has a couple buildings there. Is that sort of the go forward strategy, or it's -- [or not really].

I would say the strategy doesn't necessarily overlap entirely with the real estate group, we are not looking to invest just where they are. That's very helpful, if that's the case, and can provide us with a competitive advantage.

But I would say, generally, we are looking for scale markets where there's a need for thermal energy. There's a large university hospital network, there may be a large CBD, and given the weather in the city, they require other cooling or heating. So that could be on the heating side it could be Northern Europe, on the cooling side there's many places in the US and Australia that are great markets for these types of systems.

Great, thank you very much.

Bert Powell, BMO Capital Markets.

Thanks. Good morning, Sam and Bahir. The $1 billion of asset sales identify, can you talk to us a little bit about how you're thinking about the timing of that? And also I think there was some news in the press that you'd already begun the process on in GPL, and just how that figures into your disposition strategy in terms of raising cash.

I'll tackle those questions. First, as far as the timing of our program, I think we highlighted on an investor day that recycling capital was a continuous effort for us, and that we've earmarked probably $1 billion of assets for sale over the next plus or minus 3 years. And so I would say we are just at the front end of that initiative. We've got two businesses that are currently for sale that I would say are one's well advanced, one's in the early part of the process.

Typically I wouldn't comment on what businesses they would be. I think one of our partners has already commented about NGPL, so it is fairly well known that we are exploring strategic alternatives for that business.

There's not much I can add to what they've already said. It's early days in that process. In reports that are out there, I think people have highlighted the fact that this is a very attractive system, and while it does have high leverage, buyers have many opportunities to delever it and take advantage of the opportunities of the sales-bound gas flows. So we are pretty optimistic on that and hopefully we'll have more news for everyone in the next quarter or two.

Thanks for that, Sam. And I just want to go back to the capital projects for VLI. And I think they are kind of broken into three buckets which was the terminal in Santos, the rail link and some rolling stock investments. The 240 that's in the capital backlog today for VLI, where does that fit? In terms of those three buckets?

So the near-term projects, there's a much longer term capital program that's not all captured in the backlog today because we tend just to cover plus or minus two years of projects. And so, a good chunk of that capital relates to the tipland port in Santos, which is probably halfway done.

It will -- we think it will be a fantastic project and provide a tremendous time saving and cost saving for customers, being able to avoid all the congested areas in Santos port. So that project is underway, and I think in total that project is about on a 100% basis, BRL2 billion projects, plus or minus BRL800 million. And then in addition to that we have a number of inland grain terminals that we are building. They are smaller obviously in scale than that port, and again they are tremendous debottleneckers for the whole-grain system. They will cut the time it takes to load and unload from today, which is probably three, four days to less than seven hours.

So, we have a couple of those terminals that are being built. And I would say that's probably the main focus on the system, as well as certain parts of the rail system that are being upgraded. I hope that's helpful, give you a little color.

That does, Sam. I was just trying to figure out what's the gating issue that gets you from kind of whatever the 2 million tons to 3 million tons per year to 15 million tons when that kind of, I guess, a little bit of following on Cherilyn's question in terms of when do you kind of start to have all the pieces in place to allow that growth to come in, in terms of tons traffic on the network.

The growth is much more incremental than lumpy than you would have seen in Brookfield Rail. Because it's not one customer-specific. And the rail system itself is a little bit different. There's sort of almost three systems when you think of it. There's a self system, there's a mid-North system and a North system. And there's different projects that relate to each section of the operation that are underway, and they will come in at different times.

So unfortunately, we can't really direct you to one specific project that's going to, all of a sudden, turn a switch on, on a bunch of new volumes. But as far as a near-term project to look to and see, I think, some meaningful impact will be that tipland port project. That's a meaningful project that should be done in the next 12 to 24 months.

Last question, Bahir. Just in terms of closing for TDF, what's your kind of best guess today or timing on that?

We continue to be on track for an end of Q1 closing. So, all looks good, and fingers crossed we'll get that done by the end of first quarter.

Okay, thank you.

This concludes the time allocated for questions on today's call. I will now hand the call back over to Mr. Pollock for closing comments.

Great, thank you operator, and I'd just like to thank everyone on the call today for participating. We look forward to speaking with you again in May on our next call. Thank you.

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