Brookfield Infrastructure Partners LP (BIP) 2015 Q4 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the Brookfield Infrastructure 2015 fourth-quarter conference call.

As a reminder, all participants are in listen-only mode and the conference is being recorded.

(Operator Instructions)

I would now like to turn the conference over to Melissa Low, VP of Investor Relations and Communication. Please go ahead.

Thank you operator and good morning. Thank you all for joining us for Brookfield Infrastructure Partners year-end 2015 earnings conference call.

On the call today is Bahir Manios, our Chief Financial Officer, and Sam Pollock, Chief Executive Officer. Following the remarks we look forward to taking your questions and comments.

At this time I would like to remind you that in responding to questions and in talking about our growth initiatives and our financial and operating performance we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information on known risk factors I would encourage you to review our annual report on Form 20-F which is available on our website.

With that I'd like to turn the call over to Bahir Manios. Bahir?

Grade, thank you Melissa and good morning everyone. Brookfield Infrastructure achieved record results in 2015 in spite of the drag from the effect of foreign currencies. Our successful year was somewhat masked by the volatility in equity markets, stocks in our peer group sold off in response to market anxieties despite infrastructure assets remaining highly sought after by private institutional investors.

We're fortunate that in this environment we're able to find ways to capitalize on this dislocation by being a buyer of publicly listed companies and a seller of assets in the private markets. Of course, our unit price is not immune to negative sentiment but we're pleased with the results of the business and are very optimistic about the Company's prospects for the coming years.

The following is a summary of our key accomplishments during 2015. First, we generated very strong results. Our FFO per unit of $3.59 increased by 12% on a same-store constant currency basis, demonstrating the strength of our operations and highlighting the benefits of owning a diversified portfolio of high-quality infrastructure assets.

Second, we invested approximately $600 million in organic growth projects. These projects will expand the size of our utilities rate base, our road and rail networks and our energy systems. We expect these projects will generate attractive risk-adjusted returns and lead to EBITDA growth of almost 10% on a run rate basis once fully online.

Third, we established a communications infrastructure platform. We invested approximately $415 million in a leading French communication infrastructure business in March 2015. This business generates secure and sustainable cash flows in addition to providing further diversity to our portfolio.

We also committed over $1.5 billion of capital. These include our toe-hold position in Asciano, an Australian rail and import logistics operator; our increased ownership in our US natural gas pipeline system; and expansions of our toll road, gas storage and district energy platforms.

Fourth, we've also been working hard to strengthen our balance sheet. In 2015 we successfully accessed the capital markets, raising a total of about $2 billion at the corporate level through a series of equity debt and preferred unit issuances. We currently have almost $3 billion of liquidity positioning us well to execute on our advanced initiatives.

And finally, we launched the next phase of our capital recycling program. We opportunistically completed the sale of our New England electricity transmission business, generating an IRR of almost 30% and launched two sale processes that we expect will generate over $300 million of net proceeds.

Turning now to our financial results. And as I noted earlier in my remarks, our results were strong as we reported higher FFO in all of our operating segments compared to the prior year. For 2015 we earned FFO of $808 million or $3.59 per unit compared with $724 million or $3.45 per unit in the same period in the prior year.

We benefited from the contribution of our newly acquired communications infrastructure asset and strong organic growth across the business. This was partly offset by the impact of foreign exchange which reduced our results by approximately $75 million as well as the impact from the timing of capital raised earlier in the year that is not yet contributing to earnings. Excluding the impact of our unit issuance our FFO per unit would have increased by 12% compared to the prior year.

Our utility segment generated FFO of $387 million during 2015, an increase of 5% from the prior year. On a constant currency basis, results were up 9% driven by inflation indexation and investments in growth capital projects across the segment.

Our UK regulated distribution business continues to outperform very well and the outlook is exceptional. We've generated 243,000 new connections, a sales record for us that's well in excess of 138,000 installations in 2015.

In 2016 we'll be increasing our offering to six products with the addition of smart meters. We will shortly sign an agreement to acquire up to 700,000 smart meters over the next two years at an estimated capital cost of $220 million. While this investment is modest in size, we believe we're well-positioned to grow this part of our business and meaningfully participate in the UK's GBP12 billion smart meter rollout.

Operating performance at our Australian terminal was solid with the facility recording a utilization rate of 81% in 2015. This performance highlights our customer's attractive position in the Bowen Basin, one of the lowest cost regions in the world for metallurgical coal production.

And finally, as part of our previously announced capital recycling program last week we entered into definitive agreements to sell our Ontario electricity transmission operation. This business generates steady and reliable cash flows but we believe we can reinvest the proceeds into higher returning assets.

Upon completion of the sales process that attracted substantial interest from multiple buyers we agreed to sell this business for gross proceeds of CAD370 million with net proceeds of approximately CAD220 million. This translates to a multiple rate base of close to 1.7 times and represents a return on our investment of close to 20%.

Our transport segment generated FFO of $398 million, an increase of $6 million from the prior year. Our results benefited from tariff growth across the majority of our operations, higher volumes at our rail logistics business in Brazil and cost savings at our Australian rail operation. These positive results were offset by the conversion of these earnings in foreign currencies into fewer US dollars which reduced results in the segment by approximately $60 million in addition to lower traffic volumes at our Brazilian toll road business.

Overall our rail operations have exceeded our expectations this year. Our Australian railroad experienced volumes above take or pay levels from our iron ore customers and above average grain volumes. Given the uncertainty over commodity prices in the short to medium term, we've been proactively looking at various cost-reduction measures to allow us to mitigate any potential impacts from revenue shortfalls arising from our iron ore mining customers.

In our Brazilian rail and logistics business we continue to see volumes ahead of our underwriting. This has been driven primarily by growth in agricultural volumes as exports of these products have benefited from the decline in currency. We plan to continue to capture this growth as well as increase our market share through investments that will de-bottleneck our system and that will provide end-to-end logistics solutions to our customers. One of the largest of these investments is a BRL2 billion expansion of our port in Santos which is now 70% complete.

Our energy segment generated FFO of $90 million for 2015 compared to $68 million in the prior year, mainly as a result of organic growth initiatives. Same-store growth for this segment was 18% for the year, driven primarily by improved volumes at our North American natural gas transmission business and a more meaningful contribution from our district energy business that continues to execute on its multifaceted growth strategy.

Our French telecom infrastructure business acquired in March 2015 generated FFO of $60 million for the nine months. Results so far have been slightly ahead of underwriting and our management team has been working hard to build a strong pipeline of growth opportunities in the business.

During the year we secured two key contract extensions with mobile network operators or MNOs whose contracts were approaching expiry. Both extensions were for an additional 10-year period at favorable terms which highlights the strategic nature of our towers as part of the MNO networks. We now have long-term contracts with all of our MNO partners which bodes well for our business as a strategic participant in any consolidation in the country.

So that concludes my recap of our financial and operating highlights. I'll turn the call over to Sam to provide commentary on our outlook and to provide an update on some of our major initiatives.

Great, thanks, Bahir. And good morning everyone.

Over the past year we've continued to pursue investments to build out our operations. Weakness in commodity markets, parts of the capital markets and certain economies around the world have created numerous opportunities to deploy the capital we raised during 2015.

In August 2015 a consortium led by ourselves reached an agreement with the board of Asciano to take the business private in a transaction valued at approximately AUD12 billion. Our transaction was subject to a regulatory review and as most of you know, unfortunately, the regulators' initial assessment of the impact of the transaction on competition in the Australian rail sector differed from our own.

Over the past several months we've engaged with the ACCC, the Australian Competition and Consumer Commission, and various customers to address these concerns. In the meantime, a consortium of prominent infrastructure investors put forward a competing proposal to Asciano and its shareholders. During the quarter our consortium acquired a toe-hold position in Asciano to improve our position to successfully complete the transaction.

Our consortium acquired a total interest of approximately 19.2% at AUD8.80 per share. Brookfield Infrastructure's share of that investment was approximately $900 million.

We expect that this transaction will play out over the coming weeks and months. The competing proposal as well as our own requires undertakings to the ACCC. And the ACCC has committed to comment on two proposals including the adequacy of our undertakings by February 18. The outcome of these deliberations may have significant bearing on which transaction ultimately is successful.

Our consortium is comprised of a number of the largest and most sophisticated infrastructure investors globally. We are confident that we have the resources and flexibility to further refine our proposal if necessary to satisfy the concerns of the ACCC and continue to provide a compelling value proposition to Asciano shareholders.

While we will not be able at this stage to comment on what the specific terms of a revised proposal might be some of the alternatives include reducing the size of our participation in the transaction which will correspondingly enable us to reduce the use of BIP units as part of the consideration. Rest assured despite the competitive nature of the transaction we will remain disciplined and very patient.

The second initiative I'd like to mention is our investment in an NGPL. We are pleased to have partnered with Kinder Morgan on the joint acquisition of the remaining 53% of NGPL that we did not already. And today we own the business 50/50 with Kinder.

We invested approximately $106 million to acquire our additional stake and over time anticipate further capital commitments to fund projects and delever the business. Originally this investment came with our acquisition of Babcock & Brown back in 2009 and 2010 and we've endured a fairly challenging five-year period with it. Nonetheless, we are confident that the business reached an inflection point midway through 2015 and that the prospects for the business going forward are strong.

A good indicator of change in the business is our contract profile. As an example, as of today approximately 80% of 2016 revenue is fully contracted with an average duration of seven years taking into account the contract that we signed recently with Cheniere.

At this time last year our average duration was only two years. As a result our exposure to market sensitive revenue is substantially reduced.

We believe this business will be one of our main organic growth contributors as we expect EBIT to grow by approximately 20% in 2016 with a further step-up in 2017 and 2019. Now that we have solidified our investment in NGPL our focus will turn towards new energy infrastructure opportunities in North America where we believe for the first time in many years we will be able to make investments on a value basis.

Lastly, we recently decided to drop our efforts to acquire a 25% stake in Invepar from OAS as we could not reach an acceptable agreement with various stakeholders. However, our due diligence effort has not gone to waste. Concurrent with our discussions with OES we were offered the opportunity to fund a BRL500 million portion of a $2 billion shareholder loan directly into Invepar.

That translates into about $125 million. The loan is indexed to inflation, bears interest at approximately 20% and is repayable with any asset sale proceeds. Invepar will likely proceed with asset sales and we will be in a strong position to compete as we've already completed due diligence on all these assets.

We are also currently evaluating a number of once-in-a-lifetime opportunities across several sectors in Brazil including gas and electricity transmission, roads and rail. We are particularly enthusiastic with gas and electricity transmission opportunities as these assets have availability-based revenue frameworks and revenue indexation.

Before I turn to our outlook for the business I thought I might spend just a couple of minutes commenting on the apparent disconnect between public and private valuations. This is an issue that often gets raised with us by investors.

As many of you appreciate, the overriding mood in the market for the past month or two I'd say in particular has been a mix of pessimism, risk aversion and overall skepticism. Our experience tells us that investor psychology can at various points in time be a bigger influence on stock markets than fundamentals.

And while the extent and breadth of the current market correction is likely due to negative sentiment for the most part, it is our view that certain sectors, in particular the MLP sector, does suffer from poor fundamentals. Aggressive valuations in the North America energy infrastructure sector combined with a dramatic change in drilling economics justify a downward re-rating of many MLPs that had volume and market sensitive rate exposures.

For other infrastructure asset classes we believe the story is different. From a fundamental perspective our view of long-term growth remains relatively unchanged as is our view that interest rates will remain at relatively low levels for at least the next several years.

In addition, the investment thesis for the infrastructure sector as a low risk participant in the critical economic backbone of the economy is still very much intact. So for most non-energy-related infrastructure asset classes, we feel the fundamentals are still good.

Another dynamic that investors should be aware of is that the private infrastructure markets are experiencing money flows diametrically different than the public markets. While public security investors are pursuing risk-off strategies and reducing exposure to the equity markets private investors are steadily increasing their allocations to the infrastructure sector. We can validate that claim as our ability to track institutional capital to invest alongside us has never been greater.

The sophistication of this market has also increased substantially and given their desire to buy assets to match very long dated liabilities, these groups will take a longer-term perspective in evaluating opportunities. Equity return expectations for institutional investors are approximately 6% to 10% for core infrastructure assets. The low end of this range typically relates to utility assets or BBB investments in North America and the UK.

While it's difficult to generalize across infrastructure sectors and regions, we would estimate that private market valuations probably exceed the public equity market valuations by at least 30% to 40% today. Our view of the underlying intrinsic net asset value of Brookfield Infrastructure's business relative to our unit trading price is consistent with that.

In summary, many infrastructure businesses listed in North America including Brookfield Infrastructure have well contracted cash flows and limited exposure to the energy sector. Furthermore, given the amount of project capital seeking infrastructure asset exposure and the low likelihood of materially higher interest rates we do not foresee a change in asset values for infrastructure assets.

As a result, we believe that once market sentiment has moved past this current fear, high-quality public companies should quickly recover lost ground in their share prices. And if public market valuations remain low we'll likely see a significant increase in take private transactions.

So now let me move on to the outlook for our business. As we look ahead into 2016 it appears that the market outlook will remain choppy for at least some period of time.

In spite of this assessment we believe our business model which is focused on high-quality assets and is diversified by sector and region should enable us to deliver solid results. Our ability to grow distributions in adverse capital market conditions is a result of our unique internally generated organic growth and our ability to recycle capital. Regardless of our ability to access equity markets, our annual distribution growth target of 5% to 9% remains unchanged.

Our balance sheet is strong, liquidity is robust and our operations are currently performing well. As a result we are pleased to announce that the Board of Directors has approved a 7.5% increase in our quarterly distributions to $0.57 per unit.

Our primary focus for 2016 is to complete the various fully funded strategic initiatives that we've announced. These acquisitions will significantly expand the scale of our transport and energy segments and will meaningfully add to our overall cash flows. Over and beyond these announced transactions we are evaluating several attractive value-based opportunities in Brazil and in the US midstream sector.

We are also focused on capital recycling where we will continue to see exceptional private market pricing for our high-quality mature assets. Until we see a recovery in our unit price, we see this strategy as being the primary funding source for new investments going forward.

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

(Operator Instructions) Cherilyn Radbourne, TD Securities.

Thanks very much and good morning. So clearly the headlines around Brazil are a source of investor anxiety.

So I was just wondering if you could update us on your thinking around the timing of an economic recovery in Brazil. I think you had been thinking perhaps 2017 and was just wondering if that's changed?

Hi, Cherilyn, it is Sam and I guess I'll tackle that question. Obviously we don't have a crystal ball in relation to Brazil and so take our views with a grain of salt I guess. We would probably today continue to see the beginnings of a recovery in 2017.

I think this year will still be a relatively difficult year based off of what we're seeing in our businesses today. But we are seeing some green shoots in various parts of the country that are benefiting from the low currency.

So there's no doubt there is starting to be some impact from that enhanced cost base as certain industries have. But I'd say it's still going to be a tough year.

And the only element that is very unpredictable is we just don't know what types of policies this current government will be able to implement to assist the economy to recover. That's probably the biggest question mark today.

And is that scaring away investors incrementally in terms of those who might be competing against you for asset sales?

Yes, today my perspective would be that the number of competitors inside the country are still relatively few. Most of them I think are challenged with either issues related to scandals or just high debt levels but we're starting to see more interest from foreign investors. There's definitely been a pickup, I wouldn't say it's rush but I'd say the tide is turning as far as foreign investment looking at the country.

Okay, and then last one for me just given your comments around the disconnect between public and private market valuations and as you look at your own unit price how do you think about buybacks of your own units versus the attractiveness of the deals that you might have in your pipeline?

That's a good question. I think we always look at our shares as a source of investment and we have in the past acquired units.

Today we're somewhat restricted because of the bid that's in the market so we don't have flexibility to buy our stock. But once the Asciano situation has resolved itself and we don't have those limitations, if we continue to trade at these levels I think it could make a very compelling opportunity for us.

Great. I will pass it off to others. Thank you.

(Operator Instructions) Rupert Merer, National Bank.

Good morning everyone. The question for Sam or Bahir.

You mentioned that capital recycling will be used to support your growth requirements if unit prices remain depressed. Of course, recently you've been focused on recycling transmission assets in North America. But in your view what's the low-hanging fruit for recycling going forward?

Sure, hi Rupert. Look, as you can appreciate we don't want to specifically name businesses that we would sell just because it causes anxieties internally. But what I can say to you is that the things we generally look at I'd say there's two criteria.

The first one is is the business mature and have we fully executed on or at least executed on the lion's share of opportunity to drive value. Many of the businesses we buy we often have identified particular ways to create value. So if it's at the latter end of that process and we think we have achieved most of those things then that's something that we would definitely put into the mix as far as considering it for an asset sale.

And then the second thing we would consider is it a business where we just think others are placing a considerably higher value to the business than we would. I think in the utility sector we generally have seen that phenomenon today, there are great assets but we just think the returns are at a level that we can redeploy them at much higher levels elsewhere. So I realize that doesn't -- that's not going to help you pinpoint exactly where we're going to go next but hopefully gives you a flavor for how we think about it.

Great. I imagine there's some regional concerns as well at this point given recent moves in foreign exchange?

Yes, that's a fair comment. We would probably be reluctant to sell assets in jurisdictions where the currency has moved far off what we think is a reasonable level. However, the one caveat to that is to the extent that we're selling an asset in a jurisdiction and then redeploying the capital in that same jurisdiction then that's a consideration we can then take off the table.

Great. And then secondly, looking at your same-store constant currency growth of 13% year over year in Q4, can you talk generally about how much of that is volume driven versus inflation driven? Then getting back to Brazil, how much inflation are you seeing in Brazil today and can you talk about how you could see that inflation feeding its way into your contracted revenues in 2016?

Hi, Rupert, it's Bahir. I can take this one. So you know as you noted our same-store growth was pretty robust.

We probably see today about average 3% to 4% coming from inflation indexation as well as pretty strong volume growth. And really where that was is in our Brazilian rail logistics business and in our district energy and natural gas transmission businesses as well.

So there was a good chunk of that. And then we did have a lot of CapEx that's been commissioned or came online as well during the year or during quarter vis-a-vis the prior year. And that contributed pretty significantly as well and most of that is coming essentially from our utilities rate base where typically once we spend the capital we start earning on that rate base in a short timeframe.

So that's really the breakdown here. As far as inflation in Brazil today in our toll road business we're getting anywhere between 6% to 7% inflation tariffs. That was for 2015.

But going forward in 2016, we expect about 10% tariff growth. And that should help a lot just given some of the traffic declines that we're seeing in the country. So I think the outlook for next year on the inflation side is very positive as well.

Great. Just as a quick follow-up, how much decline are you seeing in traffic or would you anticipate in traffic in 2016?

So, Rupert, we have seen a fall or a drop in traffic in heavy traffic volumes and that's in our Brazilian business. But that's been offset quite a bit because our light vehicle traffic and essentially that's in our Chilean toll road has been very robust compared to 2014.

So on a blended basis we've seen about 3% to 4% overall traffic decline. But that's been more than offset by the inflationary tariff increases that we're seeing. And hence why you've seen our EBITDA in our toll road business in local currency terms increase by about 5% compared to the prior year.

Excellent. Thanks very much.

Bert Powell, BMO Capital Markets.

Sam, on Invepar is there anything in terms of the assets there that is imminent or particularly attractive to you?

So two questions there. Are there assets that are attractive? Absolutely, there's a number of assets that we find very attractive.

There's a great road in Peru that's called BPR that we'd like. We've always been attracted to the subway system in Rio. And there's a couple of friends that they have been Brazil that are good, some that aren't as good.

And then the only question mark on the business I'd say the most challenging asset but the one with the most optionality was always the airport in Sao Paulo Guarulhos. So the short answer is there's a number of great assets in the portfolio but all of them with some issues that need to be sorted out, hence the decision we made.

And as far as whether there is asset sales that are imminent, we believe that there likely will be but it's not right for us to comment on the timing of that -- it's not within our control nor is it up to us when they get sold. But our expectation is that there will likely be something that takes place this year.

Okay. And walking away includes walking away the dip is off the table as well?

The dip is off the table. We almost in effect did a dip, just a dip into a different company in fact into an even more secure position.

Okay, great. And then Sam, I just want to go to Australia and the track access agreements and take-or-pay, clearly there's been some press around the challenges that some of the iron ore miners have. And I wonder if you could just go into two things.

One, what is probably the status with one of the larger guys in terms of tonnes per annum Karara? And also what are the opportunities on the cost savings side for those operations to mitigate that? And I assume of that lot of that cost saving that you do would get passed back through to some of the guys that are struggling?

Sure. So you know, I can't get into specifics on any negotiations. I think you're alluding to a lot of press around KML's effort to initiate discussions with basically all their suppliers.

They would be probably the most affected by the low iron ore price just because it's a relatively new mine, they are still ramping up and their cost base is probably a little higher than some of the others. You know we're participating in a very constructive manner with them and with all the other participants.

If anything is going to happen it will be as a result of everyone participating. We're really encouraged by the fact that the owners and their banks which are all Chinese and effectively state owned are very committed to the projects.

I think they are seeking some signs of support from all the stakeholders during this difficult period of time. But we definitely get the sense that they're not looking to walk away by any stretch. And we'll have very constructive conversations with them.

I can't get into exactly what that means for us and the others. But I think our interest is obviously to preserve them as a long-standing customer and it's a very long life mine and it produces great iron ore for their operations. So I'd say while it's unfortunate the price got to this level I still see them as a very good customer for a long period of time.

Okay, perfect. And just last question, just in terms of smart meter, how would the return on that rate base compare to what you currently get in aggregate for your regulated businesses?

Okay, so look, again I can't be overly specific because it's a competitive market and we compete for those installations. So obviously what our returns would be if I told you then others -- the marketplace would know what to use to compete against us.

But what I would say is our competitive position with our other products is probably better. Just given the uniqueness of the business model, our ability to do multiple connections and obviously just our market position allows us to earn better returns.

We're getting into smart meters. We have a couple of strong competitors there today, one of which is Macquarie. It's a relatively low risk business with very solid contractual frameworks.

And so the returns are slightly lower but we think that they are still very accretive for the business. And we think we can leverage our position today where we manage and own a bunch of conventional meters to get some synergies. But I guess the short answer to your question is that the returns would be slightly lower than what we achieved today in our other product offerings.

That's great. Thanks, Sam.

Frederic Bastien, Raymond James.

Hi, good morning. I was wondering if you could expand on your decision to double up on the NGPL.

About a year ago it sounded more like you were a seller of that business. But pursuant to your strategic review probably there was an opportunity to buy the stake that you ended up buying. But wondering if you could expand on that please?

I will tackle that and maybe Bahir might want to add a few comments as well. But look, I think it was one of those businesses that going into last year we still hadn't reached that inflection point that I referred to and at that point in time we were probably indifferent as to whether we were buyers or sellers.

I think it was always on the table as to whether we would just buy out our partners or sell a long with them. Many of them had reached a point where they decided it was time for them to sell. And for us the decisions to reinvest really landed on two elements.

I think the first one and probably the most important one was just discussions we had with Kinder themselves about rebooting, restructuring the relationship to first see them increase their ownership so that we were more heavily aligned, adjusting some of the operating framework and liquidity frameworks which would be more typical of what we have in our other businesses where we could have a more active role. And I think just generally you know we just saw opportunities to do more things with Kinder. So I think the relationship took a very positive turn and we're quite enthusiastic about that.

And then on top of that as we were weighing the various alternatives, we could see a significant change in just the dynamics around the gas flows and what it was doing to this particular pipe. And with the reversal of the REX pipeline and the gas from the Marcellus now flowing into our system and really tightening up the contractual profile, we had just much better visibility into the cash flow streams for long period of time in this business. And it just I guess reaffirmed our initial view from many years ago that this was an important pipeline and that it would be a great asset for us.

So I guess those were the two factors. But I guess I think that's really all I can add to it. I don't know, Bahir, if you have anything else to add to that?

No I don't think so.

Okay thanks and with respect to this reversal project, I mean is this -- where are you at in terms of completing this? Is this a long-term process or how quickly can you get that reversal going?

Well there's some element of the reversal that we can affect without any capital. And then there's a significant portion that requires some capital that we're just in the process of scoping out and implementing. And as I mentioned in my remarks, the increase in EBITDA which is largely a result of that project will take place over the next three years.

Okay, that's helpful. Last question for me, wondering I guess maybe last year you announced that you would acquire the remaining stake in Arteris you didn't own with Abertis.

Where is the status on that? I haven't heard anything from that in a while.

So we are still progressing that. We're in the stage the process where we are receiving feedback from the CPM regarding our take private documents.

And I believe we have just two comments left to resolve. And our hope is that we would have the privatization complete by end of first quarter or early second quarter. As I understand I think there's broad support in the market for the privatization, so we don't see any issues at this stage.

Okay, but you expect a conclusion in the next few months?

That's correct.

Thank you very much.

Robert Kwan, RBC Capital Markets.

Good morning. Just kind of coming back to the public-private conversation, and does where the unit prices change how you think about your normal targeting in terms of the co-invest structure as you move forward with new investments?

I guess it depends on the transaction side. Co-invests typically occurs when we max out the amount that would be invested by the fund and as you're familiar with approximately 40% of the capital to reach investment comes from BIP.

And so on larger deals, an Asciano-type deal, in today's environment we would probably raise more capital from co-invest than we would from BIP just because of our limited resources. And obviously in periods of time where we have more resources then we would possibly take up a larger share. But I think your comment is fair.

And I guess just staying with that and coming back to the comment earlier about share buybacks, recognize that maybe the Asciano transaction while it's still here might be freezing out. But if the disconnect is that wide and it sounds like it's not just kind of generalizing across the market you certainly feel your unit price is the same way, what's the thought of undertaking larger asset sale process in or for some of the larger assets with the idea of if Asciano comes together that could help fund the cash component, even if it doesn't come together you'd be monetizing at a pretty good price and then if your share price is weak you could continue then go in or just a acquire new businesses for value?

So I didn't quite follow all that, Robert. But so putting aside Asciano I think is what you said and we'll see how that plays out. But I think more broadly strategically would we sell assets just I think if I cut through your question was would we just sell assets to buy back shares?

Why not just go larger than the roughly $300 million-ish that you're guiding to?

And look, I think that something we'll monitor. It's hard to say just how many shares or units we could buy. Once we started buying it's possible that the share price would increase very significantly as soon as we started buying and so we wouldn't want to sell a large asset and find that we had lots of liquidity and the share price moved up.

But I think more strategically we would be prepared to buy shares if the share price remains low for a period of time and consider that as an alternative to buying other assets. So I don't think -- I think we're saying the same thing, I think the short answer is, yes, we would buy shares on a larger basis.

Okay, that's great. If I can just turn to midstream, Sam, I think you had started out earlier in the call talking about the potential to maybe for the first time given the way some of the valuations have fallen and as well some of the assets that are now up for sale that otherwise might not have been available in the better markets get into the North American midstream side of things.

But then you went on to make a comment both in the letter and on the call about maybe the valuations that we've seen, particularly with the assets or the stock, the MLPs stocks has not just been negative sentiment but really underlying poor fundamentals. So I'm just wondering can you reconcile those two? Maybe it's just a subset of what you're looking at whether it's pipes versus gathering and processing but just any extra color on that?

Well, I think all we were identifying, always trying to identify was that I don't think for many of the MLPs that this is a sentiment base that they are just going to snap back. I think many of them have re-rated in value.

But I think as has happened in every market and to extend happened to us with the tide going out all of the stocks have traded down. And in those, in that universe there are a number of high-quality businesses that have traded off more than they probably deserve to. And this represents an opportunity for us to identify those higher-quality businesses that are mispriced and to see if we can acquire them.

Okay, so are you seeing better value than actually requiring the publicly traded companies as a whole? Or are you seeing better value at this point in just some of the assets that seem to be shaking loose from sellers that otherwise might not have sold just given the distress that's going on right now?

I think it could be a combination of both. There's always challenges in executing take privates as we've learned.

But you know with our gas storage investments we did a mix of buying assets on the value basis from distressed sellers and then we've also bought distressed companies. So I think as we look to roll up a meaningful position in the US midstream sector we'll take a very similar approach. We will buy assets and we'll buy companies.

That's great. Thank you very much.

Brendan Maiorana, Wells Fargo.

Thanks, good morning. Either for Bahir or Sam, so you guys addressed a little bit of counterparty exposure I think earlier on the rail response to a question on rail.

Broadly if you think about your long-term contracts and the counterparties, do you see any counterparty risk for any of the long dated contracts that you have? And if so do you feel like there is a good pipeline of customers or potential customers that could backfill any risks that you might see throughout the businesses?

Hi, Brendan. You know we analyze and assess the counterparty risk across all our businesses. I think most of the ones that are of particular concern are showing themselves today whether that's -- what's the steel company in PD ports or some of the commodity situations in Australia.

I'd say generally we've got a pretty well diversified business, so nothing that's keeping us up at night. Obviously we're watching the iron ore situation the closest. We feel pretty good with the low cost nature of our coal terminal in Australia, so I'd say that's less of a concern and the construct of the business is different, so it tends to get socialized across all the base.

We feel good about our telecom customers in France. There will probably be some consolidation there but that could potentially be an opportunity for us.

And I think in the energy sector in the US where maybe you might think there is some counterparty issues that have been generally talked about I'd say our customer base are mostly LDCs with solid rates. And we don't really have any of the notable exposure that people talk about like Chesapeake and others.

So I generally feel pretty good about that. So I think we're on top of it and obviously the ones we'll have to continue to report to you on will be the iron ore customers in Western Australia.

Okay, great. And then question probably for Bahir.

So $75 million impact on FX for the annual 2015. If currencies stay where they are today what would be the head wind as you're thinking about it for 2016?

So as we've noted before, on the hedged currencies, so this would be the Australian dollar, CAD, euro and the pound, generally speaking we could see a dropoff in hedge or I would guide you to a 5% overall dropoff in hedge rates in 2016 for those currencies. And then the rest of them are unhedged. So I guess if your question is if they stay where they are today then there would be no movements with respect to those.

Brendan Maiorana

Okay. And so the 5% drop in hedge rates from a dollar perspective, is there a sense of how much that would have an impact relative to your 2015 results?

Yes, so whatever FFO is coming from those currencies then generally that's about 60% of our FFO today. Then you would see a drop off of 5% in 2016 from those currencies.

Okay great. So like 3% or something like that on an overall basis? Okay. And then last one for you just the $900 million investment in Asciano, are the economics of that current investment roughly comparable with the proportionate economics that you laid out in terms of the original acquisition as it was disclosed in the fall?

Sorry, Brendan, can you repeat that?

Yes, so just on the kind of -- are the economics of your $900 million investment in Asciano as it stands today. Just kind of thinking about how it would flow through current earnings, current FFO, are -- is the return on that investment comparable to what the return would have been on a pro rata similar dollar basis for the transaction as you laid it out in the fall in terms of the overall acquisition that was announced?

So I'm not sure this is an accounting question or an economic question. But from an accounting perspective I believe we haven't taken any results on that.

So Brendan, if the question is more towards what would actually get booked in our financials versus sort of returns, let's leave the returns aside here, from an accounting perspective this would be classified as an available-for-sale investment or otherwise referred to in US GAAP as a cost accounting investment. So it would be more any dividend income that we received would be what we would report into our results. And for the fourth quarter which is when we made this investment we haven't recorded anything with respect to that capital.

Okay. Going forward let's just say if there is not resolution of this right away, so maybe you keep that investment for the first quarter, all you would report in your FFO is whatever the dividend income would be there. You wouldn't kind of take in your pro rata portion of the results at your $900 million investment?

That's correct. It would be all driven by dividends.

Okay great. Thank you.

This concludes time allocated for questions on today's call. I would now like to turn the conference back over to Sam Pollock for any closing remarks.

Okay, thank you operator and thank you to everyone who joined the call today. We look forward to updating you again on our progress next quarter.

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