Brookfield Infrastructure Partners LP (BIP) 2016 Q4 法說會逐字稿

Welcome to the Brookfield Infrastructure Partners' 2016, fourth-quarter and year-end conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded.

(Operator Instructions)

At this time, I would like to turn the conference over to Melissa Low, Vice President Investor Relations and Communications. Please go ahead Ms. Low.

Thank you operator, and good morning. Thank you all for joining us for Brookfield Infrastructure Partners' fourth-quarter earnings conference call for 2016. On the call today is Bahir Manios, our Chief Financial Officer and Sam Pollock, Chief Executive Officer. 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 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.

Thank you Melissa, and good morning everyone. 2016 was an active year for Brookfield Infrastructure. We delivered on many key priorities and the business is now better positioned to prosper than before.

Our results were strong, we added high-quality assets to each of our operating groups, and maintained high level of liquidity and financial flexibility. We generated a 14% increase in FFO per unit and an 11% increase in quarterly distributions, coming on the back of another strong year of a same-store organic growth and contribution from new investments.

Before I go through our recap of our financial results, I wanted to touch on a few of our key accomplishments for the year. First, we deployed approximate $850 million in organic projects. These projects expanded the size of our utilities rate base, our road and rail networks, and our energy systems. We also replenished this backlog by adding approximately $1.4 billion in new projects. The level of organic growth potential in our business is strong and provides a high degree of visibility, as a substantial portion of the capital spent is expected to be completed in the next two to three years.

Second, we executed on over $2 billion of investments which include our first acquisitions in India and Peru enabling us to expand our global toll-road business. We also diversified our ports operation by acquiring a world-class Australian container terminal business.

And lastly, in Brazil, we're pleased to have executed upon our investment thesis that we have been focused on for almost two years now. We made a commitment to acquire high-quality natural gas transmission systems and secured a number of electricity transmission projects. On the balance sheet front, we raised almost $1 billion at the corporate level through a series of equity and preferred unit issuances and completed over $3 billion of long-term financings, as we capitalized on historically low interest rates.

Last, but not least, we have launched the next phase of our capital recycling program. During the year we opportunistically raised almost $1 billion of proceeds through realizations including selling our Canadian electricity transmission and European gas distribution businesses generating IRR's of 20% and 32% respectively, in addition to also monetizing our toe-hold position in Asciano.

Turning now to our financial results, which as I noted earlier were strong. Our businesses generated FFO of $944 million or $2.72 on a per-unit basis, compared with $808 million or $2.39 per unit in 2015. Which represents increases of 17% and 14% respectively. Our results reflect the contribution of new investments that closed during the year as well as organic growth of 10% achieved across the business. It is worthwhile noting here that this meaningful growth in our FFO per unit was achieved despite the impact of foreign exchange that affected our results by approximately $43 million.

I will now take you through the results of our operating segments in a bit more detail. First, our utilities business generated an FFO of $399 million for 2016, which is an 8% increase over the prior year, excluding the impact of foreign currency. Results for the segment continued to benefit from inflation and fixation and investment in growth-capital projects that more than offset the impact of foreign exchange and lower revenue from the sale of two North American transmission businesses.

I also wanted to touch from a couple of key highlight items. Or key highlights, as they pertain to our utilities of operating group. First one being our UK distribution business where we have another exceptional year, setting another record for new sales. During the fourth quarter the business also completed a GPB285 million financing via the US private placement market, which was oversubscribed by more than 2.5 times and completed at an average all-in rate of 2.9% with an average term of 15 years.

Second, we are also expecting to close shortly on the acquisition of a Peruvian water irrigation system for approximately $15 million. While modest in size, it is a high-quality business that is being acquired for good value and will add another leg to our growing water business. Lastly, at our regulated terminal in Australia, the regulator recently released a final decision in relation to the rate we [set]. While the decision confirmed a lack of 5.82%, the regulator provided our terminal with the ability to enhance its revenues through certain expense recoveries, which should result in higher-than-planned annual FFO of approximately $10 million.

Turning now to our transport segment that generated FFO of $423 million in 2016, which was 12% ahead of the prior year or 6% including the impact of foreign currency. These results were driven by higher tariffs and volumes across a number of our operations. Results for the segment also reflect the contribution from the incremental interest we acquired in our Brazilian toll-road business during the year, the new toll-road assets in India and Peru that we invested in, as well as a partial contribution from the recently acquired Australian ports business.

A couple of operational highlights to note here would be first, at our Australian rail business, with improvement in INR prices throughout the quarter resulted in lower-than-expected customer discounts in the business. And also with respect to our newly acquired Australia container terminals, we're progressing well the integration plans there, actively pursuing a number of growth projects in addition to several cost-cutting initiatives.

Our energy segment generated FFO of $175 million in 2016, compared to $19 million in the prior year. This improvement captures the incremental contribution from increased ownership and reduced leverage in our North American natural gas transmission business. Contributions from a newly acquired gas storage business, as well as strong same-store growth of 16% across the various operations.

At our North American natural transmission business, the Chicago market expansion project was completed in November at a cost of $75 million, which was almost 10% below budget. This project will contribute approximately $10 million of FFO to BIP's results annually on a full run-rate basis. We're also seeing increasing demand for gas transported from the North end of our system to the markets in the South. This growth in demand is being driven by new investments related to US LNG export facilities and pipelines that export gas to Mexico.

Our first expansion scheduled to be in service in the fourth quarter of 2018, has a capital budget of $200 million and is supported by twenty-year take-or-pay contract with an LNG customer that should increase BIP's EBITDA by over $20 million per year. We believe that this is the first of several expansions of this nature that could materialize over the next five years. Finally, our communications infrastructure operations acquired in March 2015, generated FFO of $77 million for the year, compared to $60 million in the prior year.

Our Management Team in that business has been extremely focused on identifying growth opportunities, and during the quarter we made some good headway in that regard. First, a tuck-in acquisition of the [ETA's] group, a portfolio of around 400 sites, was recent closed on, where our share of investment was approximately $40 million and, also, we were recently selected as the preferred bidder to the deploy a fiber-to-the-home network in a town 35 km outside of Paris, connecting up to 85,000 households with ultra-fast broadband.

So that concludes my recap of our financial and operating highlights, and before I turn the call over to Sam, I wanted to provide some updates on our liquidity and risk management activities. During the past three months substantial progress is made on executing the funding plan for our strategic initiative. In November, a total of 23.8 million units were issued at a gross price of $32 per unit, raising proceeds of approximately $750 million.

Subsequent to period end, a preferred unit issuance was completed for approximately CAD300 million, capitalizing on Brookfield Infrastructure investment-grade credit rating and strong market demand. These initiatives have increased our corporate liquidity to approximately $3.2 billion.

From a risk-management perspective, 75% of our foreign denominated FFO has been converted back into US dollars for the next 24 months. Interest rates on approximately 90% of our long-term debt, has also been fixed for approximately 10 years, and on the financing front, we are actively working on two upcoming maturities: the first being the upcoming refinancing of our North American natural gas transmission business and also the corporate debt maturity comes due in the third quarter of the year.

Beyond these two refinancings, there are no other significant upcoming maturities during the next 24 months to address, and our debt maturity profile remains very well laddered. With that thanks for your time this morning, and I will now turn the call over to Sam.

Great. Thanks Bahir. The morning everyone. I thought I'd begin my remarks this quarter reviewing the investment environment and some of the strategies we're deploying to invest capital. For the last several years, the number one question posed by existing or prospective unit holders, has related to how Brookfield Infrastructure can source investment opportunities in this period of low interest rates, high liquidity and high valuations.

And while we've seen some movement in long rates, economic conditions for the most part, have not changed materially in the last few months. Our optimism about our ability to source attractive investments, is due to the fact in our experience, somewhere in the many markets we operate in, there is a company or government that is capital constrained due to uncertainties related to political, market or company-specific factors. For instance, a year ago the main driver of uncertainty was the direction of commodity prices and interest rates.

Today, the most common contributing factor to uncertainty seems to be political events. Our strategy to take a long-term perspective on the regions, where we have established businesses, and to invest further during periods of market weakness. In that regard, we seek to deploy capital in countries that a long-standing reputation of the rule of law, respect for capital and despite potential for growth and development in the future. While we don't know what may occur in the short term, we believe that countries we invest in have strong underlying fundamentals in the longer term.

Recently, we have taken a long-term view on Brazil by acquiring a number of high-quality assets. In 2016 the focus was on executing transactions, while the country was in a severe recession and lost its investment-grade status. We witnessed an environment where there was an increase supply in assets coming to market and in that case, particularly high-quality assets that would not become available under normal market conditions.

In addition, competition for those assets was limited. As a result, we are very fortunate that as Bahir mentioned we will be shortly deploying over $1 billion in the gas and electricity utility sectors. It is possible that similar situations may be developing in Mexico. Due to the protectionist attitudes garnering considerable momentum in the United States, the level of uncertainty and anxiety related to Mexico's future economic performance has not been this bad in over 20 years.

The peso has dropped to its lowest level since 1994, and the country's foreign direct investment is likely to slow down as capital sits on the sidelines. We believe that concerns over the country may overshoot, much like they did in Brazil, and as a result, our business development efforts have increased to capitalize on opportunities that may arise.

Our team spent a considerable amount of time of the last 24 months identifying mis- priced public companies to execute public-to-private transactions. And while there are still the occasional take-private opportunity, due to a mismatch between public and private valuations, our main focus at the moment has shifted a bit and is targeted towards corporate carve-outs.

These types of opportunities tend to occur when there's an acceleration of capital spend by industrial companies that substantially exceeds the availability of public market equity capital. As a result, industrials and other owners of infrastructure assets tend to look to sell non-core assets to fund the capital programs. This corporate carve-out trend plays well to our deep expertise in servicing and executing large-scale multifaceted transactions. We have historically been very successful in securing attractive large-core infrastructure businesses from industrial companies.

Some of the examples from our recent (inaudible) and past include: our acquisition of the Brazilian railroad from Bali, our North American container terminals that we bought a half interest in from Mitsui O.S.K. lines, and of course more recently the gas transmission assets from Petrobras. This year our focus is on monitoring corporate carve-out opportunities in the North American energy and Indian telecommunication sectors.

Going into India now, just to talk a bit about that, in India the government has made strides in making the operating and legal environments more investor-friendly and the expected GDP growth rate for the foreseeable future is far in excess of many developed countries. This makes an attractive market to invest in for the long term.

Last year we purchased our first infrastructure business in India, acquiring a network of toll roads that span the country, deployed just under $100 million. While modest in size, this transaction was a unique entry point into the country and one that allows us to establish ourselves as a local operator. Leveraging our new operating presence, we recently announced the acquisition of communication towers in India and what we would think of as a classic carve-out transaction.

We will soon be investing upwards of $200 million to acquire a portfolio of 40,000 telecommunication towers from Reliance Telecom, representing approximately 10% of the country's towers. The telecom's sector in India may create further exciting carve-out opportunities, as virtually all the large integrated mobile network operators are looking to raise significant liquidity in order to invest in the deployment of the 3G and 4G networks.

This is a high-quality business that is very similar to our existing tower business in France and generates secure and sustainable cash flows that will benefit from sizable growth in the industry. We are very excited about the prospect of quickly establishing a leading tower business in India and several other opportunities are being evaluated the could add meaningful scale to our global towers portfolio in the coming year.

So now let me move on to the outlook for our business. The contractual nature of the business positions Brookfield Infrastructure to deliver solid results regardless of the political and economic uncertainties in the world today. We generate steady and reliable same-store growth owing to the inflation indexation embedded in our contracts, volume growth on our networks, and the commissioning of growth projects from our capital backlog.

As Bahir talked about our balance sheet is strong, liquidity is robust, and our operations are continuing to perform well. As a result, we are pleased to announce that the Board of Directors has approved an 11% increase in our quarterly distribution to $0.435 per unit. This will mark the eighth year we have raised our distribution since our inception in 2008, and the seventh consecutive year that we have achieved double-digit distribution growth.

With a funding plan in place, our priority for the coming weeks will be to close the acquisition of the Brazilian gas transmission system and to start integrating the business into our utility's operating group. In our business plan, we traditionally estimate deploying anywhere between $500 (sic) to $1 billion annually in our new-investment activities; however, our current pipeline is pretty robust. As a result we believe Brookfield Infrastructure is well-positioned to continue to outperform its objectives and extend its track record of delivering double-digit growth in 2017.

We're also focused on executing the next phase of our capital recycling program with the maturing profile of a number of our businesses, proceeds from asset sales are expected to be $1.5 billion to $2 billion over the next few years. With that I'll turn the call back over to the operator to open the line for questions.

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

(Operator Instructions)

Cherilyn Radbourne, TD Securities.

Thanks very much, and good morning. Sam, maybe I could get you to start by elaborating a little bit on how long Brookfield has had a team in Mexico, and where you think opportunities could materialize as a result of the current uncertainty and currency weakness?

Hello Cherilyn, and good morning. Sure. I figured I might get a question on Mexico given it's a pretty topical item these days. So, we've been -- from the infrastructure perspective in Mexico, for about two to three years with an office that we opened up and with the people on the ground, Brookfield itself has been there longer.

We've owned industrial properties for a number of years and, in fact, sold them just not that long ago. But, suffice it to say, it is a region that we know fairly well, although not to the same degree obviously as places like Brazil. Having said that, what attracted us to the Mexican market more recently was the liberalization of the energy sector. I've made a number of trips down to Mexico, in fact, just one last week, where I go and meet with the CEO of PMEX, the CEO of [CSB], and with a number of ministers in government to check on the progress of the opening up of that sector in particular, which has been I would say for the last number of years our main focus.

I would say today, we also have an interest in a number of transportation assets and I think, despite a number of the negative tradewinds that there are in the market, given the devaluation of the peso, it could represent a very interesting entry point for people like ourselves and obviously the lower peso should enhance the competitiveness of the industry in that country.

Great. That's helpful. And then, on fiber to the home, you've secure your first mandate there, could you give us some color on how big you think that opportunity could be over time and frame the basic business model for us and how it might or might not compare to your UK connections business?

Hello Cherilyn, maybe I will take that, and Bahir can jump in if he wants to add more to it. The model in France is slightly different than what we have in the UK. The concept is the same though, in the sense that it's about providing a much higher quality service to residential customers.

What we've recently participated in was effectively a concession that was auctioned off by the government, whereby we have some certainty around the cash flows that we receive for deploying the capital. It's a limited [life] concession and in this case it was a relatively small investment from a Brookfield Infrastructure perspective it will be in the tens of millions of dollars.

Having said that, the government has indicated that they would do a number of these types of concessions, and I think the opportunity could be in the order of magnitude of EUR10 billion down the road. It's a very large initiative that is underway. The time of how that gets deployed, I can't give you good visibility on at this time. Does that answer your question?

I think it does. Yes. And last one for me, on the NTS deal, have you got a pretty clear path to closing that in Q1 or are there still some things outside your control?

On NTS, we are hopeful that in the next little short while, that we along with Petrobras, can provide a market update but what I can say at this stage is that most of the CP's between ourselves and Petrobras are pretty much done and that the only items that do remain, relate to regulatory approval and in that regard, we are working very closely with Petrobras and the regulator to expedite matters. I'm hopeful that this will close relatively soon, but that is something we will have to continue to give you updates as we go along.

Thank you. That's all for me.

Thanks Cherilyn.

Bert Powell, BMO Capital Markets.

Good morning, Sam and Bahir. Sam, I just wanted to start off with, in your letter you talk about focus of risk management and raising capital to enhance liquidity extending debt maturities are you incrementally more worried about the environment that is driving this and Brookfield asset management made similar kinds of comments in Q3 so just wondering if you're incrementally more cautious in the world.

Hello, Bert. That's an interesting question. When we make comments like that, it isn't really a reflection of any change in what we see as risk factors in the business. I think the reason I put that in the letter was more about ensuring that people and our investors are aware that were not just focused on new investments.

That running our business is the number one thing that we focus on day in and day out, blocking and tackling and making sure we generate those sustainable cash flows. And that we also, as Bahir likes to use the word bulletproof, that maybe a bit of a strong word, but we always want to bulletproof our balance sheet by having lots of liquidity and just pushing out those maturities as far as possible because we all know that there's cycles and you can never predict when they'll be a financial distress, and we always want to make sure that were never the party that having to hunker down during those periods of time in fact, we can be the ones that can be aggressively looking for assets. So when I talk about risk management is really about doing all the things that we think have made us successful and, given that comfort to our unit holders.

Okay. Thanks for that, Sam. And on the energy side, and NGPL, at least I think this relates to NGPL, EBITDA up 22% on 12% volume, is there -- given what happened with natural grass prices in the fourth quarter, can you help us understand how natural gas prices if at all affect the EBITDA or the FFO for this business.

We have two businesses in the energy sector, one is the gas storage and one is the gas transmissions. There is no direct linkage with natural gas prices and our results in the natural gas transmission business. There are at times cushioned sales that when they take place and if they take place when natural gas prices are higher, and that obviously is a positive factor.

But for the most part, higher natural gas prices just tend to mean that there is more demand and more demand means there is more volumes across our system that tends to push up spreads a bit. So there is that proportionate affect but its not the direct link. And our gas storage business, there is some correlation between higher prices and spreads, for our gas storage business, probably the most important factor for us though is seeing a return to the differences between summer and winter prices and that, probably more occurs when there is a better equalization between supply and demand, which we are now seeing.

So that was always our thesis on the gas storage business, that we would see a reduction in supply with lower prices. There's been lots of demand creation with new power plants and with exports to LNG into Mexico and with that coming in line that we would then see a more normalized spread between summer and winter gas. I know I probably went on a bit more than you ask for, but hopefully that's helpful.

Bert, Bahir here. Also, just to note that we did have a partial contribution from the Chicago expansion that we did that came online in November, so we had two months contributions from that contract and earlier, in the year, you might recall a couple of other contracts like the Sabine Pass, etcetera, had also come online, and so they would've had a full quarter of effect, and the contribution from all of the above year over year would have also contributed to a big part to that increase as well.

Okay. Thank you. Thanks, Bahir. And last question, maybe too early to talk about this, but just curious, you're doing a little bit of water but you've also made this investment in Poseidon, just wondering if you could just talk about that desal opportunity and how imminent that may be and what you're thinking there?

The water sector is something we talked about for a number of years as one that we think on a long-term basis is going to grow considerably faster than most of the other sectors. It's just such an important resource and it's one that we want to make sure that we have a presence. What were trying to avoid in the projects we got involved with it in some of the utilities where they tend to be more of a cost-to-capital game as supposed to an attractive investment opportunity, and so as you mentioned, we focused on water recycling in Australia, we recently just acquired the small irrigation system in Peru, which is more of a PPP-style business but one that we can grow in that country, and lastly, the water desalination business that we picked up late last year or in 2015, in California.

And on the water desal side, first on the project, the good news is, it is flagged by the current administration I think many others is one of the top infrastructure projects in the United States these days; I think it was on the top 50 and we think that given the drought situation in California, that this would be a critical insurance policy to ensure that they have adequate water at all times.

Having said all that, that is a very lengthy permitting process together in California; were hopeful that we're nearing the end of it. I think we have one permit or approval in particular that is left, and our hope is that by, for sure the end of this year, that we will have that done and that we will start that project. And the project itself is probably the order of magnitude of plus or minus $900 million and the equity investment in the fund will be probably (inaudible) $250 million and BIP's investment in that will be about 30%. So that gives you a scale of the opportunity.

That's very helpful, Sam. Thank you for that.

Robert Kwan, RBC Capital Markets.

Good morning. Just wondering as you look at potential transactions and you deemphasize here the public-to-private side, just wondering as you look back and where you thought there might of been some opportunities, what were some of the key reasons that you saw why we didn't see more activity in the public-to-private side?

Hello Robert. I'll tackle that one. Some of it may have been because we were just too slow in tackling some of them, and the market just recovered far faster than we would have expected. I'll be the first one to tell you that we saw lots of interesting opportunities in the energy sector and had done a lot of work and were ready to pounce but unfortunately, the capital markets moved quicker than we could and we didn't get it done.

So that's our mistake; having said that, you can't always -- they're not easy to do. And I think the other thing is despite my admission that we are a bit slow, it also is the reality that companies don't want to engage in a public to private if the correction has been for a fairly short period of time.

Usually there has to be a feeling that the company is re-rated at a low level and that it doesn't have access to capital and at that time they tend to be willing to have a discussion with parties like ourselves. So, I think there is a couple of factors, it's probably a bit of both but, having said that, we're always looking for opportunities and we think that's one of the tools in our toolkit that we can use.

And as we look forward talking about the carve-outs it has been something that you been quite successful with and you seem more optimistic, so I'm just wondering whether there are any trends in the market right now that you think has accelerated the likelihood of the corporate carve-outs versus optimism, maybe do a little bit more to something specific to some of the processes or negotiations that you are involved in right now?

Look, I think we're always in conversations with people around various forms of corporate carve-outs. While we defined it here, and we thought it made sense to describe it to our investors, this is a trend that has been going on for a number of years.

The most pronounced sectors where this is been done, has been the energy sector with the whole creation of the MLP model, but we see it with the carve-outs that have taken out with company-owned real estate and we see that in the real estate sector and of course our sister company BREP has done a good job in buying power facilities from industrial companies. So, in our business, what we do see is just mining companies and telecommunication companies, probably a bit slower to that phenomenon, and we are trying to be at the forefront of that.

That's great. And if I can maybe just come back then into NGPL, do you have some thoughts or early thoughts on the section five proceeding what potential impacts might be? And then, wrapped up into all of that, if we do see lower corporate taxes, that probably makes the achieved ROE worse as you think about the section five?

On your first question, we are a little perplexed over the section five. I don't think our sales (inaudible) expected it and I probably just encourage everyone to just look at the releases from Kinder in that regard. We don't think that we are over earning or if it is, it is relatively modest amount, and so we're hopeful that when the opportunity arises to sit down and go through the numbers that we'll be correct in that regard. So that's all I can really say at this stage.

In relation to your comment on lower taxes, I think I'd just be speculating. I can't say I've done the analysis yet, our team is that the analysis yet, to assess what impact there might be. And I'm not sure we know exactly yet what the new tax code will look like. Why don't we part that one for another day and let's see how it unfolds.

Fair enough and can I just ask one last quick question just on the capital recycling program; do you have any processes underway?

No we don't.

Okay. That's great. Thank you very much.

Ryan [Woonga], National Bank Financial.

Good morning everyone. This is Ryan filling in for Rupert. I just have a question here. With competition increasing for infrastructure assets in the market, whether it's by a large utilities or private markets, are you seeing valuations creep up year over year? And as a follow-up to that, which jurisdictions do believe are the most attractive at this point?

Hello Ryan, I'll tackle this one. On the valuation front, that one is always asked and the -- I would say that they're either steady or possibly going up a little still. I wouldn't say with the rising interest rates in the US, have seen any change or moderation of values just yet. I think, in particular, the most expensive market continues to be Europe.

And I have to assume that, that has to do with the zero interest rate. And then, we tend to see Australian tends to be a fairly expensive market as well, and that is probably more in relation to just the amount of capital for a relatively small market. As far as your question is to which jurisdictions we see the best value, the best value for the last 24 months in our opinion has been in Brazil.

That has been a market where we have been focused on. Probably the other interesting market, that again we have been looking at, has been India and that's less about the stress but more about just the growth in the economy and just the lack of local buyers where once there had been a lot of competition, there's probably less competition than in the past.

Those are probably, from a large-scale markets, those are probably the most interesting. And then, the only thing I would say is -- we always need to be careful not to generalize too much, because even within markets like Europe, North America, Australia, there's always pockets of value and that's really what our teams are focused on servicing, is those particular companies or situations where, either do to the complexity or certain other factors we can generate good deals. So, I don't want to give the impression that just because we see a lot of high valuations in certain markets, that doesn't mean that we won't be doing deals in those markets.

That's really helpful. Thanks. And one last question for me. Can you provide a bit of additional color on why you think companies such as Reliance are selling their telecom towers and these type of transactions are they done through a public auction process or are they proprietary?

So, look, in the case of reliance, this is a dynamic I described earlier in the call, which is they've got capital requirements and the best way for them to source capital is through selling non-core assets are at least assets that they don't need to run their business; they can contract them with us and achieve the same impact. And so, that's a phenomena we see often and they just don't have access to the public market at this stage. So that's the issue there and what was your second question again in that regard?

Just whether it's a public auction process or is it a proprietary deal.

So, our experience is that almost every situation there is some market test. That doesn't necessarily mean that it's a broad auction, it could just mean that they hire an advisor to canvas parties that have the capital and ability to do a transaction. They get a sense of where values are in level of interest and then they'll decide if they go with a party or whether or not they decide if there's lots of people they may go in a broad auction. In the case of Reliance, the pool of investors for that particular transaction, were relatively few and given the scale and complexity they decided to work with us on an exclusive basis.

Thank you very much. That's very helpful.

Okay. Thanks Ryan.

Frederic Bastien, Raymond James & Associates, Inc.

Good morning.

Hello Frederick.

Just one quick one for me, and I would like to touch and get back on the topic of water. Just wondering if there are opportunities for you to gain scale fairly quickly in that sector, or is the approach here similar to the one you been employing to grow your district energy business?

That's an interesting question. I'm hopeful that we could find scale quickly but were not building our business development efforts around that. I would say we are probably focused more on niche opportunities where we can buy for value and then have further opportunities to expand those businesses and the three businesses I described earlier are examples of that. To the extent that we can buy a large water business for value we will definitely do it. But we're just not going to engage in a cost of capital shoot-out with other institutional investors. That may not have answered your question that well, but that's the reality.

No, it does give me a good idea of how you are approaching the business. That's good. That's all I have. Thank you very much.

Thanks Richard.

Andrew Kuske, Credit Suisse.

Thank you good morning. We appreciate the ongoing disclosure on just the FX hedging, but here's a question is maybe more conceptual in nature. And it relates to just the talk in the US of a border tax or a border tax adjustment that may happen is a tariff regime. How do you think about BIPS positioning if there was a border tax adjustment in the US and just the currency ramifications of that?

Hello Andrew. So, you picked a tough one. I'd say look, in relation to our existing businesses then, I don't think it really has an impact. I don't think there's anything that we're involved with that would have a dramatic impact. I think there is -- we have our container terminals on the West Coast, and our Oakland Terminal is the largest expert term think in the United States; fifth largest port in the country. I think it will benefit LA.

In theory it's a largest import terminal and you might say what that can be impacted, but it's also the most important port in the country so my gut tells me that if there was going to be a drop-off in imports that some of the more tertiary ports would be impacted first and we will be the last ones impacted. But there could be some modest affect their.

As it relates to more broader opportunities though, there's no doubt that is going to create some winners and losers, and for some of the losers it may mean they need to raise capital and that could create an opportunity for us. So I'm trying to be positive about it. I think with change there's always opportunity.

Maybe on that line, if we saw the implementation of a border tax and let's just say for argument sake it's 20%, there's a good argument that the US dollar may gap up to that extent, and then given your global platform, would you see significantly better opportunities to effectively acquire assets elsewhere within your global model? And how do you think that would tilt the bias of BIPS asset-base prospectively?

Look, I think it's tough to say. I realize being a US functional currency that relative to lots of other foreign companies that gives us an advantage, but my own gut feeling is that the US would have a difficult time doing well if the currency gapped up another 20% and so, I'm a little skeptical that the administration despite all the things they are doing would let that happen. So, the short answer is I don't at this stage have a thoughtful response for you. I think we just haven't planned for that in any of our scenarios.

Okay. That's helpful. And then, one final question if I may, just on the distribution growth. Is it fair to say that once we close off a few of the transactions that are coming like NTS, that -- is there a prospect for say an out-of-cycle mid-year distribution increase as we saw in I believe it was 2011 we saw something to that effect?

The short answer is depending on how the business is doing. We could reevaluate the dividend in mid-year, and we thought that 11% was a pretty solid dividend so we thought we get a few cheers for that but maybe not. But nonetheless, I appreciate given the growth in the business, we may look back at the end of the year and realize that we could've done more. But at this stage, we thought it was a healthy distribution increase, it's in keeping with what we've done in the past, and hopefully enough people recognize that maybe it is possibly at the conservative end.

Okay. Great. Thank you.

Okay. Thanks a lot.

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

Great. Thank you, operator. And I would like to thank everyone who joined us on the call today. And we look forward to reporting our progress to you next quarter. Goodbye.

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