Brookfield Infrastructure Partners LP (BIP) 2025 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners fourth quarter 2025 results conference call and webcast. (Operator Instructions) Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to your speaker today, David Krant, Chief Financial Officer. Please go ahead.

Thank you, Liz, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' fourth quarter 2025 earnings conference call.

As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollock; and our Chief Operating Officer, Ben Vaughan. Also with us today is Dave Joynt, a Managing Partner; and Udhay Mathialagan, Head of our Global Data Center businesses.

I'll begin the call today by highlighting our results for 2025, followed by a recap of our record year of capital recycling. I'll then hand the call over to Udhay who will elaborate on our approach to AI infrastructure investing and how we have been able to turn sector tailwinds into durable value for unit holders.

Finally, Sam will provide an update on our recent investments before concluding with an outlook of the business.

At this time, I would like to remind you that in our remarks today, 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 latest annual report on Form 20-F which is available on our website.

2025 was another strong year for Brookfield Infrastructure. Our key accomplishments include exceeding our capital recycling target of $3 billion. investing approximately $2.2 billion of equity into growth initiatives and completing approximately $16 billion of financings to further derisk our operating company balance sheets.

From a results perspective, we generated FFO comes from operations of $2.6 billion during 2025. Normalized for the impact of asset sales and foreign exchange, FFO increased 10% compared to 2024 in line with our target and reflective of our operational performance and the strength of our business. This result includes record FFO during the fourth quarter of $0.87 per unit.

Given this performance, a conservative ratio for the year of 66% and a strong outlook for 2026, I'm pleased to report that the Board of Directors have approved a quarterly distribution increase of 6% to $1.82 per unit, on an annualized basis. This marks the 17th consecutive year of distribution increases of at least 5%.

I'll now go through the base business continued to perform well during the year. driven by inflation indexation across the portfolio and the contribution of roughly $500 million of capital commissioned into rate base over the last 12 months.

Moving on to our Transport segment. FFO totaled $1.1 billion, in line with the prior year after normalizing from $1.8 billion of capital recycling initiatives. The loss of earnings from these sales was partially offset by higher revenues across our transportation networks, particularly in our rail and toll road segments where volumes and rates grew on average by 2% and 3%, respectively.

Our Midstream segment generated FFO of $668 million for the year, representing a 7% year-over-year increase. This growth reflects higher volumes and activity levels across our midstream assets particularly at our Canadian natural gas gathering and processing operations and our recently acquired US refined products pipeline system.

Lastly, FFO from our data segment was $502 million a step change increase over 50% compared to the prior year period. The increase is attributable to several new investments completed over the last 12 months, the most recent being our US bulk fiber network, which is now fully contributing to earnings. -- the fourth quarter.

In addition, we achieved strong organic growth across our data storage business, which included the commissioning of 220 megawatts of capacity at our hyperscale data center megawatts of new billings at our US retail colocation data center operations and income generated by our global data center developers. Our global data center platform now has development potential approximately 3.6 gigawatts, including contracted capacity of over 2.3 gigawatts today.

Before turning it over to Udhay, I would like to briefly touch on our record liquidity which totaled $6 billion at the end of 2025 and included just under $3 billion at the corporate level. Contributing to this strong position was a record $3.1 billion in asset sale proceeds raised in 2025. We believe that the elevated pace of capital recycling will continue into the year ahead.

We already have two transactions secured that crystallize attractive returns. The first which is we agreed to sell the largest of four concessions within our Brazilian electricity transmission operations. We expect proceeds of approximately $150 million net to BIP generating an attractive IRR of 45% and over 8 times multiple capital. closing for the transaction is expected at the end of the first quarter in 2026.

Secondly, we formed a capital partnership for a portfolio of stabilized and under construction data centers in North America. Proceeds from the sale are expected to be used to support the buildout of our powered land bank within the business.

That concludes my remarks for this morning. I'll now pass the call over to Udhay.

Thank you, David, and good morning, everyone. AI is justifying dominating headlines with many bold predictions ranging from data centers and space to breakthrough in quantum computing that could one day redefine how the world operates.

At the same time, many are questioning the merits of the magnitude and velocity of capital flowing into AI and where the demand will materialize at a level that justifies this spending. The sheer scale of investment underway to build the physical backbone that makes AI possible is staggering.

In 2025 alone, corporates invested approximately $500 billion into AI-related infrastructure, with capital investment over the next two years expected to rise further. Much of this build-out is fundamental to the development of AI, enabling power intensive workloads to run reliably, securely and at scale in well-connected locations.

The reality is driving a sustained wave of investment into the backbone infrastructure that enables AI, including data centeric capacity, good resiliency, power generation and transmission. The sector remains exposed to overbuilding, technological change and disruption.

With capital moving quickly, not all participants will be rewarded and there will be mistakes made. Our approach is designed to protect against such exuberance. Brookfield Infrastructure is applying a prudent risk-focused approach to participating in the build-out of AI infrastructure, maintaining strict guardrails to safeguard our capital.

First, our development projects are underpinned by long-term contracts with favorable terms. We do not build speculatively and earn an attractive return within the initial contract period, mitigating technology risk. Second -- the second guardrail is that we selectively focus on the strongest investment-grade counterparties was some of the largest, well-capitalized and most profitable technology companies in the world.

Third, we concentrate on top-tier workload agnostic locations for our data centers. that can support the full spectrum of demand, reducing the risk of the single theme exposure and increases the durability of demand through cycles. The fourth is our disciplined strategy, we are deliberate in how much land and powered shelves we control and develop.

We have created a self-funding model that provides funding for future development and locks in attractive developed economics. -- as well as reduces the size of our platform while maintaining the benefits of scale. And fifth, we've matched the capital structure to the tenor of the contracted cash flows with a focus on preserving flexibility and ensuring that we can finance growth responsibly.

To illustrate the benefits of our approach during 2025, we experienced exceptional demand at our data center platforms, securing record growth, commercialization, capital recycling and capital markets activities. For example, at our US core location data center business, we experienced 11 consecutive quarters of record bookings, and it's now fully utilized across several markets.

During the quarter, we signed several large contracts at a data center in Illinois, achieving 100% occupancy and adding approximately $45 million of annual EBITDA on a run rate basis commencing later this year.

Without investing any further equity, we acquired and added a 40 site data center portfolio at January 2024 to our existing business and subsequently increased EBITDA from a combined base of approximately $200 million to approximately $500 million on a contracted basis. The exciting part that the growth journey is expected to continue, led by high returning under-roof densification and in-footprint expansion capacity, which total over 600 megawatts of identified growth potential.

Across our global data center platform, we achieved a significant lease-up of our land bank during the fourth quarter, which is expected to be commissioned over the next three years. We executed agreements for approximately 800 megawatts of capacity predominantly in North America. The vast majority of these leases are with investment-grade customers and underpinned by long-term contracts.

Since acquiring our North American and European platforms, our adherence to the guardrails outlined above has allowed us to maintain a consistent greenfield data center yield on cost. In 2025, we partnered on almost 850 megawatts of stabilized and operating sites in North America and Europe, crystallizing developer premiums and demonstrating strong demand.

Taken together, we hope these examples highlight both the strength of demand we are seeing and importance of disciplined execution converting demand into durable returns.

As AI workloads scale, the value well-located powered infrastructure intensifies. In this environment, scale, reliability and access to capital are differentiating factors to counterparties and we believe our global operating capabilities and long-standing relationships benefit us.

Our risk-focused approach and strict adherence to guardrails will enable us to continue investing in the core infrastructure needed to deliver AI at scale while protecting our downside.

That concludes my remarks for this morning, and I will now pass the call over to Sam.

All right. Thank you, David, That was great, and good morning, everyone. For my remarks today, I'm going to discuss some of our strategic initiatives and then conclude with an outlook for the year ahead.

In 2025, transaction activity accelerated and as a result, we deployed approximately $1.5 billion into new investments. We expect this momentum to carry into 2026 based on our robust pipeline of new investment opportunities that continues to be diversified across sectors and geographies.

During the quarter, we completed the inaugural project under the framework agreement with Bloom Energy, installing 55 megawatts of behind-the-meter power for a data center site in the United States. We have since secured additional projects under the framework for several hyperscaler customers, bringing the total to approximately 230 megawatts of power generation.

These additional projects have contract terms of at least 15 years in length. BIP's total equity investment associated with these projects to date is expected to be approximately $50 million and fully deployed by mid-2027.

Also during the quarter, we closed the acquisition of a South Korean industrial gas business which is the leading supplier of industrial gases to investment-grade semiconductor manufacturers in the country. The total equity purchase price is $125 million for our share.

And on January 1, we closed the acquisition of a leading railcar leasing platform in partnership with a best-in-class railcar lessor. The business is highly cash generative, providing stable cash flows that are supported by a diversified and large investment-grade customer base. BIP's total equity consideration is approximately $300 million.

Now turning to our growth outlook. We see a highly constructive backdrop for infrastructure in 2026. The asset class has a long history of delivering resilience growing cash flow through a variety of market environments and is squarely positioned at the center of three powerful structural themes, which we've talked about quite a bit in the past, digitalization, decarbonization and deglobalization.

Together, these forces are driving an infrastructure investment super cycle that is broadening in both scope and scale. We have entered 2026 from a position of considerable strength as well. Our base business is delivering resilient growing cash flows, and we have clear visibility into a multiyear runway of organic growth and capital deployment.

In addition, the rapid build-out of AI-related infrastructure is materially expanding our opportunity set across data centers, power and network connectivity. As a scaled global owner and operator of critical infrastructure, we are well placed to deploy capital into these teams at attractive risk-adjusted -- these factors, combined with a stable interest rate and foreign exchange backdrop, position us well to return to our 10% or higher per unit growth target in 2026 and beyond.

So that concludes my remarks. I'll now pass it back over to Liz to open up the line for Q&A.

(Operator Instructions) Maurice Choy, RBC Capital Markets.

I'll just ask one question, but I'll admit it is a multipart question on data centers and data infrastructure. Udhay in your prepared remarks, you highlighted how your contract approach aims to mitigate technology risk. Can you elaborate a little bit more on that? And also what risk do you think is underappreciated by the market.

And my quick follow-up is going to be on returns. Obviously, I would expect the returns are superior to the 12% to 15% target range. So maybe you could help us understand a little better how much more better, even if it's just a range, driving some factors for us to consider and quantify these premium returns?

Hi, Maurice, it's Sam here. Maybe I'll start off with the returns. And then I'll have Udhay talk about the contract items and the risk that you also asked. So on the return front, I'll keep it high level and simple. But in essence, we develop new data centers at a yield the cost anywhere on average between 9% and 10%.

And and we monetize them at cap rates actually 5.5% and 6% on average. And so that gives us a rough development profit 10 basis points.

And with leverage in the development, 70% range, that pencils into equity returns if we do everything right. into high teens or 20s. And I think that is a profitable industry. So that's the rough pull, and I think we'll leave it on that from returns perspective?

And then maybe I'll throw it over to Udhay to answer your first two questions.

Sure. Thanks, Sam. Look, I think taking a step back, the basis of pretty much all our data center businesses is around providing the core infrastructure and staying out of the real -- the technology that our tenants, our customers use.

And so my earlier remarks around being managing the technology risk is really around the way the environment within the data centers are being designed for longer-term use and for changes that are happening at the compute infrastructure level. That predominantly translates into how power and cooling works in the data centers.

So by making sure we've got very long-term contracts, so let's say, 15-year contracts, which are very specific in terms of what we deliver, we're staying completely out of any technology change that could take place in that 15-year period at a customer's end.

And in this -- in case it necessitates any change in the underlying infrastructure, then those as specific changes that are not to our cost at that point in time. So that was the underlying comment around how we're managing our -- the committed cash flows, I guess, over that period of time. in terms of technology risk.

Devin Dodge, BMO Capital Markets.

All right. Maybe to the extent that you're able, can you provide some additional color for the transaction where KKR acquired a stake and portfolio of data centers from Compass. And just trying to get a sense for how many assets are included, the timing? It sounds like it might be phased into that partnership and maybe the net proceeds to BIP.

Dan, it's Sam here. I can't really speak to the details of it because we don't get into those level of granularity on specific transactions that are private -- what I can tell you is that -- and we mentioned this earlier in the call, we've -- we effectively entered into JV arrangements with a number of institutional investors, which I would include KKR in that group across not just North America, but Europe as well. totaling about 850 megawatts.

And effectively, the way that the intense work is these are, for the most part, passive vehicles in the sense that we retain operational control of the assets and retain a significant ownership stake to have alignment with our partners. And so we've done this, as I said, in markets, and it's part of our playbook to recycle capital from developments to crystallize some profits to reinvest back in the business. So we can fund future growth.

Okay. Okay. Second question for Brookfield's is a $10 billion AI infrastructure fund. I believe BIP is one of the pools of capital that could be used to meet Brookfield's commitment. I was just wondering if you could provide a framework or thoughts on what types of investments made by the fund may be suitable or not suitable for BIP?

Devin, so that's correct. So BIP is one of the entities that will fund opportunities that come from that strategy. And I think the way to think about it is transactions that have the profile that we have in our flagship funds. So returns that are let's say, 12% and higher in sectors that are suited for BIP things that are outside of renewable energy and investments that probably don't have a development profile that's too, too long.

If the development cycle is excessively long, then that may not make it appropriate for a bit. But otherwise, I think keeping in mind for pool construction objectives for BIP. If it's in the data center sector, if it's gas-related if it's utility related, those are all sectors and if the returns fit, then we would invest through BIP for those type of transactions.

Cherilyn Radbourne, TD Cowen.

Thanks very much, and good morning. On the data center side, I did want to ask if you could talk about how you think about sovereigns versus hyperscalers of counterparties. And how you think the mix of your basket of counterparties could end up between those two groups?

Hi, Cherilyn, that's great to have you on the call. So maybe I'll touch on this and Udhay, can add anything else you'd like to. I think we like both of the counterparties because it gives diversity. One of the things that serves us well across all our business is diversity of counterparties. And obviously, the hyperscalers will amazing credits, are few in number and have similar exposures to AI and other data-related cash flows and sovereign nation diversifies from those risks.

It also -- the other reason we've been focused on some of these sovereign AI factories is because we think it gives us a differentiated strategy than many others who are just focused on building the large mega sites for the hyperscalers. Here, we can on a more bespoke basis to assist sovereign nations to build ecosystems in their countries. The challenge with it is that governments tend to move a bit slower with than corporates.

And so the time to market can sometimes be a bit longer. But as far as what the mix will be, that's a little bit too hard for me to predict at this stage. I mean we'd love to have a broad base of both hyperscalers and sovereign credit. But it's a little premature for me to speculate on that.

That's helpful color. And then more of a straight-up question for David. Can you give us a sense of what we can expect from inflation indexation across your various geographies in 2026?

Look, I think as we look forward, the two biggest drivers of growth from an organic perspective in 2016 will be the inflation indexation you highlighted as well as a significant commissioning of CapEx out of our backlog. As you've seen, it's a record level now. On the inflation front, I'd say in OECD markets, we're probably averaging between 2% and 3% on our escalators.

And then on the emerging markets, it ranges depending on which metric you're looking at. But I'd say between India and Brazil as the two biggest emerging market exposures we have inflation pass-through in -- it's probably also in the 2% to 4% depending on the metric. So I think it's more manageable, still above probably 25, 50 basis points above our historical averages that you would have observed, but certainly not as elevated that you saw in 2022.

Robert Hope, Scotiabank.

Can we dive a little bit deeper into the data operations capital backlog? It looks like it's up just over $1 billion versus Q3 with about $900 million of that driven by the hyperscale backlog -- so can you maybe dive a little bit deeper into what is driving the significant increase in Q4 as well as what is the outlook and how large can this get?

I can start and Udhay or Sam can jump in. Look, I think, Rob, you certainly pointed out. I think across the data segment, the data center platform had the most growth. We've also onboarded the bulk fiber backlog and order book in hot wire that we acquired in the fall. So those are another key driver in the increase in the last half of the year.

But on data center itself, I think it's a little chunky in terms of when we sign new on. And as we highlighted this quarter, we had significant momentum on the leasing activity. So there was about 100 megawatts signed globally. When we sign those contracts, that's effectively when we'll put in the backlog associated with those. And so up until then, as you heard through our call, there's very little investment until a contract is signed.

And then at that point, we then effectively consider the project FID and adds into our backlog. And so as you heard, it's probably a mixture of North American, European as well as a few in Asia Pacific that drove those -- those signings drove the addition to backlog.

And then maybe sticking with data centers. So $3.9 billion of the backlog relates to Intel. Can you update us in terms of timing, how you're thinking about cash flow and returns there and any potential follow-on investments?

Ben, do you want to give an update on the in-service date for the Intel facility?

Yes, sure. So for the Intel facility, our JV has two fabs and one of which has its in-service date. So it's now producing wafers, which is great. And the second fab is making good progress towards completion. So the actual underlying operations our JV and the construction activity is progressing very well for Intel.

Robert Catellier, CIBC Capital Markets.

You seem to have a pretty high level of conviction in the capital recycling, having just come off a record year and you're also continuing to make new investments. But I'm curious about the rate of commissioning capital from the backlog in 2016, given this is an important part of the capital allocation process -- so wondering if you could maybe quantify and characterize what you see coming in the next couple of years there relative to $1.5 billion commissioned in 2025.

Rob, it's David here. I can give you some color on the shape of that commissioning. I think I'd split our backlog into two various components. As you heard from the previous question, there's an Intel component which is about $3.9 billion in the number. We'd expect that to commission from our earnings profile in the back half of 2026.

The other -- the balance of our backlog would be diversified across our utilities transport midstream and data businesses. And typically, as you've heard, it's a three-year outlook. So those projects tend to be smaller, lower, shorter development cycles and build cycles. So I'd expect roughly a third of that backlog, which should be close to $1.5 billion to come in online 2026 as well throughout the year. It is -- I wouldn't say there's a chunky element to it.

It's pretty -- it will be pretty smooth across our utilities and our data centers driving the bulk of that.

Right. So exing out Intel, which is obviously a unique investment. You're really looking at about $1.5 billion-ish a year then. Is that --

What goes to our backlog, excluding Intel is $5.3 billion. And so assuming average of three years, you're looking close to $1.75 billion probably and the $1.5 billion to $2 billion.

Okay. Excellent. And then my other question was just what are your views on the Canada, Alberta MOU as it relates to energy development. It looks like there's a momentum building towards a bolder energy strategy here. So I'm curious how it impacts how you manage your midstream investments in Canada.

So do you hang on for more growth -- or does this derisk the asset to a point where you might consider more asset sales?

Robert. Look, look, I think it's -- it's too early to say whether or not the MOU is going to have any material impact on the growth trajectory of our businesses. Irregardless of that, though, we've already have plenty of growth in the -- there's been significant producer expansions underway, which has led to some additional tie-ins particularly in our IPL facility IPO network. And we've recently undertaken a number of growth initiatives North River.

In terms of our plans to monetize the businesses, I think we have business plans in place for each of the businesses that we're looking to continue to develop. And I guess the only thing that would accelerate monetizations would be market conditions to the extent that they to us bringing some or part of these businesses to the market. We might look at that. So I appreciate some of that it's very loose.

But I think the takeaway is that the businesses today operate in a very strong environment. And with the added push by the federal government with the provincial government to encourage further growth in the sector.

We think that's only helpful to our businesses and makes them more attractive to potential buyers on Yes, I totally agree with you. I think it's too early, and I too would want to say a couple of more cards slipped on how they have a MOU plays out and if they achieve the milestones as intended. So thanks for your answers.

Frederic Bastien, Raymond James.

During your Investor Day, you noted that Brookfield Ad form partnerships to build seven AI factories totaling 6 gigawatt of compute capacity. Can you provide an update on how that's going and whether you get more developments to announce soon?

Fred, maybe I'll tackle that and Udhay might add some further comments, but I think the answer is relatively short. We continue to progress all those very initiatives. And today, we have discussions underway with probably five, at least in Europe. -- some in North America as well as some of the Middle East and one actually in Oceana.

So basically, across the globe, as I mentioned I think it was Cherilyn, the -- it -- these discussions do take time, and we're probably a little disappointed that they haven't gone a little faster given the importance that each of the put towards these initiatives.

Nonetheless, I think we're hopeful that during the year, we'll have one or two of these progressed. And I think the only thing that I would caution you is that they tend to be smaller than some of the mega sites that you see announced with the hyperscalers. So most of these are anywhere between as small as 50 megawatts up to as much as maybe 250 in phases. Nonetheless, those are still represent meaningful dollars, and we're pretty excited to see it through.

And I guess your relationship with Bloom Energy is still fairly young. You've committed to delivering just under 300 megawatts of power generation. I think your original agreement was to -- was for up to 1 gigawatt of behind-the-meter power generation is. Are you comfortable that you will see through this agreement all the way to that 1 gigawatt?

Obviously, we'd be speculating on the future, so it's hard to predict. But at the moment, with the level of demand that they're seeing and the amount of developments underway, I feel pretty optimistic that we'll get to that and maybe even above that level. There's no doubt there's for Bloom at the moment.

So I mean your relationship obviously is strong and growing, obviously.

Yes. Yes, it is.

That concludes today's question-and-answer session. I'd like to turn the call back to Sam Pollock for closing remarks.

All right. Thank you, Liz, and thank you, everyone, for joining the call this morning. With you've all had a good start to the year, and we look forward to providing our first quarter results at the end of April. Thank you, and take care.

This concludes today's conference call. Thank you for participating. You may now disconnect.