BIP posts record Q2, buys district energy firm

Brookfield Infra has acquired Entergy Solutions District Energy, which serves the business districts in Houston and New Orleans.

The second quarter of 2013 was the most profitable to date for publicly-listed Brookfield Infrastructure Partners (BIP), which reported net income of $132 million bouncing back from a loss of $26 million in the second quarter of 2012, the company’s chief financial officer John Stinebaugh said during a conference call.

“FFO for the period was $180 million or $0.88 per unit, representing a year-on-year increase of 62 percent and 47 percent, respectively,” Stinebaugh said, citing the key measure – funds from operations – management uses to evaluate performance and to determine the underlying value of its businesses. The company defines FFO as net income excluding the impact of depreciation and amortisation, deferred income taxes, breakage and transaction costs and other non-cash items.

“This strong performance was driven by our recently-commissioned Australian railroad expansion and contribution from acquisitions that we closed in the latter part of 2012,” he said, noting that virtually all of the company’s businesses performed well.

The recently-commissioned railroad also contributed to the significant jump in the company’s transportation business which saw its FFO more than double to $83 million from $36 million a year earlier. The company’s toll roads, which exceeded expectations both in terms of traffic volume and tariffs, also contributed to the transportation platform’s strong, second-quarter performance.

BIP also announced the acquisition, together with institutional investors, of 100 percent of Entergy Solutions District Energy (ESDE) for $130 million, in line with its strategy to build out its North American district energy business.

“This operation will complement the system that we acquired in downtown Toronto last year and this acquisition is expected to close in the third quarter of 2013,” chief executive Sam Pollock said.

ESDE, in which BIP will own a 40 percent stake, owns and operates district energy assets serving the business districts in Houston and New Orleans.

BIP’s balance sheet benefited from a number of divestitures – the company had announced last year its intention to sell non-core assets – whose proceeds are expected to total $1.1 billion. A portion of that figure is expected to come from BIP’s recently-announced sale of its 42 percent interest in its New Zealand regulated distribution business for $410 million.

This liquidity will enable BIP to pursue its previously-stated strategies, such as acquiring non-core infrastructure assets from industrial companies that are looking to delever their balance sheets and raise alternate sources of capital to fund their investment programmes, according to Pollock.

“As we said last quarter, our pipeline of investment opportunities is stronger than ever,” he said.

Brookfield Infrastructure Partners is managed by Toronto-based Brookfield Asset Management (BAM), which focuses on property, renewable power, infrastructure, and private equity. BAM has more than $175 billion in assets under management. BIP has $20 billion in capital.