BIP to take 15% stake in $500m Texas transmission project

Management also said during the New York Stock Exchange-listed infrastructure fund’s second quarter earnings call that they are bullish on natural gas infrastructure and may pursue opportunities to acquire assets from over-leveraged infrastructure companies.

Brookfield Infrastructure Partners (BIP), will take a 15 percent ownership in a $500 million electric transmission project in Texas, the fund’s executives said today.

Sam Pollock, chief executive officer of BIP, disclosed the ownership stake during the firm’s second quarter earnings call.

He said BIP will own the interest through a separate fund sponsored by Brookfield Asset Management (BAM), BIP’s manager. BAM will own the remaining interest, which will amount to 35 percent ownership of the entire Texas CREZ project.

BIP: bullish on
natural gas

The $500 million project, a 50-50 joint venture between BAM and Spanish construction firm Isolux Corsan to build and operate a new electricity grid in the western part of the state, was awarded to Brookfield earlier this year. It is part of the Public Utility Commission of Texas’ ambitious Competitive Renewable Energy Zones (CREZ) program, which allocates transmission zones to developers for construction and maintenance.

During the conference call, Pollock said Brookfield focuses mostly on the clean-energy side of electric transmission, with wind as a primary source of generation. John Stinebaugh, BIP’s chief financial officer, singled out natural gas in particular as an area of focus for the firm.

“We think that there’s going to be a lot of opportunities to participate in the build-out of natural gas infrastructure,” he said.

“We think over the next 5 to 10 years that the natural gas generation is going to be a considerable chunk, potentially even greater than the majority of new gas fired generation build in North America.”

Pollock also said the firm is seeing more opportunities to acquire businesses from companies that are either looking to lower their debt obligations or looking for additional partners to help finance a project.

“Those opportunities exist and they are generally in that 15 to 20 percent return threshold,” Pollock said.

A spokesperson for BIP declined to name any specific investments the firm is considering.

BIP reported net operating income of $76 million for the second quarter of this year, versus $16.4 million in the second quarter of 2008. Excluding a $68.2 million gain on the sale of its Brazilian transmission investment TBE, the net operating income for the quarter was $7.8 million.

Pollock attributed the decrease to continuing weakness in BIP’s timber businesses, which have been hit by softness in the lumber market. He added that he thinks log prices may be beginning to stabilize in concert with signs of recovery in the US housing market.

BIP’s New York Stock Exchange-listed shares ended the day down 1 percent, closing on $12.95.