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Brookfield begins to negotiate asset sale

A Canadian energy and infrastructure group has entered exclusive negotiations to acquire assets from WestNet, an Australian subsidiary of Toronto-listed Brookfield Infrastructure Partners. Brookfield executives recently told investors that they would consider selling ‘non-core’ assets in order to raise capital.

Toronto- and New York-listed fund Brookfield Infrastructure Partners (BIP) is considering selling assets from one its Australian subsidiaries, according to a statement from a company looking to pursue the sale.

Canadian infrastructure group ATCO said it had entered into exclusive negotiations about a non-binding offer to buy assets from WestNet Infrastructure, a company based in Perth, Australia which BIP acquired through its merger with former Babcock & Brown vehicle Prime Infrastructure.

WestNet owns a pipeline that transmits gas from Australia to Tasmania, and also invests in natural gas infrastructure assets in Australia, according to the company’s website.

Australia’s DUET group, which has an equity stake in three of WestNet’s assets, has also begun discussions with ATCO, according to a statement to the Australian Securities Exchange.

The announcement comes just a week after executives from Brookfield Infrastructure Partners (BIP) said the fund would consider selling “non-core” assets.

In a conference call to investors, BIP chief financial officer John Stinebaugh said operational cash flows would likely not be sufficient to cover capital expenditures needed for expansion projects on existing investments, and that the fund would consider asset sales or issuing equity. But BIP did not specify the number or type of assets under consideration.

One major planned expansion project is the extension of a 5,000-kilometre rail network in western Australia that BIP also acquired as part of the Prime merger. BIP will spend about $600 million on that project over the next several years, according to a Brookfield spokesperson.

Brookfield declined to comment on any potential sale of WestNet Infrastructure’s assets.

BIP is a subsidiary of Toronto-based Brookfield Asset Management (BAM), which is looking to step up its infrastructure commitments.

In a conference call to investors, BAM chief executive Bruce Flatt said the infrastructure business was poised to grow as governments shed “infrastructure-type” assets in order to reduce debts.

“We just think there is a backdrop out there of privatisations that are going to occur over the next ten years,” Flatt said.

He said he expected both Brookfield’s listed and unlisted funds to be successful, and added that BAM intends to raise another, larger infrastructure fund once the current ones are invested.

Flatt said BAM’s infrastructure unit could grow to be as large as its property division. Commercial properties accounted for $46.4 billion of assets under management as of December last year, while infrastructure accounted for $16.4 billion, according to BAM’s most recent annual report.

Flatt said capital could be re-allocated within BAM to infrastructure, if infrastructure proved to have superior returns.

BAM has over $100 billion in assets under management, and focuses on renewable energy in addition to the real estate and infrastructure sectors.