Brookfield could cut timber amid transportation build-up

Brookfield Infrastructure Partners bought a toll road in Chile, a utility in the UK, and is sizing up a stake in OHL Brazil. Meanwhile, its timber exposure might get scaled back.

Brookfield Infrastructure Partners (BIP) is considering selling some of its timber amid a refocus on core infrastructure, particularly transportation.

BIP on Monday redoubled its transportation ante, acquiring full ownership of Autopista Vespucio Norte (AVN), a toll road circling Santiago, Chile, while also announcing its intention to acquire an interest in toll road operator Obrascon Huarte Lain Brasil (OHL Brazil). In addition, the fund also bought an 85 percent stake in Inexus, a UK utility.

But both the AVN deal and pursuit of OHL Brazil dovetailed with a plan to re-evaluate “non-core” businesses like timber, a staple of its portfolio since its 2008 spin-out from Brookfield Asset Management. 

Publicly listed BIP, with $20 billion in capital, said it might “divest some of its timber” as part of a wider asset reallocation. Though a spokesman for Brookfield in Toronto called timber “highly attractive,” BIP cited lumber for its “favourable” valuation and noted capital raised from a possible sale could be reinvested.

Of late, transportation and energy have become a sweet spot for Brookfield, a $150 billion asset manager.

In its deal for AVN, BIP contributed $165 million, giving Brookfield and its institutional investors the remaining 45 percent of the toll road in a $590 million deal. As a result, BIP will be 51 percent owner of a major thoroughfare that has experienced an 8 percent annual increase in traffic since 2004.

For OHL Brazil, BIP is teaming with Abertis in a bid to take 60 percent ownership of the toll road operator, although regulators might force the partners to completely take over OHL Brazil. BIP is eyeing a $250 million initial investment to OHL Brazil, but admits that figure may escalate if there is a follow-on tender.

Aside from transportation, BIP has just completed a high-profile energy transaction, gaining 85 percent of UK utility Inexus Group – a gas and electricity distribution business – in a deal with Challenger Infrastructure Fund for $15 million. The acquisition effectively doubled Brookfield’s UK regulated distribution holdings.

In order to reinvest $630 million in Inexus as well as AVN, Brookfield held a $445 million equity offering yesterday, led by Credit Suisse, RBC Dominion Securities, Citigroup and HSBC, with $332 million being offered to the public.