Thank you for standing by, and welcome to the Brookfield Infrastructure Partners First Quarter 2022 Results Conference Call and Webcast. As a reminder, today's program maybe recorded. And now I would like to introduce your host for today's program, David Krant, Chief Financial Officer. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' First Quarter 2022 Earnings Conference Call. My name is David Krant, I'm the Chief Financial Officer of Brookfield Infrastructure Partners. Joining me today is Sam Pollock, our Chief Executive Officer; and Scott Peak, our Chief Investment Officer for North America. Following our prepared remarks, Ben Vaughan, our Chief Operating Officer will join us to take your questions. At this time, I'd 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 annual report on Form 20-F, which is available on our website. I would like to begin with a few comments around the current macroeconomic environment. Top of mind for investors today are the elevated inflation levels, rising interest rates and decelerating global growth that creates headwinds for many industries. During these periods, the infrastructure sector generally outperforms. The growth and resiliency inherent in infrastructure assets is derived from inflation linked revenues, and the ability to pass through operating costs to customers. Exposure to rising interest rates is mitigated by long-term capital structures largely on a fixed rate basis given the highly predictable cash flow these assets produce. From a valuation perspective, these established frameworks employed across revenue, expense, and debt financing protect or expand margins through revenue compounding offsetting increases in our capital costs. These attributes in combination with strong operational performance and last year's successful capital deployment have resulted in record results to start the year. We're pleased to report funds from operations or FFO of $493 million, a 14% increase year-over-year. This was the highest in our partnership history. FFO per unit…

Thank you, David, and good morning, everyone. I'm pleased to be joining today's call to discuss natural gas as a reliable transition fuel and a path to energy security. We are operating in a market environment of disrupted supply chains and rising commodity prices. The impact of recent geopolitical events has raised commodity prices to levels not seen in years and reinforced the importance of energy security. Natural gas and more specifically LNG, will continue to be a leading transition fuel in the move towards net zero. It is also expected to play a key role in providing global energy security. These elements highlight the valuable role our critically located infrastructure plays in the processing transportation and distribution of natural gas. Our North American Midstream businesses are well-positioned in the key markets currently benefiting from high utilization rates, and increasing commodity prices. These businesses typically reserve a small portion of operational capacity as I'm contracted to provide operating flexibility. Under the backdrop of the current market, this available capacity has generated incremental revenue that has contributed to our strong financial performance. An indirect benefit of a constructive commodity environment is its impact on our energy customers who are currently experiencing strong cash flow and strengthening balance sheets. These tailwinds to our customers financial profile, coupled with improving market sentiment is expected to incent reinvestment into their operations. After several years of more limited production growth, we anticipate a renewed interest in customer-initiated infrastructure expansion projects to increase capacity and throughput across our asset base. Today we own three businesses that are expected to benefit from increased demand for LNG. There were significant interest in securing capacity at U.S LNG export terminals. Customers on our U.S natural gas pipeline are discussing the contracting options for a third phase of our Gulf Coast egress. And lastly, our Canadian Midstream business is well situated to process and support gas deliveries to West Coast LNG export terminals currently under construction. In addition to traditional energy businesses, our utility operations play a vital role in the transportation and distribution of natural gas to residential and industrial customers. In each of the countries we operate, energy regulators are advocating for energy security and diversification of supply that includes natural gas as a transition fuel and reliable source of baseload generation. The more limited investment in traditional energy supply, and the intermittency of renewable power have created more scarcity value for our assets. As we continue to expand our footprint and re-contract our assets on attractive terms, we are well-positioned to deliver strong returns on both our employees, businesses, and our capital recycling initiatives in the years to come. That concludes my remarks for today. I will now pass the call over to Sam.

Thank you, Scott, and good morning, everyone. On today's call, I want to discuss some of the strategic initiatives we have underway. And then I'll conclude with an outlook for the business. Overall, as David has discussed, we've had a strong start to the year. On top of our operational achievements and strong financial performance, we've secured nearly $1 billion of investment opportunities, leading us to believe that 2022 is shaping up to be an excellent year. We continue to see opportunity to execute our full cycle investment strategy across all segments and geographies in which we operate. We successfully invested approximately $750 million into two utility investments, including the take-private of an Australian regulated utility business called AusNet, and the acquisition of an Australian smart metering business called Intellihub. Subsequent to quarter end, we announced an agreement to acquire e Uniti Group and a Australian $3.7 billion take private transaction, through a 50:50 joint venture partnership with another infrastructure investor. Total Brooklyn equity for the investment is estimated to be approximately $850 million with BIP share at approximately $200 million. Uniti provides wholesale and retail telecommunication services to customers and businesses in Australia. Strategically, this investment provides exposure to the country’s largest pure-play greenfield fiber-to-the-home wholesale operator, with a stable and predictable recurring revenue stream and a significant backlog. This business has similarities to a fiber-to-the-home product that we sell in our U.K. last mile connections business. And this is what attracted us to acquire it. The investment is expected to close in the third quarter of 2022. In total, BIP has deployed or secured nearly $1 billion in equity thus far in 2022. And this represents over 60% of our estimated $1.5 billion in annual deployment we look to target. We have a high degree of confidence in…

Our first question comes from the line of Cherilyn Radbourne from TD Securities. Your question please.

Thanks very much and good morning. In terms of the residential infrastructure business, it looks like you've been making some interesting acquisitions to add adjacent products and services kind of following the playbook of the U.K residential distribution business to some degree. So, I was hoping you could give us a bit of color on that? And also talk at a high level about whether there are any relevant differences in how you would expect consumer-oriented infrastructure to perform in this type of environment versus infrastructure that’s more oriented to industrial counterparties?

Hi, Cherilyn. Maybe I'll start and if Scott has anything to add to my comments, then I will leave for him to add to them. So, I guess your first question is just regarding the residential infrastructure business, and our strategy of adding new distribution and products to grow the business. This is a playbook as you pointed out, that we were very successful in deploying in our U.K business. What we've -- where we've had great success is when we've had businesses that have that great operational leverage, where we have access into a customer's home, or to a developer, who has multiple needs. And the Enercare franchise, which is our -- which is where our residential business resides in North America has great access to the home. And we think that as a trend towards the decarbonization takes hold, and many new more expanse of components are introduced to consumers to facilitate the reduction or the conversion from conventional fuels that customers will need some assistance in the form of rental products or other types of means to invest in those new products and services. And so, we're well-positioned to do that. And by adding the solar product to Enercare, we think that, again, is something that's very unique, adding the generation capability through that partnership, we think is very unique. So, we'll continue to do that. And I think that is the most accretive way we can grow that franchise. The other question I guess you had, which is a follow-on to that. And I think what you're alluding to is there are noises around the potential for recessions in various markets around the world. And that might impact the ability for the consumer to invest. We think that our businesses, our residential infrastructure businesses, are largely recession proof, I hate to use that word, because it maybe too strong a word, but because they are critical, people need heating or plumbing or water products. These are not things people can do without, and many of the things that we do are replacement products. We believe, though, are the demand for what we provide will be sustained and the fact that we're providing a payment neck mechanism, and a peace of mind for this product that it could in fact do very well in a recessionary environment. The one area where we might see some softness is to the extent that we are providing product to homebuilders for new home sales, well, then it's possible we could see some weakness in that regard. But for the most part, I think our businesses are very well-positioned for any economic environment.

That's great.

Scott, do you want to add anything?

No, look, I thought that was great, Sam. I just highlight that we emphasize investments in platforms. We see accretive growth wherever it resides. So, it will not be uncommon for us to pursue adjacent synergistic growth. We're actionable across our asset portfolio. So, these types of bolt-ons and opportunistic acquisitions are going to be commonplace for us across our assets.

That's great detail. And since that was really two questions in one, I'll pass it on. Thanks.

Thank you, Cherilyn.

Thank you. Our next question comes from the line of Robert Kwan from RBC Capital Markets. Your question please.

Hey, good morning. I'm wondering just as you think about new investments, and obviously you're just targeting trying to get strong IRRs in total, but there's been some instances here where you've had high return, maybe lower multiples, but high cash on cash returns like Inter Pipe. And then you've had lower going in cash-on-cash returns, like Uniti and AusNet now obviously some lower risk or volatility, and in the case of Uniti higher growth. But when you take a step back and you think about kind of combining the investments and where you want FFO to be like, how much of a consideration is that? And maybe just, overall, where are you seeing the best opportunities right now? Is it a higher cash on cash returns? Or the lower ones with growth profile?

Hi, Robert. Maybe I'll start there, again, maybe my colleagues want to jump in, let them do that. So, I would say that the first thing is we don't make acquisitions based on whether or not they have high FFO accretion or low FFO accretion. We are IRR investors and multiple capital investors, first and foremost. So that the long-term prospects for the business are what counts. And so, you are correct in pointing out that sometimes it may be that we buy businesses that have high FFO yields out of the gate. And sometimes the profile is reversed. I think the overriding consideration, and I think your question is when we buy businesses that have lower FFO yield out of the gate, what considerations do we take into account for that versus the reverse? Because it would imply higher risk, I guess. And really what we're taking into account is the longevity and risk profile around the growth in that business. And factors we will take into account are how much of that growth is contracted and how visible that growth is. And in addition to that, we'll also look at what, Scott referred to as, the potential platform effect that we could leverage. Because in May, the businesses that we buy, often we're buying entities where someone is only exploiting a small piece of the opportunity, and because of our experience in running many different businesses globally, we can -- we have a view that we can expand that growth to a much greater extent. So, all those things -- I mean, those are the things that make us successful in buying entities versus others. And we always look to add on ancillary services and products to businesses to enhance that operating leverage. Does that answer your question?

Yes, no, that's great. Thanks. The second question here is just around inflation. And you talked about 10% organic growth in Q1, my apologies if you broke it out. But how much of that was specifically inflation? And as we look forward, how much more shows up in the future quarters of this year, whether that's contractually or regulatory wise?

I think Dave is going to answer that.

Good morning, Robert. So if we look at the 10% organic growth that we generate during the quarter, I'd say if you were to break out into the three components. And just as a reminder that the inflation indexation, GDP related volume growth and capital commissioned into our earnings, 5% and 6% of that was from inflation. And if we look across our segments, where you're seeing the biggest tailwind is obviously going to be in our utilities, transport and data businesses where unbalanced, about 90% of our business is within those segments have inflation mechanisms built into the revenue constructs. In terms of the -- looking ahead for the rest and the balance of the year, could we see further increases in inflation? I think that's possible if the levels persist , a lot of our businesses do roll over at different parts of the year. A good example, in the U.S we're seeing average inflation around in our business this quarter 5%, 6%. If we continue to run, where they are today for the balance of the year, we could see that go 7%, 8%, a bit higher in certain elements. So, I do see there being a little bit of opportunity for additional performance in the back half of this year, if the current environment persists.

And just on the capital side, in terms of what you're spending, do the regulatory constructs and/or the contractual side of things, are you protected on cost increases for capital and in fact, the benefit just from higher spending level?

Largely to your point on utility side for rate-based inclusion, we will benefit from higher capital costs of our connections and additions into our rate base. A lot of our large-scale capital projects that we highlighted this quarter, including Train 6, the Heartland Petrochemical facility and our Brazilian transmission lines, either fully complete construction in the case of Train 6 and Inter pipeline's, HPC or at 96% physically done construction. So, a lot of that inflation tail risk is behind us. On the more normal recurring connections and inter carrier additions, I'd say those are all repriced pretty regularly and capture inflation to your point, which should be beneficial for the business looking ahead.

Okay, that's great. Thanks very much.

Thank you. Our next question comes from the line of Robert Catellier from CIBC Capital Markets. Your question please.

Hi, good morning, everyone. Could you provide some context around the U.S data center operations? Why the lower revenue and how is the business being repositioned? And in light of that, have the dynamics changed at all in terms of how BIP is investing in that particular component of the segment?

Hi, Robert. Thanks for that question. And I think we'll ask Ben Vaughan, who's our Chief Operating Officer to address that question.

Yes. Hey, Robert. Yes, so in that U.S data center business, we've basically been migrating client base away from traditional retail a colo product towards the hyperscale and edge computing product. And so, as we've been engaging in that shift, we now have about 7 megawatts of new contracts from hyperscalers to take up our space. Whereas to put in perspective, a few years ago, we would have had none of those types of contracts of the businesses migrating away from a traditional retail colo offering and towards the hyperscale and edge computer offerings. So that is the process that we're undertaking. And we've got a good pipeline of hyperscale opportunities that we're pursuing and a proven track record now of contracting with hyperscale clients for that service. So, I don't know if that's responsive to your question, but that's the, I guess, the strategic shift that's going on within that asset at this point.

Yes, Ben that's exactly what I was looking for. I was curious as to the impact of competition versus deliberate strategic change there.

Yes, and I guess, Robert, sorry, just to highlight that maybe to reinforce the strategic nature of it, we are reinvesting some capital into the facilities in order to reconfigure them. Because the needs of the hyperscalers are different than just the rack-by-rack retail colo setups. So, there -- it is a very deliberate strategy with a physical repositioning of the assets that complements the new product offering, essentially. So, I hope that -- hope that's helpful.

Yes, that definitely helps. And then I'm just curious on the impact of rising interest rates on the utility ROEs. Are you genuinely expecting increases in ROEs to be commensurate with rising rates, allowing for the regular, normal regulatory lag? Where do you expect some compression to ROEs? Because they didn't necessarily chase rates down to the bottom and obviously to mitigate the pressure on customer bills.

Hi, Robert. Its Sam here. The short answer to your question is it will depend on jurisdictions. In Australia and the U.K., we expect subject to the lag as you pointed out, that the rates will adjust in the normal regulatory environments. In the U.S., where we don't really have utility operations per se, but that would be a jurisdiction where there may be some delay in response to higher rates because they didn't go down as much. But for most of our businesses, whether it's South America or Australia and the U.K., I would expect rates to move up pretty quickly with rising rates.

Okay. And just finally, I'm curious if you're noticing any change in the permitting environment your operating jurisdictions in light of the need for energy security, is the permitting environment changing to accommodate that?

Maybe I'll ask Scott to address that one.

Look, it's evolving, and it's a continuing discussion with local regulators. I can't say we're seeing a quantum shift. But I think some of the recent geopolitical events have reemphasized the need for energy security. And we're hopeful we'll get everyone aligned to get permits needed for very projects to achieve that energy security. But I can't say we're seeing a quantum shift, but definitely a constructive tailwind.

Okay. Thank you very much.

Okay. Thanks, Robert.

Thank you. Our next question comes from the line of Rob Hope from Scotiabank. Your question please.

Good morning, everyone. Just a follow-up question for me. I appreciate the commentary on organic growth being towards the upper end of -- kind of the range in 2022. But just as we look out to 2023, shouldn't we see kind of equally strong organic growth, just given the quantum capital being put into place as well as the fact that you will see kind of inflation being feathered into tariffs in -- throughout the year. So just taking a look at 2023, shouldn't the factors that we're seeing benefit 2022 equally benefit 2023 as well?

Hey, Robert. It's David here. I can take that one. I think your assumption is correct. I think one of the things that is important to highlight is obviously the inflation that we're passing through this year. One of the biggest benefits is it is compounding. This doesn't -- these do continue to grow. And to your point, we will expect to see additional inflation through the back half of this year that should lead to all else being equal. And there are a lot of other variables that go into it. But as of today, it should lead to organic growth at the high end of our target range next year. And if you factor in, the HPC will be ramping up in the balance of this year. That is another large project that should come online in 2023. That will contribute to make business earnings next year as well. So, there are a number of tailwinds that should lead to a strong outlook for 2023 as well.

Appreciate the color. Thank you.

Thank you. Our next question comes from the line of Andrew Kuske from Credit Suisse. Your question please.

Thanks. Good morning. I think the question is for Sam. And it really relates to just the partnerships and ventures you've used over the years and how they've evolved, maybe a little bit of how and why they've evolved and maybe just some examples. You had a partner on the Vodafone New Zealand deal. You align yourself with DLR in a couple jurisdictions. I guess just maybe context on how this has changed, or evolved over time? Is it easier for exit, helps with risk management, just some color would be great?

Yes, hi. Hi, Andrew. Look, I guess I could start off by saying one of our critical success factors is to be a partner of choice. And so, that's something that when we go out and meet potential strategics or even some of our peers, we pride ourselves on the fact that we've got a long history going way back into the and we had the mining companies and we have many partnerships on projects, all the way through today and 4 years later where we continue to build upon partnerships. The investments can be large and often others are looking for someone to come into to help them they're not necessarily looking to sell in every case or it's some cases, someone else might have secured the deal ahead of us and need someone to help them achieve the business plan. So, we're always looking to partners with others where it makes sense. Sometimes we choose to do things on our own, because we feel it may make sense for us to have the full discretion over the business plan in order to achieve it. And sometimes maybe the business opportunity isn't big enough to intel our partner. But I would say given the scale of the opportunities today, we see being a good partner and finding good partners as a critical component to the strategy.

Thank you. That's helpful. And then maybe a different kind of partnership, just when one looks internally at the broader group. And we think about the data business, part of that is real estate oriented, part of is power oriented, and part of it is sort of telecom and infrastructure oriented. Has the thought process changed internally at Brookfield on how you think about allocating capital to that, or is it a divide and conquer at times? Or is it just solely within BIP?

So that relates to data. This is clearly an area that infrastructure group is focused on. You rightly point out that, particularly with data centers there's elements where that the real estate group can be extremely helpful, given their land assembly capabilities. We do leverage those capabilities in markets where it makes sense. And I think one of the great attributes of Brookfield as a -- an asset manager is the fact that the various platforms are able to work seamlessly across opportunities, and we don't let the fact that one group may fund the capital, reduce the ability to leverage all those capabilities and expertise. So, yes, the short answer -- I appreciate this long winded, but short answer is we do get help from time to time from the other platforms, but we do fund all the infrastructure through the infrastructure group.

Okay, that's great. Thank you.

Thank you.

Thank you. Our next question comes from the line of Dimitry Khmelnitsky from Veritas. Your question please.

Hi, and thanks for taking my question. I wonder if you can walk us through how your business benefits from rising interest rates by segment, if possible?

David, do you want to start with that? Or I can …

I can start with that, Dimitry. I'd say largely before going segment by segment, I think it's important to understand is that our business is largely insulated from rising interest rates. Because of the capital structures and the financing approach that we put in place, which goes largely fixed rate, long duration, asset level borrowing. So, I'd say across the portfolio, outside of Brazil, 90% of our business is fixed rate with an average maturity of over 7 years. So, from a balance sheet standpoint, we're largely insulated from the impact of short-term rising rates. On the upside and where we could benefit from rising rates with light -- as Sam alluded to earlier is most likely in our utilities business where largely ROEs and returns on equity are derived from the risk free and prevailing interest rates of those local environments, in which case, we should start to see regulated earnings go up as these regulatory rate resets kick in over whatever period and whatever line that may be on. But I would say our utilities business stand to benefit from it the most.

Got it. And then you’ve potential downsides from rising rates in any of the segments?

I would say -- David touched on the balance sheet impacts, obviously, that that's where we see that the most impact. I think where we're able to adjust the business is to the extent that rates have increased, we reflect that in our acquisition models and adjust our capital allocation, both organically and inorganically. So, I feel that as rates move up, we reflect those rising rates in all the capital decisions we make going forward. But other than on a more medium to long-term basis, we don't see too much impact from rising rates.

Awesome. Got it. And the last question is, I just wonder if you can confirm that the installs in '22, you plan to generate $2 billion of proceeds from capital recycling. And whether that will come primarily from Brazil and electricity transmission, and the Indian toll roads?

So, we have probably six or so investments that are currently being marketed. The only two that we have publicly disclosed are the ones you mentioned. Those are the near-term situations that we expect to secure. Those are relatively small in the context. There are several others that are more meaningful, and will be signed, hopefully, in the third quarter of this year. And I think the overall timing to receive proceeds that will take place over the next 12 to 15 months. I think the ones that are going to be signed shortly, we hope to have probably Q3 and then the rest of them that we sign in Q2, Q3 and Q4 will be thereafter. But that is the current amount that's in the pipeline is that roughly $2 billion worth.

Right. Okay. Thank you so much.

Okay. Thank you.

Thank you. Our next question comes from the line of Naji Baydoun from IA Capital Markets. Your question please.

Hi, good morning. Time to go back to the topic of tailwinds. You talked about inflation and customer demand. I'm just wondering if you can provide any color on FX and any potential impacts there, particularly from the unhedged exposure?

Yes, happy to Naji. I think what we've seen 80% of our business today is OECD and therefore hedge back into U.S dollars for the next -- on average about 24 months, so largely our businesses is very well insulated from those movements. The one currency that where we do have the exposure is on the Brazilian reality, we've had that historically. That's a balance of somewhere between 15% to 17% of our business. And that could be one of the tailwinds that we start to see starting in the second quarter, if the currency can remain around the current levels. I think for the first quarter, we start to see an appreciation of that currency in the month of March, albeit the overall impact on the quarter was with modest pretty negligible. I think, looking ahead, that's one of the tailwinds that we could see on the -- the balance of the business backed FX base in the 4.8, 4.9 levels that we're currently seeing.

Okay. That’s helpful detail. And just wanted to ask on the M&A pipeline, it seems like you have different types and scale of transactions in the hopper. Some of them in the public news. I'm just wondering, do you see more opportunities today to pursue more public, corporate or asset transactions just given the volatile market environment? Or are you still seeing a lot of scale opportunities on the private side?

Maybe I'll take that one. It's a mix. So, I would say today, we probably have a good balance of both private versus public to private. Usually, we wouldn't have as much public to private as we have today. There does appear to be a value discrepancy between public valuations and private valuations, which makes public to private attractive for investors like ourselves. And I think, given the increasing volatility and the pullback in the market, that's likely to persist going out to the balance of the year. And so that will -- it will remain a focus. But today, I wouldn't want to give you the impression that all we're focused on is public to private, we have a large number of private opportunities that we are pursuing as well.

Got it. Understood. Thank you.

Thank you.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Sam Pollock, Chief Executive Officer for any further remarks.

Thank you, operator, and thank you to everyone for joining the call this morning. We appreciate your ongoing support. I look forward to speaking with you again next quarter. Thank you.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.