Brookfield Infrastructure Partners - Q3 2023

Transcript

Operator (participant)

Thank you for standing by, and welcome to Brookfield Infrastructure Partners' third quarter 2023 results conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star one one on your telephone. To remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, David Krant, Chief Financial Officer. Please go ahead, sir.

David Krant (CFO)

Thank you, operator, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' third quarter 2023 earnings conference call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm also joined today by our Chief Executive Officer, Sam Pollock. For the call this morning, I'll begin with a discussion of our strong financial and operating results. I'll then touch on our balance sheet strength and the success we've had in our asset sale program this year. I'll then turn the call over to Sam, who will provide an update on our strategic initiatives and capital allocation. Following our commentary, we will be joined by Ben Vaughan, our Chief Operating Officer, for question-and-answer period. 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. Beginning with our financial and operating results, we are pleased to report another quarter of excellent financial results due to good operating performance and the successful execution of our asset recycling strategy. Funds From Operations, or FFO, for the quarter was $560 million, an increase of 7% compared to the same period in 2022. Results benefited from our business's unique ability to capture current inflation levels, combined with the commissioning of nearly $1 billion of capital projects over the last twelve months.

Looking ahead, we are well positioned for a strong end of the year, considering that our European hyperscale data center platform was the only new investment to contribute this quarter, with the remaining $1.6 billion of new investments having closed at quarter end or shortly thereafter. Taking a closer look at our results by segment, our utilities businesses generated FFO of $229 million, an increase of 17% from the comparable period last year. Organic growth for the segment was over 10%, reflecting inflation indexation and the commissioning of approximately $500 million of capital into rate base during the last twelve months. Current quarter results benefited from the expansion of our residential decarbonization infrastructure platform in North America and Europe, following the acquisition of HomeServe earlier this year.

This positive contribution was partially offset by the sale of our interest in our Australian regulated utility in August of this year. Moving to our transport segment, FFO for the quarter was $205 million, with organic growth of 7% compared to the same period last year. Rates at each of our businesses have increased, reflecting the positive impact inflation has on our results. Specifically, our global toll road tariffs have increased 8%, and our rail networks are passing through rate increases of approximately 7% relative to last year. Overall, volumes remain consistent across our portfolio, reinforcing the criticality of our assets despite softness in the broader global transportation network. A bright spot within our transport segment is VLI, our integrated rail and logistics provider in Brazil.

Brazil's competitive advantages in the export of key agricultural commodities such as soy, corn, and sugar, combined with strong fertilizer imports, have supported growing rail volumes and tariffs. Over the past decade, we have been able to realize average annual volume and tariff increases of 5% and 9%, respectively. As a result, EBITDA has increased nearly six times during our ownership. Our midstream segment FFO was $163 million, a decrease of 5% compared to the prior period. This was due to the partial sale of our interest in a U.S. gas pipeline in June and the normalization of market-sensitive revenues at our Canadian diversified midstream business. Results were supported by an increased utilization and higher contracted cash flows across the segment compared to last year, as well as the initial contribution from the Heartland Petrochemical Complex.

During the third quarter, Heartland ramped up production and sold over 200 million pounds of polypropylene. We're operating at target production levels, and we expect to continue at these levels into 2024. All commercial arrangements underpinning approximately 70% of the capacity are in service, and the fourth quarter is expected to provide a full period contribution to results. Lastly, FFO from our data segment was $66 million, representing an increase of 10% from the same period last year. The increase is attributable to the acquisition of a European telecom tower operation in February of 2023 and a European hyperscale data center platform this August. The prior period included contributions from a New Zealand integrated data distribution business that we sold in June of this year. At our data center businesses, we continue to experience strong industry tailwinds, driving elevated demand for capacity.

In North America, our U.S. retail colocation business had record capacity bookings during the past two quarters and recently initiated a densification program to create incremental capacity at existing sites. At our U.S. hyperscale platform, we acquired a 200-acre site in Chicago that can accommodate 200 MW of capacity. Chicago is a fast-growing Tier 1 market for data centers with under 5% vacancy rates, and we have already received advanced indications of interest from major hyperscale customers. In the Asia Pacific region, we commercialized our inaugural data center development in Seoul, South Korea. We executed a 15-year contract with a global hyperscaler for 13 MW of capacity that has built-in inflation escalation and a pass-through of electricity costs. Construction has commenced and is forecast to be completed by the end of 2025.

In India, Reliance Industries is joining our existing joint venture on an equal basis. The current development platform includes two land parcels in Chennai and Mumbai, with total capacity potential of up to 160 MW. Transitioning from our resilient and growing financial results into remarks on our balance sheet and liquidity position, the fundamentals of our business remain strong, as the benefit of inflation escalation and a disciplined financing approach have largely insulated us from rising rates. Furthermore, the debt capital markets have been extremely favorable for infrastructure assets, providing an overall net positive backdrop to business conditions. We have proven our ability to deliver on our strategy through market cycle, sourcing several value-based investments during this period of capital dislocation, while completing our annual capital recycling objectives. In total, we have raised nearly $2 billion of proceeds this year from our program.

Achieving our capital recycling objectives has required additional focus as the current market backdrop favors buyers. We continue to execute in this environment as we benefit from owning a high quality and diversified asset base across sectors and geographies that we leverage to monetize assets at the highest valuations. We also tailor the size and structure of our assets to attract the most suitable buyers. Our capital recycling success has resulted in a strong liquidity position. At the end of Q3, our corporate liquidity was approximately $2.1 billion, which reflects the funding of all announced transactions. This available liquidity, combined with our target $2 billion of asset sales in 2024, provides a solid foundation for us to capitalize on the current investment landscape that favors well-capitalized buyers with access to capital. That concludes my remarks for this morning.

I'll now turn the call over to Sam.

Sam Pollock (CEO)

Thank you, David, and good morning, everyone. For my remarks today, I'm going to provide an update on our strategic initiatives and conclude with a brief discussion on the operating environment and our favorable outlook. The market environment we've been operating in has created a strong environment for capital deployment. We've surpassed our annual new investment objective for the third year in a row, closing the acquisitions of two marquee data center platforms, as well as the leading global logistics business, Triton International. The risk-adjusted returns we expect to generate in these investments are well in excess of our targets and are representative of the value entry points that can be achieved in this market. The take private of Triton closed on September 28th. We invested approximately $1.2 billion for a 28% interest that was funded primarily using new BIPC shares as transaction consideration.

We expect to generate a base case IRR above our targets, derived largely from the in-place cash yield. The leading market position and highly cash generative nature of the business provides strong operational flexibility to invest in fleet replacements and growth during favorable markets, or to harvest cash in less attractive markets. We're also very excited about the opportunities across our data center platform, which has grown significantly following the acquisitions of Data4 and Compass, which closed in August and October, respectively. Overnight, we signed an agreement to acquire a portfolio of data centers out of bankruptcy from Cyxtera. We believe we will generate strategic value by combining Cyxtera with Evoque to create a leading retail colocation data center provider with over 330 MW of capacity deployed in high-demand areas across North America.

The combined platform will have the scale, assets, and capabilities required to provide critical infrastructure for its over 2,500 customers to support the exponential increase in demand from industry tailwinds, including artificial intelligence and cloud deployments. Funding has been fully secured for the transaction, which is expected to close in the first quarter of 2024. Touching briefly on the current operating environment, it is clear that there are considerable impacts from geopolitical and macroeconomic factors. Also of note is that we are witnessing diverging economic conditions in several of our key markets. For instance, in Brazil, interest rates are expected to decline as inflationary pressures have waned. In the U.S., a relatively strong economic background will likely result in interest rates at current levels for a while longer. Other regions seem to be somewhere in the middle.

Our global footprint should allow us to arbitrage varying economic circumstances to recycle capital on favorable terms in certain markets while taking advantage of capital scarcity in others. This has always been our playbook, and we will continue to execute the same business strategy, which has been successful over many years. Now, I'd like to make a few comments in relation to our share price. Despite achieving solid financial results throughout the year and delivering on our strategic initiatives, Brookfield Infrastructure's unit price has disappointingly underperformed recently. This is not unique to us, as utility infrastructure companies have generally traded off as investors focused on credit or other sector strategies. As we have noted in the past, the utility and infrastructure sectors are highly resilient asset classes that generate growing and sustainable cash flows.

Indicative of those attributes, we have grown FFO per unit and distributions per unit at compound annual rates of 11% and 8%, respectively, over the past decade. Now looking ahead, there are several elements to our current situation that are worth highlighting. First, our sizable organic growth consists largely of embedded inflationary escalators and secured capital expansion projects. This benefit compounds over long periods of time and provides us with a natural hedge to higher interest rates. Also, our capital backlog is largely self-funded from a combination of committed CapEx facilities and retained cash flows. Now, second, we have exceeded our new investments target for three consecutive years. As a result, we have substantial built-in growth that provides us the flexibility to pace our investment activity in accordance for capital recycling achievements.

Third, we have locked in interest rates for over 90% of our debt, with an average maturity of approximately seven years. This provides us with great visibility into our cash flow going forward. Fourth, in light of our strong conviction in the intrinsic value of our business and its growth trajectory, we see the merit in deploying capital to repurchase our equity. During the quarter, we began repurchasing equity and have bought close to 1 million units under our Normal Course Issuer Bid. Going forward, we will consider further buybacks in conjunction with our ability to earn strong risk-adjusted returns by deploying capital and new investment opportunities. In summary, we have demonstrated our ability to use our size, scale, and diversification to continue recycling capital at good valuations while earning higher returns on our new investments.

On recycling, over the last three years, we have generated approximately $4.5 billion of proceeds from 16 asset sales. Each was completed at a premium to the IFRS carrying value at the time of sale, and the combined gain over book value is approximately 70%. On deployment, our 2023 investments are expected to provide us with some of the best risk-adjusted returns we have seen in the last decade. Combining these acquisitions with our existing platform investments, provide significant embedded growth in our business today. We remain committed to providing unitholders with a stable and growing distribution within the 5%-9% range annually, while maintaining a payout ratio between 60%-70% and a strong balance sheet. We have a track record of returning capital to investors with nearly $9 billion of distributions paid to unitholders.

Ultimately, we believe providing strong cash flow and income growth creates unitholder value, which will be reflected in our unit price over time. This concludes my remarks, and I'll now pass it back to the operator for questions.

Operator (participant)

Certainly. Once again, ladies and gentlemen, if you have a question at this time, please press star one, one. One moment for our first question. Our first question comes from the line of Cherilyn Radbourne from TD Cowen. Your question, please.

Cherilyn Radbourne (Managing Director)

Thanks very much, and good morning. I was wondering if you could start by expanding on your comment in the letter on the investment landscape, in terms of where you're seeing the most attractive opportunities by geography and by sector, and also how you think about pacing your investments in an environment where the stress associated with higher interest rates arguably hasn't been fully absorbed yet?

Sam Pollock (CEO)

Hi, Cherilyn. Thank you for those questions. I think there's two of them in there. I think the first is just where we see value and just the tone of the market, and then the second one, just on our own, you know, pacing of investments. On the first portion of your question, we do see attractive opportunities in most regions that we operate in. Frankly, you know, we've probably focused our attention in North America and Europe in the past year or two, and obviously, you know, given our base currency being U.S. dollars, it's always favorable for us to invest in U.S. dollar businesses, so that we don't have to deal with FX issues.

So we tend to focus in this market when we see great opportunities. But we are seeing interesting opportunities coming our way in Asia at the moment. We do have a new team and a focus in South Korea in particular. We've also, you know, have done generally very well in Australia, and because of the team we have down there, have hit above our weight, I guess, in terms of the amount of capital we've been able to deploy in that market. So I think in the next little while, I'm optimistic that we will find some very interesting opportunities in those two markets. But I'd say as a general comment, we do see good opportunities pretty much everywhere.

As far as sectors, as I probably said on the previous call and maybe the couple of calls before that, you know, the best value tends to be in those businesses that need capital for growth. A lot of companies are starved for growth capital and sectors, you know, particularly the telecom sector, have tremendous capital projects in front of them, and so they need capital, and that's frankly where we can invest for value today. But we are seeing interesting opportunities across, you know, transportation and utilities as well. So I realize I've covered up almost the whole universe of the infrastructure sector, but I do think there's a value to be had pretty much across the board.

And as far as our own pacing, as we mentioned in our letter, you know, we have been very successful in recycling capital and using our liquidity to invest boldly where, when we've seen good opportunities in the last couple of years. You know, I think we're gonna benefit from that for the foreseeable future. And as far as, you know, what we would do in the future, I think it will be similar. If we see some amazing opportunities, we will find the capital, you know, to take advantage of them. But at the same time, we don't feel any pressure to invest and reduce our liquidity except in those circumstances where, you know, we see exceptional opportunities.

I think you'll see us being patient, but also investing boldly if we see a great opportunity.

Cherilyn Radbourne (Managing Director)

Great. That's a great overview. I'll keep my second one short, since that one had a few inside it. With respect to your pipeline of asset sales for 2024, would some of that pipeline have debt that is portable to the prospective buyers, which is presumably an advantage in this market?

Sam Pollock (CEO)

Yeah. Hi, Cherilyn. I would say the vast majority of the ones that we are selling have portable debt. And yes, that's, you know, that's one of the characteristics that we do look for at the moment in order, you know, to be selling businesses, because I think that is a embedded value in those capital structures, and you know, allows us to, you know, continue to create, you know, create value in this market environment.

Cherilyn Radbourne (Managing Director)

Thank you for the time.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Robert Kwan from RBC.

Robert Kwan (Managing Director and Head of Global Power, Utilities and Infrastructure Research)

Great. Good morning. If I could just touch on or ask you just around the capital allocation, specifically how you are approaching buybacks. Just, you know, do you think about buybacks, especially at this unit price, as being an investment in your own assets and the return you would get based on buying back the stock at these levels versus what you think intrinsic value is? And then more broadly, are there any other tangible options that you see is on the table to support the share price?

Sam Pollock (CEO)

Hi, Robert. So on the first question on the buybacks, like, I think you've done a better job of describing how we think about it than I probably could. Yes, you know, we do consider it as buying back, you know, businesses we know and understand well and have a, you know, a good view on their future prospects. So we weigh that against, you know, making investments in new assets and the type of returns we can get on that. So that is the decision we weigh. Obviously, you know, what's attractive about buying your own assets is, you know, they're very much de-risked because you know what you're getting and you understand them well.

And so you're, you know, in some respects, you have a slightly lower return threshold than you would for new investments. But we do weigh those two things and obviously take a long-term perspective on it. We're not just looking for, you know, an initial hit. It's about, you know, are we investing our capital for good long-term value? So that definitely is how we look at buybacks. As far as things we can do in the short term, I think it's hard to do anything in particular other than, you know, continuing to, you know, describe the strength of the business and the prospects and the long-term value creation of the franchise set.

Like, I think, we've always tried to convey to our unitholders that Brookfield Infrastructure is a long-term compounder of wealth, and that, you know, people should buy it because they want to know that, you know, putting aside where volatility might take place in the market because of, you know, what the capital markets do, you know, we'll continue to deliver them with assurance, with high assurance that dividend that they have today, plus that 5%-9% growth. And we have a long track record of doing that. And when we look at our business for the long term, we feel as comfortable or more comfortable in our ability to do that. And I think that's the story we just need to reinforce with the investors.

Robert Kwan (Managing Director and Head of Global Power, Utilities and Infrastructure Research)

Great. Thanks. Just for my second question, just to ask around, BUUK. I guess first, just can you talk about, you know, your take on the housing market there, housing starts? And then just more broadly. You know, this is one of the assets that you've owned the longest, although it's not in a limited life fund. So, but can you talk about your long-term perspective on the business? How you think about, excuse me, the growth and valuation, and even just a little bit of the evolution from where you started with this business to where you are today, and where you think that business is gonna go in the future?

Sam Pollock (CEO)

Great. Okay, now, thanks, thanks, Robert. You know, for, for shareholders and analysts who have been with us for a long time, they know this is one of mine and our company's favorite businesses. We have owned it since we bought Babcock and Brown's business back in 2009, and then we've done a number of tuck-in acquisitions and organic growth projects to build the company up to where it is today. But maybe just dealing with your the first part of your question on housing starts.

This is a business, for those of you who are less familiar with it, that you know really participates in the housing growth or the increase in the stock of housing in the whole United Kingdom. What the business does is it basically works with developers to install all the last mile connections. Over time, you know what's special about this business is the fact that you know when we first bought it we used to install just gas connections. Today, we provide you know five different connections into the home, including water, electricity, fiber, and you know different heating pumps as well. So it's a unique business. Today, the housing market has pulled back you know quite a bit.

I think it's somewhere in the range of 20% pullback from the prior year. So I'd say housing is definitely weaker in the U.K. What's great about this business is the fact that even though housing has pulled back pretty dramatically this one year, our connections that will be installed will, in fact, be higher than what they were last year. We'll have another record year of installations. And we have a backlog of housing connections that represent about seven-eight years of our annual connections. So we have a big, big backlog. And, you know, I think the only other thing I'd mention about the housing is, even though it's been down this year, the amount of housing deficit that exists in the market is pretty substantial.

You know, typically, there's about 200,000 plus new homes built, you know, in the U.K. every year, and the government has had a long-term ambition to see that grow to over 300,000. And so, there's always lots of programs to encourage it. And, like most countries, including Canada, the need for housing is pretty dramatic. So you know, we expect while there's a pullback this year in housing starts, that that will rebound pretty quickly. Just maybe just a couple of final comments, on you asked about, you know, the business and our thoughts on it. You know, we like this business because, you know, it basically is a perpetual asset base with inflation-linked and highly diversified, regulated cash flows.

And it's been growing FFO at about 20% per annum over the past 10 years. So the growth in the business is tremendous. We do have many investors in the fund. Most of them are on the debt side. You know, we've issued about $2 billion of investment-grade debt into the U.S. markets, and it's a regular issuer into the debt markets and has a very strong following. And we also have an institutional investor who's been alongside us for the whole time, for about 10 years, a big European institution who owns 20% of the company. You know, they've seen, you know, the growth in the company, as have we.

And you know, this is a company that, you know, today we don't typically talk about value, but it is a very meaningful value to us. We prepare valuations for them each year, as we do for many of our other institutional investors. And you know, to give you a sense, you know, a Big Four accounting firm put a value on this business at over GBP 3.1 billion, which is almost $4 billion. So a very sizable company, very successful, and one that I hope we keep for a long, long time.

Robert Kwan (Managing Director and Head of Global Power, Utilities and Infrastructure Research)

That's great. Thanks for your help.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Devin Dodge from BMO Capital Markets. Your question, please.

Devin Dodge (Director of Equity Research)

Thanks, good morning. So we've been getting questions from investors on your ability to recycle capital in this type of market. You know, I know you talked about it at the Investor Day, as well as in the prepared remarks earlier, but should we expect a bit of a lull on monetizations until long-term interest rates stabilize? Then maybe just in a general sense, where are you seeing the most interest from potential buyers?

Sam Pollock (CEO)

...Hi there. So, you know, obviously, it's hard to predict exactly, you know, what the market will look like. But what I would say, though, is that, you know, we are bringing, you know, we will, you know, bring to market those businesses that, you know, we think will be highly sought after. You know, what I can say is that, you know, on the businesses that we've already launched processes, at the moment, and it's obviously early days, the number of interested parties looking at it is substantial. So there is lots of investors out there looking for high-quality businesses. That's not stopped, and even over the last while, has been relatively robust, and we still see large transactions, in fact, being done.

I think in this market environment, if I had to say where, you know, the sweet spot is, the sweet spot is probably more mid-market transactions than large-scale transactions. There's a lot more players in that segment. You know, I think, you know, given the uncertainty around growth, highly contracted businesses tend to be, you know, have less divergence in views as far as valuations than, say, businesses with growth wedges. So again, that's something to keep in mind. But then you also have the dynamics that, you know, some regions are in a different spot than others. You know, and I mentioned South America and Brazil.

You know, they got ahead of the curve as far as tackling inflation and increasing interest rates, and rates there now are expected to drop pretty meaningfully over the next couple of months. I'd say the market has improved significantly, and the enthusiasm in that market is actually quite high, compared to some markets where, you know, people are a little more skittish. So, you know, I think one of the big benefits, and this is what we highlight in our letter and we've said in the past, is having a business that's very diversified across many regions. We can, you know, bring assets to sale in regions where people are more constructive, and there's lots of access to capital.

And then in those regions where things are less constructive, you know, we tend to be looking for opportunities there to buy.

Devin Dodge (Director of Equity Research)

Okay. No, I appreciate that. It's a good color. Okay, I'm going to switch over to maybe the deal announced this morning just in a general sense. But I think it's fair to say that your initial investment in a retail colocation data center business has been, you know, at least a bit of a challenge. Can you talk about the improvements that have been made at Evoque over the last couple of years and how the addition of the Cyxtera assets will further those efforts?

Sam Pollock (CEO)

Okay. Well, maybe I'll, I'll start, and I'll turn it over to Ben here to talk about the things that we've done. And yes, I think it's a fair comment that the first couple years have been challenging as we, you know, work through our tenant base there. But it has been a business that over the last, I'd say year and a bit, we've seen a real turnaround in its leasing profile and leasing success. So maybe Ben will touch on that.

But as far as the Cyxtera, you know, the real opportunity here is, you know, the ability to, you know, not only buy for value, but also execute a multifaceted transaction where we can, you know, reunite some of the underlying land leases that are associated with the Cyxtera assets, combine some of those, as well as the data centers in Cyxtera. And then take that set of assets, combine it with our business, which is largely data centers with real estate that's owned. Take advantage of significant synergies from a sales and cost perspective, where we can really reduce the overhead as a percentage of revenue quite dramatically because of the combination of the two businesses.

And then, especially finance the businesses, because now you have much more scale as well as, mostly owned real estate. And so it, it really is a very, very different business than what the two were separately. And so we're very excited by that. And, and, and obviously, I think the real win is going to be the fact that we're buying at a time when the tailwinds are really just starting for the edge-type centers that we have. I don't know, Ben, if you want to add a little bit more what we've done with Evoque.

Ben Vaughan (COO)

Yeah. Maybe as we've talked about on a few calls in the past, what we've been up to at Evoque is... You know, when we bought the business, it was in a moment when some enterprise clients, there was a significant migration towards the cloud. So what we did is we worked to improve our data centers and position them both to be attractive to hyperscalers as they need to move to the edge, continue to be attractive to enterprise clients, and also, you know, today we're seeing large demand from smaller companies engaged in AI businesses.

... So with the under roof upgrades that we undertook over the last many years, the business today has a tremendous call on its capacity. Utilization is going up tremendously. We've had record sales quarters, and like I said, enterprise is coming back into retail colo. Hyperscalers are looking for edge applications, and AI clients have tremendous demand. And I think as Sam mentioned in his opening comments, as part of our under roof upgrades, we also identified an ability to bring on a fairly significant amount of additional capacity at a very low cost per megawatt. So, you know, going forward, we're executing that now that the, you know, the centers will reach full utilization, and we're going to add capacity in the coming years to meet the, you know, the demand that we see in the market.

It's been a real turnaround in the business.

Devin Dodge (Director of Equity Research)

Okay, good to hear. Really good call. Appreciate that. I'll turn it over.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Robert Hope from Scotiabank. Your question, please.

Robert Hope (Managing Director of Equity Research)

Hi, good morning. You know, just given the market's focus on funding liquidity across a variety of sectors, you know, how do you think about your existing liquidity position? Could you accelerate asset sales to further bolster the balance sheet or look for other levers, like, you know, marketable security sales?

David Krant (CFO)

Hey, Robert, it's David here. Look, I think first and foremost, we feel very good about our current liquidity position. As you'll see, it's over $2 billion at the corporate level and a lot of existing liquidity in each of our businesses so that they can fund a lot of the organic growth that we talked about, as you've seen throughout our materials. I think from a liquidity perspective, I think the $2 billion of asset sales that we have earmarked for next year is a very actionable plan, as you heard from Sam. We also have many pockets in the business where we think we can find additional liquidity if we need to accelerate our new investment opportunity.

But when you pro forma that with $4 billion of total liquidity, we think that's a significant amount to be operating at in this environment, and going forward.

Robert Hope (Managing Director of Equity Research)

Thanks for that. And then maybe just going back to the commentary on pacing. Like, when we take a look at the environment, you know, which could be full of opportunities, you know, how is that balanced, you know, with a market where it could be, you know, more difficult to sell assets or your unit price implies a higher cost of capital? You know, how do you balance the potential for significant accretive acquisitions versus, you know, what we'll call your higher cost of capital, as well as, you know, the higher, sorry, a higher cost of capital?

Sam Pollock (CEO)

Robert, I guess all I can say is, you know, we just closely monitor our liquidity. So, we know, you know, what we have to live with as far as our capacity, and once we have visibility on our capital recycling program, that will, you know, gauge our aggressiveness in pursuing big opportunities. In the meantime, you know, we'll continue to, you know, look at the tuck-in acquisitions or the businesses, the opportunities like the Cyxtera opportunity, which didn't really require any capital, and we'll take advantage of those.

There's lots of things we can do to create value in our businesses that doesn't require a lot of capital, and those larger ones, you know, will, as we said, you know, will match up with the cash that comes in from our asset sales.

Robert Hope (Managing Director of Equity Research)

Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Robert Catellier from CIBC Capital Markets. Your question, please.

Robert Catellier (Energy Infrastructure Analyst)

Hey, good morning, and thank you for your comments so far. I do want to get back to the capital allocation subject. It looks like you've become considerably more active under the NCIB following quarter end. I'm just wondering if there's something more substantial that you can do there over time. And you've touched on this versus comparing repurchases versus investments, but I'm wondering how you're looking at this capital allocation in terms of some of your other options, like perhaps deleveraging, just given that seems to be what the market is focused on in general.

Sam Pollock (CEO)

Hi, hi, Robert. So, you had a couple of different elements to your question there. I think, you know, just to repeat from the, the buyback of shares, you know, you know, we will do that, you know, on a periodic basis, you know, with the, existing programs that we have in place. And to the extent that, you know, once we've done some, capital recycling, we may do something larger, as opposed to, you know, making investments in, in new transactions. So I think that's all we're telling people is it's, it's part of our investment, decision framework today, given where we're trading. You know, in, in relation to, delevering, you know, we feel very comfortable with, our balance sheet today, which is, has been, is strong and...

Our maturities are as well laddered as they probably have ever been. We really don't have any maturities at the corporate level for many years, and at the asset level, you know, it, it's not only extremely manageable, but very comfortable what we have. So there's nothing that we're looking to delever in any particular case. I think, and our business, I think the other thing which, you know, we did flag in our, in our, letter is, you know, even as interest rates go up, the inflation compounding within our business exceeds the amount of any increase in interest rates. So, from that perspective, we are always delevering, just because the businesses are growing. So, I think that just leaves it at that, unless Dave you had to add something.

David Krant (CFO)

Nope, I think that, that covers it well.

Robert Catellier (Energy Infrastructure Analyst)

Okay, thanks for that. And, I just wanted to clarify something. In recent years, you've been talking about the value of your platform investments. And I've... If I understand your comments correctly this morning, you said that in terms of monetizing assets, the sweet spot is more middle market, mid-market rather than large scale. And, you know, given that you're looking to pace your new investments with the recycling, can we expect more in the next year or so in terms of tuck-ins rather than large acquisitions in the current environment?

Sam Pollock (CEO)

No, I wouldn't say that, and I hope I didn't give people the wrong impression. I think all we wanted to just flag was, you know, what was in the letter, namely that we've made lots of investments. There's no pressure that we feel to deploy capital. You know, we will be optionistic, and as you know, our liquidity increases with capital recycling, you know, we'll be on the lookout for great opportunities, whether it's buying our shares or making a big investment. We'll continue to do that. The tuck-ins are things that I would say that is a constant thing we're always doing. Those don't generally require any capital.

We can usually do them on our, you know, lines of credit in each of the businesses. Those are just part of the regular business plans of creating value. And we'll continue to do those, particularly in this market, where we see good opportunities.

Robert Catellier (Energy Infrastructure Analyst)

Yeah, okay. Thank you.

Operator (participant)

Thank you. One moment for our next question. And our next question comes from the line of Frederic Bastien from Raymond James. Your question, please.

Frederic Bastien (Managing Director and Head of Industrial Research)

Hey, good morning.

Sam Pollock (CEO)

Morning, Frederic.

Frederic Bastien (Managing Director and Head of Industrial Research)

Just wanted to close the loop on this latest Cyxtera investment. Can you reconcile the total purchase price of $1.3 billion you highlighted in your prepared remarks and the $775 million bucks that's been quoted in the press? And what is BIP's actual commitment to this $1.2 billion?

Sam Pollock (CEO)

Yeah, sorry. The 1.3 includes all the purchases of the land leases, in addition to the $750 going to Cyxtera. So it's, as I mentioned earlier, it's really a multifaceted transaction with many, many different parties. Think of it as a true, you know, recapitalization of that business, before we combine it with ours. And the funding is in place from a group of lenders to complete all the acquisitions. It's not requiring any capital from us and, you know, closing is expected in the first quarter of 2024.

Frederic Bastien (Managing Director and Head of Industrial Research)

Okay, thanks for that clarity, Sam. Just a couple more questions quickly. In prior periods of market volatility, we've seen you make toehold investments in depressed public stocks. Obviously, you have been buying your own stock, but have you made such investment recently in other companies?

Sam Pollock (CEO)

So, we can't really comment too much on specifics. But, you know, we do periodically, you know, make investments in companies that trade down and to monitor them. And it's safe to say that at any given point in time, we probably have, you know, one or two that we've done that with. But, you know, I'd rather not comment more than that.

Frederic Bastien (Managing Director and Head of Industrial Research)

Okay, fair enough. Lastly, where do you see the best opportunities for organic and inorganic growth in the midstream segment right now?

Sam Pollock (CEO)

Sorry, say again, Fred. The question was, where do we see-

Frederic Bastien (Managing Director and Head of Industrial Research)

The best opportunities for growth in midstream, whether it's organic or inorganic.

Sam Pollock (CEO)

Okay. Yeah, I'd say, most of what we're focused on in the midstream sector is on the organic side. Maybe, Ben, do you want to touch upon a little bit of what we're doing in IPL and at midstream, North River in relation to some of the, you know, customer-related projects.

Ben Vaughan (COO)

Yeah. Mostly what we're focusing on in, in those businesses are what I would consider, you know, fairly smaller scale, but, you know, important projects for our clients to just help them with additional capacity needs. We're seeing utilization rates, you know, increase and, and reach pretty high levels across our midstream fleet. And so most of what we're engaged in is, I'd call them bite-sized capital projects to allow our customers to bring either more barrels or gas through our facilities, and, and they're very, smaller scale and, relatively lower risk CapEx projects that are highly accretive for us. So that's our main area of focus, yeah, in that space.

Sam Pollock (CEO)

I would say on a total dollar basis, though, Ben, it's probably the next couple of years we've been investing $400 million of capital with relatively low EBITDA to CapEx ratios.

Frederic Bastien (Managing Director and Head of Industrial Research)

Yep.

Sam Pollock (CEO)

So they're very accretive. They represent, you know, diversified number of, of clients, and we'll be doing this both at IPL as well as at North River.

Frederic Bastien (Managing Director and Head of Industrial Research)

That's great. Thanks so much.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Patrick Kenny from NBF. Your question, please.

Patrick Kenny (Managing Director and Research Analyst)

Thank you. Good morning. Let's come back to the balance sheet here. You referenced your non-recourse debt maturing over the next 12 months. Could maybe bring investment grade versus rollover. And notwithstanding your constructive comments from other markets demand for, just wanted to confirm whether or not there might be any businesses or might be in need of liquidity support over the next 12 months?

David Krant (CFO)

I didn't catch much of that, admittedly, Pat. It's David here. I think what I did capture, and feel free to jump in. What I think you're asking about was upcoming refinancings that we referenced in our materials and any need for liquidity or support from the business or from Brookfield Infrastructure. And I think, you know, we highlighted the well-laddered maturity profile in our materials. We have no concerns around the leverage in each any of our businesses that we have or the need for financial support for them. We, as we've alluded to in the past, these are structured, you know, predominantly to investment grade levels, very sustainable amounts of leverage at the underlying businesses.

The reason we do that is for, you know, the ability to operate through cycles, and we've seen that come to fruition this year. So, you know, I'd say from a maturity standpoint, we have about 5% in the next 12 months. You know, when we think through the cost of that financing, you know, depending on when that debt was raised, you know, if it was in the last 5 years, it was probably, you know, somewhere in the 150-200 basis points more expensive on base rates. You know, spreads for the sector have remained relatively constructive because of, you know, the market's been very open for high-quality infrastructure businesses like ours. So, we're not feeling any concerns at the portfolio company or of upcoming refinancing.

Patrick Kenny (Managing Director and Research Analyst)

Okay. No, that's great, David. Thanks. And then you guys provided a quick recap of your Investor Day highlights, and I apologize if I missed it, but just wanted to confirm on the back of the Cyxtera transaction here, that you continue to expect that 12%+ FFO per unit growth over the next 1-3 years?

David Krant (CFO)

Yep. Nothing has changed in the environment from last month when we provided that.

Patrick Kenny (Managing Director and Research Analyst)

Perfect. I'll leave it there. Thanks, guys.

Operator (participant)

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 for any further remarks.

Sam Pollock (CEO)

Okay, thank you, operator, and thank you to everyone for joining the call this morning. We'd like to wish everyone a very happy upcoming holiday season, and we look forward to providing you our fourth quarter and year-end results early in the new year. All the best. Thank you.

Operator (participant)

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