Brookfield Infrastructure Partners L.P. — 2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone Q4 filing. Amounts are U.S. dollars unless noted. Financial statements are prepared under IFRS; FFO, AFFO, Adjusted EBITDA, invested capital, debt attributable to the partnership and net debt are non-IFRS measures defined by the partnership and may not be comparable across issuers.
Business context
Brookfield Infrastructure owns and operates global infrastructure businesses across utilities, transport, midstream and data. Management says approximately 90% of Adjusted EBITDA is supported by regulated or contracted revenues. The partnership relies on Brookfield affiliates for management and advisory services and has no employees of its own apart from operating-subsidiary employees.
Key financial metrics
| Metric | 2023 | 2022 | Change or context |
|---|---|---|---|
| Revenue | $17.931 billion | $14.427 billion | Up $3.504 billion, or approximately 24% |
| Net income | $1.448 billion | $1.375 billion | Up $73 million |
| Net income attributable to the partnership | $432 million; $0.14 per unit | $407 million; $0.14 per unit | Higher total amount; per-unit figure unchanged |
| FFO | $2.288 billion; $2.95 per unit | $2.087 billion; $2.71 per unit | Up 10% in total and 9% per unit |
| AFFO | $1.838 billion | $1.701 billion | Up $137 million |
| Adjusted EBITDA | $3.591 billion | $3.032 billion | Up $559 million |
| Operating cash flow | $4.078 billion | $3.131 billion | Up $947 million |
| Investing cash flow | $(12.990) billion | $(3.365) billion | Higher spending, including acquisitions |
| Financing cash flow | $9.419 billion | $56 million | Primarily net borrowing and non-controlling-interest funding |
| Total assets | $100.784 billion | $72.969 billion | Increase mainly reflected acquisitions and growth |
| Consolidated borrowings | $45.815 billion | $30.233 billion | Includes $4.911 billion corporate and $40.904 billion non-recourse borrowings |
| Debt attributable to the partnership | $28.476 billion | $20.797 billion | Partnership-share measure, not consolidated debt |
| Net debt | $26.680 billion | $19.188 billion | Debt attributable to the partnership less its share of cash |
| Group-wide liquidity | $5.211 billion | $5.087 billion | Includes corporate and subsidiary availability |
The net-debt-to-invested-capitalization ratio was 67%, versus 61% in 2022. Average cash interest rate was 5.7%, versus 5.5%; approximately 37% of borrowings were initially floating-rate, reduced to approximately 17% after interest-rate swaps (about 13% excluding working-capital and capital-expenditure facilities). Debt attributable to the partnership had an average term of seven years.
Material changes versus prior year
- Revenue growth reflected acquisitions, inflation indexation, rate-base additions and organic growth. It was partly offset by asset sales and foreign-exchange effects.
- FFO increased across utilities, transport and data; midstream FFO declined to $684 million from $743 million, with higher borrowing costs and lower interest capitalization partly offsetting improved utilization, contracted cash flows and the initial Heartland Petrochemical Complex contribution.
- Major 2023 acquisitions included HomeServe, Triton and Data4. Triton consideration included $751 million of BIPC exchangeable shares. The acquired businesses contributed to higher assets, revenue and debt; purchase-price allocations for acquisitions were partly provisional at year-end.
- Asset recycling included sales of interests in an Australian utility, a U.S. gas pipeline, a New Zealand data business and Indian toll roads. Management said gains on dispositions and associate results contributed to 2023 earnings.
- Cash distributions were $1.53 per unit for 2023, up 6%. FFO payout ratio was 66%, within the stated 60%–70% target; AFFO payout ratio was 82%.
Outlook, commentary and risks
- Management targets long-term annual returns on invested capital of 12%–15% and annual distribution growth of 5%–9%. The board approved a 6% increase to $0.405 per unit quarterly, or $1.62 annualized, beginning with the March 2024 distribution. Management cautions that distributions are discretionary and not assured.
- Management cited 8% organic growth in 2023 and a $5.1 billion data-segment capital backlog to be commissioned, including approximately $3.9 billion related to two semiconductor foundries under construction with Intel. Delivery, timing and returns are not assured.
- Subsequent to year-end, the partnership completed the approximately $1.3 billion Cyxtera data-center acquisition, financed with debt, and agreed to pursue a $2 billion acquisition of 78,000 telecom sites in India, subject to regulatory approvals and expected to close in the second half of 2024.
- Risks include higher interest rates, refinancing and leverage; execution, construction and capital-spending risks; foreign-exchange exposure; regulation, climate and commodity-demand changes; cyber incidents; customer defaults and contract renewal risk; and the possibility that asset sales or acquisitions are delayed or not completed.
- Brookfield controls the general partner and receives a 1.25% annual base management fee plus incentive distributions. The filing describes extensive potential conflicts, limited fiduciary duties and limited ability to terminate the services agreement. Brookfield’s beneficial ownership was approximately 26.6% on a fully exchanged economic basis.
- The partnership reported no material governmental, legal or arbitration proceedings known to it. It reported $8 million of letters of credit issued on behalf of subsidiaries; separate financial-statement disclosure reports $410 million of bank guarantees and letters of credit for the partnership and associates.
- The auditor gave an unqualified opinion on the IFRS financial statements and internal control over financial reporting. Management and the auditor excluded HomeServe, Data4 and Triton from the 2023 internal-control assessment; together, those businesses represented 24.4% of total assets, 33.2% of partnership capital and 15.8% of revenue.
Important facts for investors to verify
- Reconcile reported IFRS earnings and operating cash flow with FFO and AFFO, including maintenance capital spending and the impact of non-controlling interests.
- Review debt maturities, refinancing needs, floating-rate exposure, covenants and the distinction between consolidated debt and partnership-attributable net debt.
- Assess whether acquisition integration, capital projects and the data backlog deliver expected cash flows and returns; check final purchase-price allocations for acquired businesses.
- Confirm the funding, approvals and closing status of the proposed Indian tower acquisition and the impact of debt-funded growth on leverage and distributions.
- Evaluate asset-sale proceeds and timing, and the sustainability of distribution growth against FFO, AFFO, payout ratios and liquidity.
- Review related-party fees, incentive distributions, Brookfield’s opportunity-allocation practices and the governance protections available to public unitholders.
- Consider the control-assessment exclusions for the three acquired businesses and the valuation sensitivity of revalued property, plant and equipment, goodwill and investments in associates.