Brookfield Infrastructure Partners L.P. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; filed March 17, 2023. This is an annual report, not a standalone Q4 filing. Financial statements are prepared under IFRS and amounts are in U.S. dollars unless noted.
Business context
Brookfield Infrastructure owns and operates global utilities, transport, midstream and data assets, emphasizing contracted and regulated cash flows. Management reported approximately 90% of Adjusted EBITDA supported by regulated or contracted revenues. Brookfield’s economic interest was approximately 27.1% on a fully exchanged basis.
Financial results and liquidity
| Metric (US$ millions unless per unit) | 2022 | 2021 | Change / context |
|---|---|---|---|
| Revenue | 14,427 | 11,537 | Up 25%; acquisitions, inflation, rate-base additions and organic growth contributed. |
| Net income | 1,375 | 2,719 | Down 49%; prior year included substantially larger disposition gains. |
| Net income attributable to partnership | 407 | 1,093 | Down 63%. |
| Net income per limited partnership unit | $0.14 | $1.16 | Historical per-unit figures reflect the unit split and BIPC special distribution. |
| FFO (non-IFRS) | 2,087 | 1,733 | Up 20%; $2.71 per unit, up 12%. |
| AFFO (non-IFRS) | 1,701 | 1,412 | Up 20%. |
| Adjusted EBITDA (non-IFRS) | 3,032 | 2,451 | Up 24%. |
| Cash from operating activities | 3,131 | 2,772 | Up about $359 million. |
| Cash used by investing activities | (3,365) | (1,173) | Higher investment in acquisitions and long-lived assets. |
| Cash from (used by) financing activities | 56 | (995) | Included net borrowing proceeds, distributions and deferred-consideration settlements. |
| Consolidated assets | 72,969 | 73,961 | Down about $1.0 billion. |
| Consolidated borrowings | 30,233 | 29,253 | Corporate borrowings rose; non-recourse borrowings were broadly unchanged. |
| Partnership net debt (non-IFRS) | 19,188 | 17,502 | Net debt to capitalization was 61%, versus 59%. |
| Group-wide liquidity | 5,087 | 5,380 | Included $891 million corporate cash and financial assets and available facilities. |
The weighted-average cash interest rate was 5.5%, compared with 4.9% in 2021. Partnership-attributable debt had an average term of seven years; approximately 34% was floating-rate before swaps, or approximately 22% after swaps. Consolidated cash and cash equivalents were $1.279 billion.
Segment FFO was $739 million in utilities, $794 million in transport, $743 million in midstream and $239 million in data. Adjusted EBITDA margins were 45% in transport (47% in 2021), 56% in midstream (59%) and 57% in data (55%). Utilities rate base increased to $6.804 billion from $5.818 billion; its reported return on rate base was 13%, versus 12%.
Material changes versus 2021
- Revenue and FFO increased, supported by the full-year contribution from Inter Pipeline, organic growth, inflation-linked tariffs and newly commissioned projects. Foreign exchange movements reduced reported U.S.-dollar revenue.
- Net income fell principally because 2021 included approximately $2.1 billion of disposition gains net to the partnership, compared with approximately $110 million in 2022.
- Interest expense increased $387 million to $1.855 billion, reflecting acquisition-related borrowing, growth funding and repayment of $1 billion of deferred consideration at the Brazilian regulated gas transmission business.
- Growth capital expenditures rose 40% to $1.613 billion. Data’s capital backlog to be commissioned increased to $4.095 billion, including approximately $3.6 billion for the Intel semiconductor-facility project.
- Partnership capital decreased to $25.554 billion from $26.391 billion. Foreign-currency translation reduced partnership capital by $892 million, partly offset by hedging gains.
- The partnership completed a three-for-two split of its units and specified exchangeable securities on June 10, 2022; preferred units were unaffected.
Outlook, commentary and risks
- Distributions: The board approved a 6% increase in the quarterly distribution to $0.3825 per unit, or $1.53 annualized, beginning in March 2023. Management targets annual increases of 5%–9% and a long-term payout ratio of 60%–70% of FFO. The 2022 FFO payout ratio was 68%; the AFFO payout ratio was 83%. These are targets, not guarantees.
- Returns and growth: Management targets long-term annual returns on invested capital of 12%–15%. It cited digitalization, decarbonization and deglobalization as investment themes and expects to fund growth through operating cash flow, asset sales and capital markets. The filing states approximately $5.2 billion of committed backlog and $6.3 billion of capital to be commissioned over the next two to three years.
- Transactions: Subsequent to year-end, the partnership acquired an effective 26% and 25% interest in HomeServe’s North American and European businesses, respectively. Other announced or pending transactions include the Indian toll-road sale and Australian port sale, both subject to closing conditions, and the German/Austrian telecom-tower investment completed in February 2023.
- Leverage and covenant item: Approximately $31 million of partnership-attributable debt was in breach of asset-level financial covenants at year-end—less than 1% of such debt. Management expected refinancing or covenant waivers. Asset-level debt maturities, refinancing access and higher interest rates remain important risks.
- Operating and market risks: The filing highlights inflation, supply-chain and construction costs, foreign-exchange exposure, regulation, commodity-linked demand, climate and environmental obligations, customer concentration, cybersecurity, and market access. Some assets depend on finite contracts or concessions. A majority of contractual and regulated revenues at the Brazilian regulated transmission operation came from one customer.
- Governance and related parties: Brookfield controls the general partner; the partnership depends on Brookfield-affiliated service providers and pays a base management fee of 1.25% annually under the agreement. The filing describes potential conflicts in allocating investments, services and expenses, and notes limited unitholder voting rights and restrictions on terminating the services agreement.
- Unusual accounting and audit matters: IFRS net income includes non-cash revaluation and disposition effects; FFO, AFFO, Adjusted EBITDA and partnership-attributable debt are non-IFRS measures with issuer-specific definitions. Deloitte issued unqualified opinions on the financial statements and internal control; it identified valuation of property, plant and equipment and investments in associates and joint ventures as critical audit matters.
Most important facts for investors to verify
- Reconcile 2022 FFO and AFFO growth to cash distributions, maintenance capital requirements and acquisition contributions; review the company’s non-IFRS definitions and reconciliations.
- Assess partnership-attributable net debt, the 61% net-debt-to-capitalization ratio, floating-rate exposure and the $31 million covenant breach, including subsequent waivers or refinancing.
- Verify expected timing, funding and returns for the committed project backlog, especially the Intel foundries, and the completion and proceeds of announced asset sales.
- Evaluate the sustainability of the distribution increase against cash available from subsidiaries, debt restrictions, preferred distributions and incentive distributions.
- Review valuation assumptions for revalued assets and equity-accounted investments, and monitor customer concentration, regulatory resets, currency effects and Brookfield-related fees and conflicts.
FFO, AFFO, Adjusted EBITDA, partnership-attributable debt and net debt are non-IFRS measures and may not be comparable with similarly named measures at other issuers.