Brookfield Infrastructure Corporation — Form 6-K Summary
Business Context and Reporting Period
Filed June 22, 2020, for the month of June 2020, by Brookfield Infrastructure Partners L.P. and Brookfield Infrastructure Corporation in connection with a U.S. offering of preferred securities. The filing provides a COVID-19 operational and financial update rather than quarterly financial statements.
Financial Position and Key Metrics
- Utilities, energy and data infrastructure businesses contributed nearly 70% of 2019 funds from operations (FFO) and experienced minimal COVID-19 impact, supported by regulated or contractual revenue models.
- Transport contributed approximately 30% of 2019 FFO.
- In the transport segment, rail assets generated approximately 50% of segment FFO in the first quarter of 2020 after the acquisition of a significant North American asset.
- Port volumes declined approximately 15% year over year in the first quarter of 2020, primarily because of lower volumes from Asia, but subsequently rebounded.
- Toll road traffic declined approximately 40% versus plan while national shutdowns were in effect.
- In April 2020, the Partnership issued C$400 million of medium-term notes and obtained an incremental $1.0 billion revolving credit facility.
- Total liquidity was approximately $3.4 billion, including capacity to support operations and pursue new investments.
- The filing does not provide consolidated revenue, net income, FFO, cash flow, margin, leverage, or debt-balance figures for the reporting period.
Material Changes Versus the Prior Comparable Period
- COVID-19 caused significant traffic reductions at toll roads and a first-quarter decline in port volumes, while rail operations remained resilient.
- Construction slowdowns delayed commissioning of secured growth projects, including contracted growth at the U.K. regulated distribution business, which slowed significantly in April 2020.
- The Partnership strengthened liquidity through the medium-term note issuance and additional revolving credit capacity.
Outlook, Commentary, Risks and Unusual Items
Management stated that all businesses were deemed essential and remained operational, with continuity and safety protocols implemented. The diversified portfolio, regulated frameworks and long-term take-or-pay contracts were cited as mitigating factors.
Management did not anticipate a significant long-term impact from COVID-19, assuming continued economic reopening. Delays in construction may defer accounting revenue and FFO recognition, but management characterized the effect as a timing issue rather than a permanent loss of cash flow or economic value because delayed projects are expected to enter the rate base.
Toll road concession agreements may provide relief for force majeure events through direct compensation or extensions of concession terms. The timing and amount of any such relief are uncertain.
Key risks include the severity, duration and spread of COVID-19, further economic disruption, construction delays, volume weakness and the possibility that actual results differ materially from forward-looking statements. The filing provides no formal quantitative earnings guidance.
Investor Verification Items
- Verify the composition of the approximately $3.4 billion liquidity figure, including cash and undrawn commitments, and review associated covenants and maturities.
- Assess the terms, interest rates and maturity of the C$400 million medium-term notes and the incremental $1.0 billion revolving facility.
- Confirm subsequent port, rail and toll road volume trends and whether force majeure claims resulted in compensation or concession extensions.
- Determine the actual FFO and cash-flow effects of delayed construction and the timing of projects entering the rate base.
- Review subsequent filings for changes in COVID-19 assumptions, leverage, distributions and investment activity.