Brookfield Infrastructure Partners L.P. (BIP) CEO Samuel Pollock on Q4 2018 Results - Earnings Call Transcript

Brookfield Infrastructure Partners L.P. (NYSE:BIP) Q4 2018 Earnings Conference Call February 6, 2019 9:00 AM ET

Company Participants

Melissa Low - Vice President, Investor Relations

Bahir Manios - Chief Financial Officer

Samuel Pollock - Chief Executive Officer

Benjamin Vaughan - Chief Operating Officer

Conference Call Participants

Devin Dodge - BMO Capital Markets

Cherilyn Radbourne - TD Securities, Inc.

Robert Catellier - CIBC World Markets Inc.,

Andrew Kuske - Credit Suisse

Jeremy Rosenfield - Industrial Alliance Securities

Robert Kwan - RBC Capital Markets

Rupert Merer - National Bank Financial

Ryan Levine - Citigroup

Frederic Bastien - Raymond James

Operator

Good day, ladies and gentlemen, and welcome to the Brookfield Infrastructure’s Fourth Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call maybe recorded.

I would now like to introduce your host for today’s conference Melissa Low. You may begin.

Melissa Low

Thank you, operator, and good morning. Thank you all for joining us for Brookfield Infrastructure Partners' fourth quarter earnings conference call for 2018. On the call today is Bahir Manios, our Chief Financial Officer; Sam Pollock, Chief Executive Officer; and Ben Vaughan, Chief Operating Officer of Brookfield Infrastructure. Following their remarks, we look forward to taking your questions and comments.

At this time, I remind you that in responding to questions and in talking about our growth initiatives and our financial and operating performance, 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.

With that, I'd like to turn the call over to Bahir.

Bahir Manios

Great. Thank you, Melissa, and good morning, everyone. I'm very pleased this morning to provide you with a quick overview of 2018, discuss our results of operations and also touch on our liquidity position. So first up, we classified 2018 to have been a very active and successful year for our business where we completed many key priorities that has enhanced our overall profile.

Over the years, Brookfield Infrastructure’s business has evolved greatly not just in terms of size, but also the maturity profiles of our assets. As such, we’ve taken strides in repositioning our funding model to become much more self-reliant in nature with respect to how we fund our growth going forward. We have accomplished this by executing well on our asset rotation strategy, which is an integral component of our overall – full investment cycle plan.

The ability for us to buy and sell assets is important because it enables us to capture extra value for our unitholders. Our goal is to buy higher growth businesses, where we can apply our operational expertise, thus earning higher returns. These investments are funded with proceeds generated from the sale of mature derisk businesses to investors with lower return hurdles. The value arbitrage between the two can be quite meaningful to our results. This strategy, in addition to being an alternative source of funding, allows us to utilize the capital markets only on an opportunistic basis to fund our growth.

Going forward, we expect the majority of our growth to be funded by the proceeds from asset sales and cash flows retained in the business. This is different than when we started the business 10 years ago. In previous years, we issued equity to fund much of our M&A investment activities on large-scale capital projects.

Even though our funding model is evolving, we still have excellent access to the capital markets. As a result, we may nonetheless issue equity when we have outsized investment opportunities or in circumstances when it makes financial sense to do so. But we are no longer dependent on this approach.

Now on to our financial results for fiscal 2018. Our business generated Funds from Operations or FFO of $1.23 billion, or $3.11 on a per unit basis. While FFO benefited from solid organic growth of 8% compared to 2017, results were impacted by the loss of income associated with asset sales and the time required to redeploy those proceeds.

In addition, a stronger U.S. dollar reduced results by approximately $100 million, compared to the prior year. Results in our Utilities segments were solid. Our operating groups contributed FFO of $576 million compared to $610 million for the prior year, which included approximately $60 million of additional income from the transition business we sold in 2018.

Underlying performance remains strong, reflecting the benefits of capital commissioned into our rate base and inflation-indexation, which led to a 5% increase in our FFO. These benefits were partially offset by the loss of income associated with the sale of our electricity transmission operations and higher borrowing costs relating to debt financing at our Brazilian regulated gas transmission business, both of which were completed in the first half of the year. Results for our Utilities segment were also impacted by foreign exchange, which reduced earnings for the year by over $60 million.

Our UK regulated distribution operations achieved another record year across all key performance indicators, including new sales and completed connections. At the end of July, our order book exceeded 1 million connections for the first time and increased further to almost 1.1 million by the end of the year. Momentum in this business has been sustained by robust growth in home completions in the country and a wide acceptance of our multi-utility offering by homebuilders.

In addition, we recently secured two exciting opportunities for our utilities business. At our North American electricity transmission operation, we obtained the necessary approvals to proceed with the construction of a 24 kilometer line connecting our operations to the largest electric utility in Texas. Our share of the project will require an investment of $33 million and should be complete by 2022.

Our Transport segment generated FFO of $518 million for the year, which was modestly lower than the prior year. Results on a constant-currency basis actually increased by 5%, as our operating groups benefited from inflationary tariff increases and GDP-linked volume growth, arising from solid economic fundamentals in the majority of the regions in which we operate.

In particular, results reflect strong agricultural volumes at our rail operations and higher traffic at our port assets. These positive effects were partially offset by lower mineral volumes at our Australian rail operations, the impact from the handback of one of our state concessions in our Brazilian toll road business, and the impact of foreign exchange, which reduced our results in U.S. dollar terms by approximately $40 million.

Our port operations delivered strong financial performance for the year, with FFO increasing 4% on a constant-currency basis. The improvement in results was primarily driven by strong container volumes in most of our core markets around the world. On average, volumes were up by 3%, and in aggregate, our business currently delivers over 6 million lifts per year, which is 6% higher than the prior year.

The growth in our volumes has been driven by new contract wins, and increased capacity utilization on existing vessel calls. Additionally, in Australia, our team successfully secured three new contracts that will add traffic and over $4 million of incremental EBITDA annually.

Our Energy segment generated FFO of $269 million in 2018, 29% ahead of the prior year. Results in this segment benefited from the initial contribution of two sizable investments made in a Canadian midstream business and a leading North American residential energy infrastructure company. We also benefited from a 16% increase in gas transport volumes at our U.S. gas transmission operations due to the production growth and contributions from the first phase of its Gulf Coast expansion project commissioned in the fourth quarter.

Our North American district energy business was recently awarded a C$10 million grant from the Canadian government through a low carbon economy fund, to finance the expansion of its deep lake water cooling system. The expansion will cost approximately C$100 million with BIP share being $20 million and will increase cooling capacity at our Toronto operation by over 25% to support growing demand for its services.

Our Data Infrastructure segment contributed FFO of $77 million for the year, which was slightly ahead of the prior year. Results for the year were 5% higher in local currency due to the benefits of inflation-indexation and contribution from capital investments made in the prior year. The strong underlying performance was partially offset by the impact of lower average hedge rates, compared to the prior year.

Our French Telecom business recently secured a contract with one of our largest customers to build a minimum of 1,250 new towers over the next four years. Securing this contract reaffirms our strong build-to-suit tower offering, which captures growth driven by the increasing coverage requirements in France. This will require €150 million investment with BIP share being approximately $35 million and is expected to generate levered returns in excess of 20%.

Shifting now to our current financial position, there has been a considerable amount of volatility in equity markets. The trading price of our units was no exception, and sold off in response, despite infrastructure assets remaining highly sought after by private institutional investors.

We were able to take advantage of this by repurchasing units under our normal course issuer bid. Since December, we have repurchased approximately 1.6 million units at an average price of $35. The markets have enjoyed a very strong January and our units have returned to pre-December pricing levels since.

We currently have a strong financial position, with total liquidity of $3.3 billion, of which over $2.1 billion is at the corporate level. This liquidity is expected to be further bolstered in the coming weeks, with proceeds generated from the partial sale of our Chilean toll road that Sam will touch on in his remarks.

And finally before I hand the call off to Sam, I'm very announced that based on our strong performance this past year, our robust overall liquidity position and positive outlook for the business in 2019 and beyond, our Board of Directors approved the 7% increase in our quarterly distribution to approximately $0.50 per unit in 2019, which marks our tenth consecutive year of distribution increases.

This year’s distribution increase is at the mid-point of our long-term target range. In setting our distribution level, we decided to retain a greater amount of cash in the business to fund our growing backlog of organic growth projects, which we expect will generate very strong risk-adjusted returns.

And so with that, thank you for your time and attention this morning, and I'll now turn the call over to Sam.

Samuel Pollock

Thank you, Bahir, and good morning, everyone. Before I provide you an update on our ongoing strategic initiatives, I'm going to reflect on some of our accomplishments in 2018. I'll also then turn the call over to Ben Vaughan, our Chief Operating Officer to share our views on Brazil's economic recovery. And then I'll conclude the call with an overall outlook for the business.

So let me begin with 2018. It was an extremely successful year for our business. First, we significantly expanded our presence in North America. We did this through the acquisition of a leading provider of essential residential energy infrastructure and the largest independent natural gas gathering and processing business in western Canada.

In total, we committed $1.9 billion of capital to new investments in 2018 of which $1.3 billion was deployed in this region. Next, we invested approximately $800 million in organic growth capital projects. These projects will increase our utilities rate base and expand our transport, energy, and data infrastructure networks. We expect these projects to grow EBITDA by 10% on a run rate basis, once fully online in the next two years or so.

We also executed on our capital recycling program. We opportunistically completed the sale of our Chilean electricity transmission operations, generating an IRR of 18% and net after-tax proceeds of $1.1 billion.

We also recently signed agreements to sell up to 33% of our stake in our Chilean toll roads and currently have another five sale processes that are being progressed. In total, we expect to generate net proceeds of $1.5 billion to $2 billion in the next 12 to 18 months from the sales.

And finally, we strengthened our financial position. We enhanced our corporate liquidity by accessing the capital markets on an opportunistic basis, and raised a total of $800 million through a series of debt and preferred share issuances.

We also complete over $1.5 billion of refinancings during the year, and with that, we have no maturities we need to deal with for the next five years. So shifting our focus to our strategic initiatives, the fourth quarter was another active period for Brookfield Infrastructure and we've sustained that momentum into the New Year.

On December 31, we closed on the previously announced U.S. data center acquisition from AT&T, investing $160 million in a high-quality portfolio of retail co-location data centers in several key markets.

In addition, in January, we successfully acquired a 100% interest in an Asia Pacific Data Center business for $180 million, BIP’s share being $50 million. This business consists of two Australian data centers providing services to investment-grade hyperscale customers under long-term contracts. This is an opportunity for us to establish a presence in Asia Pacific region and to pursue meaningful growth opportunities through a well-progressed sales and development pipeline.

Furthermore, working alongside a strategic partner, we have achieved all milestones to acquire Ascenty, the leading hyperscale data center operator in South America, and anticipate closing this transaction in February. We are already actively assessing prospective “tuck-in” acquisition opportunities in the South American region which we think will be very complementary to this business.

Also closing is progressing well, for our Indian Natural Gas Pipeline acquisition and we anticipate completing this transaction by the end of the month as well. We have started to turn our attention to executing our 100-day business plan and integrating these assets into our portfolio.

At our Western Canadian Midstream business, we are continuing to complete the regulatory process to close on the last group of assets. This process remains on track and is scheduled to close in mid-2019. In addition to these strategic initiatives, we are focused on executing capital recycling priorities as part of our full cycle investment program that Bahir talked about earlier.

The first one I mentioned is the toll road transaction that both Bahir and I mentioned. In January, we signed an agreement to sell up to 33% of our stake in our Chilean toll road business. We considered this to be an opportune time to monetize a portion of the investment, as the asset had reached the mature phase of its lifecycle.

Concurrently, we are executing a dividend recapitalization, which will be completed upon closing of the sale, which is expected imminently. After-tax proceeds to Brookfield Infrastructure are estimated to be approximately $365 million. We are very pleased with this outcome and will realize an after-tax annualized return of approximately 17% on this portion of our investment.

In addition, we may sell down a further stake in the business in the next six months to nine months, adding further liquidity to our balance sheet. We also have five other sales processes that are well underway. We are optimistic that we can complete these asset sales in the next 12 months to 18 months and generate an additional $1.5 billion to $2 billion of proceeds.

With that, I will now turn the call over to Ben to discuss the economic outlook for Brazil.

Benjamin Vaughan

Thank you, Sam, and good morning, everyone. As Sam mentioned, I’ll be providing an update on what were seeing in Brazil these days. Particularly in light of the recent elections and changes in government which we think are positive and could provide some tailwinds for our businesses in the country in the coming years.

First, a bit of background. As many of you know, Brookfield has had a longstanding presence in Brazil, having been an owner and operator of infrastructure businesses in the country since the turn of the last century. We’ve been attracted to Brazil, good rule of law, functioning democracy, and a consistent need to attract foreign capital over time to build out high-quality infrastructure that the country needs.

With a population of over 200 million, a growing middle-class and an abundance of natural resources, the country benefits from a large domestic economy which is actually the ninth largest in the world. And in addition to the large domestic economy, the country also as a strong position in exports as a low-cost producer and growing exporter of agricultural and natural resource commodities.

After struggling, politically and economically for several years. In late 2018, Brazil held national and state elections and we are encouraged by the results and the direction that the new government is taking on many fronts. Brazil shifted solidly to the right in the election and voted in new leadership that ran on a platform of fiscal discipline, attracting investment, and driving economic growth.

The new administration has made strong appointments for key cabinet positions and outlined an ambitious economic reform agenda, including an acceleration of the privatization of critical assets. If the new government is successful in addressing long-standing constraints and fiscal imbalances, we would expect the medium to long-term outlook for the economy to significantly improve. Overall, we would expect higher growth rates, lower inflation and interest rates, a stronger currency and just overall more bullish market conditions.

While it is early days for the new administration, we have observed several positive indicators that support the outlook for our investments in Brazil. First, the financial and capital market conditions in the country have improved. As an example and as Bahir mentioned, on the back of a meaningful decline in interest rates, we successfully completed a R$5 billion up-financing in the first half of 2018 at our Brazilian regulated gas transmission business, which we initially acquired on a fully unlevered basis. So credit markets have come back. In an addition, equity markets have strengthened with the country’s stock exchange up over 100% from its low three years ago and reaching record highs over the past few months.

Secondly, we are seeing increased competition for high-quality assets, with more investors bidding high values relative to last few years. For example, at a recent electricity transmission auction held in this past December, the average winning bids ascribed value is significantly higher than the values we ascribed to our investments during the depths of Brazil’s recent economic downturn. This market dynamic reaffirmed our view that these types of assets were trading well below intrinsic value a few years ago simply because the country was out of favor.

And last, currency matters a lot when investing in Brazil, and we believe that these positive developments should provide some currency stabilization and tailwinds in the coming years, compared to the prior five-year period. Our investments in the country benefit from inflation protected cash flow streams, and this protection, combined with a potentially stable to strengthening currency, could position us well for strong returns.

As I mentioned before, it’s too early to say with certainty what the new administration will accomplish, the announced desire to accelerate privatization programs and expand investment could provide us with opportunities to grow our existing businesses and enter new segments as the market evolves. We are a well-known and credible investor in the country and have become a partner of choice for many domestic and foreign investors.

The new government in Brazil represents something we haven’t seen in a long time, a free market-oriented administration that has the potential to energize the country’s economic reform, create healthy market competition and attract investment. And having an established position in the country, we will look for opportunities to invest for value and to potentially harvest capital as a recovery unfolds.

And with that, I’ll turn the call back over to Sam to discuss our outlook for the business.

Samuel Pollock

Thank you, Ben. And I guess I'll conclude just with some remarks on our outlook. Over the past few quarters, our view has been that the global macroeconomic conditions and political uncertainties would dominate the news cycle. Heading into 2019, it appears that will continue. Concerns around a potential pullback of the global economy spurred by the threat of a U.S.-China trade war, uncertainties around Brexit, and continued speculation around Federal Reserve policies will continue to persist over the coming months.

That said, our businesses are built to withstand varying market conditions, and that is due to the well-insulated cash flows generated from regulated and long-term, contractual arrangements. And growth in our core regions, while they won’t be synchronous, we do expect that even in slower growing regions, our businesses will continue to perform well as they have been.

The overall outlook for our business is very positive and we believe we will experience meaningful growth in our results in 2019, and some of those drivers will be the fact that we are imminently closing three secured transactions. They represent approximately $700 million of new investments and this will take place in the first half of the year. These new investments should be fully contributing to results by the second half of the year as a result generating attractive going-in yields.

Second, we have strong organic growth. The commissioning of approximately $800 million of capital projects, coupled with inflation-indexation, and higher volumes from our GDP sensitive businesses, should result in another year of robust organic growth which will probably be at the higher end of our long-term 6% to 9% growth targets.

And finally, we expect foreign exchange tailwinds. Our hedged rates in 2019 for the Australian dollar and the British pound are on average around 5% higher than 2018. With over 65% of our FFO currently generated in, or hedged back to, U.S. dollars, our only material unhedged foreign currency exposure relates to Brazil. And as Ben just went through, we are observing a nice rebound in the country’s currency since a trough I guess last year. We expect this recovery to continue in 2019, and as a result could meaningfully benefit our results going forward.

So with those comments, I will now pass it over to the operator and we'd be pleased to take Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from Devin Dodge of BMO Capital. Your line is now open.

Devin Dodge

All right. Thank you. Good morning.

Samuel Pollock

Good morning.

Devin Dodge

I guess, to start with, on the new investment front, 2018 was above average in terms of capital deployment and deal flow. What are your expectations for 2019? Just wondering if we should be expecting a return to kind of the $0.5 billion to $1 billion range? Or given what you see in the pipeline, do you think it's likely to remain elevated in 2019?

Bahir Manios

Hi, Devin. So I wouldn't say it was above average. I think it was an awesome year to be frank. We had I think seven transactions and so it was a stellar year. In relation to what we see going forward, I think we go into every year expecting to invest in new investments around $1 billion. So I think it turns out to be $500 million that would probably be at the lower end of our current view. But as you've noted, some years, we have more success than others just depending on the market environment. But I'd say so far we feel pretty good about our pipeline of opportunities, and I think we will hopefully hit our $1 billion target.

Devin Dodge

Okay. That's helpful. And then maybe coming back to some of Ben's comments. I believe you mentioned that the new Brazilian government signaled that it could look to do more asset privatizations. I guess what sort of assets do you expect to come forward that would be interesting to you? And maybe just given the greater competition for these investments, how confident are you that BIP can secure these investments and still meet your investment return targets?

Benjamin Vaughan

Yes. I’d say Devin the assets that the government has telegraphed are going to come to market are really across the board. It's really across the entire spectrum of transportation assets, energy assets, utilities. So I think it'll be – if they accomplish their plans, it'll be a broad range of opportunities. And in terms of our – looking at some of those opportunities if they come with meaningful large positions in many of those sectors already, I think we're just really well positioned to look at various tuck-unders and growing our current platforms if new assets come to market. With a good position already established, I think we're just well positioned as an incumbent rather than someone that's coming fresh.

Devin Dodge

Okay. Understood. And maybe your stake sale for the Chilean toll road business, just could you provide some color on the decision to sell a minority interest instead of the entire stake? And just – I know you referenced and maybe a potential further sell-down to the next six to nine months, but I guess how long do you hold? I'm not sure if that was for the rest of the business or whether it was just another partial stake. And I guess how long do you expect to hold it if it's just another partial sell-down?

Samuel Pollock

Yes. So it was always our plan to sell up to 50%. And if someone had come along and maybe offered us a knock up bid for 100%, we might have considered it. So I think the way it’s unfolding is according to the plan we had set up for ourselves. This is a very large transaction in this market.

And so our expectation was that we would sell down over time. It's also a great cash flowing business and we do like it. I think if we can sell another stake that we reduced ourselves down to 50% depending on the price, maybe we might consider going a little bit lower. But it's just all part of a long-term exit strategy that we set out for this particular business.

Devin Dodge

Okay. And should we be expecting this kind of approach for some other assets that you're coming to market with?

Samuel Pollock

Yes. I think our approach, it will be multifaceted. I think the one dynamic that's entered into the infrastructure market is something that basically just followed on the real estate market, which is the fact that there is a growing interest from private institutional investors to own minority stakes in businesses and you will see – it become quite common across the infrastructure market. The sale of these 25%, 33% type stakes in businesses. And longer-term, most of them will probably own in consortium's of three or four, particularly for large businesses.

So when we look to sell assets going forward, I think you can see us sell like we did with AVN, Transelec, frankly it wasn't much different. We sold a 27% stake, or we could sell in some cases 100% of a business to a strategic buyer, or we could take businesses public. So it will be probably one of those three exit strategies.

Devin Dodge

Okay. That's helpful. I'll leave it there. Thank you.

Samuel Pollock

Thank you.

Operator

Thank you. And our next question comes from Cherilyn Radbourne of TD Securities. Your line is now open.

Cherilyn Radbourne

Thanks very much, and good morning.

Samuel Pollock

Good morning, Cherilyn.

Cherilyn Radbourne

Sam, I wanted to start by asking you in terms of the M&A pipeline. Is there any indication yet that recent equity and credit market volatility could be added into that pipeline, either in general or in specific geographies? Or is it still a little bit early for that?

Samuel Pollock

I would say it's a little bit early. There was no doubt that with the market – the credit markets, that is, somewhat shutting down later in the fourth quarter that it felt like transactions across the board we would get repriced and that the avenues for various companies to recapitalize themselves would reduce somewhat.

We've had a pretty strong rebound in sentiment and access to the capital markets here in the first quarter. So it's hard to say, this is just a blip, and everything's just back in business or if those more challenging conditions that we saw later in 2018, we'll begin to persist. If you ask for my opinion, I think that the markets will probably get tougher again and we'll see more of the – more challenging conditions and that will play very well to our ability to find great opportunities.

Cherilyn Radbourne

Great, that's helpful. Separately in terms of your recent data infrastructure investments, just curious whether there was an opportunity to knit those together into a larger platform? Or should we think that they're likely to remain more sort of discrete regional platforms?

Samuel Pollock

That's a great question. We have two different types of businesses. We have the wholesale hyperscale businesses in Asia Pacific and in South America that very much serve the same client base. Our retail co-location business here in North America, I think serves I can complete different marketplace and has a different strategy.

So I think the opportunities if they exist will likely be between the Asia Pacific business and the South American business. With the only complication being that we have a partner in our South American business. So we will try to extract as many synergies as we can, I don't see them coming together from a legal perspective, but I do see significant amount of sharing of information between those companies. Hope that’s helpful.

Cherilyn Radbourne

Okay. Yes. And then last one for me, I think that Bahir can recently signaled that it might opportunistically hedge a portion of its Brazilian cash flows and just I was hoping for an update on that front?

Samuel Pollock

Bahir, you want it.

Bahir Manios

Yes, sure. So, hi, Cherilyn, Bahir, here. So as we highlighted in this past or during our Q3 call I believe, what we've seen is just interest rate differentials between Brazil and the U.S. have tightened up a lot over the years. Nothing has changed raw materially from that analysis.

And what we're waiting to see is another – continued recovery in the currency from existing levels. It has rebounded by a lot compared to earlier in 2018 levels. And so we're continuing to monitor that situation. But with any sort of significant rebounding the currency, you should expect see us hedge at least a portion of our FFO for the next call it 12 months to 24 months.

Cherilyn Radbourne

Thank you. That's all for me.

Samuel Pollock

Thank you.

Operator

Thank you. Your next question comes from Robert Catellier of CIBC Capital Markets. Your line is now open.

Robert Catellier

Hi, good morning, everyone. I have similar questions to the previous two questioners. First of all, on the Brazil description you gave on the one hand very strong economy and privatizations, but also more competition. But it still sounds like you expect to be a net investor in terms of your new dollars over the next two years to three years. Is that correct? So not a net seller putting more money to work in Brazil?

Samuel Pollock

So I think we will be putting more money to work. It may be within the existing businesses. I think today our focus is primarily on expanding the various operations in our rail business and our data center business as well as the toll roads and the transition business. So all of them have great opportunities to invest capital. It's a little early to say what new investment opportunities may lay out that are attractive to us, will obviously monitor the market.

Over the next, it's hard to say how many years, but we do expect though if conditions continue to approve currencies improve, that there will be great opportunities to realize on some of our investments in that region as well. So I can't predict exactly how the flows will go. You're right, it probably is maybe a little bit more in a short run, but in the medium-term, I expect there may be more capital being harvested than going in.

Robert Catellier

Okay. Thank you for that. And then what – it looks like you're a little bit more active near-term on the capital recycling. That's the long-term target change. I think you gave a bogie of about $5 billion over three years to five years at the Investor Relations days. And that's still generally what we should be expecting?

Samuel Pollock

Yes.

Robert Catellier

Okay. And a question for Bahir, you gave with some pretty good detail on the impact of currency on the 2018 results. But you've also characterize the environment is a little bit better. Do you have any sense of today's rates? What positive tailwind currency might have on FFO in 2019 even if it's just a range?

Bahir Manios

Sure. Hi, Rob. So as you know, our currencies in the developed markets, the Australian dollar, the Pound Sterling, the Canadian dollar and the Euro, have all been hedged for 24 months. And so in 2019, those hedge rates already locked in and they are on average 5% a higher than 2018 and in 2020 they're also a bit better than also the 2019 number. So we should see. So those tailwinds, and which accounts for about 65% to 70% of our FFO have already been locked in for those next two years.

And then, on the Brazilian real, it's hard to sort of guess where that currency can go, maybe as a data point. If we get back to 2017 levels, so there we were translating our results at an average rate of about 320, I believe. If we get back to those kind of levels, just as a data point here, I'm not actually calling for that move, but as a data point that would be probably at $0.20 to $0.25 list from today's levels.

Robert Catellier

So $0.20 to $0.25 in FFO per share or just on currency?

Bahir Manios

FFO per unit. Yes.

Robert Catellier

All right.

Bahir Manios

$0.25, yes.

Robert Catellier

And did you end up with a better result on the Australian ports, than you were indicating in terms of re-contracting and getting the EBITDA run rate back up? What was that in line with your expectations?

Benjamin Vaughan

Yes. It's Ben here Robert. Yes, I would say the Australian ports have been performing really well and volumes have been strong. We've had some good client wins as Bahir referenced in his comment. And I would say overall probably a – slightly above plan, like probably slightly, slightly above our expectations and trending well into 2019.

Robert Catellier

Okay. That's it for me. Thank you.

Benjamin Vaughan

Okay, thank you.

Operator

Thank you. And our next question comes from Andrew Kuske of Credit Suisse. Your line is now open.

Andrew Kuske

Thank you. Good morning. I'm not sure who this one is for, but maybe an easy question to start. The situation with Valley and Brazil. It's obviously very difficult, but are you seeing any impact on your logistics assets within the country at this point in time?

Samuel Pollock

Hi, Andrew. Are you asking are there any impacts because of the tragedy of the dam collapse on our businesses or I think, it wasn't quite out of the question?

Andrew Kuske

Yes, exactly with the dam disaster that just happened a few weeks ago.

Samuel Pollock

Yes. No, there's been no impact on any of our operations, yes.

Andrew Kuske

Okay. I appreciate the clarification. And then just with the capital recycling, is there any color you can provide on the five processes you have in place? Are you seeing or are some of the processes related to past fund maturities and then the one and a half to 2 billion of proceeds, is that effectively to account for the Brookfield commitment in BIP 4 or at least part of that commitment?

Samuel Pollock

Andrew basically, each one of the opportunities, we're looking to sell is based on our view of the state of where the acid is and our view that it's a good time to approach to the markets. So there no we have no impending fun maturities. Our first fund matures in 2022. And we have extensions beyond that. So there is no sort of pressure from that perspective.

I think what – the way you need to think about asset sales, it’s similar to how we've always approached any a capital raising initiatives, it's just us being optimistic with raising and capital at very attractive rates and knowing our businesses when we think we can sell them to people who will pay more for them than what we think they're worth it and what they're worth to us today. So that's the context. Hopefully they all go ahead, but maybe some don't and we hold onto them for a bit longer.

Andrew Kuske

Okay. And then just finally on the unit repurchased, the $1.6 million since December just north of $50 million. Could you provide some color on – would you have done more if there's more liquidity in the markets? Did that feel like the right amount? Just what were your thought processes on the $56 million of purchases?

Samuel Pollock

Bahir, do you want to tackle this one or do you want me to take it?

Bahir Manios

Sure, I could take it. Hi, Andrew. So I think you're exactly right. We were very active especially in December. But to your point, given the liquidity, we do have constraints as to how many units we’re able to buy each trading day. So we pretty much were maxed out in December. And then in January, we had to put forward sort of an automatic purchase plan that has to get approval from the stock exchange. It's based on a whole bunch of parameters. But basically within those parameters, we did all we can do and we'll continue to monitor the situation carefully or closely once we're out of blackouts in the next couple of days.

Andrew Kuske

Okay. That's very helpful. Thank you.

Operator

Thank you. And our next question comes from Jeremy Rosenfield of Industrial Alliance. Your line is now open.

Jeremy Rosenfield

Yes, thanks. I've several questions, but maybe just to begin with, can you just comment on the relative attractiveness? There’s been some large scale regulated electric utilities in the U.S., some distressed situations, I'm thinking here one on the West Coast, one on the East Coast. I'm just curious as to whether these are things that are on your radar, maybe not specifically ones that have been in the press recently, but if that type of investment is on the radar?

Samuel Pollock

Maybe I'll tackle this one, Jeremy. Look we think regulated utilities are a great investment asset and we're always out there looking at each of the opportunities. The one challenge though and why we haven't historically invested in any significant North American utilities is just the regulatory difficulties in getting approvals and the time it takes. And more recently some of the trading values that they have achieved with often seeing prices to wrap in excess of two times, which we don't feel as good value.

So there's obviously one huge situation that everyone's talking about, it's highly complicated, it has to go through a number of bankruptcy processes to figure out where exactly it's going to end up. And I think there have to be some regulatory changes. And I think the only opportunities that will come out of that, that would be of interest to us, we'll be, if it gets broken apart into various pieces.

And maybe some of the pieces might make sense. But just to summarize, and I realize this is very general, so I don't know how useful it is, but yes, we like to factor, we will monitor for opportunities by just caution you that public to privates in this sector are very challenging.

Jeremy Rosenfield

Right. That's very useful. And then just back on Brazil for a second. I'm just curious, it sounds like you clearly have a positive outlook on Brazil, but then at the same time, investments in Brazil I think represent relatively a large component of the overall portfolio. And I'm just curious as to whether you're inclined to grow that slice of the pie, if you will, and if you are able to start putting currency hedges into place in Brazil at some point in the future, does that give you more comfort in growing that slice of the pie even further?

Samuel Pollock

So what I would say is, our strategy is to have a diversified business across many geographies. We've made a number of investments more recently in Brazil because we saw great value. And so we're probably at the higher end of what we would typically allocate to that particular country.

If great opportunities continue to surface there, we will look at them and take advantage of them. But my sense is, over time, we will likely see opportunities, surface and other regions. We're seeing that today, particularly in North America where we're deploying a lot of capital.

And I think as a percentage of our overall business, five years and now likely Brazil will be less than this today. But we're really excited by the opportunity and we're really excited about how our businesses in the near-term are going to perform. If the government does all the things they say they're going to do.

Jeremy Rosenfield

Okay. All right, I'll leave it there. Thank you.

Operator

Thank you. And our next question comes from Robert Kwan of RBC Capital Markets. Your line is now open.

Robert Kwan

Good morning. Just starting on asset sales, you had a long-standing kind of driver of that being monetizing de-risked mature businesses. But I'm wondering is anything in kind of the five processes or anything else that you're considering driven by changes in your investment theses around various business lines either where you're seeing fewer relative growth opportunities or even just the ability to add value in terms of some of the platforms that you built?

Samuel Pollock

Hi, Robert. So I think there are certain situations where we are looking to monetize businesses, where we feel our ability to grow them on an accretive basis isn't as strong as we once thought it was and that's primary because of new entrance using a much lower cost to capital.

That represents a great opportunity as a seller, because to extent that they're prepared to pay for our growth of the low cost of capital, which is what we saw in Transelec that we can achieve most of the value of the growth pipeline up front with all having to do the work.

So yes, we'll definitely look at those situations and sometimes there are situations where we have to way, the choices of where we want to put our capital, and there are some businesses that even though they have some growth opportunities, we may feel that the probabilities of being able to achieve success on those are less than if we put our capital elsewhere. So yes, decisions are taken to a multitude of considerations, all with the objective of creating long-term value for the company.

Robert Kwan

Got it. As you look at the funding plan and kind of the repositioning of the funding plan and the code of majority of your growth being funded by asset sales and retain cash flow. Just wondering, especially if you think about the interplay with the new private funds, is BIP going to take smaller percentages of new transactions particularly larger ones?

Samuel Pollock

So the short answer is it will probably be slightly lower, but not meaningful lower. We will always be the biggest investor in any of our funds and obviously therefore in each assets.

I think, what we will do going forward, it speak our spots on, where we might make an outsized investment if we have a very large transaction like we had with the NTS, where we increase the amount we deployed because we saw that was just a fantastic opportunity.

They may not be as occur as often, but if they do, those are the types of situations where – we will likely to go to the capital markets then to raise capital. And so that's why we highlight that as being a situation where the equity markets are perfectly suited for us to tap into.

Robert Kwan

Got it. And I can maybe just finish on – there was a statement in the letter of the organic growth side expected to be at the higher end if your long-term six to nine here. Just wanted to confirm that is just the organic growth as we head into 2019 and then be here you talked about the FX tailwinds that would be additive as well as the contribution from new acquisitions kind of forming the year?

Benjamin Vaughan

Hey, Robert, I think that's exactly right. When we referenced the organic growth targets their journey on a constant currency basis and so heading into 2019 given that we've got the hedges locked in. And yes, we will be, we're forecasting to deliver sort of at the high end if the target ranges of constant currency and then have a currency pick-up on top of that relative to 2018.

Robert Kwan

Okay. Sounds good. Thank you.

Samuel Pollock

Thank you.

Operator

Thank you. And our next question comes from Rupert Merer of National Bank. Your line is now open.

Rupert Merer

Good morning.

Samuel Pollock

Good morning.

Rupert Merer

Looking at the sale of minority stakes and assets like the Chilean toll road, is this in any way you signal intention to hold onto your remaining stake for a longer period? Are you expecting to collect the management fee from your new partners from operating the assets?

Samuel Pollock

Rupert, I would say, first of all, we don't collect the management fee from our new partners and two, I don't think its signals anything. I think we will reevaluate every year, our intention to whether sell or hold the business. So we've not made commitments for the long-term. In fact, we've signaled to both our shareholders as well as at the other owners that we probably we'll sell down a further stake. How long we hold on that remaining stake is will be dependent on our views at that going forward.

Rupert Merer

Okay. Great. Thanks. And then secondly, you've had a little bit of time with the acquisition, the Canadian Midstream and Energy Services business. Maybe too early here, but can you give us some feedback on how the integration is progressing, you seeing any surprises there? And maybe give update on the outlook for growth and synergy from the asset?

Samuel Pollock

Ben, do you want to do that or you want me to?

Benjamin Vaughan

Sure. Yes. As you said, it is early days. These transactions didn't close very recently, but the both going very well, so no surprises. On the Enercare business, we're working hard to accelerate the growth of that business, plugging the leadership team there and into various Brookfield entities involved in the homebuilding and condominium servicing and in and around the same markets that business is in and that's progressing well. So I think we're in the early stages, but we're sort of looking to accelerate growth in that business. And no surprise, we're still not fully closed, the midstream business at west, but it's going well I know surprise. And has a couple of interesting growth projects that we're considering. So all is good.

Rupert Merer

With the dynamics Canadian energy market, is that at all changing your outlook for organic growth in the long run with the midstream business.

Benjamin Vaughan

No, at this point, I don't think it's changing our outlook. We've got great counterparties in that business and it's a prolific region that we're in and if anything our clients are calling on us to provide additional services and additional assets to help them out. So we're not seeing any impact at this point.

Samuel Pollock

In fact, the opportunity for us to deploy capital and to buy assets from producers is only increasing and getting better.

Rupert Merer

Very good. Thank you.

Operator

Thank you. And our next question comes from Ryan Levine of Citi. Your line is now open.

Ryan Levine

Thank you. Would you be able to comment on your – if there's any active discussions in the U.S. Midstream business? There’s press reports of those interest in Tallgrass from a few months ago, are those reports accurate? And is that the type of business that you maybe interested in?

Benjamin Vaughan

Hi, Ryan. Obviously, we can't comment on any specific transactions whether or not we’re involved or looking at it or not. That's just a company policy. We do have an interest in U.S. Midstream. We think that with the pullback in the MLP market and the lack of capital that many midstream owners in the state have today to capital. Their lack of access provides great opportunities for us to either joint venture with various partners to help them build out some of their infrastructure.

There's opportunities to do carve-outs much like we did with Enbridge, and then absolutely to the extent that it makes sense from a value perspective, we will look at the public to privates as well. Those are all part of our game plan going forward and we think one of the best opportunities today is in various parts of the U.S. Midstream sector.

Ryan Levine

Thanks. And then shifting gears to South America. You saw in that there is meaningful opportunities in the Chilean or Peru market.

Samuel Pollock

So we do see opportunities there. And in fact, we have a couple of interesting transactions that we are currently monitoring. They are smaller economies, and so these are what I would describe is, highly active markets, but every year or two, very attractive businesses do come to market either through privatizations or through sale from strategics. And as that happens, we tend to be one of the first calls given our reputation in that market and our ability to get transactions closed. So I am optimistic about our ability to transact in those markets in the not so distant future.

Ryan Levine

Given your history in that region, are there any contractual limitations to acquire assets in those countries?

Samuel Pollock

Today, we don't. The one issue that we always have to keep an eye out for is any issues related to the activities of our renewable power sister company and what they do in the market. And making sure that to the extent that they have a significant presence that that doesn't preclude us from owning certain sectors like transmission assets.

Typically those two, you can't own one and the other. You can either be a transmission owner in the country or a generator. You can't usually do both. So, we watch and monitor those dynamics. Today, I think we're relatively free to own any assets in those markets. But that could change.

Ryan Levine

Okay. Thank you.

Samuel Pollock

Okay. Thank you.

Operator

Thank you. And our next question comes from Frederic Bastien of Raymond James. Your line is now open.

Frederic Bastien

All right, thank you. You mentioned a while back that you were most excited about BUK regulated distribution business when it came down to organic growth potential? Is that still the case today or are there other assets exhibiting equally strong growth prospects?

Samuel Pollock

Hi, Frederic. Nice to hear from you. I think that was a nice setup question because I always love talking about BUK and the business continues to take off. We see no slowdown in the business. And if I had to say that there's a business that I'm super excited about today, because it has all the same growth potential it has to be our Endercare business.

I think Ben described a little bit earlier that we are plugging into all the various related businesses that we have within the Brookfield fold to see how we can supercharge the growth engine.

We think the ability to take that company to the next level is at the same potential level that we saw back a number of years ago at the U.K. We just think that the number of customers who would be attracted to the product offering with the lessons that we learned from our BUK business, which is essentially a very similar business.

It's a distribution business. We think we can bring a lot of value to bear. And we've also uncovered a number of low hanging fruit and ways to optimize a business to generate higher returns. And so today that's probably our most exciting business that we're working on.

Frederic Bastien

Thanks. That's helpful. Good luck with that. Last one for me. Given your recent investment, the Fracture tailwinds you're anticipating for this year and also the billion dollars plus of asset sales you're contemplating how should we think about FSL per unit growth in 2019? Is 350 attainable or can you do better than that?

Bahir Manios

Hi, Frederic. It's Bahir. Maybe I can take that one. At investor day. We sort of walked through the building blocks of how our results will evolve on a run rate basis going forward. Because to your point, we've got all these investments closing at different points in time. We've got a lot on the organics growth front that's also getting commissioned at different points in the year.

And then there are obviously the FX tailwinds. So, when it comes to 2019, it's going to be a year where I think people should analyze us on more of a run rate basis than what the full year will deliver because it's going to be more of a back end story in 2019 versus the front end.

Once all of our investments are contributing fully online, there's a bit of ramp up in some of those as well as we get into Q3 and Q4 of 2019. We've got a number of projects that are going to be coming online. Smart meters, connections in the UK, some Brazilian transmission projects that are getting commissioned and a few toll roads rebalancing as well.

And just with respect to our hedge fund tracks a lot of the better rates that I was referring to come into play in the latter half of the year. So, all that to say that the run rate going forward for the business should be at 10% to 15% higher than where we are at today in Q4 of 2018.

Frederic Bastien

Okay. But as you contemplate the asset sales, obviously Transelec was a big chunk and it had an, obviously, adverse impact of FFO, because you're contemplating a few of them you don't estimate them to have as big of a drag as Transelec did. Do you?

Samuel Pollock

So, Frederic, what I would say – this run rate that I'm speaking about would contemplate the asset sale that we just announced this morning. With respect to the other sale processes that we have on the go, a number of those will close more in the latter end of the year. Maybe one in the middle-end of the year. And to that point or to your point none of those sales that are contemplated to close in 2019 on an individual basis would have as significant of a drop from an FFO perspective as Transelec did in 2018.

Frederic Bastien

Okay. Super helpful. Thanks a lot guys.

Samuel Pollock

Okay. Thank you.

Operator

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the conference back over to Sam Pollock for closing remarks.

Samuel Pollock

Okay. Thank you very much, operator and I'd like to thank everyone for joining the call today and for all those questions. We look forward to updating you again on our progress later this year. So, thank you very much and have a nice day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.