BIP Initiation PDF

Special Situations
Brookfield Infrastructure
(BIP NYSE)
Stock Rating: Outperform
December 22, 2011 Toronto, Ontario Bert Powell, CFA BMO Nesbitt Burns Inc. (416) 359-5301 bert.powell@bmo.com Associate: Luigi Di Pede (416) 359-6442 luigi.dipede@bmo.com
Price (21 Dec) Target Price (FY Dec.) FFO/Unit P/FFO CDPU Payout Ratio Dividend Book Value Shares O/S (mm) Float O/S (mm) $26.37 $31.00 2010A $1.79 $1.10 62% $1.40 $16.94 185.1 129.6 52-Week High 52-Week Low 2011E $2.37 11.1x $1.32 56% Yield Price/Book Mkt. Cap ($mm) Float Cap ($mm) $28.00 $20.56 2012E $2.07 12.7x $1.42 69% 5.4% 1.5x $4,881 $3,418
Global Infrastructure Play; Organic and Acquisition Growth to Drive Cash Flow; Initiating Coverage at Outperform
Highlights
BIPs portfolio consists of globally diversified high quality infrastructure assets that provide essential products and services for the global economy. The assets tend to be long-life assets that require minimal maintenance capital expenditures. Currently approximately 80% of the cash flow is generated from long term contracts or regulated businesses, which are supported by take-or-pay contracts. BIP continues to grow its portfolio and currently has approximately $1 billion in capital projects to drive future cash flow growth along with a pipeline of future growth opportunities including acquisitions. Almost all of the planned capital projects are supported by regulated returns or take-or-pay contracts. We forecast FFO/unit to grow at a CAGR of 3% between 2011 and 2013, while the distribution/unit is expected to grow at a CAGR of 8% over the same time period as the payout ratio, currently 56%, moves to the bottom end of managements target range of 60-70% in 2013. Management believes that long-term distribution increases will be near the top of its 3-7% annual range supported by both organic growth and acquisition growth. Our one year target price of $31 is based on a cash flow yield methodology. BIP is currently yielding 5.3%, based on annual distribution of $1.40/ unit and 5.8% based on our 2013 forecast distribution of $1.54/unit. In order to support our valuation, we complement our analysis using a sum-of-parts analysis and historical P/FFO multiples. Our target price represents a total potential return of 23% including an annual distribution of $1.40/unit. We are initiating coverage of BIP with an Outperform rating and a target price of $31.
Notes: All values in US$
Price: High,Low,Close(US$)
30 25 20 15 10 5 20 10 0 160 140 120 100 80 2008
Brookfield Infrastructure Partners (BIP)

30 25 20 15 10 5
Volume (mln)
20 10 0
BIP Relative to S&P 500
160 140 120 100
2009
2010
2011
80
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under FINRA rules. For disclosure statements, including the Analysts Certification, please refer to pages 50 to 53.
Table of Contents
Investment Thesis........................................................................................................................................................... 2 Overview of Brookfield Infrastructure Partners.............................................................................................................. 3 Evolution of the Business............................................................................................................................................ 3 Infrastructure Assets................................................................................................................................................... 5 Utilities. ....................................................................................................................................................................... 7 Electricity Transmission.............................................................................................................................................. 8 Australian Coal Terminal Operations........................................................................................................................ 13 Energy Distribution................................................................................................................................................... 17 Recent Financial Performance .................................................................................................................................. 18 Transport & Energy Infrastructure............................................................................................................................... 20 Brookfield Rail............................................................................................................................................................. 22 Significant Growth Opportunities................................................................................................................................. 23 Ports.......................................................................................................................................................................... 24 Significant Growth Opportunities................................................................................................................................. 25 Euroports Diverse Long-Term Customer Base Portends Stability ............................................................................. 25 Natural Gas Pipeline of America (NGPL). ................................................................................................................... 26 Irreplaceable Strategic Asset with Exposure to Fast Growing Shale Plays................................................................. 26 Diverse Group of Customers with Investment Grade Ratings................................................................................... 26 Stable Cash Flow Profile with Leverage to Rising Natural Gas Prices....................................................................... 27 Recent Financial Performance ..................................................................................................................................... 27 Timber.......................................................................................................................................................................... 29 High Quality Timberlands with Ready Access to Export Markets a Defining Feature of BIPs Timber Assets......... 29 U.S. Homebuilding Expected to Remain Weak over the Medium Term . .................................................................. 30 Increasing Demand for Logs from China as Wood Use Moves up the Value Chain.................................................. 31 Long-term Supply / Demand Fundamentals Remains Positive.................................................................................. 32 Recent Financial Performance...................................................................................................................................... 32 Strong Organic and External Growth Opportunities.................................................................................................... 33 Investment in Utilities Rate Base............................................................................................................................... 33 Investment in Transport & Energy. ............................................................................................................................ 34 Strong Backlog of Projects Approaching $1 Billion. .................................................................................................. 34 External Growth Opportunities.................................................................................................................................... 36 Utilities Platform....................................................................................................................................................... 36 Transport & Energy Platform.................................................................................................................................... 36 Access to Capital.......................................................................................................................................................... 37 Forecast........................................................................................................................................................................ 38 EBITDA.................................................................................................................................................................... 38 FFO.......................................................................................................................................................................... 39 Distribution & Payout Ratio. ..................................................................................................................................... 39 Maintenance Capital & AFFO.................................................................................................................................. 39 Valuation...................................................................................................................................................................... 40 Dividend Yield Approach.......................................................................................................................................... 40 Sum-of-Parts Analysis............................................................................................................................................... 42 Utilities. ..................................................................................................................................................................... 43 Transport & Energy................................................................................................................................................... 43 Sum-of-the-parts Value............................................................................................................................................. 44 FFO Multiple Approach........................................................................................................................................... 46 Corporate Structure...................................................................................................................................................... 46 Risks............................................................................................................................................................................. 48
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Brookfield Infrastructure Partners, L.P.
Investment Thesis
We are initiating coverage of Brookfield Infrastructure Partners, L.P. (BIP) with an Outperform rating and a $31 target price, which implies a 23% return including the annual distribution of $1.40 per unit. BIP is a publicly traded partnership that was spun off from Brookfield Asset Management (BAM) in 2008. BAM maintains an approximate 30% interest in BIP on a fully exchanged basis. BIPs portfolio consists of globally diversified high quality infrastructure assets that provide essential products and services for the global economy. The assets tend to be long-life assets that require relatively minimal maintenance capital expenditures and have high barriers to entry. Currently 37% of the cash flows are underpinned by contractual arrangements and 44% are regulated, which are supported by take-or-pay contracts delivering relatively stable cash flows. We believe prospective new projects are expected to take this percentage closer to 50% in 2013. BIP continues to grow its portfolio and currently has approximately $1 billion in capital projects to drive future cash flow growth. Almost all of the planned capital projects are supported by regulated returns or take-or-pay contracts. BIP places a strong emphasis on deploying capital with limited downside risk. Acquisitions have been and will continue to be part of the story. The timing, price and magnitude are difficult to predict and do not form part of our forecast. Current operations focus on Utility businesses, Transport & Energy businesses and freehold Timberlands in North and South America, Australasia and Europe. Management has a track record of acquiring high quality assets on a value basis in favourable markets during periods of economic stress and generating returns through active operational management and investing in the core platforms to build value. The product of this model has been the recent recapitalization and subsequent merger with Prime Infrastructure, which has substantially increased the cash flows of the business and led to substantial increases in distributions from $0.275/unit per quarter in Q1/09 to $0.35/unit per quarter currently. Based on our forecast for 2011, the payout ratio will be 56%, below Managements target of 60% to 70%. Management believes that long-term distribution increases will be near the top of its 3-7% annual range supported by both organic growth and acquisition growth. Based on our forecast, we believe BIP can grow the FFO per unit from $2.37/unit in 2011 to $2.52/unit in 2013, representing a compound annual growth rate (CAGR) of 3%; however, we expect distributions to grow from $1.32/unit in 2011 to $1.54/unit in 2013, representing a CAGR of 8% as the payout ratio moves up to the bottom of managements target range. Our target price of $31 is based on a cash flow yield methodology. In order to support our valuation, we complement our analysis using a sum-of-parts analysis and FFO multiples to arrive at an equity value to unit holders. In our sum-of-parts analysis, we value the constituent parts of the Utilities and Transport & Energy businesses based on applying the comparable value metrics derived from publicly traded comparables or recent transactions to our forecast 2013E EBIDTA. In the case of the Timber business, we relied on BIPs IFRS value for its Timber assets as an appraisal of fair value, which we believe is likely at the low-end of the fair value range.
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Overview of Brookfield Infrastructure Partners

Evolution of the Business
BIP was spun out of BAM in January 2008. The initial assets were electricity transmission assets in Chile, North America, and Brazil, along with standing timber assets in Western Canada and Western United States. In Late 2009 BIP participated in the recapitalization of Prime Infrastructure (formerly Babcock & Brown) acquiring a 40% interest in Primes assets, which added the Dalrymple Bay Coal Terminal (DBCT) asset to the Utilities segment and seeded the creation of the Transport & Energy segment. In late 2010, BIP merged with Prime. The table below provides a chronological review of the events that have transpired since inception. The recent merger has had a significant impact on cash flows and makes using prior period comparisons for analysis irrelevant.
Figure 1: Segment Development Timeline
Utilities
BIP spun out from Brookfield Asset Management with the following interests in each of the assets Transelec purchase price adjustment following resolution of 2006 rate proceeding 11% Interest in Transelec (Chilean transmission assets) 100% interest in North American Transmission assets 7% to 18% Interest in TBE (Transmissoras Brasileiras de Energia) Interest in Transelec increased to 18% 30% interest in U.S. timberlands maintained Acquired a hospital in the U.K. and Prison Hospitals in Australia for $12 million Acquired Melbourne Show Grounds for $3 million 0% Interest in TBE 11% interest in WETT. $750 million project expected to be completed by beginning of 2013 Added a direct interest in Australian Dalrymple Bay Coal Terminal (DBCT), European Energy distribution (GTC), and the Australian Energy distribution distibution business (Powerco) Added a direct interest in PD Ports. Through Prime added North American Gas Transmission assets NGPL, Australian Rail Road, and European Ports (Euroports) No assets until Q4/09
Transportation & Energy
Timber
38% interest in Canadian timberlands 30% interest in U.S. timberlands
Social Infrastructure
31-Jan-2008
4-Apr-2008
Invested $103 million in U.S. 11-Apr-2008 timber assets to maintain ownership interest post 12-May-2008 2-Mar-2009 Acquired PPP social infrastructure assets Acquired an addition social infrastructure asset
Sell interest in TBE for $275 30-Jun-2009 million resulting in after-tax gain of $68 million Q3/09 BAM contributes its interest in Wind Energy Texas Transmission (WETT) to a BAM sponsored partnership.
Acquire 40% Interest in Prime Infrastructure, formerly Babcock & 20-Nov-2009 Brown for $941 million as part of $1.6 billion Prime recapitalization. Issued 40.7 million shares at a price of C$15.55 (~US$14.60 ) for proceeds of C$632 million. Also issued 28.1 million 20-Nov-2009 redeemable units to BAM at a price of US$13.71 for proceeds of $385 million allowing BAM to maintain 41% interest in BIP. BIP Merges with Prime increasing ownership from 40% to 100%. 50.7 million shares were issued. On a fully diluted basis BAM's interest in BIP falls to 30%. Sells PPP portfolio
Projects in B.C. and Ontario. $3 million in vestment
8-Dec-2010
DBCT 71.0% IEG 100.0% Ontario Transmission 100.0% Powerco 42.0% Texas Transmission 11.0% Transelec 17.8%
Brookfield Rail 100.0% Euroports 60.0% NGPL 26.4% PD Ports 59.0% IEG 100.0% Sells Portfolio for $16 million
1-Jan-2011
Issues 19.4 million units at a price of $24.75 for proceeds of $479 million. Issues 8.3 million 19-Oct-2011 redeemable shares to BAM at the same price, net of underwritting fees, enabling BAM to maintain it's 30% interest
Source: Brookfield Infrastructure Partners, BMO Capital Markets
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Brookfield Infrastructure Partners, L.P. In the following figure, we illustrate the impact on cash flow from the corporate actions since BIP was spun out from BAM as well the historical dividend distribution and payout ratio.
Figure 2: Growth in FFO Driven by Corporate Activities
FFO
$120 $100 FFO ($USMM) $80 $60 $40 $20 $0 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 $20 $9 $8 $12 $52 $55 $46 $98 $102 $97
$45
Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets Note: excludes sale of TBE in June 2009
Figure 3: Historical Dividend Distribution and Payout Ratio

FFO/unit ($), Distribution/unit ($)
Distribution/unit, FFO/unit & Payout Ratio (%)

$1.00 $0.80 $0.60 $0.40 $0.20 $0.00 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Distributions/unit FFO/unit Payout ratio 150% 120%
Payout Ratio (%)
90% 60% 30% 0%
Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets Note: excludes sale of TBE in June 2009
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Infrastructure Assets
BIP tends to focus its infrastructure interests on high-quality, long-life assets that form the backbone of the economy. The three main Platforms are:
Table 1: Operating Profile
Platforms
Return Drivers Regulated assets that earn a
Assets Coal terminal Electricity transmission Energy distribution (last-mile gas & electricity connections) Railroad Energy transmission (midstream natural gas transmission & storage) Energy distribution Ports Toll roads Freehold standing forest
Geography Australiasia Chile, Ontario, Texas U.K.
Utilities
return on a prescribed rate base and capital structure
Australia U.S.A
Transport & Energy
Long-term contracts (70% of EBITDA), take-or-pay contracts, high barriers to entry
U.K., New Zealand U.K., Europe & China Chile West Coast of Canada & U.S.A.
Timber
Renewable asset, standing inventory grows in value
The makeup of these assets have evolved over time and were most recently strengthened with the recapitalization (Q4/09) and subsequent merger (Q4/10) of Brookfield Infrastructure with Prime Infrastructure, which added infrastructure assets in the U.K, and Australasia to the existing timberland and electricity transmission assets in North and South America. Total invested capital currently stands at approximately $3.0 billion.
Figure 4: Segment Diversification
Figure 4A: Global Footprint
Timber 14% Transport & Energy 45% Utilities 41%
South Europe America 14% 10%
North America 29%
Australasia 47%
Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets Note: Segment diversification and global footprint based on Q3/11 invested capital
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Figure 5: Global Infrastructure Platform
Canadian Timberlands
N. A. Electricity Transmission Operations
UK Port Operations
European Energy Distribution Operations
U.S. Timberlands
Australian Coal Terminal Operations European Port Operations
N.A. Gas Transmission Operations
Australian Railroad Operations
Australasian Energy Distribution Operations
S.A. Electricity Transmission Operations
Australian Energy Distribution Operations
Source: Brookfield Infrastructure Partners L.P.
Cash flows tend to be stable since the assets are either in regulated business, which earn a return on their asset base or are underpinned by long-term contracts, including some take-or-pay contracts, which are designed to generate a return on capital over the life of the contract. As at Q3/11, 80% of BIPs cash flows were generated from either regulated businesses or long-term contracts. Currently 44% of the cash flows are underpinned by take-or-pay terms where BIP has neither price nor volume risk. As BIP continues to grow its portfolio, the emphasis is on deploying capital with limited downside (i.e., the new rail access agreements are take-or-pay agreements). Including prospective take-orpay contracts, we believe 50% of 2013E cash flows are expected to be underpinned by take-or-pay contracts.
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Figure 6: Stable Cash Flow Profile
19% 44%
37%
Other
Contractual
Regulated
Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets
Utilities
The Utilities platform consists of a portfolio of regulated business that earns a regulated or contracted return on the asset base. As a result cash flows tend to be very stable and predictable. The Utilities platform also benefits from having a diverse portfolio of assets. With operations located in four different countries, regulatory risk is reduced. The plat2010 EBITDA and FFO by Segment forms assets are located in growing markets and offer significant opportunities to invest in system expansions at attractive returns. Within this 13% segment, there are two flagship assets, Transelec, a Chilean based electricity transmission 10% asset, and DBCT, a major coal 10%10% port terminal in Australia. Transelec and DBCT combined made up about 65% and 68%, 43% respectively, of BIPs EBITDA and FFO in this segment in 2010. 41%
12% 12%
Figure 7: 2010 Utilities EBITDA and FFO by Segment
2010 EBITDA and FFO by Segment

13% 10% 10%10% 12% 12% 27% 22% 43% 41%
27% 22%
Australasia (DBCT) South America (Transelec) North America (Ontario and Texas Transmission) Europe - GTC "last mile" Australasia - PowerCo - New Zealand
Australasia (DBCT) South America (Transelec) North America (Ontario and Texas Transmission) Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets Europe - GTC circle "last mile" Note: Outer represents Earnings Before Interest expense, Taxes, and Depreciation & Amortization Australasia PowerCo - New Zealand (EBITDA),-while inner circle represents Funds From Operations (FFO), which is EBITDA less interest expense and cash taxes
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Table 2: Utilities Portfolio

Utilities Transelec DBCT Powerco GTC Ontario Transmission Ownership 18% 71% 42% 100% 100% Key Barriers to Entry Backbone transmission company in Chile serving 98% of population Coal export terminal that accounts for 8% of global seaborne coal and 21% of global seaborne metallurgical coal 2nd largest energy distribution company in New Zealand 2nd largest independent connection company in UK; Revenue Drivers Regulated monopoly Regulated monopoly Regulated monopoly Long-term contracts/sole provider of service Regulated monopoly
Cross Sound Cable Texas Transmission
23% 11%
Electric transmission company in Northwestern Ontario Merchant Transmission Facility 24 mile (39km) long submarine cable buried in Long Island Sound that connects the electric transmission grids of New England and Long Island, offering Transmission Services in accordance with the NEPOOL NY. Open Access Transmission Tariff Schedule Electric transmission company in Texas Regulated monopoly
Electricity Transmission
The electricity transmission assets are comprised of a major transmission backbone in Chile along with transmission assets in Texas and Ontario. The Chilean assets represent 71% of the FFO on a trailing twelve month basis. Transelec Electricity Transmission in Chile Transelec was originally acquired by Brookfield in 2006 from Hydro Quebec and today is owned by BIP (18%), BAM (10%) and the balance between the Canadian Pension Plan Investment Board (CPPIB) and British Columbia Investment Management (bcIM) and PSP Investments. Chiles Largest Transmission Company In Chile, a majority of electricity is supplied by hydro generation from mountainous regions in the central-south area of the country, which is carried by transmission lines to population centers located in central and coastal Chile. Transelec is Chiles largest electric transmission company. Its network stretches over 8,200 km from the north to the south of Chile, and is equipped with 52 substations and delivers power to approximately 98% of the Chilean population. Electric generation companies are Transelecs main customers. They utilize the grid to transport electricity generated to distribution companies who then deliver the energy to end customers. As of December 2010, three customers accounted for 84% of Transelecs revenues, the largest of which is Endsea, the principal electricity generator in Chile, which operates 35% of the countrys installed capacity.
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Figure 8: Revenue per Customer
5% 6% 8%
11%
70%
Endesa & related
Colbun
Gener & related
GasAtacama
Others
Source: Transelec, BMO Capital Markets
Dominant Market Position There are two main interconnected grids in Chile, the SIC system, which serves principally industrial and household consumers in the centre-south region of Chile, while the SING Transelecs Role in the Chilean Economy system mostly serves large industrial customers, primarily mining companies in Chiles northern regions. is Transelec controls almost the company entire trunk grid that serves Transelec the largest transmission in transmission Chile the SIC region, which spans 93% of the population, and owns 100% of the SING and Operates over 8,203 km of lines SIG trunk systems.
Sole owner of the 500kV lines that form the backbone of the countrys transmission system Operates in the SIC and SING regions and serves over 98% of the Chilean population
Figure 9: Main Chilean Interconnected Systems

SING
Transmission is the critical link between new sources of sup and demand
New generation likely to be large-scale hydro or coal projects
Trunk transmission connects large generators (particularly hydro Transelec owns 959 kilometers of transmission lines mountainous regions with population centers in central and coas and 5 substations in the SING region Chile
Chile is projected to experience continued economic growth

Implies demand growth of 7% per annum over next ten years SIC
To maintain reserve margin, requires 450 MW of incremental sup each year owns: 7,244 kilometers of transmission Transelec
Investment in transmission will be critical to maintaining reliability and, by extension, economic growth Chile has a supportive regulatory environment that favours reliability over price
lines and 47 substations in the SIC region
Transmission tariffs account for only a small proportion of overal electricity costs
Short Law I passed to encourage investment in transmission sec
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Brookfield Infrastructure Partners, L.P. Transelecs transmission assets are concentrated on the highest voltage levels it owns 100% of Chiles 500 kV transmission lines (trunk lines), the highest voltage lines in the country, which form the backbone of the electrical grid (suitable for transmitting bulk power over extremely long distances and are shared among many users), and 45% of the 220 kV lines and 94% of the 154 kV lines. It also owns 11% of the 110 kV and 89% of 66 kV (and below) lines, respectively.
Figure 10: Transelec Market Share

500 kV lines
Other 6%
154 kV lines
Transelec 100%
Transelec 94%
220 kV Lines
110 and 66 kV lines

Transelec 11% Transelec 45% Other 89%
Other 53%
Brookfield Infrastructure Partners, L.P. Electricity Demand Continues to Grow in Chile
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Chiles economy is heavily tied to the copper industry. Growth in emerging markets and the collateral impact on the Chilean economy has driven demand for energy. Electricity demand in Chile has been growing at a rate of 6% annually over the last two decades.
Figure 11: Annual Electricity Demand Growth in Chile
Annual Electricity Demand Growth

45 40 35 30 GwH 25 20 15 10 5 1 3 5 7 9 1 5 7 9 3 5 7 20 0 19 9 19 8 19 8 19 8 19 9 19 9 19 9 19 9 20 0 20 0 20 0 20 0 9
11% 8% 8% 8% 8% 7% 7% 3%3%
12% 10% 9% 8% 10% 8% 6% 8% 6% 4% 4% 6% 4% 4% 8% 6% 4% 2% 0% -1% -2% -2% -4% %
6%
6%
Source: Transelec, CDEC, Banco Mundial, BMO Capital Markets
Superior Regulatory Environment In order to address to the infrastructure requirements to meet this demand growth, new supportive regulatory regimes have been established. Most recently, the original regulatory framework, which unbundled and later privatized the electrical system in Chile, was amended (Short Law I) to introduce a new transmission pricing structure and trunk system expansion procedure with a disputes mechanism arbitrated by an impartial Experts Panel. Unlike in other jurisdictions where there is pressure to invest capital to maintain the rate base while also allowing for an adequate rate of return, the new regulatory framework in Chile provides the transmission company with a legislated 10% pre-tax real rate return based on the replacement value of the transmission system. This is in addition to annual payments for maintenance and other operating costs, which the transmission company can recover through tolls charged to generating companies that utilize the grid. Importantly, the 10% real rate of return is a matter of law for transmission assets in Chile, and not subject to regulatory review. However, the assessment of market value is reviewed every four years and is based on twelve key inputs. We understand BIP remains positive on the transparency of the review process and that changes in fair value are not applied retroactively.
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Brookfield Infrastructure Partners, L.P. Eighteen Percent of Sales Have Volume Risk Transelecs main sources of revenue are generated from Trunk and Sub-transmission systems, which are regulated assets, and for use of Additional unregulated transmission lines, which are governed by long term bilateral contracts. Both Trunk and Additional System revenues are structured as take or pay agreements, while BIP assumes volume risk on Sub-transmission system revenues. Approximately 55% of Transelecs revenues (excluding Other non-transmission based revenue) are governed by long-term contracts (the largest of which expires in 2018 after which a majority of these contracts will revert to the Short Law) that have pricing frameworks similar to the regulatory framework.
Figure 12: Revenue per System (2010) 18% 10% 17%
55%
Other
Additional
Trunk
Subtransmission
Note: Trunk revenues includes 27% of revenues from contracts (at regulated rates) Source: Transelec, BMO Capital Markets
Highly Stable Cashflow Profile Since the Chilean regulatory and contractual frameworks are based on replacement cost, Transelec is not required to invest at its level of depreciation to prevent a decline in revenue. As well, we understand Transelecs system is in very good physical condition. As a result, maintenance capital expenditures are at relatively low levels (US$1-$2 million per year). With strong EBITDA margins in excess of 80% combined with low maintenance capital expenditures, Transelec generates strong stable cash flows. Significant Growth Opportunities Chiles economy is growing at an annual rate of 5 to 7% and commensurately so is its power demand. In many cases power generation is far away from the power users, which drives demand for increased transmission infrastructure. Given the regulatory framework in Chile and Transelecs scale and location advantages, we believe there is significant opportunity to increase revenues and cash flows over time through additional capital projects as Transelec continues to expand its network.
Brookfield Infrastructure Partners, L.P. North American Transmission
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There are two assets in this segment: 1) an Ontario transmission asset; and 2) a transmission development project in Texas. The Ontario transmission assets comprise 550 kilometres of 44kV to 230kV regulated lines. The Ontario asset is allowed to earn a 9.66% return on equity based on theoretical capital structure of 60/40 debt-to-equity. BAM has a 50/50 joint venture with Isolux which is building a $750 million transmission line in the state of Texas of which BIP owns 11%. The project is expected to begin operations at the beginning of 2013.
Australian Coal Terminal Operations

High Barriers to Entry with Significant Scale and Location Advantages DBCT is a multi-user coal terminal located in the Queensland region of Australia at the Port of Hay Point, which is on the northeast side of the country. The terminal is owned by the Queensland Government and leased to DBCT Management (BIP) under a long term leasing arrangement, which extends for 50 years (beginning in 2001), with an option to extend the lease for a further 49 years. The terminal is managed by Dalrymple Bay Coal Terminal Pty Ltd, a company owned by eight of the largest users of the terminal. DBCT commenced operations in 1983, with an annual throughput capacity of 15 Mtpa and has expanded in three stages since then, the most recent expansion occurring in June 2009, in response to growth in demand for coal in the region and a consequent growth in demand for terminal capacity. DBCT is currently one of the worlds largest coal terminal (at 85 Mtpa capacity), exporting 8% of the total global seaborne coal and 20% of the global metallurgical seaborne coal. The primary end-markets are Japan, Korea, India and China, which use the coal to generate electricity and make steel.
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Figure 13: Dalrymple Bay Coal Terminal
Figure 13: Dalrymple Bay Coal Terminal
Source: http://www.farrell-associates.com.au/Papers/DBCT%20Case%20Study.pdf Source: http://www.farrell-associates.com.au/Papers/DBCT%20Case%20Study.pdf
Structure Replicates and Indexed Bond Structure Replicates and Indexed Bond
DBCT serves many of the large mining companies operate in the Bowen Basin, including DBCT serves many of the large that mining companies that operate in the Bowen Basin, Peabody Energy, Vale and Rio Tinto. The Bowen Basin is located in central Queensland and contains including Peabody Energy, Vale and Rio Tinto. The Bowen Basin is located in central one of the lowest cost sources of coal in the world. Capacity is currently 100% contracted to 2014 Queensland and contains one of no the lowest cost sources so of in coal in the world. Capacity is through long-term take-or-pay contracts, which have force majeure provisions, the case of a natural disaster there is no impact on revenues. to Customers have to give five yearstake-or-pay notice to reduce the currently 100% contracted 2014 through long-term contracts, which have annual contracted tonnage shipped and are committed to the take-or-pay terms for five years from no force majeure provisions, so in the case of a natural disaster there is no impact on notice. The agreements are such that if no replacement volume is found after the five years notice then have to give five These years contracts notice to reduce annual contracted tonnage the costs arerevenues. socialized Customers over the remaining customers. have two the components: a shipped and arecharge. committed to thecharge take-or-pay five years from notice. The agreecapacity charge and a handling The capacity is basedterms on the for percentage of capacity allocated andments is regulated by the Queensland Competition Authority, QCA, which uses a return on notice then the are such that if no replacement volume is found after the five years regulated asset based methodology. The handling charge (both fixed and variable), which is associated costs are socialized over the remaining customers. These contracts have two components: with operating and maintaining the facility is directly passed through to customers. The capacity a capacity and a handling The capacity charge is based charge is determined everycharge five years by the QCA with charge. the most recent undertaking occurring in 2010,on the percentage of a capacity allocated is regulated by the of Queensland Competition which approved weighted average costand of capital (WACC) increase 100 bps to 9.9% commencing Authority, QCA, January 1, 2011. As auses result, over theon next five and a asset half years, this change is expected tohandling result in ancharge (both fixed which a return regulated based methodology. The additional A$70 million in incremental EBITDA at the BIP level. Essentially the structure replicates and variable), which is associated with operating and maintaining the facility is directly an indexed bond for BIP.
passed through to customers. The capacity charge is determined every five years by the QCA with the most recent undertaking occurring in 2010, which approved a weighted average cost of capital (WACC) increase of 100 bps to 9.9% commencing January 1, 2011. As a result, over the next five and a half years, this change is expected 13to result in an additional A$70 million in incremental EBITDA at the BIP level. Essentially the structure replicates an indexed bond for BIP. Allowed Return Formula Likely to be Maintained; Upside to WACC Supported by Recent Financings
As part of its undertaking assessment process, the QCA retained the methodology it utilized in its 2006 regulatory review, including retaining key parameter values (i.e., equity beta and market risk premium). In so doing, the QCA utilized a formula that DBCT
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Management and its customers had adopted to arrive at a customer supported WACC. As a result, we believe the risk is low that the formula (i.e., Capital Asset Pricing Model) will likely change in the next regulatory review given that the proposed WACC was based on a market outcome. From a regulatory perspective, we understand the biggest risk around the allowed return appears to be from a reduction in the equity beta (currently 1) for the asset (i.e., certain comparator firms have equity betas of less than 1), and as well, re-estimates of the time-variant parameters (i.e., risk-free rate and debt margin). In terms of potential upside, it is possible the QCA could ascribe a higher proportion of debt in the theoretical capital structure (i.e. currently 60% debt to capitalization) applied to the asset, which would result in an increase in the WACC (all else being same), which we understand has been supported by recent refinancing of debt (i.e., deemed investment grade with 72% debt to capitalization ratio) at DBCT. Re-contracting Risk Low We believe the re-contracting risk is low given the cost advantage of the coal in the region served, and the replacement cost of the port. Average met coal prices currently average around US$250 - $US300 / tonne and production costs are about A$80 / tonne and the Bowen basin is recognized as one of the lowest cost coal mining regions in the world. Currently total terminal charges are about $5/tonne and are about half of what they would be compared to new capacity. We believe the dynamics of the region support continued volumes, however, under the current contracts, volumes are only fully contracted to 2018. Capital Requests Managed by DBCT and not Undertaken Unless Factored in Rate Base DBCT management regularly consults with access holders to assess capacity needs. Capital is only allocated to the extent it is factored into the rate base and approved by QCA. This typically means that so long as access seekers have contractually committed to at least 60% of the capital undertakings, and no more than 60% of accesses holders who do not benefit, do not oppose it, QCA generally allows the requests. Significant Opportunities to Invest Capital at Attractive Returns Given Strong Demand for Coal from China and India The booming demand for coal in India and China place DBCT in a very strong competitive position to invest capital at attractive returns to expand this facility.
Figure 14: New Demand Growth for Coal from 2010

Page 16 Brookfield Infrastructure Partners, L.P.
Figure 14: New Demand Growth for Coal from 2010 (million short tons)
Source: Alpha Natural Resources, EIA, IEA
Source: Alpha Natural Resources, EIA, IEA
There are areother otheraccess access points for coal from Bowen Basin, namely the adjacent There points for coal from the the Bowen Basin, namely the adjacent Hay Hay Point Terminal this terminal is owned BHP Billiton and Mitsubishi, and services only Point Coal(HPCT), Terminalbut (HPCT), but this terminal isby owned by BHP Billiton and Mitsubishi, export requirements. DBCT HPCT have a capacity of 130have Mtpa and services only their exportand requirements. DBCT and HPCT a between capacity them. of 130Given the gro Mtpa between them. the growing industry demand for coal, there is a projected industry demand for Given coal, there is a projected need to have export capacity increase to 250-300 need have export capacity increase to 250-300 Mtpa over the next 5-10 years. over to the next 5-10 years. Figure 15: Coal Exports from Port of Hay Point
Figure 15: Coal Exports from Port of Hay Point
Coal Exports from Port of Hay Point

75
Million Tonnes Million Tonnes
Coal Exports from Port of Hay Point
60
75
60 45 45 30
15 30
15 0
01/02
02/03
03/04
04/05
05/06 DBCT
06/07 HPCT
07/08
08/09
09/10
10/11
01/02
02/03
03/04
04/05
05/06 DBCT
06/07 HPCT
07/08
08/09
09/10
10/11
Source: Queensland State Government, BMO Capital Markets
Source: Queensland State Government, BMO Capital Markets
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In July 2010, DBCT was appointed as one of two preferred development proponents (the other being Adani, an Indian conglomerate who won the right to develop the Abbott Point terminal in the region) for the Dudgeon Point Coal Terminal (DPCT). DPCT is located in the port of Hay Point, which is located four kilometres north of DBCT and will have an export capacity of 120-150 Mtpa. We understand that BIP has received access requests (i.e., soft commitments) from potential customers for 130 Mtpa. On December 13, 2011 the state of Queensland, Australia announced that it allocated land to Brookfield and Adani Group for two coal terminals at Dudgeon Point with each getting 190 hectares (50% each). The two proposed terminals at Dudgeon Point will provide export capacity up to 180 Mtpa. The construction of the terminals is expected to begin in 2013 and cost ~A$10 billion (we believe Brookfields share A$3-4 billion), and be ready by the end of 2016.
Energy Distribution
GTC - UK Distribution Business This is a last-mile business for connecting gas and electricity services in the U.K residential housing market, called GTC. GTC is the second largest independent connections business in the U.K. with approximately 450,000 natural gas connections and 25,000 electricity connections. This is a regulated price business. However the regulated prices are insufficient to attract capital, and require developers to subsidize the connections with up front fees. The revenue in this business is comprised of developer fees and on going customer revenue based on the regulated price. The developer fee portion, while theoretically intended to levelize the return over the life of the connection, is recognized in BIPs revenue upon receipt. Including the developers fee, the IRRs for a dual fuel connection, which most are today, is in the mid-teens. The industry dynamics are such that the independents are more responsive than the incumbents and tend to garner a larger portion of the new business. The number and timing of new connections are a function of housing starts and completions in the U.K. It is anticipated at the current level of completions that BIP should generate about $9 million a quarter in developer connection fees, which assumes about 12,000 dual fuel connections a quarter. BIP currently enjoys a 25% market share on new connections in the industry.
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are today, is in the mid-teen. The industry dynamics are such that the independents are more responsive than the incumbents and tend to garner a larger portion to the new business. The number and timing of new connections are a function of housing starts and completions in the U.K. It is anticipated at the current level of completions that BIP should generate about $9 million a quarter in Brookfield Infrastructure Partners, L.P. developer connection fees, which assumes about 12,000 dual fuel connections a quarter. BIP currently enjoys a 25% market share on new connections in the industry. Figure 16: Trends in Housing Starts and Completions, England, 12 month Rolling Totals
Figure 16: Trends in Housing Starts and Completions, England, 12 month Rolling Totals
Source: UK Government
Source: UK Government
Powerco
16
Powerco is New Zealands second largest electricity and gas distribution company and one of two dual-energy distributors in the country. Powercos distribution network is spread across the upper-central, central and lower areas of New Zealands North Island. Powerco has approximately 420,000 customers represent 46% of gas connections and 16% of electricity connections in New Zealand. Powercos electricity business operates under regulation administered by the New Zealand Commerce Commission (NZCC), which determines the annual increase in prices that can be applied and the quality thresholds that must be achieved (i.e., response time after an emergency). Powercos Authorization expires on July 1, 2012, at which time the gas distribution business will become subject to a new pricing regime. There is currently some regulatory dynamics that could for a period of time provide some uncertainty with respect to FFO. However, based on regulatory options the FFO is likely to be at or above prior levels by July 2014. Revenue is mainly based on regulated tariffs, with a significant portion being from state-owned businesses (i.e., 66% of the electric and 49% of the gas energy retailers are state-owned). Electricity revenues represent 80% of the companys sales and have grown at a 4.1% compound annual rate over the past five years. Electricity and gas customers are largely residential and are generally contracted via retail energy companies.
Recent Financial Performance

The Utilities platform generated FFO of $144 million in 2010, up from $61 million in 2009 (excluding the one-time gain of $68 million from the sale of TBE). The strength in recent performance is attributable to the merger with Prime as well as strong performance from the Australian coal terminal, electricity operations and UK distribution business. BIP uses Adjusted Funds From Operations (AFFO) yield as a non-IFRS measure of operating performance. AFFO is FFO less maintenance capital expenditures and may also include incentive distributions payable to Brookfield. Invested capital is the cash put into the business, plus cash generated less cash taken out of the business. The AFFO yield is AFFO divided by invested capital and is meant as a proxy for cash-on-cash returns in the business.
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Figure 17: Utilities Segment Operating Performance FFO/AFFO Yield (%)
Utilities Segment Operating Performance FFO / AFFO Yield (%)

$90 $80 $70 FFO ($USMM) $60 $50 $40 $30 $20 $10 $0 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Coal Terminal Electricity Transmission Energy Distribution AFFO Yield % $12 $11 $14 $20 $27 $32 $43 $42 $61 $66 $77 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% AFFO Yield (%)
Figure 18: Trailing Twelve Month Utilities Segment FFO
TTM FFO by Segment (%)
16% 37% 22%
7%
18%
Coal Terminal Operations Electricity Transmission - North America Energy Distribution - Australasia
Electricity Transmission - South America Energy Distribution - Europe
After deducting capital expenditures of $13 million, the weighted average AFFO yield in 2010 was 15% on an invested capital base of $1,298. The rate base increased 68% in 2010 to $3,182 million, due to the Prime merger, while the return on the rate base was 11%.
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Figure 19: Utilities Segment Operating Performance Rate Base / Return on Rate Base
Utilities Segment Operating Performance Rate Base / Return on Rate Base (%)
$4,000 $3182 $3252 Rate Base ($USMM) $3,000 $2,000 $1,000 $0 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Rate Base Return on rate base (%) $1891$1939 $1816 $1838 $3474 16% $3155 12% 8% 4% 0%
Return on Rate Base (%)
$519 $531 $566
Transport & Energy Infrastructure

The Transport & Energy infrastructure business is a geographically diverse, capital intensive fee-for-service business that is comprised of transportation, storage and handling services for energy, freight and commodity businesses. The business generally benefits from the increased movement of energy, freight and bulk commodities, which over the long-term tends to increase with the growth in the economy. Performance has tended to remain stable despite the poor macro outlook. The business benefits from two factors: 1) high barriers to entry as a result of its locational advantages and regulatory restrictions, which mitigates competition and enables BIP to negotiate long-term contracts with customers. We understand that about 70% of the EBITDA in this segment is subject to long-term contracts; and 2) the diversity of the businesses tends to mitigate fluctuations in demand from any one sector, commodity or customer. The segments two premier assets are PD Ports and Brookfield Rail (formerly WestNet Rail). In aggregate, the UK port operations, Australian railroad and the North American gas transmission business accounted for 80% and 86%, respectively, of the EBITDA and FFO in Transport & Energy platform in 2010.
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Figure 20: 2010 Transport & Energy EBITDA and FFO by Segment
2010 EBITDA and FFO by Segment 15% 10% 18% 19% 5% 4% 39% 37% Australasia (Brookfield Rail) North America - NGPL Other - IEG (Channel Islands/Isle of Man) UK - PD Ports Euroports
25% 28%
Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets Note: Outer circle represents Earnings Before Interest expense, Taxes, and Depreciation & Amortization (EBITDA), while inner circle represents Funds From Operations (FFO), which is EBITDA less interest expense and cash taxes
Table 3: Transport & Energy Portfolio

Transportation & Energy Infrastructure Brookfield Rail PD Ports Euroports NGPL IEG-other TasGas Ownership 100% 59% 40% 26% 100% 100% Key Barriers to Entry Sole rail provider for minerals and grain in Western AUS Landlord port that is 4th largest port in UK by volume; harbour authority for River Tees Seven ports with key strategic locations throughout Europe and China, handling over 70 Mtpa. One of the largest natural gas transportation companies in US; serves 61% of Chicago/N Indiana market; accounts for 7% of storage capacity in US Sole LPG provider in Channel Islands/Isle of Man Sole natural gas distribution company in Tasmania Revenue Drivers Long-term contracts/regulated Status as harbour authority/long-term contracts Strategic location Strategic location/regulated Long-term contracts/sole provider of service Sole provider of Service
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Brookfield Rail
Brookfield Rail
Essential Infrastructure Asset with Stable Revenue Stream from Blue-Chip Customer Base
Brookfield Rail controls approximately 5,100Stream km of railway track throughout the southEssential Infrastructure Asset with Stable Revenue from Blueern half of Western Australia (WA) through a 40 year lease with the WA Government. Chip Customer Base Brookfields rail infrastructure is located near a large number of iron ore, bauxite and other types 5,100 of mineral deposits intrack the area, and is also for of much of the goods Brookfield Rail controls approximately km of railway throughout theresponsible southern half transported eastern the Government. country. Brookfield Rail handles Western Australia (WA) through a 40 from year the lease with part the of WA Brookfields rail approximately 50 Mtpa of cargo, and in many cases, is the only economic means to infrastructure is located near a large number of iron ore, bauxite and other types of mineral deposits get in commodities in this region to government ports on the coast forthe export. Accordingly, customers tend to the area, and is also responsible for much of the goods transported from eastern part of the sign long-term agreements with Brookfield in order to ensure adequate country. Brookfield Rail handles approximately 50 Mtpa of cargo, and in many cases, is the only access to the rail network. The access charges are regulated by the WA government, but our understanding economic means to get commodities in this region to government ports on the coast for export. is that current contracts are below the current ceiling. In addition, rail transport represents Accordingly, customers tend to sign long-term agreements with Brookfield in order to ensure a smallThe yet essential component of the overall cost ofgovernment, the commodities transported, which adequate access to the rail network. access charges are regulated by the WA but our tends to provide very stable revenue streams. Brookfields top 9 customers understanding is that current contracts are below the current cieling. In addition, rail transport contribute 90% of component its revenues with expiration dates ranging from 2011 which to 2026. Revenues are represents a small yet essential of the contract overall cost of the commodities transported, A200 - A$300 million tends to provide very stable approximately revenue streams. Brookfields top 9annually. customers contribute 90% of its revenues with contract expiration dates ranging from 2011 to 2026. Revenues are approximately A200 - A$300 million annually.
Figure 21: 21: Brookfield Rail Infrastructure Figure a. Brookfield Rail Infrastructure Figure 21b: Brookfield Mix of Business b. Brookfield Rail MixRail of Business (2009) (2009)
Source: Brookfield Rail Source: Brookfield
Rail
Source: Brookfield Rail
21
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Well Positioned For Significant Volume Growth; Focus Shifts to Take-or-Pay Contracts Brookfield Rail appears well positioned to benefit from growing freight demand to support increased economic activity as well as increases in commodity demand. We understand there are currently six large projects underway at advanced stages of development (new mine projects as well as extensions of existing mines) in close proximity to these assets that should, once completed, increase the tonnage transported by Brookfield by approximately 24 Mtpa or 45% by 2014.
Table 4: Brookfield Rail Expansion Projects

Project Extension Hill iron one project KML iron ore project Worsley aluminum expansion Koolyanobbing iron ore mine expansion Yilgarn iron ore project Collie urea project Commercial Status Signed CTAA Signed CTAA Signed CTAA Agreed terms Signed CTAA Signed CTAA Projected Volume 3.0 mtpa 10.0 mtpa 2.0 mtpa 2.2 mtpa 4.4 mtpa 2.0 mtpa Expected Start Date Late 2011 2012 2012 2012 Late 2011 2014
Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets Note: CTAA is Commercial Track Access Agreement
BIP expects to invest a further A$425 million of capital over the next two years to upgrade and expand the network. Combined with previous investments of ~A$175 million, it is expected these investments will generate incremental EBITDA of A$150-$200 million per year by 2014. Specifically, BIP expects its minimum take-or-pay revenues associated with these expansions will generate revenues of ~ A$65 million in 2012, increasing to ~A$160 million in 2013 and a further A$10 million to A$170 million in 2014. Importantly, when the business was acquired in 2009, 0% of the revenue was covered by take-or-pay provisions, while in 2014 that level will be closer to 60%. To date, BIP has finalized five of the largest of the six expansion contracts representing 93% of its incremental revenues, of which all are backed by takeor-pay provisions. The contracts on average extend over 15 years, but importantly, the reserves of the mines BIP is supporting are well beyond that.
Significant Growth Opportunities

To the extent that volumes exceed minimum take-or-pay levels, BIP will generate incremental EBITDA above that amount. For example, BIP has thus far contracted 24 Mtpa of additional volume growth when the upgrade and expansions are complete, but that does not include another 14 15 Mtpa these same customers believe they will be able to bring online. As a result, actual volume growth may not be 24 Mtpa, but actually closer to 40 Mtpa, which should drive additional cash flow growth. There is also the potential for BIP to generate additional cash flows as new customers develop coal and iron ore projects in the region and require rail access in order to transport these commodities to government
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Brookfield Infrastructure Partners, L.P. owned ports for export. Currently the ports are operating at full capacity and appear to be a gating issue for incremental volume beyond current commitments. Apparently the government does not have the funds to upgrade their capacity and BIP is working in partnership with miners to invest capital in order to debottleneck the ports, which could also represent an attractive investment opportunity. It is estimated the capital needed to enhance these ports is in excess of A$500 million over the next three to five years.
Ports
PD Ports - Strategically Located with Diverse Set of Terminals and Facilities PD Ports is the fourth largest port operator in the UK by volume, shipping approximately 40 Mtpa of cargo. Essentially, PD Ports acts as the landlord for the Ports of Tees and Hartlepool (Teesport) and has the right to collect conservancy tariffs (toll-like duties) from anyone using the River Tees to access their own terminals. We understand that approximately 50% of the business FFO is related to these fees plus rent from the 2,000 acres of land it owns. PD Ports has a number of long-term contracts with large multinational corporations, which have invested significant amounts of capital within the ports and have no other way to access its terminals than by ship. This gives PD Ports pricing power and enables BIP to enter into long-term contracts, which underpins the about 40% of its revenues. In addition, PD Ports maintains its own container terminals and bulk terminals, which it charges a fee to use (50% of FFO). Within the vicinity of the Port there are a number of large-scale industrial plants (i.e., chemical producers, coal-fired power plants) that are designed to operate at high efficiency/volumes. As a result, bulk handling tends to be less sensitive to economic changes than handling containers, which are generally used to restock warehouses and is a GDP sensitive business.
Locations
D Ports (PDP)
Asset Description
PDP owns and operates the Port of Tees and Hartlepool (Teesport) which is the UKs 3rd largest port by Figure 22: PD Ports (PDP) tonnage. PDPs business also includes the operation of a number of other ports (including a container terminal at Hull) and a logistics business in support of the port operations. Middlesbrough, England (near Teesport) Brookfield: 100% Range of long-term contracts with strong, established counterparties including large multi-nationals.
on:
Port (SHA) Port operator Container terminals Logistics operations
p:
Principal Operations
PDP is the statutory harbour authority for Teesport and is responsible for the navigation of 11 nautical miles of the River Tees. Over 50% of PDPs income is earned from conservancy fees (i.e. tolls) related to the movement of cargo on vessels using the river. Teesport also operates a wide range of facilities including transports, bulk handling, cars, steel, forest imports and two container terminals with aggregate 215,000 TEUs of capacity. Teesports freehold land base of 1,558 acres provides an additional source of income to PDP. C Container terminal operator with 300,000 TEUs of f capacity. Warehousing, loading and general cargo handling services.
Teesport
Hull Immingham
am:
Brookfield Asset Management Inc.
Source: Brookfield Infrastructure Partners L.P.
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Teesport has distinct a geographical advantage relative to the ports in the southeast of the U.K. All major distribution centres in the U.K. can be reached within a single driving shift of Teessport. The Port has a less congested road network compared to south east, which improves time of arrival for deliveries. The rail solutions in the south east are also hampered by load restrictions and competing track access with high volumes of passenger traffic. As imports in the U.K. grow, we believe Teesports alternative gateway into the U.K. market leave it well positioned to provide additional port capacity and logistical capabilities for cargo traffic. In 2010, Teesport container volumes increased 40%, but this volume growth was somewhat offset by lower margins due to operating inefficiencies as a result of operating at fully capacity. BIP is in the process of expanding the container terminals capacity from 235,000 TEUs (Twenty Foot Equivalent Units) to 450,000 TEUs, which is expected to restore margins to historical levels.
Significant Growth Opportunities

It was recently announced that a Thai Steel manufacturer, SSI (Sahaviriya Steel Industries) acquired a steel-blast furnace in Teesport from Tata Steel that was closed in January 2010. At the time of the plants closure, the plant brought in 25% of Teesports volumes. SSI is investing ~ $1 billion to buy and upgrade the facility and BIP is currently negotiating a take-or-pay contract to serve the expansion with revenues beginning in Q1/12. We understand the contract could add ~ $6.5 million (~ 4.04.7 million at a 1.5x US$/ exchange rate) per annum in incremental EBITDA, which is significant on a base of 24 million. PD Ports is also well positioned to benefit from continued container business growth in the U.K. when the economy improves. We understand that there are planned developments in the surrounding areas by leading retailers. For example, Tesco, a leading U.K. retailer recently constructed the largest warehouse facility (900,000 sq. ft.) ever in the U.K. in the Ports estate. Other potential opportunities are the acquisition of Trust Ports if they were privatized by the government. There are over 100 Trust Ports in the U.K, each administered by a Trust, the largest of which is the Port of Dover. The government is looking to privatize the Trust Ports in order to raise capital funds to build new terminals to provide additional capacity.
Euroports Diverse Long-Term Customer Base Portends Stability

Euoports is comprised of a portfolio of concessions throughout Europe and China. This is a diversified business that handles heavy dry bulk, specialty dry bulk, liquid bulk, general cargo and containers. With its 16 locations in seven countries in Europe, Euroports is one
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Brookfield Infrastructure Partners, L.P. of the largest port operators in Europe and handles over 50 Mtpa of cargo. Europort operates 1 terminal in China.
Natural Gas Pipeline of America (NGPL) Natural Gas Pipeline of America (NGPL)
Irreplaceable Strategic Asset withto Exposure to Fast Growing Irreplaceable Strategic Asset with Exposure Fast Growing Shale Shale Plays Plays
NGPL is among the largest natural gas pipeline and storage systems in the U.S. The pipeNGPL is among the largest natural gas pipeline and storage in the U.S. and The Southern pipeline system, line system, which traverses 10 states systems in the Midwestern U.S., extends over which traverses 10 states in the Midwestern and Southern U.S., extends over 15,500 km and delivers 15,500 km and delivers approximately 2.2 trillion cubic feet of natural gas per annum. approximately 2.2 trillion cubic feet of natural gas per annum. NGPL also has seven storage facilities NGPL also has seven storage facilities with a combined working gas capacity of 270 bilwith a combined working gas capacity of 270 billion cubic feet, which represents approximately 7% lion cubic feet, which represents approximately 7% of total natural gas storage capacity of total natural gas storage capacity in the U.S. NGPL supplies approximately 60% of the natural gas in the U.S. NGPL approximately 60% positioned of the natural gas used in the Chicago used in the Chicago and Northern Indiana supplies markets and is geographically in close proximity and Northern Indiana markets and is geographically positioned in close proximity to to several major conventional natural gas supply basins in the U.S., as well as fast growing several major conventional natural gas supply basins in the U.S., as well as fast growing unconventional gas plays including the Woodford, Fayetteville, and Haynesville. BIP owns a 26% unconventional gas plays including the Woodford, Fayetteville, and Haynesville. BIP interest in NGPL along with other inventors, including Kinder Morgan Inc. (KMI), which owns 20% owns a 26%of interest in NGPL along with other inventors, including Kinder Morgan Inc. and operates the system on behalf the partners. (KMI), which owns 20% and operates the system on behalf of the partners. Figure 23: NGPL Natural Gas transmission and Storage Network
Figure 23: NGPL Natural Gas transmission and Storage Network
Source: http://steelriverpartners.com/ngpl.html
Source: http://steelriverpartners.com/ngpl.html
Diverse Group Diverse of Customers with Investment Grade Ratings Group of Customers with Investment Grade Ratings
NGPL diverse group of customers that includes investment grade local gas distriNGPL has a diverse group has of a customers that includes investment grade local gas distribution bution companies, gas-fired power plants and other interstate pipelines. NGPLs top 10 companies, gas-fired power plants and other interstate pipelines. NGPLs top 10 customers account customers account for over 60% with of the transmission storage for over 60% of the transmission and storage revenues average contractand terms of 2.8revenues years forwith average contract terms of 2.8 years for transport and 3.5 years for storage customers. Given transport and 3.5 years for storage customers. Given NGPLs strong market position and diverse NGPLs strong market position diverse sources of gas, the company has a history of sources of gas, the company has a history of rolling overand customer contracts. rolling over customer contracts.
25
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Stable Cash Flow Profile with Leverage to Rising Natural Gas Prices
The majority of NGPLs revenues are generated under contracts with a demand charge and a variable charge structure. The demand charge does not fluctuate with usage and is designed to cover fixed costs and provide a return on capital. The variable charge is designed to cover variable costs. NGPLs transmission operations are subject to regulation by the Federal Energy Regulatory Commission (FERC), which provides a framework to reach commercial agreements without direct intervention under a maximum rate regime. We understand the max rates (under FERC) NGPL is permitted to charge on storage are marginally below market. As a result, NGPLs storage capacity effectively remains fully contracted in all price environments; however, in a high price environment, NGPLs ability to contract capacity at max rates goes up as companies/marketers seek to move gas into the markets with demand. With respect to the variable handling charge, NGPL is permitted to retain a regulated amount of gas passing through its pipelines as an offset of the costs to operate the transmission system. If NGPL is efficient in operating its pipes and uses less gas to operate than NGPL is permitted to retain, NGPL can sell this gas into the market. We understand the transmission system is run very efficiently and NGPL regularly sells gas in the market, which benefits NGPL as gas prices go up. In 2010, FERC approved a settlement under its regulations that resulted in FFO being reduced by $18 million on a run-rate basis. The impact of the settlement was fully phased in beginning in July 2011. The settlement provided greater stability of cash flows due to a five-year term in which customers cannot initiate a rate case.

The Transport & Energy platform generated FFO of $91 million in 2010. After deducting maintenance capital expenditures of $33 million, the average weighted AFFO yield in 2010 was 9% on an invested capital base of $1,235 million. BIP uses adjusted funds from operations (AFFO) yield as a non-IFRS measure of operating performance. AFFO is funds from operations less maintenance capital and may also include incentive distributions payable to Brookfield. Invested capital is the cash put into the business, less cash taken out plus AFFO. The AFFO yield in the AFFO divided by the invested capital and is meant as a proxy for cash-on-cash returns in the business. The AFFO yield in 2010 was impacted by lower FFO in the North American gas transmission business due to soft market conditions and a rate settlement, higher maintenance capital expenditures at Brookfield Rail as well as a weak fourth quarter that was impacted by lower grain harvest volumes. The recent increase in FFO was due to the Primer merger. The decline in the AFFO yield is the result of a reduction of returns on capital at both the North American energy transmission operations and at Brookfield Rail combined with an increase in invested capital due to the Prime merger and investments at Brookfield Rail and the UK port that have not yet begun to generate cashflow.
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Figure 24: Transport & Energy Segment Operating Performance FFO / AFFO Yield (%)
Transport & Energy Operating Performance FFO / AFFO Yield (%) $50 $40 FFO ($USMM) $30 $20 $10 $0 Q4/09 Q1/10 Q2/10 Q3/10 Rail Road Q4/10 Ports Q1/11 Q2/11 Q3/11 FFO $27 $26 $20 $13 $19 $45 $39 $39 20% 16% AFFO Yield (%) 12% 8% 4% 0%
Energy Transmission
AFFO Yield %
Figure 25: Trailing Twelve Month Utilities Segment FFO
TTM FFO by Segment (%) 9%
17%
32%
11% 31%
Australasia (Brookfield Rail) Other - IEG (Channel Islands/Isle of Man) Euroports
North America - NGPL UK - PD Ports
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Timber
High Quality Timberlands with Ready Access to Export Markets a Defining Feature of BIPs Timber Assets
The defining attribute of timber is its reliable long-term biological growth, and this growth, which is perpetual, can be captured and stored as unharvested timber over an indefinite period of time or harvested for income and capital appreciation. In general, a trees wood volume increases 2 8% annually based on weather (varying by climate, species, age), which compounds over time, yielding higher value trees as they mature. These attributes allow timberland managers to switch between income when lumber prices are high and capital appreciation when lumber prices are less favourable, thereby potentially maximizing total returns by matching harvest opportunities to market conditions. On a proportionate basis, BIP actively manages in excess of 419,000 acres of high-quality, freehold and 12,300 acres of higher and better use (HBU) timberlands located in the coastal regions of British Columbia, Canada and the Pacific Northwest region of the United States, which provides ready access to export markets. Combined, BIP has an estimated 29.1 million cubic meters of merchantable inventory that it can harvest, which includes a deferred harvest volume of 2.8 million cubic meters (i.e., surplus inventory). Reflecting annual timber growth within its forests, it is estimated BIP can cut at a longrun sustainable yield (LRSY) of 1.6 million cubic meters of timber per year (forever). To monetize the deferred harvest volume (once prices recover), BIP could cut trees at 120% of its LRSY for approximately 9 years.
Table 5: Timber Portfolio

Timber Island Timberlands Longview Timber Ownership 38% 30% Description 634,000 acres of freehold timberlands in coastal BC 2nd largest private timberland holdings in BC 655,000 acres of freehold timberlands in Pacific Northwest U.S. Competitive Position Premium product mix Coastal access HBU* Premium product mix Coastal access Proximity to low cost customers
* Higher and Better Use opportuniteis Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets
Timberland managers harvest logs that are sold to third parties, which convert the timber to wood products such as lumber and other building products, paper, furniture, biomass, etc. The costs to harvest timberlands are predominately variable, since they are largely a function of harvest levels, and ongoing capital requirements tend to be minimal.
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U.S. Homebuilding Expected to Remain Weak over the Medium Term

BIPs timber assets have a variety of end-markets, but the greatest exposure is to home building (and repair and remodelling) in the U.S., which remains depressed. The recession in North America and the severe downturn in the U.S. housing market have had a significant impact on demand for wood products. As a result of these exceptionally low market conditions, timber prices declined and timberland owners, including BIP sought to reduce harvest levels with the anticipation of being able to sell this unharvested timber into meaningfully better markets in the future.
Figure 26: North American Supply and Demand - Lumber
Figure 26: North American Supply and Demand Lumber
Note: BBF is billion board Note: BBF is billion board feet feet Source: Woodbridge Associates, Canfor, USDA Source: Woodbridge Associates, Canfor, USDA Capacity growth rate estimated at 2.2% based on historic figures Capacity growth rate estimated at 2.2% based on historic figures Expectations are that the U.S. lumber market will recover as the labour market slowly improves, but
Expectations are that the U.S.at lumber will recover asthe the labour of market we do not expect that to occur, least in market a meaningful way, until inventory unsold slowly homes normalizes and prices of existing homes in the US stops falling. Foreclosures are at record highs, improves, but we do not expect that to occur, at least in a meaningful way, until the which adds to the overhang of unsold homes and distressed sales by lenders puts additional downward inventory of unsold homes normalizes and prices of existing homes in the US stops fallpressure on resale values. Together, these factors curtail the construction of new homes. For what its ing. Foreclosures are at record highs, which adds to the overhang of unsold homes and worth, industry forecasts suggest a 21% increase in new housing starts in the U.S. in 2012 to 725,000, distressed lenders puts additional downward pressure on in resale values. Together, which is sales belowby the long-term average for single family housing starts the U.S. of 1.5 million annually. these factors curtail the construction of new homes. For what its worth, industry forecasts suggest a 21% increase in new housing starts in the U.S. in 2012 to 725,000, which is below the long-term average for single family housing starts in the U.S. of 1.5 million annually. Increasing Demand for Logs from China as Wood Use Moves up the
Value Chain
While North American demand remains week, demand from Asia, predominately China continues to grow. Chinas economic growth was 10% in 2010 and is expected to be approximately 8% in 2012 (down from ~9% in 2011). While much of the current demand from China is for low-grade lumber (utility grade) used for building concrete forms, the expectation is that as the Chinese become more accustomed to using wood in home construction, not to mention for its green attributes, that demand for more valuable lumber (i.e., used in building roof trusses and floor beams) will improve as well.
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Increasing Demand for Logs from China as Wood Use Moves up the Value Chain
While North American demand remains week, demand from Asia, predominately China continues to grow. Chinas economic growth was 10% in 2010 and is expected to be approximately 8% in 2012 (down from ~9% in 2011). While much of the current demand from China is for low-grade lumber (utility grade) used for building concrete forms, the expectation is that as the Chinese become more accustomed to using wood in home conPAGE 12 struction, not to mention for its green attributes, that demand for more valuable lumber (i.e., used in building roof trusses and floor beams) will improve as well.
China
Figure 27: China Moving Up the Value Chain
Figure 27: China Moving Up the Value Chain

China: Annual Housing Starts
18 China: Annual Housing Starts
Mmfbm
China: Wood Used in Concrete Forming and Wood Frame Construction China: Wood Used in Concrete Forming and Wood 900 Frame Construction Mmfbm
800 700 600 500 400
Mmfbm
18 16
Millions
16 14 12
14
12 10 10 8
6 8 4 6
Millions
Long term commitment to China Building codes are now more conducive d i t to wood df frame construction (WFC)
2000 2000 2001 2001 2002 2002 2004 2005 2005 2006 2006 2007 2008 2010
2011F 2009
300 200 100 0 2005 2006 2007 2008 2009 2010 2011F
4 2 2 0 0
1998
1999
2003
2004
2008
2009
1998
1999
2003
2007
2010
Source: Brookfield Infrastructure Partners L.P., Canfor, BMO Capital Markets
2011F
Establishing 2 x 4 for the emerging WFC housing sector
LowGrade
#2&Better
Source: Brookfield Infrastructure Partners L.P., Canfor, BMO Capital Markets
C A N F O R
C O R P O R A T I O N
Figure 28: China Effect
Figure 28: China Effect
Source: Canfor
Source: Canfor
In 2010, BIP sales of sawlogs to China represented 36% of sales (export volumes improved 46% year over year), up from 11% in 2009 in response to attractive pricing. In the short to medium term, we expect the rebuilding phase in Japan will also fuel demand for logs from BIP.
30
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Brookfield Infrastructure Partners, L.P. In 2010, BIP sales of sawlogs to China represented 36% of sales, up from 11% in 2009 in response to attractive pricing. In the short to medium term, we expect the rebuilding phase in Japan will also fuel demand for logs from BIP.
Long-term Supply / Demand Fundamentals Remains Positive

The sawlogs for export overseas from BIP come from its two premier assets located on the west coast, Island Timberlands in coastal B.C. and Longview Timber in the Pacific Northwest, which are primarily compromised of high-value Douglas-fir, hemlock and cedar trees. Importantly, neither has been impacted by the Mountain Pine Beetle infestation, which has devastated pine tree forests across the region (predominately in the central interior), reducing sawlog availability. In addition, the fact that large swaths of forest are being set-aside for non-commercial use is also expected to further reduce sawlog availability. As the timber resource available for lumber production decreases and demand recovers, we would expect BIPs timber business to benefit from positive fundamentals on the supply side, which BIP will be in a position to capture through ramping up harvest levels in both its Canadian and U.S. operations.

Improved conditions in both domestic and export markets have resulted in average realized log prices increasing by approximately 10% in 2010 compared to 2009 to $79/m3, while overall harvest volumes increased 26% to 1,225,000 m3. The net effect of the weak U.S. market and the stronger Asian market is that BIP is currently producing at its long run sustainable yield.
Figure 29: BIP Timber Harvest Volumes and Log Pricing

500 400 000's m3 300 200 100 0 267 198
Timber Segment Operating Performance Harvest Volume, Average Realized Log Prices 455 396 306 242 346 272 301 354 $120 $100 $80 US$/m3 $60 $40 $20 $Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Harvest Volume Average Price
266
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In 2010, FFO was $11 million, compared to negative $3 million in 2009. The AFFO yield was 2%. Harvest volumes and average log prices have continued to improve in 2011 relative to 2010 resulting in significantly improved FFO; however, quarterly performance has recently been impacted by higher costs.
Figure 30: BIP Timber FFO and AFFO Yield

$20 $15 FFO ($USMM) $10 $5 $0 $2
Timber Segment Operating Performance FFO, AFFO Yield (%) 20% $13 $10 $6 $1 $2 $3 $0 $5 15% AFFO Yield (%) 10% 5%
0% Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 -$3 -$5 -5% -$3 -$10 FFO AFFO Yield % -10%
Strong Organic and External Growth Opportunities

BIP is currently pursuing a large number of capital projects to expand and upgrade various components of its network to take advantage of customer initiated growth prospects. Over the long-term, given its competitive position, scale and location advantages, these projects should drive meaningful cash flow growth.
Investment in Utilities Rate Base

While DPCT is further out, BIP is actively involved in a number of other opportunities to upgrade its utilities assets to expand the rate base. In this regard, the capital project backlog, including work in progress stands at $350 million ($105 million DBCT, $70 million for Transelec, $70 million for WETT, and the balance evenly split over the energy distribution businesses) at the end of Q3/11. This incremental capital will form part of the rate base and should generate an 11% plus return on the additional capital deployed. One project BIP has been progressing is the $750 million Texas transmission initiative to connect wind power in the state of Texas. The state is attempting to promote development of wind power, which currently represents 8% of the states electricity supply. With an aging transmission system there is not enough capacity to carry the power being generated by wind. Completion of the transmission system should spur further wind power development in the state because it will allow the power, which is generated in remote areas to be ferried to major load centers.
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Investment in Transport & Energy

There is currently A$600 million of capital projects over the next couple of years at Brookfield Rail (combined with previous investments), as we mentioned previously, that are expected to generate incremental EBITDA of A$150 - A$200 million per year in 2014. Customers have currently contracted approximately 24 Mtpa (on a minimum basis) of volume growth, but there is also the potential that existing customers will require additional volume growth to meet their needs, and we understand customers are potentially looking to add an additional 14 to 15 Mtpa above that amount, which would have a positive impact on cash flow. BIP is also investing 17 million in PD Ports handling capacity as part of the expansion of the container terminals as volumes continue to grow. The plan is to eventually expand port capacity to at least 650,000 TEUs.
Strong Backlog of Projects Approaching $1 Billion

At the end of Q3/11, the backlog of organic growth projects was approximately $1 billion. We believe there are wide array of additional revenue generating capital expenditure and operational improvement opportunities that could materially add to the backlog over time, including A$500 million in port opportunities adjacent to the Australian rail operations and the A$5 billion expansion project at Dungeon Point.
Table 6: Backlog of Organic Growth Projects
Investment in utilities rate base Rail expansion projects UK ports expansion Capital backlog Construction work in progress
$300 $432 $15 $747 $246
Total capital to be commissioned $993 Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets
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Table 7: Organic Growth Opportunities

Opportunities for Growth Transelec Upgrades and expansion of electricity transmission system connect generation that is miles away from customers to load centers to satisy increased electricity demand resulting from economic growth Increased international demand for steel and electricity should increase customer demand, allowing for further expansion Energy demand and consumption levels; New connections as a result of new housing development; Regional economic and population growth New connections in gas and electricity as UK housing market recovers Upgrades and expansion of electricity transmission system to connect generation that is miles away from customers to load centers to satisfy increased electricity demand resulting from economic growth Well positioned to benefit from container business growth and other income streams resulting from recent and planned development in Teesport area Well positioned to benefit from increased economic activity; Opportunities for growth to support expansions of mining industry and provide access to export markets Volume growth from increasing demand for bulk and general commodities in geographic hinterlands; Cross-selling opportunities to develop additional commercial businesss with existing customers Geographic proximity to emerging shale gas basin provides opportunities to expand pipeline Load increases with new connections; Co-generation opportunities Volume growth from recovery in new home construction in the U.S.; well positioned to benefit from growth in Asia Volume growth from recovery in new home construction in the U.S.; well positioned to benefit from growth in Asia
DBCT Utilities Transport and Energy Timber Powerco GTC Ontario Transmission / Texas Transmission PD Ports Brookfield Rail Euroports
NGPL IEG Island Timberlands Longview Timber
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External Growth Opportunities

BIP is focused on expanding its infrastructure platform by acquiring businesses in and around its existing networks where there exist synergies or competitive advantages. Given the sovereign debt issues in Europe, the focus has been on buying assets of European companies that have international operations who are being forced by their banks to delever their balance sheets and are shedding assets. As well, European companies are looking for partners who can invest alongside them in order to continue investing in new projects. European governments are putting up for sale infrastructure assets as well, but these sales are generally auction situations where the competitive advantage is solely based on cost of capital.
Utilities Platform
Management has indicated the most competition for assets today given the uncertain macro outlook is the Utilities segment as investment capital searches for safe haven and income type products with long-term contracted cash flows. Despite the generally compressed investment returns, BIP has been successful in buying assets in the segment. Most recently, BIP has acquired a 23% interest in Cross-Sound Cable (CSC) from a bank for $9 million. CSC is a high-voltage subsea transmission line that connects New England and Long Island. The service contract, which is availability-based extends for another 21 years with the Long Island Power Authority. The asset was originally acquired in 2006 from HydroQuebec by Prime (formerly Babcock and Brown Infrastructure) for an equity investment of $26 million. The asset, which was held-for-sale on BIPs balance sheet, had a gearing ratio of 90% and a post-tax IRR of 12% at that time.
Transport & Energy Platform

Within the Transport & Energy platform, BIP seeks to establish new operating platforms such as toll roads, airports and storage facilities mainly through acquisitions in distressed markets, such as at present in Europe. BIP recently announced that it acquired a 24% direct interest in two Chilean toll roads from ACS, a Spanish engineering and construction group for a $150 million. Autopista Vespucio Norte (AVN) is a 29 kilometre freeflow toll road concession that expires in 2033 and forms part of the Santiago ring road. Tunel San Cristobal is a 4 kilometre free-flow toll road concession that expires in 2037 that connects to the eastern entrance point of AVN. The toll roads act as key arteries in Santiago, which is a fast growing city with increasing motorization rates. Importantly, the regulatory framework allows BIP to increase rates on an annual basis, both by Chilean CPI and a further 3.5%. As well, BIP has the ability to charge congestion tariffs, so when there are certain traffic flows, BIP can increase prices. This investment is expected to generate an after-tax IRR of 12-15% by 2014, in line with BIPs target returns for this segment, but will initially generate a return closer to 4% until traffic patterns and fee optimization are established.
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Importantly, this was not an auction process, and the aim was not only to acquire an attractive asset, but also to develop a relationship with ACS, which is seeking to reduce over $13 billion in debt. For example, we understand ACS is looking for an equity partner to take half of the $208 million investment ACS holds itself in the newly constructed I-595 toll road in South Florida. ACS also holds equity investments in a number of other toll roads (i.e., Barcelona, Vancouver), and the company has recently signed construction contracts worth over $4 billion in the first half of 2011 that likely will require a significant amount of working capital.
Access to Capital
Given the nature of the assets, and the fact that the cash flows from these growth initiatives are supported by long-term contractual revenues or by regulatory frameworks, management expects that approximately 65-85% of the capital requirements can be funded by internally generated cash flow as well as a combination of project level debt. Asset sales and/or the issuance of equity are expected to fund the remainder.
Figure 31: Indicative Sources of Funding

20-30% 50-60% 20%
Disposals and Equity
Retained Cash
Project Level Debt
At end of the Q3/11, Brookfield Infrastructure had $388 million of corporate liquidity under a $700 million credit facility, in addition to $200 million of cash retained within the business to fund working capital and its capital growth projects. In October, BIP raised approximately $657 million of capital, including $200 million from BAM to acquire interests in the two Chilean toll roads ($150 million), as well as to fund the growth capital expenditures at Brookfield Rail ($150 million), and to repay the amount outstanding under the credit facility.
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Forecast
EBITDA
In the Utilities segment, we forecast EBITDA of $405 million in 2012 and EBITDA of $429 million in 2013 with FFO of $253 million and $265 million, respectively. We assume BIP can achieve a return of 11% on the rate base (excluding developer contributions) and that the rate base will grow 6% in 2012 and 7% in 2013, respectively from our estimate of $3,211 million 2011. We assume developer contributions add $9 million per quarter to EBITDA, but realize that they could vary based on the level of housing activity in the U.K. and may not be recurring. In addition, we assume the company can maintain a capital backlog of $300 million going forward implying that the capital deployed to increase the rate base ($50 million/quarter) will be offset by new mandates. In the Transportation & Energy segment, we forecast EBITDA of $384 million in 2012 and EBITDA of $455 million in 2013 with FFO of $207 million and $277 million, respectively. The main driver of the improvement is the increased contribution from Brookfield Rail as a result of the new access agreements. Specifically, we assume EBITDA in this segment will increase to $227 million in 2013 from $160 in 2012. With respect to the other segments, notably NGPL and the Ports operations (PD Ports and Europe Ports), we have assumed EBITDA remains unchanged at $40 million in both years despite the improvement in the container handling capacity at PD Ports, whose contribution we understand is likely further out. Notionally, we expect natural gas prices to remain relatively stable at current levels due to weak economic demand and increased gas production. We have also assumed the contribution of the Chilean Toll roads adds $20 million in EBITDA in 2012 and approximately $24 million in 2013, which is based on managements AFFO guidance of 4% in the first year post acquisition. In the Timber segment, we have assumed sales volumes of 1.6 million cubic meters per year in 2012 and 2013, respectively in line with the LRSY and average prices (both export and domestic) of $95 per cubic meter, which is in line with the current price environment. At these sales levels, we believe EBITDA margins in the low 30% range are achievable. Taken together, we forecast EBITDA of $49 million in 2012 and 2013, respectively. This is down from our forecast of $60 million in 2011 given the expectation for lower harvest volumes. We believe the high inventory of logs at Chinese ports and lower access to credit will result in softening demand from export markets. At the same time, domestic markets over the medium term are likely to continue to remain weak. We expect G&A expenses to be roughly $10 million per year and base management fees to run-rate at $58 million annually in 2012 and 2013, respectively, which is up from our forecast of $52 million in 2011 driven in part by the recent equity issuance. All in, we forecast EBITDA of $771 million in 2012 and $865 million in 2013, which represents an increase of 5% and 12%, respectively from our 2011 EBITDA estimate of $736 million.
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FFO
In the Utilities segment, we assume the capital expenditures commissioned into the rate base are financed with non-recourse debt with the aim to maintain a debt-to-capital ratio of approximately 70%. In the Transport & Energy segment, the expansion of PD Ports is self-funded with internally generated cash flows, while a significant portion of the rail road expansion program is being financed with a non-recourse A$430 million construction facility. In the Timber segment, we assume current debt levels remain constant. Consistent with current reported interest rates, we forecast financing costs of $30 million in both 2012 and 2013. Including G&A and base management fees, total Corporate and Other expenses are estimated to be approximately $100 million per year over our forecast period. As a result, we forecast FFO of $383 million in 2012 and FFO of $466 million in 2013 compared with FFO of $383 million in 2011. On a per unit basis, we forecast FFO per share to grow from $2.37 in 2011 to $2.52 in 2013, representing a compound annual growth rate (CAGR) of 3%.
Distribution & Payout Ratio

Based on our forecast, we expect distributions to grow from $1.32/unit in 2011 to $1.54/ unit in 2013, representing a CAGR of 8% as the payout ratio trends towards the bottom end of managements target of 60% to 70% from 56% in 2011. Our forecast contemplates an 8% increase in distributions per unit in 2012 and an 8% increase in 2013, which is in excess of managements long-term goal of 3-7% in annual distribution increases. In 2012, we expect the payout ratio to increase to 69% as a result of the increased share count following the recent equity issuance and higher distribution.
Maintenance Capital & AFFO

Relative to the asset base, the level of maintenance capital expenditures are minor and that is because the assets are relatively new. In 2012, we forecast maintenance capital expenditures of $105 million and in 2013 maintenance capex of $119 million (on an asset base of $8 billion) compared to maintenance capital expenditures of $94 million in 2011. We have also included the incentive distribution to BAM. As a result, we forecast AFFO of $271 million in 2012 and $334 million in 2013 with AFFO/unit of $1.46 and $1.80, respectively.
Figure 32: FFO/Unit and Distribution/Unit
FFO/Unit andand Distributions/Unit FFO/Unit Distributions/Unit
FFO/Unit CAGR: 74% FFO/Unit CAGR: 74% Distribution/Unit CAGR: 4% 4% Distribution/Unit CAGR: FFO/Unit CAGR: 3% 3% FFO/Unit CAGR: Distribution/Unit CAGR: 8% 8% Distribution/Unit CAGR:
$2.37 $2.37 $1.80 $1.80 $1.06 1.03 1.03 $1.06 $1.10 $1.10 $1.32 $1.32 $2.52 $2.52 $2.07 $2.07 $1.42 $1.42 $1.54 $1.54 125% 125% 103% 103% 100% 100% 75% 75% 50% 50% 25% 25% 20092009 20102010 2011E 2011E 2012E 2012E 2013E 2013E 0% 0% 69% 69% 56% 56%
Figure 32A: Payout Ratio

Payout Ratio Payout Ratio
61% 61%
61% 61%
Distribution/unit FFO/unit Distribution/unit FFO/unit
20092009
20102010
2011E 2011E
2012E 2012E
2013E 2013E
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Table 8: Summary BIP Model

in millions of US$ EBITDA by Segment Utilities y/y% Transport & Energy y/y% Timber y/y% Total y/y% General & administrative Base management fee Total Operating Expenses y/y% EBITDA y/y% FFO by Segment Utilities y/y% Transport & Energy y/y% Timber y/y% Corporate Expenses & Other y/y% FFO y/y% W.A Units FFO / Unit y/y% Distribution per Unit y/y% Payout ratio on FFO Mainteance Capex AFFO by Segment Utilities Yield % Transport & Energy Yield % Timber Yield % Corporate Expenses & Other AFFO AFFO / Share (GAAP) 2009 $89 $24 $21 $134 -$6 -$10 -$16 $118 (IFRS) 2010 $227 155% $169 604% $36 71% $432 222% -$14 -$28 -$42 163% $390 231% $144 136% $91 600% $11 nmf -$48 120% $198 303% 110 $1.80 74% $1.10 4% 61% $49 $131 15% $58 9% $8 2% -$49 $148 $1.35 Q1A $97 102% $84 83% $17 113% $198 94% -$2 -$11 -$13 49% $185 98% $61 126% $45 67% $10 400% -$18 65% $98 117% 157 $0.62 47% $0.31 13% 50% $27 $55 13% $25 8% $9 8% -$18 $71 $0.45 2011E (IFRS) Q2/A Q3/A $102 100% $78 95% $20 43% $200 90% -$2 -$13 -$15 50% $185 95% $66 106% $39 50% $13 117% -$16 33% $102 96% 157 $0.65 33% $0.31 13% 48% $20 $58 15% $28 8% $12 10% -$16 $82 $0.52 $113 82% $79 114% $12 71% $204 92% -$2 -$13 -$15 36% $189 99% $77 79% $39 95% $5 nmf -$24 200% $97 76% 157 $0.62 20% $0.35 27% 57% $21 $73 19% $23 6% $4 4% -$26 $74 $0.47 Q4/A $97 47% $86 86% $11 55% $194 63% -$2 -$15 -$17 34% $177 66% $61 46% $45 149% $4 29% -$24 37% $86 89% 176 $0.49 28% $0.35 27% 72% $26 $53 13% $28 8% $3 2% -$26 $58 $0.33 2011E $409 80% $327 93% $60 66% $796 84% -$8 -$52 -$60 42% $736 89% $265 84% $168 84% $32 190% -$82 69% $383 94% 162 $2.37 32% $1.32 20% 56% $94 $239 15% $104 7% $28 6% -$86 $285 $1.76 Q1A $99 2% $91 8% $12 -28% $202 2% -$2 -$15 -$17 29% $185 0% $62 2% $46 3% $5 -48% -$24 35% $89 -9% 185 $0.48 -23% $0.35 13% 73% $25 $56 14% $28 8% $4 4% -$26 $62 $0.34 2012 (IFRS) Q2/A Q3/A $100 -2% $91 16% $12 -39% $203 2% -$2 -$15 -$17 12% $186 1% $63 -5% $46 18% $5 -60% -$24 51% $90 -12% 185 $0.49 -25% $0.35 13% 72% $25 $57 14% $28 8% $4 4% -$26 $63 $0.34 $102 -10% $91 15% $12 1% $205 0% -$2 -$15 -$17 12% $188 -1% $64 -17% $46 18% $5 3% -$24 1% $91 -7% 185 $0.49 -21% $0.36 3% 73% $25 $58 14% $28 8% $4 4% -$26 $63 $0.34 Q4/A $103 6% $113 32% $12 12% $228 18% -$2 -$15 -$17 2% $212 19% $64 5% $68 52% $5 33% -$24 1% $114 32% 185 $0.61 25% $0.36 3% 59% $30 $58 15% $46 12% $4 4% -$26 $82 $0.44 2012E $405 -1% $384 18% $49 -19% $838 5% -$9 -$58 -$67 13% $771 5% $253 -5% $207 23% $21 -35% -$97 18% $383 0% 185 $2.07 -13% $1.42 8% 69% $105 $229 14% $130 9% $17 4% -$104 $271 $1.46 (IFRS) 2013E $429 6% $455 18% $49 0% $932 11% -$9 -$58 -$67 0% $865 12% $265 5% $277 34% $21 0% -$97 0% $466 22% 185 $2.52 22% $1.54 8% 61% $119 $241 15% $186 13% $17 4% -$110 $334 $1.80
$61 $13 -$3 -$22 $49 48 $1.03 $1.06 103% $18 $49 15% $13 15% -$9 -2% -$22 $31 $0.65
Valuation
To arrive at our target price, we used a cash flow yield based methodology. We also triangulate using a sum-of-parts and historical P/FFO multiple analysis to arrive at the value to equity holders.
Dividend Yield Approach

This approach considers that BIPs infrastructure assets generate sustainable cash flows, and therefore, the assets can be valued as yield-bearing securities. Specifically, our valuation analysis applied an expected yield range of 4.27.1% to the potential 2013E range of distributions. In 2013, our forecast distribution is $1.54/unit at a payout ratio of 61%, but we consider an upper and lower bound based on a payout ratio of 60-70% of our FFO forecast of $2.52/unit. This equates to a distribution delineated by $1.51/unit at the low end and $1.76/unit at the high end with the target price of $31 yielding 5.0%.
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Figure 33: Historical TTM Yield

8% 7% 6% 5% 4% 3% 2% May-2010
TTM Yield %
Min: 4.2% Max: 7.1%
May-2011
Nov-2010
Aug-2010
Sep-2010
Nov-2011
Apr-2011
Aug-2011
Sep-2011
Apr-2010
Feb-2011
Jun-2010
Jan-2011
Mar-2011
Jun-2011
Jul-2011
Oct-2010
Oct-2011
Jul-2010
Table 9: Yield Based Valuation Based on Target Payout Ratio
Yield Based Valuation Sustainable Cash Available for Distribution (2013E) Estimated Target Payout Ratio Potential Distribution Target Yield Based on Sustainable Distribution Yield Based Valuation Current Share Price (December 21, 2011) Implied Yield Based on Sustainable Distribution Source: BMO Capital Markets
Dec-2010
High 70% $1.76 4.2% $41.95 $26.37 6.7%
Target $2.52 61% $1.54 5.0% $30.71 $26.37 5.8%
Low 60% $1.51 7.1% $21.27 $26.37 5.7%
Dec-2011
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Sum-of-Parts Analysis
We use comparable publicly traded companies and applied the appropriate metrics to BIPs Utilities and Transport & Energy infrastructure businesses. The value of standing timberlands is much more complex to determine because many of the attributes including species mix, topography, and cost to harvest the lumber vary significantly from forest to forest, and, therefore are much more difficult to compare. As a result, we have relied on BIPs IFRS value for its Timber assets as an appraisal of fair value. As at the end of Q3/11, Timber assets were valued at $607 million or $3.28 per unit. We believe the assumptions used to derive this value are fairly conservative, and therefore likely represents an assessment at the low-end of the fair value range. In the following we provide a list of comparables we used in our valuation of the Utilities and Transport & Energy Platforms.
Table 10: Trading Comparables

Market Cap ($mm) $7650 $4045 $6031 $3792 Enterprise Value ($mm) $12753 $7678 $12785 $6321
Ticker Regulated Utilties Canadian Utilities Emera Fortis ITC Holdings Average Median Ports & Terminals Westshore Terminals Income Fund Cosco Pacific Dalian Port DP World Hamburger Hafen Luka Koper Port of Tauranga Ltd. Average Median Energy Distribution National Grid NiSource Average Median Railroads CP Rail CSX CN Rail Kansas City Southern Norfolk Southern Union Pacific Average Median Pipelines & Storage Enbridge Kinder Morgan Southern Union Spectra Energy Average Median NG.-LN NI-US CU EMA FTS ITC-US
21-Dec Close Yesterday's Close $60.00 $33.10 $32.27 $74.10
EV/EBITDA 2012E 2013E 8.7x 11.0x 9.7x 10.6x 10.0x 10.2x 16.2x 16.9x 8.8x 16.1x 5.1x 6.3x 13.0x 11.8x 13.0x 8.3x 9.8x 9.5x 9.0x 9.2x 9.3x 12.9x 15.3x 8.1x 13.9x 4.5x 5.8x 12.2x 10.4x 12.2x 8.3x 8.4x 8.3x 8.3x 7.8x 5.8x 8.4x 8.5x 6.2x 6.3x 7.1x 7.1x 12.0x 14.2x 8.8x 9.4x 11.1x 10.7x
YIELD 2.7% 4.1% 3.7% 1.9% 3.1% 3.2% 4.5% 2.6% 16.8% 0.0% 1.8% 0.0% 2.9% 4.1% 2.6% 6.3% 4.0% 5.1% 5.1% 1.8% 2.3% 1.7% 0.0% 2.4% 2.3% 1.8% 2.1% 3.0% 3.9% 1.4% 3.7% 3.0% 3.3%
WTE.UN 1199-HK 2880-HK DPW-NDB HHFA-XE LKPG-LJ POT-NZ
$23.33 CNY 8.59 CNY 1.68 $9.95 21.65 7.30 $9.90
$1733 $493 CNY 967 $8300 1,981 134 $1327
$2035 $6161 CNY 16,232 $14367 1,766 311 $1513
6.07 $22.90
21,718 $6618
45,077 $14175
8.7x 8.7x 8.7x 8.7x 8.7x 6.3x 8.9x 9.6x 6.8x 7.0x 7.9x 7.9x 13.1x 16.6x 8.8x 9.7x 12.0x 11.4x
CP CSX-US CNR KSU-US NSC-US UNP-US
$64.78 $20.94 $76.92 $64.83 $70.86 $101.20
$11045 $22552 $34214 $7125 $24092 $49396
$15295 $30565 $40425 $8657 $30535 $57156
ENB KMI-US SUG-US SE-US
$37.09 $30.14 $42.20 $30.03
$28060 $21309 $5264 $19530
$44691 $41655 $8949 $31788
Source: Thomson, BMO Capital Markets
Page 43
Utilities
In determining the value of the Utilities assets we considered a number of publicly traded comparables. For example, ITC Holdings (ITC-NYSE) is the largest independent electricity transmission company in the U.S. ITCs transmission assets are located in Michigan and surrounding states. Westshore Terminals (WTE.UN-TSX) is a coal export terminal on North Americas West Coast. It enjoys significant natural advantages, including its proximity to low-cost producing mines and deepwater berth capacity, which provides access to large ships. As well, we understand a significant portion of the Westshore Terminals 27 million tonne annual capacity has been accounted for by existing customers through takeor-pay contracts. National Grid (NG-LON; NGG-NYSE) is an electricity transmission and gas distribution and transmission company with assets in both the U.S. and U.K. ITC trades at 10.5x the Enterprise value to 2012 EBITDA mean estimate, in line with regulated utilities in Canada. We believe Transelec should trade at a premium to ITC, as the Chilean regulatory regime allows for Transelec to earn a real rate of return on its rate base. In contrast, North American utilities are required to invest at least their assets depreciation charges to maintain the rate base. National Grid trades at 9x the Enterprise value to 2012 EBITDA mean estimate, while Westshore Terminals trades at approximately 16x. We believe the higher relative valuation of Westshore Terminals is in part due to investor appetite for high yield stocks by Canadian investors and the growth outlook (given the capacity expansion plans to 33 Mtpa of throughput capacity to be completed in 2012), while National Grid trades at a lower relative multiple (9x) given then the lower earned returns on equity for distribution assets in the U.S. Based on our estimate of the business mix in 2013, we applied a blended multiple of 13.0x to our forecast EBITDA of $393 million (excluding the developer contribution from the U.K. distribution business). Our blended multiple assumes the comparables trade at the same multiples, one year from now. We have applied a lower multiple to our estimate of the annual developer contributions because they vary based on the level of housing activity in the U.K. and are not recurring. Based on applying these valuation metrics to our 2013E EBITDA estimate, we arrive at a blended multiple of 12.5x to our forecast EBITDA of $429 million. After taking into account the forecast indebtedness of the segment, we arrive at an equity value for the Utilities business of approximately $2.5 billion.
Transport & Energy

For determining the value of the Transport & Energy assets we considered typical North American railroad EV/EBITDA multiples, which range from 610x, and typical North American pipeline and storage EV/EBITDA multiples, which range from 9x to 13x. We believe Brookfield Rail should trade at a premium multiple (12x EV/EBITDA multiple one year from now) relative to its North American peers given the higher growth prospects in Australia as well as greater protection from volume and price risk due to the larger proportion of long-term take-or-pay arrangements similar to DBCT for the new access agreements. In the case of NGPL, we have applied a 12x multiple to our 2013E EBITDA forecast, which is consistent with typical North American pipeline and storage multiples highlighted previously and recently announced transaction multiples in the sector. Specifi-
Page 44
Brookfield Infrastructure Partners, L.P. cally, Kinder Morgan is in the process of acquiring El Paso, which owns North Americans largest natural gas pipeline system for 13x LTM EBITDA. In comparison, the group of investors that acquired 80% of NGPL from KMI in 2007 paid 10x LTM EBITDA. For our valuation of the Ports assets, we considered typical international port sector EV/ EBITDA multiples, which range from 5x to 17x. We have applied a 13x multiple to our 2013E EBITDA forecast, which is above the mid-range of the publicly traded peers, but below recently announced transaction multiples in the sector. Specifically, the Forth Ports, the largest port owner and operator in Scotland was acquired in 2011 by Arcus Infrastructure Partners (formerly principals from Babcock and Brown Infrastructure) for 15x LTM EBITDA. The Forth Ports has substantial property holdings (and surplus land for future development) and capacity has been expanded significantly in recent years, and therefore has scope to expand volumes without significant investment. In comparison, Babcock and Brown acquired PD Ports in 2006 for 13x LTM EBITDA, and the port operator is presently in the process of expanding the terminals container capacity for service with the benefits likely to be had further out (i.e., 2014). At the same time, a significant portion of PD Ports revenues are from conservancy tariffs and property rental, which provides high revenue certainty and long term stable growth. Based on applying the appropriate valuation metrics to our 2013 EBITDA estimate for each of the sub-segments, we arrive at a blended multiple of 12x to our forecast EBITDA of $455 million. After taking into account the forecast indebtedness of the segment, we arrive at an equity value for the Transport & Energy business of approximately $3.0 billion.
Sum-of-the-parts Value
We have capitalized our 2013 management fee and G&A estimate at 10x. After taking into account our forecast of the cash retained in the business and corporate and subsidiary debt in 2013, we arrive at a sum-of-the parts value of approximately $5.7 billion or $31, which is a 23% premium to current share price of $26.37. We are valuing the cash as cash, but believe it will be deployed to earn a return, the optionality of which is has not been captured in our valuation.
Page 45
Table 11: Sum-Of-Parts Valuation

2013E EBITDA ($MM) Utilities: Regulated EBITDA Developer Contibutions Segment Debt Net Asset Value ($MM)
Multiple
$393 $36 $429
13.0x 6.0x 12.4x Value
$5,103 $216 $5,319 -$2,828 $2,491
Excludes developr contributions of $9 million per quarter Reflects non recurring nature of developer contributions
Transport & Energy: Brookfield Rail North America - NGPL OTHER - IEG (Island of Man) UK PD Ports Euroports Chilean Toll Road Segment EBITDA Segment Debt
227 100 24 40 40 24 $455
12.0x 12.0x 8.0x 13.0x 13.0x 12.0x 12.0x
Value Timber: Partnership Capital Value Total Cash Corporate Liabilities Management Fee Net Asset Value (NAV) Shares NAV / Share Premium (Discount) to Current Price $26.37
2724 1200 192 520 520 288 $5,444 $5,444 -$2,400 $3,044
Premium multiple to North American peers Multiple in line with publicly traded North American pipeline and storage peers Multiple in line with publicly traded Energy distribution peers Transaction multiple for PD Ports acquired by BBI Premium multiple to publicly traded International Port operators Reflects recent precedent transactions
$607 $607 $6,142 $663 -$424 -$670 $5,711 185.1 $30.85 17%
Reflects external valuation of Timberlands
-$67
10.0x
2013 Cash retained in the business 2013 Corporate and subsidary debt 2013 Management fee capitalized at 10x
Page 46
FFO Multiple Approach

BIPs average price-to-TTM FFO/unit multiple has averaged 13x. If we applied the average multiple to our 2013E FFO/unit forecast of $2.52, we arrive at an equity value of $32.75.
Figure 34: Historical Price / TTM FFO/Unit

18.0x 16.0x 14.0x 12.0x 10.0x 8.0x May-2010
Price to TTM FFO/Unit
Average:13x
May-2011 Feb-2011 Mar-2011 Apr-2010 Jun-2010 Jan-2011 Apr-2011 Dec-2010 Jun-2011 Jul-2010 Oct-2010 Jul-2011 Oct-2011 Nov-2010 Nov-2011 Dec-2011 Aug-2010 Sep-2010 Aug-2011 Sep-2011
Corporate Structure
BIP is a Bermuda based limited partnership structure that holds a 71% interest in a private entity called Brookfield Infrastructure L.P. (Holdings). Brookfield Asset Management (BAM) holds the other 29% through redeemable shares that represent a 28% interest in Holdings plus a 1% General Partnership (GP) interest in Holdings. Figure 37 shows BIPs corporate structure as well as the economic interests of various stakeholders.
other 29% through redeemable shares that represent a 28% interest in Holdings plus a 1% General Partnership (GP) interest in Holdings. Figure 37 shows BIPs corporate structure as well as the economic interests of various stakeholders. Brookfield Infrastructure Partners, L.P. Page 47 Figure 37: Corporate Structure
Figure 35: Corporate Structure
GP Interest 0.01% LP Interest 1%
BIP Unitholders
LP Interest 98.99%
Brook eld Asset Management Inc. ("BAM")
Brook eld Infrastructure Partners L.P. ("Partnership")
Post October 26, 2011 Equity issue, there are 185.1 million units outstanding. BAM - Owns 53 million redeemable* shares. Public Unit Holders - 132 million units.
*redeemable shares are redemable for cash equal to Partnerships unit market price; however, the Partnership may settle the obligation with Partnership units.
LP Interest 28%
LP Interest 71%
GP Interest 1%
Brook eld Infrastructure L.P. ("Holding LP")
Common Shares 100%
Utilities Infrastructure
DBCT ..............71.0% IEG............. ........ 100.0% Ontario Transmission.........100.0% Powerco............42.0% Texas Transmission...........11.0% Transelec.............17.8% Cross Sound Cable. ........... ......23%
Transport & Energy

Brook eld Rail.... ........... ..100.0% Euroports...................40.0% NGPL..................26.4% PD Ports.........................59.0% IEG..................................100.0% Autopista Vespucio (Toll Road) Norte..................24.0% Tunel San Cr istobal ................ ........ 24.0%
Timber Infrastructure
Island Timberlands ...37.5% LongviewTimber............30.0%
Source: BMO Capital Markets, Company reports Note:Capital A portion of DBCT, PD Ports and Texas transmission project are owned through a Brookfield Asset Source: BMO Markets, Company reports Management sponsored fund. Assumes Toll Road purchase closes. Note: A portion of DBCT, PD Ports and Texas tran smission project are owned through a Brook eld Asset Management sponsored fund. A ssumes Toll Road purchase closes.
Redeemable shares can be put tobe Holdings for cash equal to the Partnerships unit value; unit however the Redeemable shares can put to Holdings for cash equal to the Partnerships value; Partnership has the right of rst refusal and at its discretion can elect to settle the obligation with however the Partnership has the right of first refusal and at its discretion can elect to Partnership units. Accordingly, the redeemable shar es and units are treated as one- in-the-same. The settle the obligation with Partnership units. Accordingly, the redeemable shares and units Partnership has control over Holdings, and Partners presents the consolidated nancial results. Under are interests treated as in-the-same. The Partnership control over accounted. Holdings, and IFRS partial inoneassets where there is no control arehas one-line equity The Partners nancial presents the consolidated financial results. Under IFRS partial interests in assets where information in this report will present the Partners proportionate interests in cash ow, liabilities, and thereis isinstructive, no controlbut arenot one-line equity accounted. The financial information in this report assets, which an IFRS presentation. will present the Partners proportionate interests in cash flow, liabilities, and assets, which is instructive, but notpartners an IFRS presentation. Unitholders of BIP are limited and their rights are subject to a partnership agreement that is contractual in nature and not duciary. The partnership agreement outlines unit holders rights, and
46
Page 48
Brookfield Infrastructure Partners, L.P. Unitholders of BIP are limited partners and their rights are subject to a partnership agreement that is contractual in nature and not fiduciary. The partnership agreement outlines unit holders rights, and amongst other items, does not give holders rights with respect to removing BAM as the managing general partner, appointing directors or preventing a change of control. Unitholders receive quarterly cash distributions as determined by managing general partner. Holdings expects to distribute 6070% of the partnerships Funds from Operations (FFO) to unitholders, subject to any incentive distributions paid to BAM as the general partner. Currently BIPs quarterly distribution to the limited partners is $0.35 per BIP unit, representing a payout of 56% of our 2013E FFO forecast. Based on the growth in per unit FFO, the company is targeting 3% to 7% annual distribution growth. BAM is the general partner and manager of the Infrastructure Partnership. The Partnership does not employ any personnel and relies solely on BAM to provide day-to-day management and administrative services. In exchange for BAMs managerial services, BAM receives a base management fee equal to 1.25% annually of the market capitalization of BIP, including redeemable shares. Based on the market value of the partnership as of December 5, 2011, the fee would be approximately $60 million per year. BAM is also entitled to receive incentive distributions based on the amount by which quarterly distributions on the limited partnership units of the Infrastructure Partnership exceed specified target thresholds. The incentive distribution to BAM ranges from zero to as much as 25% of incremental distributions over $0.33 per unit per quarter. BAM is entitled to 15% of distributions between $0.305 and $0.330 per unit per quarter, and 25% of distributions above $0.33 per quarter.
Risks
Limited operating history: BIP was spun out of BAM in January 2008 and underwent a transformational merger in late 2010. Accordingly, there is limited operating history to draw from in evaluating each segment of the business and the business as a whole. Tax: BIP is a Bermuda based limited partnership structure that sits on top of corporate structures. The tax structure is complex and it is difficult to determine the impact of a change in regulations or legislation in any country where BIP, or an investee entity resides. Changes in tax law may also affect the tax status of a unit holder with respect to receiving BIP distributions. Regulatory: BIP, or assets that BIP has interest in, are subject to various regulatory regimes and may undergo regulatory reviews that could result in a reduction in the cash flow. Further, BIP is subject to environmental laws and regulations that could impose fines or cause BIP to incur capital expenditures to bring into compliance. Weather: Some of BIPs assets are collaterally impacted by weather. For example, the grain harvest in Australia used Brookfield Rail. To the extent that weather diminishes the harvest the railway can suffer lower volumes and pricing.
Page 49
Interest rates and liquidity: BIP uses the debt markets and relies on access to bank facilities to manage and grow its business. Events, either exogenous or internal that lead to limited access to liquidity or higher interest rates could materially impact the business. Foreign Exchange: BIP reports in U.S. dollars, but has assets and cash flow denominated in other currencies. A significant strengthening of the U.S. dollar against these currencies, depending on hedges in place at the time, could impact cash flows. Counter Party Risk: BIP relies on a number of counterparties in conducting its business. In some cases there is risk in the form of take-or-pay contracts for assets that are geographically limited to serving a few customers and BIP is reliant on those customers alone. Reliance on Brookfield Asset Management (BAM): BIP is reliant on BAM for management services in which it pays a fee for BAM providing these services. Further, BAM is the general partner and BIP is managed in the context of the partnership agreement. BIP unit holders have voting rights with respect to change of control and liquidation, amongst other rights, but the agreement with BAM is contractual not fiduciary. Insurance: The timber assets are not insured and are subject to natural disasters such as fire and insect destruction.
Page 50
Brookfield Infrastructure Partners (BIP)

Quarterly Price (US$) 30 25 25 Target Price(US$) Share Price(US$) 30
25
25
20
20
20 15 3)OP NR 2)
4) NR R 5)
20 15
15
15
10
10
10 1) Mkt 5
10
5 BIP Relative to S&P 500 BIP Relative to Auto Components
BIP Relative to S&P 500 BIP Relative to Auto Components 180 160 140 120 100 1980 1985 1990 1995 2000 2005 2010 180 160 140 120 100
150
150
100
100
50
50
2009
2010
2011
2 1 0
Revenue / Share - (US$) Price / Revenue
2 1 0
100
BIP Relative to S&P 500 Y/Y (%) BIP Relative to Auto Components Y/Y (%)
100
-100
2009
2010
2011
-100
EPS (4 Qtr Trailing) - (US$) Price / Earnings
0.01
1985
1990
1995
2000
2005
2010
-0.01
FYE (Dec.) 2008 2009 2010 Current* Average:
EPS US$
P/E nm nm nm nm
DPS US$ 1.06 1.06 1.10 1.40
Yield % 9.5 6.3 5.2 5.5 5.8
Payout % nm nm nm nm
BV US$ 23.09 ND 48.43 NA
P/B 0.5 nm 0.4 nm 0.5
ROE % nm nm nm nm
BIP - Rating as of 8-Jan-09 = OP Date 1 2 3 4 5 4-Feb-09 8-Oct-09 23-Oct-09 18-Oct-11 26-Oct-11 Rating Change OP to Mkt Mkt to OP OP to NR NR to R R to NR Share Price $13.75 $17.01 $17.69 $25.48 $25.11
ND
* Current EPS is the 4 Quarter Trailing to Q2/2011.
Last Daily Data Point: December 20, 2011

IMPORTANT DISCLOSURES Analysts Certification
Page 51
I, Bert Powell, CFA, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients. Company Specific Disclosures 1 - BMO Capital Markets has undertaken an underwriting liability with respect to this issuer within the past 12 months. 2 - BMO Capital Markets has provided investment banking services with respect to this issuer within the past 12 months. 3 - BMO Capital Markets has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months. 4 - BMO Capital Markets or an affiliate has received compensation for investment banking services from this issuer within the past 12 months. 6 - This issuer is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months: Investment Banking Services 8 - BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of this issuer. 18 - A redacted draft of this report was previously shown to the issuer (for fact checking purposes) and changes were made to the report before publication. For Important Disclosures on the stocks discussed in this report, please go to http://research-ca.bmocapitalmarkets.com/Company_Disclosure_Public.asp. Methodology and Risks to Price Target Methodology: Our target price is based on a combination of BIPs forecast cash flow yield in 2013, historical P/FFO multiples and our estimate of its NAV one year from now. Risks: BIPs limited operating history; potential changes in taxation laws; regulatory changes; changes in weather patterns; rising interest rates and liquidity; foreign exchange. Distribution of Ratings (September 30, 2011)
Rating Category Buy Hold Sell BMO Rating Outperform Market Perform Underperform BMOCM US Universe* 39.2% 58.9% 1.9% BMOCM US IB Clients** 12.6% 13.2% 0.0% BMOCM US IB Clients*** 38.8% 61.2% 0.0% BMOCM Universe**** 42.5% 54.6% 2.9% BMOCM IB Clients***** 48.1% 50.9% 0.9% Starmine Universe 57.2% 38.5% 4.3%
* ** *** ****
Reflects rating distribution of all companies covered by BMO Capital Markets Corp. equity research analysts. Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage within ratings category. Reflects rating distribution of all companies from which BMO Capital Markets Corp. has received compensation for Investment Banking services as percentage of Investment Banking clients. Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts.
***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients.
Page 52
Ratings and Sector Key We use the following ratings system definitions: OP = Outperform - Forecast to outperform the market; Mkt = Market Perform - Forecast to perform roughly in line with the market; Und = Underperform - Forecast to underperform the market; (S) = speculative investment; NR = No rating at this time; R = Restricted Dissemination of research is currently restricted. Market performance is measured by a benchmark index such as the S&P/TSX Composite Index, S&P 500, Nasdaq Composite, as appropriate for each company. BMO Capital Markets eight Top 15 lists guide investors to our best ideas according to different objectives (Canadian large, small, growth, value, income, quantitative; and US large, US small) have replaced the Top Pick rating. Other Important Disclosures For Important Disclosures on the stocks discussed in this report, please go to http://researchglobal.bmocapitalmarkets.com/Public/ Company_Disclosure_Public.aspx or write to Editorial Department, BMO Capital Markets, 3 Times Square, New York, NY 10036 or Editorial Department, BMO Capital Markets, 1 First Canadian Place, Toronto, Ontario, M5X 1H3. Prior BMO Capital Markets Ratings Systems http://researchglobal.bmocapitalmarkets.com/documents/2009/prior_rating_systems.pdf. Dissemination of Research Our research publications are available via our web site http://bmocapitalmarkets.com/research/. Institutional clients may also receive our research via FIRST CALL, FIRST CALL Research Direct, Reuters, Bloomberg, FactSet, Capital IQ, and TheMarkets.com. All of our research is made widely available at the same time to all BMO Capital Markets client groups entitled to our research. Additional dissemination may occur via email or regular mail. Please contact your investment advisor or institutional salesperson for more information. Conflict Statement A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with investment research which is available at http://researchglobal.bmocapitalmarkets. com/Public/Conflict_Statement_Public.aspx. General Disclaimer BMO Capital Markets is a trade name used by the BMO Investment Banking Group, which includes the wholesale arm of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc. and BMO Nesbitt Burns Lte./Ltd., BMO Capital Markets Ltd. in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Ltd. and BMO Capital Markets Corp are affiliates. Bank of Montreal or its subsidiaries (BMO Financial Group) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. Additional Matters To Canadian Residents: BMO Nesbitt Burns Inc. and BMO Nesbitt Burns Ltee/Ltd., affiliates of BMO Capital Markets Corp., furnish this report to Canadian residents and accept responsibility for the contents herein subject to the terms set out above. Any Canadian person wishing to effect transactions in any of the securities included in this report should do so through BMO Nesbitt Burns Inc. and/or BMO Nesbitt Burns Ltee/Ltd.
Page 53
To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/ or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by To U.S. Residents: BMOAuthority. The Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates BMO NB, furnish this report to U.S. residents the Financial Services contents hereof are intended solely for the use of, of and may only be issued or passed on to, (I) and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. Markets Act 2000 (Financial 2005 (the Order) or Markets (II) high net worth entities falling and within Article to (d) To U.K. Residents: In the UK Promotion) this documentOrder is published by BMO Capital Limited which is authorised regulated by49(2)(a) the Financial of the Order (all such as relevant persons). The are not the useprofessional of and may Services Authority. Thepersons contents together hereof arereferred intended to solely for the use of, and may onlycontents be issued hereof or passed on to, intended (I) personsfor who have not be issued or passed on to to, retail clients. experience in matters relating investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
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2005 (the Order) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as relevant
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and commercial banking clients are served by BMO Harris Bank N.A. (Member FDIC). Investment and corporate banking services are provided in Canada and the US through BMO Capital Markets. BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A, (Member FDIC), BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC), BMO Nesbitt Burns Trading Corp. S.A., BMO Nesbitt Burns Securities Limited (Member SIPC) and BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada, Europe and Asia, BMO Nesbitt Burns Lte/Ltd. (Member Canadian Investor Protection Fund) in Canada, BMO Capital Markets Limited in Europe, Asia and Australia and BMO Advisors Private Limited in India. Nesbitt Burns is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. BMO Capital Markets is a trademark of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license. Registered trademark of Bank of Montreal in the United States, Canada and elsewhere. TM Trademark Bank of Montreal COPYRIGHT 2011 BMO CAPITAL MARKETS CORP.
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Special Situations

Notes: All values in US$

Brookfield Infrastructure Partners (BIP)

BIP Relative to S&P 500

160 140 120 100

Brookfield Infrastructure Partners, L.P.

Brookfield Infrastructure Partners, L.P.

Overview of Brookfield Infrastructure Partners

Transportation & Energy

Projects in B.C. and Ontario. $3 million in vestment

Source: Brookfield Infrastructure Partners, BMO Capital Markets

Figure 2: Growth in FFO Driven by Corporate Activities

Figure 3: Historical Dividend Distribution and Payout Ratio

Distribution/unit, FFO/unit & Payout Ratio (%)

90% 60% 30% 0%

Brookfield Infrastructure Partners, L.P.

Table 1: Operating Profile

Return Drivers Regulated assets that earn a

Geography Australiasia Chile, Ontario, Texas U.K.

return on a prescribed rate base and capital structure

Transport & Energy

Long-term contracts (70% of EBITDA), take-or-pay contracts, high barriers to entry

Renewable asset, standing inventory grows in value

Source: Brookfield Infrastructure Partners, BMO Capital Markets

Figure 4: Segment Diversification

Figure 4A: Global Footprint

Timber 14% Transport & Energy 45% Utilities 41%

South Europe America 14% 10%

North America 29%

Brookfield Infrastructure Partners, L.P.

Figure 5: Global Infrastructure Platform

N. A. Electricity Transmission Operations

European Energy Distribution Operations

Australian Coal Terminal Operations European Port Operations

N.A. Gas Transmission Operations

Australian Railroad Operations

Australasian Energy Distribution Operations

S.A. Electricity Transmission Operations

Australian Energy Distribution Operations

Source: Brookfield Infrastructure Partners L.P.

Brookfield Infrastructure Partners, L.P.

Figure 6: Stable Cash Flow Profile

Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets

Figure 7: 2010 Utilities EBITDA and FFO by Segment

2010 EBITDA and FFO by Segment

Brookfield Infrastructure Partners, L.P.

Table 2: Utilities Portfolio

Cross Sound Cable Texas Transmission

Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets

Brookfield Infrastructure Partners, L.P.

Figure 8: Revenue per Customer

Endesa & related

Gener & related

Source: Transelec, BMO Capital Markets

Figure 9: Main Chilean Interconnected Systems

Chile is projected to experience continued economic growth

lines and 47 substations in the SIC region

Short Law I passed to encourage investment in transmission sec

Figure 10: Transelec Market Share

110 and 66 kV lines

Source: Transelec, BMO Capital Markets

Brookfield Infrastructure Partners, L.P. Electricity Demand Continues to Grow in Chile

Figure 11: Annual Electricity Demand Growth in Chile