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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
• BIP’s 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 management’s 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 Analyst’s 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 BIP’s 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. BIP’s 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 Management’s 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 management’s 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 BIP’s 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.

Brookfield Infrastructure Partners, L.P.

Page 3

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 Prime’s 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

Page 4 Brookfield Infrastructure Partners.20 $0.P. FFO/unit & Payout Ratio (%) $1. BMO Capital Markets Note: excludes sale of TBE in June 2009 Figure 3: Historical Dividend Distribution and Payout Ratio FFO/unit ($).40 $0.P.. Distribution/unit ($) Distribution/unit. 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. 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.P.00 $0.. BMO Capital Markets Note: excludes sale of TBE in June 2009 . L.80 $0. In the following figure.60 $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.

L.K. Texas U. Ontario.P. New Zealand U. Europe & China Chile West Coast of Canada & U. 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. Timber Renewable asset.. high barriers to entry U. which added infrastructure assets in the U. Utilities return on a prescribed rate base and capital structure Australia U.. Total invested capital currently stands at approximately $3.A Transport & Energy Long-term contracts (70% of EBITDA).P.Brookfield Infrastructure Partners.S. BMO Capital Markets Note: Segment diversification and global footprint based on Q3/11 invested capital .S.K.K. 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. standing inventory grows in value Source: Brookfield Infrastructure Partners..A. take-or-pay contracts. long-life assets that form the backbone of the economy.K. BMO Capital Markets 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. and Australasia to the existing timberland and electricity transmission assets in North and South America.0 billion. Page 5 Infrastructure Assets BIP tends to focus its infrastructure interests on high-quality.

which earn a return on their asset base or are underpinned by long-term contracts. Electricity Transmission Operations UK Port Operations European Energy Distribution Operations U.S.A. Timberlands Australian Coal Terminal Operations European Port Operations N.. As BIP continues to grow its portfolio. which are designed to generate a return on capital over the life of the contract. L. Cash flows tend to be stable since the assets are either in regulated business. Including prospective take-orpay contracts. 80% of BIP’s cash flows were generated from either regulated businesses or long-term contracts. Gas Transmission Operations Australian Railroad Operations Australasian Energy Distribution Operations S. the new rail access agreements are take-or-pay agreements).A.P. Figure 5: Global Infrastructure Platform Canadian Timberlands N.Page 6 Brookfield Infrastructure Partners. Electricity Transmission Operations Australian Energy Distribution Operations Source: Brookfield Infrastructure Partners L. . including some take-or-pay contracts.P. As at Q3/11. A. Currently 44% of the cash flows are underpinned by take-or-pay terms where BIP has neither price nor volume risk. the emphasis is on deploying capital with limited downside (i. we believe 50% of 2013E cash flows are expected to be underpinned by take-or-pay contracts.e.

a Chilean based electricity transmission 10% asset. With operations located in four different countries. and DBCT.Brookfield Infrastructure Partners. which is EBITDA less interest expense and cash taxes . there are two flagship assets. As a result cash flows tend to be very stable and predictable.GTC "last mile" Australasia . 43% respectively.P.New Zealand (EBITDA). Transelec and DBCT combined made up about 65% and 68%.New Zealand Australasia (DBCT) South America (Transelec) North America (Ontario and Texas Transmission) Source: Brookfield Infrastructure Partners L.. L. 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. The Utilities platform also benefits from having a diverse portfolio of assets. regulatory risk is reduced.. Within this 13% segment.P. Taxes. The plat2010 EBITDA and FFO by Segment form’s assets are located in growing markets and offer significant opportunities to invest in system expansions at attractive returns. BMO Capital Markets Europe .GTC circle "last mile" Note: Outer represents Earnings Before Interest expense. Transelec.PowerCo . a major coal 10%10% port terminal in Australia. and Depreciation & Amortization Australasia PowerCo .-while inner circle represents Funds From Operations (FFO).P. 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 . Page 7 Figure 6: Stable Cash Flow Profile 19% 44% 37% Other Contractual Regulated Source: Brookfield Infrastructure Partners L. of BIP’s EBITDA and FFO in this segment in 2010.

which is carried by transmission lines to population centers located in central and coastal Chile.200 km from the north to the south of Chile.. the largest of which is Endsea. Electric generation companies are Transelec’s main customers. BAM (10%) and the balance between the Canadian Pension Plan Investment Board (CPPIB) and British Columbia Investment Management (bcIM) and PSP Investments.P. offering Transmission Services in accordance with the NEPOOL NY. which operates 35% of the country’s installed capacity. BMO Capital Markets 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. 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. the principal electricity generator in Chile. a majority of electricity is supplied by hydro generation from mountainous regions in the central-south area of the country. 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. . As of December 2010. They utilize the grid to transport electricity generated to distribution companies who then deliver the energy to end customers.P. and is equipped with 52 substations and delivers power to approximately 98% of the Chilean population. Chile’s Largest Transmission Company In Chile.Page 8 Brookfield Infrastructure Partners. Transelec is Chile’s largest electric transmission company. L. three customers accounted for 84% of Transelec’s revenues. Its network stretches over 8. Transelec – Electricity Transmission in Chile Transelec was originally acquired by Brookfield in 2006 from Hydro Quebec and today is owned by BIP (18%). Open Access Transmission Tariff Schedule Electric transmission company in Texas Regulated monopoly Source: Brookfield Infrastructure Partners L.

BMO Capital Markets Dominant Market Position There are two main interconnected grids in Chile.P. economic growth • Chile has a supportive regulatory environment that favours reliability over price Source: Transelec. which serves principally industrial and household consumers in the centre-south region of Chile.Brookfield Infrastructure Partners. 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. ¾ Sole owner of the 500kV lines that form the backbone of the country’s transmission system ¾ 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 ¾ New generation likely to be large-scale hydro or coal projects ¾ 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 ¾ Implies demand growth of 7% per annum over next ten years SIC ¾ To maintain reserve margin. the SIC system. while the SING Transelec’s Role in the Chilean Economy system mostly serves large industrial customers. primarily mining companies in Chile’s northern regions. requires 450 MW of incremental sup each year owns: 7. L.203 km of lines SIG trunk systems. by extension. Page 9 Figure 8: Revenue per Customer 5% 6% 8% 11% 70% Endesa & related Colbun Gener & related GasAtacama Others Source: Transelec.244 kilometers of transmission Transelec • Investment in transmission will be critical to maintaining reliability and. BMO Capital Markets lines and 47 substations in the SIC region ¾ Transmission tariffs account for only a small proportion of overal electricity costs ¾ Short Law I passed to encourage investment in transmission sec . and owns 100% of the SING and ¾ Operates over 8.

BMO Capital Markets . 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). Transelec’s transmission assets are concentrated on the highest voltage levels – it owns 100% of Chile’s 500 kV transmission lines (trunk lines). 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. L.Page 10 Brookfield Infrastructure Partners. 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% Source: Transelec.P. respectively.

the assessment of market value is reviewed every four years and is based on twelve key inputs. 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. 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. the original regulatory framework. Electricity Demand Continues to Grow in Chile Page 11 Chile’s economy is heavily tied to the copper industry. We understand BIP remains positive on the transparency of the review process and that changes in fair value are not applied retroactively. Electricity demand in Chile has been growing at a rate of 6% annually over the last two decades. Banco Mundial.Brookfield Infrastructure Partners. which the transmission company can recover through tolls charged to generating companies that utilize the grid. the 10% real rate of return is a matter of law for transmission assets in Chile. Growth in emerging markets and the collateral impact on the Chilean economy has driven demand for energy. 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. and not subject to regulatory review. L. which unbundled and later privatized the electrical system in Chile. This is in addition to annual payments for maintenance and other operating costs. new supportive regulatory regimes have been established. BMO Capital Markets Superior Regulatory Environment In order to address to the infrastructure requirements to meet this demand growth. . 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. Importantly. However. Most recently.P.

In many cases power generation is far away from the power users. while BIP assumes volume risk on Sub-transmission system revenues. . As well. Both Trunk and Additional System revenues are structured as take or pay agreements. Eighteen Percent of Sales Have Volume Risk Transelec’s main sources of revenue are generated from Trunk and Sub-transmission systems. which are governed by long term bilateral contracts. Approximately 55% of Transelec’s 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. With strong EBITDA margins in excess of 80% combined with low maintenance capital expenditures.P. BMO Capital Markets Highly Stable Cashflow Profile Since the Chilean regulatory and contractual frameworks are based on replacement cost. L. Significant Growth Opportunities Chile’s economy is growing at an annual rate of 5 to 7% and commensurately so is its power demand. we understand Transelec’s system is in very good physical condition. As a result. which drives demand for increased transmission infrastructure.Page 12 Brookfield Infrastructure Partners. and for use of Additional unregulated transmission lines. which are regulated assets. Transelec generates strong stable cash flows. Given the regulatory framework in Chile and Transelec’s scale and location advantages. Transelec is not required to invest at its level of depreciation to prevent a decline in revenue. maintenance capital expenditures are at relatively low levels (US$1-$2 million per year). 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. 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.

with an annual throughput capacity of 15 Mtpa and has expanded in three stages since then. The primary end-markets are Japan. The project is expected to begin operations at the beginning of 2013. India and China. The terminal is managed by Dalrymple Bay Coal Terminal Pty Ltd. 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. 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 Ontario asset is allowed to earn a 9. . with an option to extend the lease for a further 49 years. in response to growth in demand for coal in the region and a consequent growth in demand for terminal capacity. which extends for 50 years (beginning in 2001). The Ontario transmission assets comprise 550 kilometres of 44kV to 230kV regulated lines. which is on the northeast side of the country. exporting 8% of the total global seaborne coal and 20% of the global metallurgical seaborne coal. the most recent expansion occurring in June 2009. The terminal is owned by the Queensland Government and leased to DBCT Management (BIP) under a long term leasing arrangement. DBCT is currently one of the world’s largest coal terminal (at 85 Mtpa capacity). L. and 2) a transmission development project in Texas.Brookfield Infrastructure Partners. which use the coal to generate electricity and make steel. DBCT commenced operations in 1983.P. a company owned by eight of the largest users of the terminal. Korea. North American Transmission Page 13 There are two assets in this segment: 1) an Ontario transmission asset.66% return on equity based on theoretical capital structure of 60/40 debt-to-equity.

Vale and Rio Tinto. which is associated with operating and maintaining the facility is directly an indexed bond for BIP. have two the components: a shipped and arecharge. Upside to WACC Supported by Recent Financings As part of its undertaking assessment process. 2011. Essentially the structure replicates an indexed bond for BIP.farrell-associates. over the next five and a half years. which have force majeure provisions. over theon next five and a asset half years. In so doing. 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.. 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.9% commencing Authority. the case of a natural disaster there is no impact on revenues. passed through to customers. which is associated costs are socialized over the remaining customers. Essentially the structure replicates and variable).com. These contracts have two components: with operating and maintaining the facility is directly passed through to customers. equity beta and market risk premium). Peabody Energy.farrell-associates. this change is expected 13to result in an additional A$70 million in incremental EBITDA at the BIP level.pdf Structure Replicates and Indexed Bond Structure Replicates and Indexed Bond DBCT serves many of the large mining companies operate in the Bowen Basin. L. including retaining key parameter values (i. so in the case of a natural disaster there is no impact on notice.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. 2011. Capacity is through long-term take-or-pay contracts. The capacity a capacity and a handling The capacity charge is based charge is determined everycharge five years by the QCA with charge.au/Papers/DBCT%20Case%20Study. the most recent undertaking occurring in 2010.P. The handling charge (both fixed and variable). which have annual contracted tonnage shipped and are committed to the take-or-pay terms for five years from no force majeure provisions.pdf Source: http://www. the QCA utilized a formula that DBCT . Allowed Return Formula Likely to be Maintained. QCA.9% commencing January 1.com.Page 14 Figure 13: Dalrymple Bay Coal Terminal Brookfield Infrastructure Partners. QCA. The capacity charge is determined every five years by the QCA with the most recent undertaking occurring in 2010. the QCA retained the methodology it utilized in its 2006 regulatory review.au/Papers/DBCT%20Case%20Study. 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. 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 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. The Bowen Basin is located in central Queensland and contains including Peabody Energy. Figure 13: Dalrymple Bay Coal Terminal Source: http://www. As a result. including DBCT serves many of the large that mining companies that operate in the Bowen Basin. As auses result. which approved a weighted average cost of capital (WACC) increase of 100 bps to 9. to Customers have to give five yearstake-or-pay notice to reduce the currently 100% contracted 2014 through long-term contracts.e. committed to thecharge take-or-pay five years from notice. January 1. socialized Customers over the remaining customers.

Brookfield Infrastructure Partners. deemed investment grade with 72% debt to capitalization ratio) at DBCT. This typically means that so long as access seekers have contractually committed to at least 60% of the capital undertakings. do not oppose it. L.e. we believe the risk is low that the formula (i. Capital Asset Pricing Model) will likely change in the next regulatory review given that the proposed WACC was based on a market outcome. In terms of potential upside. From a regulatory perspective. certain comparator firms have equity betas of less than 1). QCA generally allows the requests. 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. 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. and as well. Capital is only allocated to the extent it is factored into the rate base and approved by QCA.e. Re-contracting Risk Low We believe the re-contracting risk is low given the cost advantage of the coal in the region served. under the current contracts.$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. Average met coal prices currently average around US$250 .. and the replacement cost of the port. Currently total terminal charges are about $5/tonne and are about half of what they would be compared to new capacity. .e..e. volumes are only fully contracted to 2018. risk-free rate and debt margin). Capital Requests Managed by DBCT and not Undertaken Unless Factored in Rate Base DBCT management regularly consults with access holders to assess capacity needs. however. currently 60% debt to capitalization) applied to the asset.. As a result.. Page 15 Management and its customers had adopted to arrive at a customer supported WACC.P.e. which we understand has been supported by recent refinancing of debt (i. We believe the dynamics of the region support continued volumes. it is possible the QCA could ascribe a higher proportion of debt in the theoretical capital structure (i. which would result in an increase in the WACC (all else being same). and no more than 60% of accesses holders who do not benefit. re-estimates of the time-variant parameters (i.

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

GTC is the second largest independent connections business in the U.000 electricity connections. while theoretically intended to levelize the return over the life of the connection. 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).P.. The revenue in this business is comprised of developer fees and on going customer revenue based on the regulated price.UK Distribution Business This is a last-mile business for connecting gas and electricity services in the U.K residential housing market. which assumes about 12. which most are today.000 natural gas connections and 25. which is located four kilometres north of DBCT and will have an export capacity of 120-150 Mtpa. The construction of the terminals is expected to begin in 2013 and cost ~A$10 billion (we believe Brookfield’s share A$3-4 billion). DPCT is located in the port of Hay Point. an Indian conglomerate who won the right to develop the Abbott Point terminal in the region) for the Dudgeon Point Coal Terminal (DPCT). The number and timing of new connections are a function of housing starts and completions in the U.000 dual fuel connections a quarter. We understand that BIP has received access requests (i. On December 13. The developer fee portion. soft commitments) from potential customers for 130 Mtpa.Brookfield Infrastructure Partners. . However the regulated prices are insufficient to attract capital. the IRR’s for a dual fuel connection. and require developers to subsidize the connections with up front fees. 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. called GTC.e. L. The two proposed terminals at Dudgeon Point will provide export capacity up to 180 Mtpa. BIP currently enjoys a 25% market share on new connections in the industry. Page 17 In July 2010. is recognized in BIP’s revenue upon receipt.K. 2011 the state of Queensland. Energy Distribution GTC . This is a regulated price business. DBCT was appointed as one of two preferred development proponents (the other being Adani. is in the mid-teens. and be ready by the end of 2016. with approximately 450. Including the developers fee. It is anticipated at the current level of completions that BIP should generate about $9 million a quarter in developer connection fees.K.

It is anticipated at the current level of completions that BIP should generate about $9 million a quarter in Brookfield Infrastructure Partners. 12 month Rolling Totals Figure 16: Trends in Housing Starts and Completions. The AFFO yield is AFFO divided by invested capital and is meant as a proxy for cash-on-cash returns in the business. at which time the gas distribution business will become subject to a new pricing regime. Revenue is mainly based on regulated tariffs. 66% of the electric and 49% of the gas energy retailers are state-owned). based on regulatory options the FFO is likely to be at or above prior levels by July 2014. Powerco’s Authorization expires on July 1. Recent Financial Performance The Utilities platform generated FFO of $144 million in 2010. Invested capital is the cash put into the business. central and lower areas of New Zealand’s North Island.e.e.. which assumes about 12. L. AFFO is FFO less maintenance capital expenditures and may also include incentive distributions payable to Brookfield. However. BIP currently enjoys a 25% market share on new connections in the industry. Powerco has approximately 420. 12 month Rolling Totals Source: UK Government Source: UK Government Powerco 16 Powerco is New Zealand’s second largest electricity and gas distribution company and one of two dual-energy distributors in the country. The number and timing of new connections are a function of housing starts and completions in the U. BIP uses Adjusted Funds From Operations (AFFO) yield as a non-IFRS measure of operating performance. plus cash generated less cash taken out of the business. Powerco’s distribution network is spread across the upper-central. The strength in recent performance is attributable to the merger with Prime as well as strong performance from the Australian coal terminal.K. Electricity and gas customers are largely residential and are generally contracted via retail energy companies. electricity operations and UK distribution business. England.000 dual fuel connections a quarter.Page 18 are today. 2012. England. which determines the annual increase in prices that can be applied and the quality thresholds that must be achieved (i. up from $61 million in 2009 (excluding the one-time gain of $68 million from the sale of TBE). developer connection fees. with a significant portion being from state-owned businesses (i. Powerco’s electricity business operates under regulation administered by the New Zealand Commerce Commission (NZCC). There is currently some regulatory dynamics that could for a period of time provide some uncertainty with respect to FFO. 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.1% compound annual rate over the past five years. response time after an emergency). . Electricity revenues represent 80% of the company’s sales and have grown at a 4.. Figure 16: Trends in Housing Starts and Completions. is in the mid-teen.P.000 customers represent 46% of gas connections and 16% of electricity connections in New Zealand.

while the return on the rate base was 11%. BMO Capital Markets After deducting capital expenditures of $13 million..North America Energy Distribution .298.Europe Source: Brookfield Infrastructure Partners L. Page 19 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 (%) Source: Brookfield Infrastructure Partners L.182 million. . L..South America Energy Distribution . due to the Prime merger. The rate base increased 68% in 2010 to $3.Brookfield Infrastructure Partners. the weighted average AFFO yield in 2010 was 15% on an invested capital base of $1. BMO Capital Markets Figure 18: Trailing Twelve Month Utilities Segment FFO TTM FFO by Segment (%) 16% 37% 22% 7% 18% Coal Terminal Operations Electricity Transmission .P.P.Australasia Electricity Transmission .P.

P.000 $3182 $3252 Rate Base ($USMM) $3.Page 20 Brookfield Infrastructure Partners. We understand that about 70% of the EBITDA in this segment is subject to long-term contracts. L. The business benefits from two factors: 1) high barriers to entry as a result of its locational advantages and regulatory restrictions.P. BMO Capital Markets Transport & Energy Infrastructure The Transport & Energy infrastructure business is a geographically diverse. respectively. capital intensive fee-for-service business that is comprised of transportation. storage and handling services for energy. which mitigates competition and enables BIP to negotiate long-term contracts with customers.000 $1. freight and bulk commodities. Figure 19: Utilities Segment Operating Performance – Rate Base / Return on Rate Base Utilities Segment Operating Performance Rate Base / Return on Rate Base (%) $4.. commodity or customer. the UK port operations. which over the long-term tends to increase with the growth in the economy. freight and commodity businesses. Australian railroad and the North American gas transmission business accounted for 80% and 86%. .000 $2. The business generally benefits from the increased movement of energy. of the EBITDA and FFO in Transport & Energy platform in 2010. Performance has tended to remain stable despite the poor macro outlook.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 Source: Brookfield Infrastructure Partners L. and 2) the diversity of the businesses tends to mitigate fluctuations in demand from any one sector. The segment’s two premier assets are PD Ports and Brookfield Rail (formerly WestNet Rail). In aggregate.

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 Source: Brookfield Infrastructure Partners L. One of the largest natural gas transportation companies in US..P.P. L. serves 61% of Chicago/N Indiana market. BMO Capital Markets . handling over 70 Mtpa.NGPL Other .P.IEG (Channel Islands/Isle of Man) UK . 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.PD Ports Euroports 25% 28% Source: Brookfield Infrastructure Partners L. harbour authority for River Tees Seven ports with key strategic locations throughout Europe and China. while inner circle represents Funds From Operations (FFO). and Depreciation & Amortization (EBITDA). BMO Capital Markets Note: Outer circle represents Earnings Before Interest expense. Page 21 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 ..Brookfield Infrastructure Partners. Taxes.

A$300 million tends to provide very stable approximately revenue streams. 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. customers contribute 90% of its revenues with contract expiration dates ranging from 2011 to 2026. customers tend to the area. country. and in many cases. In addition. and in many cases. rail transport contribute 90% of component its revenues with expiration dates ranging from 2011 which to 2026. Brookfield’s top 9 customers understanding is that current contracts are below the current cieling. Revenues are approximately A200 .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. Brookfield Rail handles approximately 50 Mtpa of cargo. the commodities transported. Brookfield Rail Infrastructure Figure 21b: Brookfield Mix of Business b. is the only economic means to infrastructure is located near a large number of iron ore. Brookfield Rail handles Western Australia (WA) through a 40 from year the lease with part the of WA Brookfield’s rail approximately 50 Mtpa of cargo. Chip Customer Base Brookfield’s rail infrastructure is located near a large number of iron ore. Figure 21: 21: Brookfield Rail Infrastructure Figure a. and is also for of much of the goods Brookfield Rail controls approximately km of railway throughout theresponsible southern half transported eastern the Government. Brookfield Rail Brookfield Rail Essential Infrastructure Asset with Stable Revenue Stream from Blue-Chip Customer Base Brookfield Rail controls approximately 5. is that current contracts are below the current ceiling. which adequate access to the rail network. bauxite and other types 5. Revenues are represents a small yet essential of the contract overall cost of the commodities transported. rail transport represents Accordingly. but our understanding economic means to get commodities in this region to government ports on the coast for export. Accordingly. L. customers tend to sign long-term agreements with Brookfield in order to ensure a smallThe yet essential component of the overall cost ofgovernment. bauxite and other types of mineral deposits get in commodities in this region to government ports on the coast forthe export.Page 22 Brookfield Infrastructure Partners. The access charges are regulated by the WA government.A$300 million annually. Brookfield’s top 9annually.100 of mineral deposits intrack the area.P. Brookfield Rail MixRail of Business (2009) (2009) Source: Brookfield Rail Source: Brookfield Rail Source: Brookfield Rail 21 . A200 . In addition. access charges are regulated by the WA but our tends to provide very stable revenue streams. is the only access to the rail network.

. when the business was acquired in 2009. but actually closer to 40 Mtpa. To date. The contracts on average extend over 15 years. but that does not include another 14 – 15 Mtpa these same customers believe they will be able to bring online. As a result. Significant Growth Opportunities To the extent that volumes exceed minimum take-or-pay levels. L.P. but importantly. the reserves of the mines BIP is supporting are well beyond that.0 mtpa 2. increasing to ~A$160 million in 2013 and a further A$10 million to A$170 million in 2014. BIP expects its minimum take-or-pay revenues associated with these expansions will generate revenues of ~ A$65 million in 2012.0 mtpa 10. of which all are backed by take–or-pay provisions. BIP has thus far contracted 24 Mtpa of additional volume growth when the upgrade and expansions are complete. which should drive additional cash flow growth.P. BIP will generate incremental EBITDA above that amount. 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 .Brookfield Infrastructure Partners. once completed.2 mtpa 4. actual volume growth may not be 24 Mtpa. BIP has finalized five of the largest of the six expansion contracts representing 93% of its incremental revenues.0 mtpa Expected Start Date Late 2011 2012 2012 2012 Late 2011 2014 Source: Brookfield Infrastructure Partners L. 0% of the revenue was covered by take-or-pay provisions. 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. Specifically. Importantly.0 mtpa 2.4 mtpa 2. Combined with previous investments of ~A$175 million. while in 2014 that level will be closer to 60%. it is expected these investments will generate incremental EBITDA of A$150-$200 million per year by 2014. 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. 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. Page 23 Well Positioned For Significant Volume Growth. increase the tonnage transported by Brookfield by approximately 24 Mtpa or 45% by 2014. 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. For example.

Warehousing. C Container terminal operator with 300. Ports PD Ports . L. We understand that approximately 50% of the business’ FFO is related to these fees plus rent from the 2.Page 24 Brookfield Infrastructure Partners. PDP’s 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.000 TEU’s of capacity. Over 50% of PDP’s income is earned from conservancy fees (i. which have invested significant amounts of capital within the ports and have no other way to access its terminals than by ship. Teesport’s freehold land base of 1. bulk handling.. 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. loading and general cargo handling services. As a result.P.558 acres provides an additional source of income to PDP. PD Ports maintains its own container terminals and bulk terminals.000 TEU’s of f capacity. forest imports and two container terminals with aggregate 215. Currently the ports are operating at full capacity and appear to be a gating issue for incremental volume beyond current commitments. chemical producers. Middlesbrough.e. owned ports for export. Source: Brookfield Infrastructure Partners L. . 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. PD Ports has a number of long-term contracts with large multinational corporations. Within the vicinity of the Port there are a number of large-scale industrial plants (i. established counterparties including large multi-nationals. tolls) related to the movement of cargo on vessels using the river. Teesport Hull Immingham am: Brookfield Asset Management Inc. coal-fired power plants) that are designed to operate at high efficiency/volumes. which underpins the about 40% of its revenues. Locations D Ports (PDP) Asset Description PDP owns and operates the Port of Tees and Hartlepool (“Teesport”) which is the UK’s 3rd largest port by Figure 22: PD Ports (PDP) tonnage. steel.Strategically Located with Diverse Set of Terminals and Facilities PD Ports is the fourth largest port operator in the UK by volume.000 acres of land it owns. Teesport also operates a wide range of facilities including transports. 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. In addition.e. England (near Teesport) Brookfield: 100% Range of long-term contracts with strong. 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. This gives PD Ports pricing power and enables BIP to enter into long-term contracts. which are generally used to restock warehouses and is a GDP sensitive business.P. which it charges a fee to use (50% of FFO). cars. bulk handling tends to be less sensitive to economic changes than handling containers. shipping approximately 40 Mtpa of cargo. Essentially.

retailer recently constructed the largest warehouse facility (900. Significant Growth Opportunities It was recently announced that a Thai Steel manufacturer. we believe Teesport’s alternative gateway into the U. the plant brought in 25% of Teesport’s volumes. There are over 100 Trust Ports in the U. With its 16 locations in seven countries in Europe. SSI (Sahaviriya Steel Industries) acquired a steel-blast furnace in Teesport from Tata Steel that was closed in January 2010. Teesport container volumes increased 40%. liquid bulk. in the Ports’ estate. which improves time of arrival for deliveries.000 TEUs.5 million (~ £4. • All major distribution centres in the U. a leading U. BIP is in the process of expanding the container terminal’s capacity from 235.Brookfield Infrastructure Partners. ft. which is expected to restore margins to historical levels. each administered by a Trust. In 2010.K.5x US$/£ exchange rate) per annum in incremental EBITDA. which is significant on a base of £24 million.K. Tesco. Euroports is one . 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.) ever in the U.K. This is a diversified business that handles heavy dry bulk.7 million at a 1. can be reached within a single driving shift of Teessport. but this volume growth was somewhat offset by lower margins due to operating inefficiencies as a result of operating at fully capacity. At the time of the plant’s closure. For example. Page 25 Teesport has distinct a geographical advantage relative to the ports in the southeast of the U. L. the largest of which is the Port of Dover. Other potential opportunities are the acquisition of Trust Ports if they were privatized by the government. • The Port has a less congested road network compared to south east.0–4. grow. market leave it well positioned to provide additional port capacity and logistical capabilities for cargo traffic. general cargo and containers.K.000 sq. We understand that there are planned developments in the surrounding areas by leading retailers. Euroports – Diverse Long-Term Customer Base Portends Stability Euoports is comprised of a portfolio of concessions throughout Europe and China. As imports in the U.P. when the economy improves.K. We understand the contract could add ~ $6.K.K. The government is looking to privatize the Trust Ports in order to raise capital funds to build new terminals to provide additional capacity. specialty dry bulk. PD Ports is also well positioned to benefit from continued container business growth in the U.K.000 TEUs (Twenty Foot Equivalent Units) to 450. • The rail solutions in the south east are also hampered by load restrictions and competing track access with high volumes of passenger traffic.

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..S. which owns 20% owns a 26%of interest in NGPL along with other inventors. 25 . and Haynesville. gas-fired power plants and other interstate pipelines. which represents approximately 7% of total natural gas storage capacity of total natural gas storage capacity in the U.S. Given transport and 3. including Kinder Morgan Inc.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.S. extends over which traverses 10 states in the Midwestern and Southern U. BIP owns a 26% unconventional gas plays including the Woodford. L. which traverses 10 states systems in the Midwestern U.8revenues years forwith average contract terms of 2. (KMI).. and The Southern pipeline system.S. as well as fast growing several major conventional natural gas supply basins in the U.500 km and delivers approximately 2. approximately 2. The pipeNGPL is among the largest natural gas pipeline and storage in the U. NGPL supplies approximately 60% of the natural gas in the U.S.S.5 years for storage customers. of the largest port operators in Europe and handles over 50 Mtpa of cargo. as well as fast growing unconventional gas plays including the Woodford.Page 26 Brookfield Infrastructure Partners.html Source: http://steelriverpartners.S. BIP interest in NGPL along with other inventors. the company has a history of rolling overand customer contracts. 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.com/ngpl.2 trillion cubic feet of natural gas per annum. gas-fired power plants and other interstate pipelines. NGPL’s top 10 companies. (KMI). and Haynesville. and operates the system on behalf the partners. Fayetteville. the company has a history of sources of gas. which owns 20% and operates the system on behalf of the partners. which represents approximately 7% lion cubic feet.. Given NGPL’s strong market position and diverse NGPL’s strong market position diverse sources of gas. 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.com/ngpl. including Kinder Morgan Inc.. Fayetteville. extends over 15. rolling over customer contracts. Europort operates 1 terminal in China. line system. NGPL’s 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 2.500 km and delivers 15.2 trillion cubic feet of natural gas per annum.S.P. Figure 23: NGPL Natural Gas transmission and Storage Network Figure 23: NGPL Natural Gas transmission and Storage Network Source: http://steelriverpartners.8 years for transport and 3.5 years for storage customers.

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. The impact of the settlement was fully phased in beginning in July 2011. . FERC approved a settlement under its regulations that resulted in FFO being reduced by $18 million on a run-rate basis. 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. NGPL’s ability to contract capacity at max rates goes up as companies/marketers seek to move gas into the markets with demand. however. The variable charge is designed to cover variable costs. in a high price environment. NGPL’s transmission operations are subject to regulation by the Federal Energy Regulatory Commission (FERC). BIP uses adjusted funds from operations (AFFO) yield as a non-IFRS measure of operating performance. L. higher maintenance capital expenditures at Brookfield Rail as well as a weak fourth quarter that was impacted by lower grain harvest volumes.Brookfield Infrastructure Partners. 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. less cash taken out plus AFFO. 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. In 2010. The recent increase in FFO was due to the Primer merger. As a result. The demand charge does not fluctuate with usage and is designed to cover fixed costs and provide a return on capital. With respect to the variable handling charge. After deducting maintenance capital expenditures of $33 million. AFFO is funds from operations less maintenance capital and may also include incentive distributions payable to Brookfield.P. which benefits NGPL as gas prices go up. NGPL’s storage capacity effectively remains fully contracted in all price environments. Page 27 Stable Cash Flow Profile with Leverage to Rising Natural Gas Prices The majority of NGPL’s revenues are generated under contracts with a demand charge and a variable charge structure. Recent Financial Performance The Transport & Energy platform generated FFO of $91 million in 2010. Invested capital is the cash put into the business. which provides a framework to reach commercial agreements without direct intervention under a maximum rate regime. If NGPL is efficient in operating its pipes and uses less gas to operate than NGPL is permitted to retain. the average weighted AFFO yield in 2010 was 9% on an invested capital base of $1. 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. We understand the max rates (under FERC) NGPL is permitted to charge on storage are marginally below market.235 million. The settlement provided greater stability of cash flows due to a five-year term in which customers cannot initiate a rate case.

BMO Capital Markets Figure 25: Trailing Twelve Month Utilities Segment FFO TTM FFO by Segment (%) 9% 17% 32% 11% 31% Australasia (Brookfield Rail) Other .P.NGPL UK .Page 28 Brookfield Infrastructure Partners..IEG (Channel Islands/Isle of Man) Euroports North America .P. 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 % Source: Brookfield Infrastructure Partners L. L.P.PD Ports Source: Brookfield Infrastructure Partners L. BMO Capital Markets ..

In general. Canada and the Pacific Northwest region of the United States. BIP could cut trees at 120% of its LRSY for approximately 9 years. a tree’s wood volume increases 2 – 8% annually based on weather (varying by climate. age). biomass. thereby potentially maximizing total returns by matching harvest opportunities to market conditions. which includes a deferred harvest volume of 2. which is perpetual. The costs to harvest timberlands are predominately variable..000 acres of freehold timberlands in Pacific Northwest U. since they are largely a function of harvest levels.6 million cubic meters of timber per year (forever). furniture. . BIP has an estimated 29.000 acres of high-quality. 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. and this growth.8 million cubic meters (i. surplus inventory). Page 29 Timber High Quality Timberlands with Ready Access to Export Markets a Defining Feature of BIP’s Timber Assets The defining attribute of timber is its reliable long-term biological growth. BIP actively manages in excess of 419. it is estimated BIP can cut at a longrun sustainable yield (LRSY) of 1.e. etc. Combined. These attributes allow timberland managers to switch between income when lumber prices are high and capital appreciation when lumber prices are less favourable. which convert the timber to wood products such as lumber and other building products.P. Reflecting annual timber growth within its forests.1 million cubic meters of merchantable inventory that it can harvest. species. which compounds over time. yielding higher value trees as they mature.300 acres of higher and better use (HBU) timberlands located in the coastal regions of British Columbia.. can be captured and stored as unharvested timber over an indefinite period of time or harvested for income and capital appreciation.000 acres of freehold timberlands in coastal BC 2nd largest private timberland holdings in BC 655. To monetize the deferred harvest volume (once prices recover). Table 5: Timber Portfolio Timber Island Timberlands Longview Timber Ownership 38% 30% Description 634. On a proportionate basis. paper. BMO Capital Markets Timberland managers harvest logs that are sold to third parties. freehold and 12. L. which provides ready access to export markets. and ongoing capital requirements tend to be minimal.S.Brookfield Infrastructure Partners.

As a result of these exceptionally low market conditions. least in market a meaningful way.P. Canfor. improves.S.S.at lumber will recover asthe the labour of market we do not expect that to occur. The recession in North America and the severe downturn in the U. Together. Homebuilding Expected to Remain Weak over the Medium Term BIP’s timber assets have a variety of end-markets. distressed lenders puts additional downward pressure on in resale values. these factors curtail the construction of new homes.S.2% based on historic figures Expectations are that the U.Lumber Figure 26: North American Supply and Demand Lumber Note: BBF is billion board Note: BBF is billion board feet feet Source: Woodbridge Associates. For what it’s ing.S..2% based on historic figures Capacity growth rate estimated at 2. not to mention for its green attributes.S.000. which remains depressed. 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. predominately China continues to grow. which is below the long-term average for single family housing starts in the U.S. housing market have had a significant impact on demand for wood products. until inventory unsold slowly homes normalizes and prices of existing homes in the US stops falling.e.S. demand from Asia. For what it’s worth. Increasing Demand for Logs from China as Wood Use Moves up the Value Chain While North American demand remains week. 29 .Page 30 Brookfield Infrastructure Partners.5 million annually. timber prices declined and timberland owners. in 2012 to 725.5 million annually. Together. in 2012 to 725. which is sales belowby the long-term average for single family housing starts the U. 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. of 1. of 1. industry forecasts suggest a 21% increase in new housing starts in the U. China’s economic growth was 10% in 2010 and is expected to be approximately 8% in 2012 (down from ~9% in 2011). but we do not expect that to occur. but Expectations are that the U. lumber market will recover as the labour market slowly improves. the expectation is that as the Chinese become more accustomed to using wood in home construction.000. USDA Capacity growth rate estimated at 2. L. that demand for more valuable lumber (i. While much of the current demand from China is for low-grade lumber (utility grade) used for building concrete forms. used in building roof trusses and floor beams) will improve as well. Foreclosures are at record highs. Foreclosures are at record highs. at least in a meaningful way. Canfor. these factors curtail the construction of new homes. industry forecasts suggest a 21% increase in new housing starts in the U..S. USDA Source: Woodbridge Associates. but the greatest exposure is to home building (and repair and remodelling) in the U. U. Figure 26: North American Supply and Demand . which adds to the overhang of unsold homes and worth.S.

. predominately China continues to grow.. Page 31 Increasing Demand for Logs from China as Wood Use Moves up the Value Chain While North American demand remains week. L. not to mention for its green attributes. 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. used in building roof trusses and floor beams) will improve as well. China’s economic growth was 10% in 2010 and is expected to be approximately 8% in 2012 (down from ~9% in 2011).e. Canfor. up from 11% in 2009 in response to attractive pricing.P. In the short to medium term.P. 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 Ź 4 6 Ź 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 Ź 1998 1999 2003 2007 2010 Source: Brookfield Infrastructure Partners L. Canfor.Brookfield Infrastructure Partners. that demand for more valuable lumber (i. demand from Asia. BMO Capital Markets 2011F Establishing 2 x 4 for the emerging WFC housing sector LowGrade #2&Better Source: Brookfield Infrastructure Partners L. While much of the current demand from China is for low-grade lumber (utility grade) used for building concrete forms. 30 .. the expectation is that as the Chinese become more accustomed to using wood in home conPAGE 12 struction. we expect the rebuilding phase in Japan will also fuel demand for logs from BIP. BIP sales of sawlogs to China represented 36% of sales (export volumes improved 46% year over year).P.

while overall harvest volumes increased 26% to 1. 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 Source: Brookfield Infrastructure Partners L. 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.C.S. the fact that large swaths of forest are being set-aside for non-commercial use is also expected to further reduce sawlog availability. 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.. hemlock and cedar trees. Island Timberlands in coastal B.S.000 m3. we expect the rebuilding phase in Japan will also fuel demand for logs from BIP. Recent Financial Performance 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. BIP sales of sawlogs to China represented 36% of sales. operations. which BIP will be in a position to capture through ramping up harvest levels in both its Canadian and U.Page 32 Brookfield Infrastructure Partners.P.P. L. Importantly. BMO Capital Markets . In addition.225. In 2010. reducing sawlog availability. market and the stronger Asian market is that BIP is currently producing at its long run sustainable yield. As the timber resource available for lumber production decreases and demand recovers. which has devastated pine tree forests across the region (predominately in the central interior). we would expect BIP’s timber business to benefit from positive fundamentals on the supply side. In the short to medium term. up from 11% in 2009 in response to attractive pricing. neither has been impacted by the Mountain Pine Beetle infestation. The net effect of the weak U. and Longview Timber in the Pacific Northwest. which are primarily compromised of high-value Douglas-fir.

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% Source: Brookfield Infrastructure Partners L. The AFFO yield was 2%. The state is attempting to promote development of wind power. Page 33 In 2010. compared to negative $3 million in 2009. and the balance evenly split over the energy distribution businesses) at the end of Q3/11. FFO was $11 million. given its competitive position.P. . One project BIP has been progressing is the $750 million Texas transmission initiative to connect wind power in the state of Texas.Brookfield Infrastructure Partners. these projects should drive meaningful cash flow growth. Harvest volumes and average log prices have continued to improve in 2011 relative to 2010 resulting in significantly improved FFO. This incremental capital will form part of the rate base and should generate an 11% plus return on the additional capital deployed.P. $70 million for Transelec. L. which is generated in remote areas to be ferried to major load centers. quarterly performance has recently been impacted by higher costs. which currently represents 8% of the state’s electricity supply. Completion of the transmission system should spur further wind power development in the state because it will allow the power. however. Figure 30: BIP Timber FFO and AFFO Yield $20 $15 FFO ($USMM) $10 $5 $0 $2 Timber Segment Operating Performance FFO. BMO Capital Markets 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. the capital project backlog. including work in progress stands at $350 million ($105 million DBCT. $70 million for WETT.. Over the long-term. With an aging transmission system there is not enough capacity to carry the power being generated by wind. In this regard. BIP is actively involved in a number of other opportunities to upgrade its utilities assets to expand the rate base. Investment in Utilities Rate Base While DPCT is further out. scale and location advantages.

P. 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. L. that are expected to generate incremental EBITDA of A$150 . as we mentioned previously. but there is also the potential that existing customers will require additional volume growth to meet their needs.A$200 million per year in 2014. 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..Page 34 Brookfield Infrastructure Partners. Customers have currently contracted approximately 24 Mtpa (on a minimum basis) of volume growth.P. The plan is to eventually expand port capacity to at least 650. 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. and we understand customers are potentially looking to add an additional 14 to 15 Mtpa above that amount. the backlog of organic growth projects was approximately $1 billion. which would have a positive impact on cash flow. 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).000 TEUs. Strong Backlog of Projects Approaching $1 Billion At the end of Q3/11. including A$500 million in port opportunities adjacent to the Australian rail operations and the A$5 billion expansion project at Dungeon Point. BMO Capital Markets .

P.. New connections as a result of new housing development. 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. L.Brookfield Infrastructure Partners.S. 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. 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 Source: Brookfield Infrastructure Partners L. 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. BMO Capital Markets . Co-generation opportunities Volume growth from recovery in new home construction in the U.. Page 35 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. well positioned to benefit from growth in Asia Volume growth from recovery in new home construction in the U. allowing for further expansion Energy demand and consumption levels..S.P.

Given the sovereign debt issues in Europe. had a gearing ratio of 90% and a post-tax IRR of 12% at that time. which was held-for-sale on BIP’s balance sheet. As well. which is availability-based extends for another 21 years with the Long Island Power Authority. Despite the generally compressed investment returns. Importantly. which is a fast growing city with increasing motorization rates. The asset was originally acquired in 2006 from HydroQuebec by Prime (formerly Babcock and Brown Infrastructure) for an equity investment of $26 million. Most recently. 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. both by Chilean CPI and a further 3. in line with BIP’s target returns for this segment. 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. . airports and storage facilities mainly through acquisitions in distressed markets. The toll roads act as key arteries in Santiago. 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. The service contract. 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. The asset. BIP recently announced that it acquired a 24% direct interest in two Chilean toll roads from ACS. CSC is a high-voltage subsea transmission line that connects New England and Long Island. the regulatory framework allows BIP to increase rates on an annual basis. BIP has acquired a 23% interest in Cross-Sound Cable (CSC) from a bank for $9 million.P. As well.5%.Page 36 Brookfield Infrastructure Partners. but will initially generate a return closer to 4% until traffic patterns and fee optimization are established. This investment is expected to generate an after-tax IRR of 12-15% by 2014. BIP seeks to establish new operating platforms such as toll roads. Transport & Energy Platform Within the Transport & Energy platform. Autopista Vespucio Norte (AVN) is a 29 kilometre freeflow toll road concession that expires in 2033 and forms part of the Santiago ring road. such as at present in Europe. a Spanish engineering and construction group for a $150 million. BIP has been successful in buying assets in the segment. L. 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. BIP has the ability to charge congestion tariffs. BIP can increase prices. so when there are certain traffic flows.

BMO Capital Markets At end of the Q3/11. Figure 31: Indicative Sources of Funding 20-30% 50-60% 20% Disposals and Equity Retained Cash Project Level Debt Source: Brookfield Infrastructure Partners L. in addition to $200 million of cash retained within the business to fund working capital and its capital growth projects. and to repay the amount outstanding under the credit facility. and the aim was not only to acquire an attractive asset.P. ACS also holds equity investments in a number of other toll roads (i. 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. 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. 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.. but also to develop a relationship with ACS. as well as to fund the growth capital expenditures at Brookfield Rail ($150 million). this was not an auction process. including $200 million from BAM to acquire interests in the two Chilean toll roads ($150 million). In October. L. . Vancouver). For example. BIP raised approximately $657 million of capital. and the fact that the cash flows from these growth initiatives are supported by long-term contractual revenues or by regulatory frameworks. Barcelona. Brookfield Infrastructure had $388 million of corporate liquidity under a $700 million credit facility. Asset sales and/or the issuance of equity are expected to fund the remainder. Page 37 Importantly.e. Access to Capital Given the nature of the assets.Brookfield Infrastructure Partners. which is seeking to reduce over $13 billion in debt..P.

We believe the high inventory of logs at Chinese ports and lower access to credit will result in softening demand from export markets. which represents an increase of 5% and 12%. This is down from our forecast of $60 million in 2011 given the expectation for lower harvest volumes.211 million 2011. At the same time. In the Transportation & Energy segment. L. we have assumed sales volumes of 1. we forecast EBITDA of $384 million in 2012 and EBITDA of $455 million in 2013 with FFO of $207 million and $277 million. 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. respectively. Specifically.Page 38 Brookfield Infrastructure Partners. and may not be recurring. We have also assumed the contribution of the Chilean Toll roads adds $20 million in EBITDA in 2012 and approximately $24 million in 2013. respectively. . We assume developer contributions add $9 million per quarter to EBITDA. In addition. we forecast EBITDA of $405 million in 2012 and EBITDA of $429 million in 2013 with FFO of $253 million and $265 million. we forecast EBITDA of $49 million in 2012 and 2013. whose contribution we understand is likely further out. respectively. respectively from our estimate of $3.6 million cubic meters per year in 2012 and 2013. 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.P. but realize that they could vary based on the level of housing activity in the U.K. All in. With respect to the other segments. In the Timber segment. which is up from our forecast of $52 million in 2011 driven in part by the recent equity issuance. respectively from our 2011 EBITDA estimate of $736 million. notably NGPL and the Ports operations (PD Ports and Europe Ports). we assume EBITDA in this segment will increase to $227 million in 2013 from $160 in 2012. Taken together. domestic markets over the medium term are likely to continue to remain weak. we forecast EBITDA of $771 million in 2012 and $865 million in 2013. 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. The main driver of the improvement is the increased contribution from Brookfield Rail as a result of the new access agreements. Notionally. 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. respectively. we expect natural gas prices to remain relatively stable at current levels due to weak economic demand and increased gas production. At these sales levels. which is based on management’s AFFO guidance of 4% in the first year post acquisition. we have assumed EBITDA remains unchanged at $40 million in both years despite the improvement in the container handling capacity at PD Ports. Forecast EBITDA In the Utilities segment. we believe EBITDA margins in the low 30% range are achievable.

03 1. Page 39 FFO In the Utilities segment.03 $1. Our forecast contemplates an 8% increase in distributions per unit in 2012 and an 8% increase in 2013. L.42 $1.80 $1. the expansion of PD Ports is self-funded with internally generated cash flows. In the Timber segment.P. respectively. As a result.37 $2. representing a CAGR of 8% as the payout ratio trends towards the bottom end of management’s target of 60% to 70% from 56% in 2011. the level of maintenance capital expenditures are minor and that is because the assets are relatively new.42 $1.37 in 2011 to $2.06 1. We have also included the incentive distribution to BAM.80.80 $1. we forecast FFO of $383 million in 2012 and FFO of $466 million in 2013 compared with FFO of $383 million in 2011. BMO Capital Markets . Maintenance Capital & AFFO Relative to the asset base.32/unit in 2011 to $1. 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. 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 2011.54 $1.. Including G&A and base management fees. while a significant portion of the rail road expansion program is being financed with a non-recourse A$430 million construction facility. 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.52 in 2013. we forecast AFFO of $271 million in 2012 and $334 million in 2013 with AFFO/unit of $1.46 and $1.54/ unit in 2013.10 $1. we expect distributions to grow from $1.Brookfield Infrastructure Partners.37 $1.10 $1. In 2012.32 $2. Distribution & Payout Ratio Based on our forecast. representing a compound annual growth rate (CAGR) of 3%. we assume current debt levels remain constant. which is in excess of management’s long-term goal of 3-7% in annual distribution increases. 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%.07 $2. As a result. total Corporate and Other expenses are estimated to be approximately $100 million per year over our forecast period. On a per unit basis. we forecast FFO per share to grow from $2.52 $2.P.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 Source: Brookfield Infrastructure Partners L.32 $1.07 $1. we forecast financing costs of $30 million in both 2012 and 2013. Consistent with current reported interest rates. In the Transport & Energy segment. In 2012.52 $2.06 $1.

the assets can be valued as yield-bearing securities.65 Source: Brookfield Infrastructure Partners L.54/unit at a payout ratio of 61%.52/unit. we used a cash flow yield based methodology.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.. This equates to a distribution delineated by $1. . L.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 $0.2–7.51/unit at the low end and $1.61 25% $0.P. Dividend Yield Approach This approach considers that BIP’s infrastructure assets generate sustainable cash flows.35 13% 73% $25 $56 14% $28 8% $4 4% -$26 $62 $0.03 $1.45 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 $0.35 13% 72% $25 $57 14% $28 8% $4 4% -$26 $63 $0.36 3% 73% $25 $58 14% $28 8% $4 4% -$26 $63 $0. BMO Capital Markets Valuation To arrive at our target price.0%.10 4% 61% $49 $131 15% $58 9% $8 2% -$49 $148 $1.1% to the potential 2013E range of distributions. Table 8: Summary BIP Model in millions of US$ 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. our forecast distribution is $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. and therefore.62 47% $0.35 27% 72% $26 $53 13% $28 8% $3 2% -$26 $58 $0.31 13% 50% $27 $55 13% $25 8% $9 8% -$18 $71 $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 $2.34 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 $0.32 20% 56% $94 $239 15% $104 7% $28 6% -$86 $285 $1.52 $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 $0.31 13% 48% $20 $58 15% $28 8% $12 10% -$16 $82 $0.49 -21% $0.49 28% $0.07 -13% $1. our valuation analysis applied an expected yield range of 4.42 8% 69% $105 $229 14% $130 9% $17 4% -$104 $271 $1.Page 40 Brookfield Infrastructure Partners.62 20% $0. We also triangulate using a sum-of-parts and historical P/FFO multiple analysis to arrive at the value to equity holders. Specifically.80 $61 $13 -$3 -$22 $49 48 $1.80 74% $1.37 32% $1.52 22% $1.34 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 $0.49 -25% $0.46 (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 $2.44 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 $2.06 103% $18 $49 15% $13 15% -$9 -2% -$22 $31 $0.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.P.65 33% $0.36 3% 59% $30 $58 15% $46 12% $4 4% -$26 $82 $0.54 8% 61% $119 $241 15% $186 13% $17 4% -$110 $334 $1.47 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. but we consider an upper and lower bound based on a payout ratio of 60-70% of our FFO forecast of $2. In 2013.35 27% 57% $21 $73 19% $23 6% $4 4% -$26 $74 $0.48 -23% $0.76/unit at the high end with the target price of $31 yielding 5.

.7% Dec-2011 .52 61% $1. L.2% $41.37 6.95 $26.54 5.Brookfield Infrastructure Partners.8% Low 60% $1.7% Target $2.37 5. BMO Capital Markets 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 21.51 7.0% $30.37 5.1% 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 Source: Brookfield Infrastructure Partners L.P.71 $26.1% $21.27 $26. 2011) Implied Yield Based on Sustainable Distribution Source: BMO Capital Markets Dec-2010 High 70% $1.2% Max: 7.76 4. Page 41 Figure 33: Historical TTM Yield 8% 7% 6% 5% 4% 3% 2% May-2010 TTM Yield % Min: 4.P.

and therefore likely represents an assessment at the low-end of the fair value range. topography.5x 9. we have relied on BIP’s IFRS value for its Timber assets as an appraisal of fair value.7x 6. 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.1x 6.0x 7.8% 2.83 $70.3x 9.1x 7.232 $14367 € 1.92 $64.0% 3.9% 4.2x 10.1% 3.1x 12.4% 3.8x 5.9x 4.7x 11.1% 5.3x 8. As at the end of Q3/11.7% 1.0x 8.981 € 134 $1327 $2035 $6161 CNY 16.6x 8.9x 7.8x 9.4x CP CSX-US CNR KSU-US NSC-US UNP-US $64.0x 10.7x 8.78 $20.30 $9.8% 2.3x 8.1% 3. In the following we provide a list of comparables we used in our valuation of the Utilities and Transport & Energy Platforms.0x 9.8% 0.0% 1.10 $32.5x 5.6x 10.9x 9.UN 1199-HK 2880-HK DPW-NDB HHFA-XE LKPG-LJ POT-NZ $23.03 $28060 $21309 $5264 $19530 $44691 $41655 $8949 $31788 Source: Thomson.65 € 7.3x 12.8x 12.3% 1.0x 11.7x 8.8x 9.90 $1733 $493 CNY 967 $8300 € 1.8x 13.3x 8.9% 1.86 $101.2x 9.766 € 311 $1513 £6.7x 8.1% 3.0% 2.7% 4.4x 12.4x 11.3x 7.8% 0.33 CNY 8.68 $9. As a result. and.Page 42 Brookfield Infrastructure Partners.6x 6.90 £21.1x 16.8x 9.14 $42.7x 10.2% 4.1x 10.9x 8.4% 2.1x 13.8x 7. and cost to harvest the lumber vary significantly from forest to forest.3x 7.4x 8.6% 16. BMO Capital Markets . The value of standing timberlands is much more complex to determine because many of the attributes including species mix.077 $14175 8. therefore are much more difficult to compare. Timber assets were valued at $607 million or $3.10 EV/EBITDA 2012E 2013E 8.3x 8. We believe the assumptions used to derive this value are fairly conservative.P.8x 16. Table 10: Trading Comparables Market Cap ($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.1x 5.0% 2.2x 16.2x 8.718 $6618 £45.1% 2.3% 1.00 $33.5x 6.28 per unit.7x 12.2x 8. L.59 CNY 1.20 $11045 $22552 $34214 $7125 $24092 $49396 $15295 $30565 $40425 $8657 $30535 $57156 ENB KMI-US SUG-US SE-US $37.2x 6.8x 8. Sum-of-Parts Analysis We use comparable publicly traded companies and applied the appropriate metrics to BIP’s Utilities and Transport & Energy infrastructure businesses.7x 8.0x 9.0% 5.9x 15.27 $74.6% 6.9x 13.7% 3.07 $22.9% 3.94 $76.7x YIELD 2.4x 8.3% 4.0x 11.1% 1.0% 3.-LN NI-US CU EMA FTS ITC-US 21-Dec Close Yesterday's Close $60.3x 13.20 $30.5% 2.95 € 21.7% 0.0x 14.09 $30.3% WTE.2x 16.

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. we applied a blended multiple of 13.Brookfield Infrastructure Partners. National Grid trades at 9x the Enterprise value to 2012 EBITDA mean estimate. one year from now. In contrast. National Grid (NG-LON. Based on applying these valuation metrics to our 2013E EBITDA estimate. we understand a significant portion of the Westshore Terminal’s 27 million tonne annual capacity has been accounted for by existing customers through takeor-pay contracts.0x to our forecast EBITDA of $393 million (excluding the developer contribution from the U. ITC Holdings (ITC-NYSE) is the largest independent electricity transmission company in the U. Transport & Energy For determining the value of the Transport & Energy assets we considered typical North American railroad EV/EBITDA multiples. while National Grid trades at a lower relative multiple (9x) given then the lower earned returns on equity for distribution assets in the U.K. Specifi- . which range from 6–10x.S. 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). We believe Transelec should trade at a premium to ITC. For example. NGG-NYSE) is an electricity transmission and gas distribution and transmission company with assets in both the U. Based on our estimate of the business mix in 2013. North American utilities are required to invest at least their assets’ depreciation charges to maintain the rate base. which range from 9x to 13x. Page 43 Utilities In determining the value of the Utilities assets we considered a number of publicly traded comparables. It enjoys significant natural advantages. which is consistent with typical North American pipeline and storage multiples highlighted previously and recently announced transaction multiples in the sector. distribution business). in line with regulated utilities in Canada. L. we arrive at a blended multiple of 12.UN-TSX) is a coal export terminal on North America’s West Coast. and U. 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. while Westshore Terminals trades at approximately 16x.5x to our forecast EBITDA of $429 million.S. In the case of NGPL.5x the Enterprise value to 2012 EBITDA mean estimate. After taking into account the forecast indebtedness of the segment.S. As well.P.5 billion. and typical North American pipeline and storage EV/EBITDA multiples.K. ITC’s transmission assets are located in Michigan and surrounding states. ITC trades at 10. we have applied a 12x multiple to our 2013E EBITDA forecast. which provides access to large ships. Westshore Terminals (WTE. Our blended multiple assumes the comparables trade at the same multiples. we arrive at an equity value for the Utilities business of approximately $2. and are not recurring. as the Chilean regulatory regime allows for Transelec to earn a real rate of return on its rate base. including its proximity to low-cost producing mines and deepwater berth capacity.

After taking into account the forecast indebtedness of the segment. Kinder Morgan is in the process of acquiring El Paso. we arrive at an equity value for the Transport & Energy business of approximately $3. which range from 5x to 17x. we arrive at a blended multiple of 12x to our forecast EBITDA of $455 million. we considered typical international port sector EV/ EBITDA multiples.7 billion or $31. but below recently announced transaction multiples in the sector. We are valuing the cash as cash. the optionality of which is has not been captured in our valuation. the Forth Ports. For our valuation of the Ports assets.P. which is a 23% premium to current share price of $26. and therefore has scope to expand volumes without significant investment. Sum-of-the-parts Value We have capitalized our 2013 management fee and G&A estimate at 10x. 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. After taking into account our forecast of the cash retained in the business and corporate and subsidiary debt in 2013. but believe it will be deployed to earn a return. and the port operator is presently in the process of expanding the terminal’s container capacity for service with the benefits likely to be had further out (i. we arrive at a sum-of-the parts value of approximately $5. Based on applying the appropriate valuation metrics to our 2013 EBITDA estimate for each of the sub-segments. which is above the mid-range of the publicly traded peers. which owns North American’s largest natural gas pipeline system for 13x LTM EBITDA.Page 44 Brookfield Infrastructure Partners. the group of investors that acquired 80% of NGPL from KMI in 2007 paid 10x LTM EBITDA. At the same time..37. . cally.e. In comparison. Specifically. In comparison. L. We have applied a 13x multiple to our 2013E EBITDA forecast. Babcock and Brown acquired PD Ports in 2006 for 13x LTM EBITDA.0 billion. which provides high revenue certainty and long term stable growth. The Forth Ports has substantial property holdings (and surplus land for future development) and capacity has been expanded significantly in recent years. a significant portion of PD Ports’ revenues are from conservancy tariffs and property rental. 2014).

0x 12.85 17% Reflects external valuation of Timberlands -$67 10. Page 45 Table 11: Sum-Of-Parts Valuation 2013E EBITDA ($MM) Utilities: Regulated EBITDA Developer Contibutions Segment Debt Net Asset Value ($MM) Multiple $393 $36 $429 13.0x 12.0x 13.044 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 $6.400 $3. L.4x Value $5.IEG (Island of Man) UK PD Ports Euroports Chilean Toll Road Segment EBITDA Segment Debt 227 100 24 40 40 24 $455 12.103 $216 $5.828 $2.444 $5.0x 6. BMO Capital Markets .1 $30.0x 8.711 185.37 2724 1200 192 520 520 288 $5.491 Excludes developr contributions of $9 million per quarter Reflects non recurring nature of developer contributions Transport & Energy: Brookfield Rail North America ..0x Value Timber: Partnership Capital Value Total Cash Corporate Liabilities Management Fee Net Asset Value (NAV) Shares NAV / Share Premium (Discount) to Current Price $26.444 -$2.0x 12.P.P.319 -$2.Brookfield Infrastructure Partners.0x 12.0x 13.NGPL OTHER .0x 2013 Cash retained in the business 2013 Corporate and subsidary debt 2013 Management fee capitalized at 10x Source: Brookfield Infrastructure Partners L.142 $663 -$424 -$670 $5.

Page 46 Brookfield Infrastructure Partners. . we arrive at an equity value of $32.52. BMO Capital Markets Corporate Structure BIP is a Bermuda based limited partnership structure that holds a 71% interest in a private entity called Brookfield Infrastructure L.0x 14. Figure 34: Historical Price / TTM FFO/Unit 18. If we applied the average multiple to our 2013E FFO/unit forecast of $2.0x 12.75.P. L. 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. FFO Multiple Approach BIP’s average price-to-TTM FFO/unit multiple has averaged 13x. (“Holdings”).0x 16.P.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 Source: Brookfield Infrastructure Partners. Figure 37 shows BIP’s corporate structure as well as the economic interests of various stakeholders.0x 10.

*redeemable shares are redemable for cash equal to Partnerships unit market price. Under IFRS partial interests in assets where information in this report will present the Partners proportionate interests in cash ow..4% PD Ports…..... but notpartners an IFRS presentation.......….. the redeemable shares and units Partnership has control over Holdings...…......…100........ PD Ports and Texas tran smission project are owned through a Brook eld Asset Management sponsored fund... the redeemable shar es and units are treated as one.5% LongviewTimber…...42.... Accordingly.. Public Unit Holders ..……….1 million units outstanding.. ("BAM") Brook eld Infrastructure Partners L..P....…40..37... Under are interests treated as in-the-same. however. ...0% Timber Infrastructure Island Timberlands …... liabilities. PD Ports and Texas transmission project are owned through a Brookfield Asset Source: BMO Markets.. Holdings..17...........…. no controlbut arenot one-line equity accounted.. Redeemable shares can be put tobe Holding’s for cash equal to the Partnership’s unit value..0% Euroports……….0% Transelec……...0% Source: BMO Capital Markets.. The partnership agreement outlines unit holders’ rights.…100... Company reports Note:Capital A portion of DBCT.24. and IFRS partial inoneassets where there is no control arehas one-line equity The Partners nancial presents the consolidated financial results...…11. The financial information in this report assets..…... .….....….... and thereis isinstructive......…59...0% Ontario Transmission....... Accordingly...... A ssumes Toll Road purchase closes.…...... ...………….…. . Assumes Toll Road purchase closes.. Brookfield Infrastructure Partners...….99% Brook eld Asset Management Inc..….in-the-same..... Unitholders of BIP are limited and their rights are subject to a partnership agreement that is contractual in nature and not duciary.100....... liabilities. 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.......…. 24... Figure 37 shows BIP’s corporate structure as well as the economic interests of various stakeholders..132 million units. ("Holding LP") Common Shares 100% Utilities Infrastructure DBCT ……………….... .. will present the Partners proportionate interests in cash flow...... The settle the obligation with Partnership units. 2011 Equity issue.......Owns 53 million redeemable* shares. the Partnership may settle the obligation with Partnership units......0% NGPL……......0% Powerco….. there are 185..8% Cross Sound Cable.71.......…. and Partners presents the consolidated nancial results................ LP Interest 28% LP Interest 71% GP Interest 1% Brook eld Infrastructure L... unit however the Redeemable shares can put to Holding’s for cash equal to the Partnership’s value....... which is instructive..P.……... which an IFRS presentation.. . BAM ... The Partnership control over accounted...... 100...0% Autopista Vespucio (Toll Road) Norte…………………..P...0% IEG…..0% IEG……. L.. Company reports Management sponsored fund.26. and assets...... ("Partnership") Post October 26....…….. and 46 ......30.….....23% Transport & Energy Brook eld Rail... Note: A portion of DBCT..…. Page 47 Figure 37: Corporate Structure Figure 35: Corporate Structure GP Interest 0..01% LP Interest 1% BIP Unitholders LP Interest 98..other 29% through redeemable shares that represent a 28% interest in Holdings plus a 1% General Partnership (GP) interest in Holdings...0% Texas Transmission.0% Tunel San Cr istobal ....

Changes in tax law may also affect the tax status of a unit holder with respect to receiving BIP distributions. BAM is the general partner and manager of the Infrastructure Partnership. . Risks Limited operating history: BIP was spun out of BAM in January 2008 and underwent a transformational merger in late 2010. the grain harvest in Australia used Brookfield Rail.33 per unit per quarter. appointing directors or preventing a change of control. does not give holders rights with respect to removing BAM as the managing general partner. Currently BIP’s quarterly distribution to the limited partners is $0. including redeemable shares.Page 48 Brookfield Infrastructure Partners. 2011. and 25% of distributions above $0. 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. Holding’s expects to distribute 60–70% of the partnership’s Funds from Operations (FFO) to unitholders. BAM receives a base management fee equal to 1. Weather: Some of BIP’s assets are collaterally impacted by weather. the fee would be approximately $60 million per year. and amongst other items. Unitholders of BIP are limited partners and their rights are subject to a partnership agreement that is contractual in nature and not fiduciary. the company is targeting 3% to 7% annual distribution growth. BAM is entitled to 15% of distributions between $0. Based on the market value of the partnership as of December 5.305 and $0.35 per BIP unit.330 per unit per quarter. For example. The Partnership does not employ any personnel and relies solely on BAM to provide day-to-day management and administrative services.25% annually of the market capitalization of BIP. are subject to various regulatory regimes and may undergo regulatory reviews that could result in a reduction in the cash flow. there is limited operating history to draw from in evaluating each segment of the business and the business as a whole.P. representing a payout of 56% of our 2013E FFO forecast. In exchange for BAM’s managerial services. L. subject to any incentive distributions paid to BAM as the general partner. or assets that BIP has interest in. Regulatory: BIP. 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. The partnership agreement outlines unit holders’ rights.33 per quarter. BIP is subject to environmental laws and regulations that could impose fines or cause BIP to incur capital expenditures to bring into compliance. Based on the growth in per unit FFO. The incentive distribution to BAM ranges from zero to as much as 25% of incremental distributions over $0. Unitholders receive quarterly cash distributions as determined by managing general partner. Further. Tax: BIP is a Bermuda based limited partnership structure that sits on top of corporate structures. To the extent that weather diminishes the harvest the railway can suffer lower volumes and pricing. Accordingly. or an investee entity resides.

Further.P. but has assets and cash flow denominated in other currencies. Insurance: The timber assets are not insured and are subject to natural disasters such as fire and insect destruction. Foreign Exchange: BIP reports in U. BIP unit holders have voting rights with respect to change of control and liquidation. either exogenous or internal that lead to limited access to liquidity or higher interest rates could materially impact the business. amongst other rights. . 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.S. 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. Page 49 Interest rates and liquidity: BIP uses the debt markets and relies on access to bank facilities to manage and grow its business. could impact cash flows. A significant strengthening of the U. Counter Party Risk: BIP relies on a number of counterparties in conducting its business. but the agreement with BAM is contractual not fiduciary. depending on hedges in place at the time.Brookfield Infrastructure Partners. BAM is the general partner and BIP is managed in the context of the partnership agreement. Events. dollars.S. dollar against these currencies. L.

) 2008 2009 2010 Current* Average: EPS US$ P/E nm nm nm nm DPS US$ 1.11 ND * Current EPS is the 4 Quarter Trailing to Q2/2011.Page 50 Brookfield Infrastructure Partners.8 Payout % nm nm nm nm BV US$ 23. Last Daily Data Point: December 20.09 ND 48.69 $25.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 $13.5 5.5 ROE % nm nm nm nm BIP .(US$) Price / Earnings 0.48 $25.01 FYE (Dec. L.5 nm 0. Brookfield Infrastructure Partners (BIP) Quarterly Price (US$) 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 0 2009 2010 2011 0 2 1 0 Revenue / Share .3 5.5 6.10 1.75 $17.2 5.01 0 1985 1990 1995 2000 2005 2010 -0.43 NA P/B 0.P.(US$) 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 2 EPS (4 Qtr Trailing) .06 1.40 Yield % 9. 2011 .01 $17.4 nm 0.06 1.

2% 38.bmocapitalmarkets. please go to http://research-ca. Risks: BIP’s limited operating history.BMO Capital Markets has provided investment banking services with respect to this issuer within the past 12 months. Company Specific Disclosures 1 . 6 . BMO CM Ltd.0% BMOCM US IB Clients*** 38.9% 1.2% 58. For Important Disclosures on the stocks discussed in this report. and service to clients.9% 0. 4 .0% BMOCM Universe**** 42. or will be. . ***** Reflects rating distribution of all companies from which BMO Capital Markets has received compensation for Investment Banking services as percentage of Investment Banking clients. foreign exchange.9% BMOCM IB Clients***** 48. 2 . BMO Capital Markets Corp. I also certify that no part of my compensation was.BMO Capital Markets has undertaken an underwriting liability with respect to this issuer within the past 12 months. hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. has received compensation for Investment Banking services as percentage of Investment Banking clients. L. or an affiliate within the past 12 months: Investment Banking Services 8 . performance of recommendations.BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of this issuer.BMO Capital Markets has managed or co-managed a public offering of securities with respect to this issuer within the past 12 months. accuracy of earnings estimates. is. directly or indirectly. Bert Powell.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.6% 13. Methodology and Risks to Price Target Methodology: Our target price is based on a combination of BIP’s forecast cash flow yield in 2013. Reflects rating distribution of all companies covered by BMO Capital Markets equity research analysts. historical P/FFO multiples and our estimate of its NAV one year from now..Brookfield Infrastructure Partners. rising interest rates and liquidity.3% * ** *** **** Reflects rating distribution of all companies covered by BMO Capital Markets Corp.com/Company_Disclosure_Public.2% 0. has received compensation for Investment Banking services as percentage within ratings category. Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates. CFA.This issuer is a client (or was a client) of BMO Nesbitt Burns Inc.5% 54. Reflects rating distribution of all companies from which BMO Capital Markets Corp. regulatory changes.8% 61.BMO Capital Markets or an affiliate has received compensation for investment banking services from this issuer within the past 12 months. equity research analysts. 3 . Distribution of Ratings (September 30. Reflects rating distribution of all companies from which BMO Capital Markets Corp.5% 4. 2011) Rating Category Buy Hold Sell BMO Rating Outperform Market Perform Underperform BMOCM US Universe* 39.2% 0. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients.. changes in weather patterns. IMPORTANT DISCLOSURES Analyst’s Certification Page 51 I.asp.6% 2.9% Starmine Universe 57. related to the specific recommendations or views expressed in this report. 18 . potential changes in taxation laws. which includes the overall profitability of investment banking services.9% BMOCM US IB Clients** 12.P.1% 50.

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