Brookfield Infrastructure Partners L.P. (BIP) Q2 2026 Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners L.P. Second Quarter 2026 Results Conference Call and Webcast. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a Q&A session. To ask a question during the session, you will need to press star, then one on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, David Krant, Chief Financial Officer. Please go ahead.

Thank you, Crystal, and good morning, everyone. Welcome to Brookfield Infrastructure Partners’ Second Quarter 2026 Earnings Conference Call. As introduced, my name is David Krant, and I am the Chief Financial Officer of Brookfield Infrastructure. I am joined today by our Chief Executive Officer, Samuel Pollock; our Chief Operating Officer, Benjamin Vaughan; as well as Dave Joynt, a Managing Partner on our investments team; and Lief Williams, a Managing Director focused on AI infrastructure investments. I will begin the call today with a discussion of our second-quarter 2026 financial and operating results, followed by an update on our asset sale initiatives. I will then turn the call over to Samuel, who will discuss our new investments and provide an outlook for the business. At this time, I would like to remind you that in our remarks today, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, I would encourage you all to review our latest annual report on Form 20-F, which is available on our website. We are pleased to report that, in addition to Brookfield Infrastructure delivering strong financial results this quarter, we have also made meaningful progress across our strategic initiatives. Beginning with our financial and operating results, in the second quarter, we generated FFO of $702 million, or $0.89 per unit. This represents a 10% increase compared to the prior year on both a quarterly and year-to-date basis, which is in line with our long-term growth target. The increase reflects organic growth within our 6% to 9% target range, driven by inflation-linked rate increases in our Utility segment, strong activity levels across our Transport and Midstream businesses, and the commissioning of new capital projects in our Data segment. Results also benefited from the strong cash contribution from new investments, which are generating returns meaningfully above the yield on our completed asset sales. I will now go through our results by segment in more detail. Starting with our Utilities segment, we generated FFO of $196 million, an increase of 5% versus the prior year. The increase was driven by inflation indexation, the contribution from capital commissioned into our rate base, and the acquisition of a South Korean industrial gas business completed last year. This growth was partially offset by foregone earnings from asset sales, including the largest of four concessions within our Brazilian electricity transmission operation and our Mexican regulated natural gas transmission business, both of which contributed results in the comparable period. Moving on to our Transport segment. FFO was $311 million, representing a 7% increase over the prior year after normalizing for capital recycling activity. The increase was driven by broad-based strength across our operations, with volumes across our rail, port, and toll road operations increasing between 3% and 7% year over year. In addition, results benefited from the contribution from our North American railcar leasing platform, which closed on January 1. These contributions were partially offset by the foregone earnings associated with the sale of a 49% interest in our Australian export terminal, the sale of our Australian container terminal business, and a partial sale of our U.K. port operation, all of which closed last year. Our Midstream segment generated FFO of $183 million, up 17% compared to the same period last year. The increase reflected strong organic growth across the portfolio, particularly at our Canadian diversified midstream business, which benefited from strong asset utilization as well as elevated commodity pricing. Results also benefited from the contribution of our recently acquired U.S. refined products pipeline system, which more than offset the lost earnings from the sale of our U.S. gas pipeline last year. Lastly, FFO from our Data segment was $154 million, representing an increase of 36% compared to the prior year. The increase was driven by the contribution from our U.S. bulk fiber network acquired last September, as well as income generated by our data center developers and the initial contribution from our partnership with Intel to construct semiconductor foundries in Arizona. Turning to our balance sheet and capital recycling program. Public markets have been an increasingly effective exit channel for us. So far in 2026, we have generated meaningful proceeds from public market transactions, reflecting both the quality of the businesses we have built and the depth of investor demand for scaled, high-quality infrastructure platforms. IPOs and follow-on public market monetizations provide us with an attractive path to crystallize value, broaden the buyer universe, and retain flexibility to participate in future upside. They also give us optionality alongside private sale alternatives, supporting value maximization across multiple potential exit paths. The most recent example was the IPO of our U.S. colocation data center operation on the New York Stock Exchange. Since our initial investment in 2018, we have transformed the business into a scaled platform with a large presence across major U.S. markets, serving more than 1,700 customers. A key value driver in this transformation was the acquisition of over 40 sites through a bankruptcy process, which scaled the platform, optimized the portfolio, and accelerated its growth. During our ownership, we have increased EBITDA by more than four times and expanded capacity from 115 megawatts to approximately 390 megawatts. The IPO represents the next step in our value creation plan. The transaction generated gross proceeds of approximately $1.2 billion at an attractive valuation. Brookfield retains a 64% ownership interest in the business and will continue to participate in future value creation, including the potential to grow the platform to approximately 1 gigawatt of capacity through equipment optimization and under-roof expansion. In the quarter, we also advanced monetization across two listed businesses in India. At our Indian telecom tower portfolio, we sold a 7% interest through the capital markets. Similarly, at our Indian gas transmission operation, we completed several smaller sell-downs to public market investors following our inaugural sale last year, exiting a further 14% of the business. Combined, these transactions generated nearly $100 million of proceeds net to BIP. Adding to our asset sale progress, we executed a second transaction under our established framework for monetizing de-risked and contracted container portfolios at our global intermodal logistics operation. On July 1, we completed the sale of a majority interest in a portfolio of contracted containers, generating approximately $60 million to BIP. Finally, at our North American railcar leasing platform, we generated approximately $20 million in proceeds at our share. These proceeds were primarily generated through our structured investment framework, which provides for the transfer of ownership to our partner over time. Altogether, these transactions further support our ability to self-fund growth while recycling capital at attractive valuations. So far in 2026, we have generated nearly $1.2 billion of proceeds from our asset sales, with several sale processes well underway that give us confidence in achieving our capital recycling objective for this year. That concludes my remarks this morning, and I will now turn the call over to Samuel.

All right. Thank you, David, and good morning, everyone. The first half of the year was active on both sides of our asset rotation strategy. In addition to the asset sales David just discussed, we have secured or deployed over $800 million into new investments. This includes the acquisition of Clarus, New Zealand’s leading gas infrastructure utility, with closing expected in the coming weeks, and an increased equity commitment to the Bloom Energy framework to support an additional CapEx project. Looking beyond the projects already secured, momentum in AI infrastructure is accelerating, with our AI factory strategy gaining traction globally and expanding our pipeline of investment opportunities. In the U.S., Brookfield was selected by the Department of Energy to develop an AI data center campus in Kentucky designed to support over 1.2 gigawatts of compute capacity. We have formed a consortium to advance the project through a bring-your-own-power model. In South Korea, Brookfield, NAVER, and NVIDIA announced plans to develop 200 megawatts of sovereign compute capacity. Under the proposed arrangement, Brookfield would act as the exclusive capital partner to finance the deployment of GPUs at the campus, supporting one of South Korea’s largest planned sovereign compute developments. We also expanded our framework with Bloom fivefold, from $5 billion to $25 billion of total CapEx, creating a significant pipeline of future deployment opportunities for behind-the-meter power solutions for leading hyperscale customers. Together, these initiatives demonstrate the breadth of our AI infrastructure opportunity set and our ability to originate large-scale projects on a bilateral basis by combining our digital infrastructure and power expertise with flexible capital at scale to support leading energy and technology partners globally. As these opportunities progress, we will only commit material capital once appropriate commercial arrangements are secured and our risk-adjusted return objectives are met. With a broader opportunity set in front of us, converting our growing pipeline to capital deployment is a key focus for the balance of the year. We are advancing opportunities across sectors and geographies through traditional M&A and strategic capital partnerships, where leading companies are seeking long-duration capital at scale and an aligned operating partner. Together, these channels provide multiple avenues to deploy capital into high-quality opportunities at attractive risk-adjusted returns. One of our strategic initiatives for the year is to complete the recently announced corporate simplification to convert BIP and BIPC into a single publicly traded corporation, Brookfield Infrastructure Partners Inc. We believe the simplified structure will provide improved trading liquidity, increased demand from index funds and ETFs, and broader access to investors who prefer a traditional corporate structure, among other benefits. We expect the simplification to be tax-deferred for Canadian and U.S. investors and completed without any meaningful cost to the business. Special meetings of BIP unitholders and BIPC shareholders will be held on October 14, and we anticipate completing the simplification in the fourth quarter of 2026. Ultimately, we expect this simplification to drive long-term value for all security holders. In closing, we enter the second half of 2026 from a position of strength. Resilient operating performance, a healthy balance sheet, and meaningful proceeds from recent asset sales provide significant flexibility to pursue attractive growth opportunities. This concludes my remarks, and I will pass it back over to the operator, Crystal, to open the line for Q&A.

Thank you. At this time, we will conduct a Q&A session. As a reminder, to ask a question, you will need to press star, then one on your telephone and wait for your name to be announced. To withdraw your question, please press star, then one again. Our first question will come from Cherilyn Radbourne from TD Cowen. Your line is open.

Thanks very much, and good morning. So clearly, the market has become more anxious about the CapEx going into AI and data centers and the timing of the payoff. I was hoping you could speak to the opportunity set and how BIP is able to maintain its investment guardrails against that backdrop. And maybe you could touch on whether you are seeing degradation in contract terms more broadly across that space.

Hi, Cherilyn. I'll start off, and then I'll ask Lief Williams, who is with our AI infrastructure group, to add further color. As far as the momentum in the sector and the demand signals that we are seeing, we have definitely seen no reduction in the developments underway or the speed at which our clients are looking to bring forward projects. So while capital markets have obviously pulled back in the last couple of weeks, customers—and our customers are the largest hyperscalers in the world—are obviously thinking about longer-term trends as opposed to short-term gyrations. Regarding your question about degradation of contracts, we have always told our investors that we will only deal with the highest-quality customers and invest in those projects where we have proper risk-adjusted returns. The main guardrail is the fact that all these projects require a significant amount of debt capital. In order to source that debt capital, you need to have highly creditworthy counterparties. If you do not, then you are not going to be able to raise the equity capital. While there might be some smaller projects that others might be pursuing where they are taking on lesser-quality counterparties, in our case, we are only dealing with the best. We are not seeing any degradation in terms. Lief, do you want to talk about any trends that you are seeing as far as new developments?

Thanks, Samuel, and thanks for the question, Cherilyn. From a commercial terms perspective, as Samuel said, we continue to see strong contracts from our customers. In terms of development yields, I would say it is still high single digits to low double digits. You see that move a little bit with interest rates. We are in a slightly higher interest rate environment than in the past, and that ultimately flows into development yields as well as the annual escalator. Whereas historically that has fluctuated between 2% and 3%, right now you are seeing it at the higher end of that range, more 2.5% to 3%. The last key commercial term I would highlight is lease term. Typically, the focus for greenfield projects is 15 years plus, and we are starting to see customers who are open to a 20-year initial lease term. From our perspective, that is a crucial input to developer returns. Overall, I would characterize it as a strong market on the private side. We see very good demand, and we think it is a great opportunity to deploy capital at attractive risk-adjusted returns.

Thank you for that detail. Just to make this call not all about data, I thought I would ask about where else you are seeing opportunities outside of data. One area where we are seeing some news and potential activity is industrial carve-outs, with resource companies looking to focus on core operations and carve out utilities and things of that nature. Are you seeing that in your pipeline as well?

On the first part of your question, where we are seeing knock-on effects in other parts of our business, one area where you might not expect a lot of impact is our transportation business. We are seeing a lot of what we refer to as the domino effect of these developments requiring products and assets from different parts of the world, and that is reflected in trade flows. I will ask Dave Joynt, who runs our transportation business, to talk about what we are seeing from a transportation perspective.

Thanks, Samuel, and thanks, Cherilyn, for the question. Overall, I think you have seen a very strong quarter for us in transportation, but what might be a little bit hidden is that a lot of that strong demand is actually coming from the big build-out of data centers themselves. If you look at Chinese exports on a year-to-date basis, they are up nearly 20%. Underneath that is machinery and motors and transformers and pumps and valves and tubing that goes into lots of machinery that goes into the complex itself. That is flowing through a very strong demand environment for our container leasing business, but also for our ports and our rails on a global basis.

We are definitely focused on strategic partnerships and carve-outs in a number of sectors. That worked well on the railcar leasing side that we recently did. We are seeing a number of industrial companies looking to take advantage of capital available from infrastructure players like ourselves to source low-cost capital to grow their operations. It is a focus, and hopefully some of the transactions we will announce in the coming quarters will demonstrate that.

Thank you for the time.

Thank you. One moment for our next question. Our next question will come from Devin Dodge from BMO Capital Markets. Your line is open.

It seems like the AI factory strategy is really starting to gain traction here. It is obviously great to see. It seems like, based on your comments, there are still a lot of irons in the fire. Just wondering if you can frame how large of an opportunity the AI factory strategy could be over time, and maybe for the projects and frameworks that you have secured to date, any thoughts on potential equity commitments or deployment timing from a BIP perspective.

I might ask Lief to comment on some of the initiatives we have globally. Some are still in the early stages, and we cannot get into too many specifics on them. We have been busy developing a number of them for the past year. As these opportunities are sovereign AI factories, they tend to take a bit of time because of dealing with governments. On potential deployment, if we look out over a longer-term timeframe, in a three- to five-year time frame, we see the potential for BIP to be significant and a major component of our investment. Because many of these opportunities are development-related, there is a delayed-draw component. Capital is deployed over a period of time, so significant dollars for the AI factories will come in a couple of years as opposed to the next year or two. They are somewhat back-end loaded. Lief, do you want to give a quick update?

Absolutely. We see a massive opportunity in the space. We think in excess of 100 gigawatts of load will be required over the next decade. Hyperscalers are looking for partners who can engage at scale and help move the needle. Building gigawatt-plus-scale campuses is a huge undertaking. We announced a project in western Kentucky located on a Department of Energy site that will ultimately serve as a data center with in excess of 1.2 gigawatts of IT load. That type of project will require up to $100 billion in private capital. That will support the data center itself, the compute inside, and the power generation that will support it. The power piece is crucial to ensure there is not an adverse impact on local ratepayers and that these AI factories are bringing their own generation. That is crucial from a practical perspective and from a social-license perspective, ensuring strong local support and that these sites bear the cost of the grid required. From Brookfield’s perspective, we have been looking for sites like this around the world, given our global footprint. As mentioned, we announced a large-scale project in the U.S., and we also have large-scale sites in Canada and Europe and recently announced one in South Korea. We think we are well positioned to be a partner of choice for large technology companies and sovereign governments around the world.

Okay. Thanks for that. For your data center businesses, there seems to be growing pushback around the build-out of these facilities. We've definitely seen that more recently in the U.S. How do you think this plays out over time? Do you build where there is less resistance, or are there different approaches being pursued that could address at least some of the concerns from governments and local communities?

Thanks, Devin. There is increased NIMBYism or pushback against certain data center developments. There are also lots of false narratives and perceptions about the industry. Our experience is that many local communities welcome data center investments. From a geography perspective, NIMBYism is probably most prevalent in the U.S. right now. It is growing in the European market, and we are starting to see some pushback in smaller markets like Canada as well. The false perceptions mostly relate to water consumption, rising electricity rates, and noise. The industry is focusing on comprehensive solutions to these issues. For example, closed-loop water cooling means the consumption of water is de minimis; data centers can be neutral to positive on electricity rates and support local utilities and their grids; and noise can be minimized. Our operating companies are leaders on these fronts, and we are seeing support from many local communities. In terms of where data centers get developed, the industry is actively working on solutions, and we are focusing on geographies where developments are welcome.

Okay. Thanks for that, Benjamin. I will turn it over.

Okay. Thank you.

Thank you. Our next question will come from Maurice Choy from RBC Capital Markets. Your line is now open.

Thanks, and good morning, everyone, or good afternoon.

Good morning.

Just a quick question on AI for a moment. Notwithstanding all the comments you made about NIMBYism and the earlier response about timing of the payoff for CapEx in AI, you have signed a number of AI-related deals in Kentucky and South Korea. Are these AI opportunities progressing in line with your prior projections, or are there pockets of the AI infrastructure value chain that may be accelerating?

I will ask David to talk about it from a business-plan perspective.

Good morning, Maurice. From a business-plan perspective, I would say deployment is fairly in line with what we had for deployment. The pace of announcements and initial frameworks agreed to may have accelerated a little faster than we would have thought. From a pure investing perspective, I think we are right on track. At Investor Day last year, we said that if the AI infrastructure strategy unfolded as expected, we would be deploying $500 million of equity a year in this strategy. With Bloom today and the contracts we have in place, we are probably close to $100 million year to date. If we do upsize the framework and participate, that will get us closer to the midpoint or high end of that range we gave. As we look ahead, progressing the commercial fronts on the AI factories in various regions should help achieve $300 million to $500 million of equity invested in AI infrastructure on an annual basis. I think we are in line with where we thought we would be.

On the second part of your question about pockets of the value chain, our AI group refers to a very large opportunity set. You can already see, with the magnitude of projects we have signed, the market is massive. We generally talk about four areas: AI factories, compute, behind-the-meter power opportunities, and adjacencies related to AI. For compute, we have established Radiant, our in-house neocloud, and have signed agreements to provide compute, with the recent one being NAVER. Behind-the-meter power opportunities are represented by Bloom. For AI factories, Lief described the sites we are pursuing. We expect many to be shovel-ready in the coming quarters. On the adjacencies, opportunities arise across all parts of our business. As David mentioned, we are seeing trickle-on effects into transportation. The opportunity set is developing as expected, and we will discuss further at Investor Day.

Yeah. Looking forward to that. If I could finish with a comment you made: 'The public markets have been an increasingly effective exit channel to maximize value in your capital recycling program.' Can you unpack that a little bit, especially relative to private channels you have utilized more in the past, or perhaps how the private channels have changed?

In short, nothing has changed on the private channels. They remain open, and all our tools to exit remain relevant. One thing that changed in the last nine to 12 months is that the equity capital markets opened up and were receptive to new IPOs, which we had not really seen for a couple of years. We are taking advantage of the market as it exists. It is a competing source of capital to the private markets. In some industries it is competitive; in others, less so. The market windows open and close. It is probably closed for the next little bit, but I suspect it will reopen given the companies coming to market in the fall. We do not think the market is shut, and we will continue to consider it for other opportunities.

Thank you.

Thank you. And I am showing no further questions from our phone lines. I would now like to pass the conference back to Samuel Pollock for any closing remarks.

All right. Well, thank you, Crystal. And thank you to everyone for joining the call this morning.