Earnings Call Transcript - BIP Q1 2023

David Krant, Chief Financial Officer

Thank you, operator, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' first quarter 2023 earnings conference call. My name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure Partners. I'm also joined today by our Chief Executive Officer, Sam Pollock; and Dave Joynt, Managing Partner on our investments team focused on global transport opportunities. I'll begin with the discussion of our first quarter financial and operating results as well as our balance sheet strength and liquidity position. I'll then turn the call over to Dave, who will discuss global supply chain investment opportunities. Finally, Sam will provide an update on our strategic initiatives and priorities for the balance of the year. Following our commentary, we will be joined by Ben Vaughan, our Chief Operating Officer, for our question-and-answer period. 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 our known risk factors, I would encourage you to review our annual report on Form 20-F, which is available on our website. With that, during the first quarter of 2023, we generated strong financial and operational results. Our regulated and contracted business generated funds from operations or FFO of $554 million or $0.70 per unit, both increasing 12% over the prior year. Organic growth was strong at 9%, which is the high end of our annual target, reflecting the benefit of elevated levels of inflation on our tariffs, strong volumes across our transport networks and the commissioning of approximately $1 billion in new capital projects over the last 12 months. Results were further supported by the contribution of approximately $2.4 billion of capital deployed in new acquisitions over the past year. Partially offsetting the strong underlying performance of our business was the normalization of market sensitive revenues, as the prior year benefited from elevated commodity prices, as well as the impact of asset sales. Diving deeper into our segments, starting with utilities, we generated FFO of $208 million, an increase of 25% from the same period last year. The current quarter benefited from the expansion of our residential decarbonization infrastructure platform in North America and Europe following the acquisition of HomeServe that closed earlier in the quarter. Results also benefited from the strong organic growth of over 10% within our base business, as well as the full quarter contribution from an Australian regulated utility we acquired midway through February last year. In January, we completed the acquisition of HomeServe to bolster our global residential decarbonization infrastructure platform. As part of our business plan to establish leading residential demand-side decarbonization businesses, we subsequently separated the North American and European operations to facilitate integration into our existing regional operations. We've begun to unlock synergies, including enhanced procurement opportunities, as well as driving higher sales or cross-selling our multi-product offerings. Our global footprint is comprised of operations in six countries with over 260,000 installations completed annually. Moving to our transport segment, where FFO for the first quarter was $192 million, an increase of 11% on a same-store basis. As a result of strong customer demand and activity levels, we continue to benefit from higher flows across our networks and increased rates that are generally in line with inflation in the countries we operate in. Specifically, our global toll road portfolio saw traffic levels increase 3%, our rail networks transport 11% more volumes, and our global ports business moved 5% more cargo relative to the prior year. Our midstream segment generated FFO of $198 million, consistent with the prior year. Our base business continues to benefit from strong utilization due to increased long-term contracting and strategic capital projects designed to enhance the accessibility of our infrastructure. At our diversified Canadian midstream operation, volumes on our conventional systems increased 6% from the same period in the prior year. Utilization at our Western Canadian natural gas gathering and processing operation increased to record highs and our U.S. gas pipeline has fully contracted storage services, while transportation throughput increased 11% over the prior year. Strong performance at our North American gas storage business continued from the fourth quarter, offsetting the normalization of market-sensitive revenues at our U.S. gas pipeline and diversified Canadian midstream business. Finally, our data segment generated FFO of $70 million, an increase of 21% from the same period last year. Organic growth for the segment was 9%, resulting from additional points of presence and inflationary tariff escalators across the portfolio. Our integrated data distribution business in New Zealand benefited from a recovery in roaming revenue due to an uptick in international travel, as well as fiber connectivity requirements from the commissioning of new third-party data centers connected to our network. Current quarter results also benefited from the acquisition of a European telecom tower business in February and the contribution from our Australian fiber operation acquired in August of last year. In addition to the strong financial and operational start to the year, our balance sheet is in excellent shape. Despite capital market volatility, driven by monetary policy and isolated banking failures during the quarter, we are confident in the strength of our balance sheet. This strength is recently validated by S&P who reaffirmed our BBB+ credit rating, as well as a newly secured investment grade credit rating of BBB+ from Fitch. The second rating will help us further expand our access to capital and highlights the positive evolution of our credit over time. Our ability to source capital has been proven through cycles and is underpinned by the stable and predictable cash flows generally associated with infrastructure assets. Over the last few months, we raised over $5 billion of capital from nine relationship banks across North America, Europe and Asia to backstop and support our recently secured transactions. We ended the first quarter with total corporate liquidity of $2.4 billion, which will further be enhanced by proceeds expected from our capital recycling program that Sam will touch on shortly. Now before that, I would like to thank you all for your time this morning. And I will now pass the call over to Dave Joynt to further discuss our transport business and supply chain investments.

Dave Joynt, Managing Partner, Investments Team

Thank you, David, and good morning, everyone. This is Dave Joynt speaking, and I'm pleased to join today's call to discuss the investment outlook for infrastructure assets that underpin global supply chains. Over the last decade and a half, we have developed a large and diversified transport portfolio. In particular, we've made significant investments in rail and port infrastructure. Our operations form a critical backbone for global supply chains and are highly utilized or contracted to provide predictable and increasing cash flows benefiting from economic growth. Today, we own and operate a transportation network with over $25 billion of assets under management serving a large and diversified group of customers across the globe. In recent years, geopolitical tensions and the COVID-19 pandemic have caused substantial disruptions, forcing companies to rethink their global supply chains. On one hand, we are witnessing a wave of on-shoring projects associated with high-tech and strategic components, such as semiconductors, medical essentials, and EV batteries. We are finding that these deglobalization initiatives are creating significant investment opportunities for us. On the other hand, lower-value goods, such as apparel, furniture, or household items, continue to be manufactured in low-cost jurisdictions, primarily in Asia. Rather than re-shoring, companies are instead looking to geographically diversify their supplier base, reducing their reliance on any one location or supplier, in what many are terming a China-plus-one strategy. In aggregate, we expect that these diversification efforts will increase the total distance goods travel and global supply chains, which will therefore result in higher demand for container-based transportation. These trends are tied to a greater desire for supply chain resilience and support the value of our in-place asset base, as well as create new and exciting investment opportunities within our transport segment. Most recently, we announced our intention to acquire Triton International in a $13.3 billion take-private transaction, which will further enhance our infrastructure footprint underpinning global supply chains. Triton is the world's largest owner and lessor of intermodal containers and is a critical provider of global transport logistics infrastructure. The size and scale of Triton's global network differentiate it from competitors, driving lower procurement and financing costs, and enjoying structurally high fleet utilization and margins. We were attracted to Triton's highly contracted asset base with approximately 90% of its fleet under long-term contract and limited re-contracting exposure. Furthermore, Triton has a strong going-in yield with highly cash-flow generative assets that are linked to the long-term expansion and decentralization of global trade. In the context of our broader transportation franchise, we expect the acquisition will improve customer relationships and create new organic growth opportunities across our portfolio. Adding Triton to our global rail, port, and logistics businesses will make us one of the most integrated providers of freight transportation services in the world, allowing us to unlock new efficiencies for our customers. More strategically, Triton is uniquely positioned to provide valuable insight into global trade flows. Its size allows it to be one of the first companies to observe real-time changes in market demand, which can be inferred by the ratio of new lease origination to fleet returns. This has implications for Triton's ability to react quickly to market changes, but also benefits the commercial positioning of our broader portfolio and improves our intelligence in capital allocation. Our investment in Triton is just one example of a large opportunity set we anticipate stemming from the ongoing changes to global supply chain. In closing, I also want to note that even as we enter a period of slowing economic growth, it is important to remember the long-term resilience and durability of our transport businesses. Our global rail franchise provides cost-effective, low-emission, and highly efficient transportation for the inputs of everyday life. Our port and bulk terminal assets act as critical gateways for the import and export of essential goods and commodities. Meanwhile, Triton provides the containers that are necessary for the movement of goods amongst global port, rail, and road networks. That concludes my remarks. I will now pass the call over to Sam.

Samuel Pollock, Chief Executive Officer

Thank you, Dave, and good morning, everyone. Today, I'll update you on our strategic initiatives and our priorities for the business in 2023. Our achievements over the last quarter show our resilience and our ability to generate shareholder value through different market cycles. As David Krant mentioned, we had a strong start to the year. In addition to solid results, we've already identified our new investment targets for the year. We agreed to acquire a leading European data center platform and finalized terms for the privatization of Triton International. Our capital recycling efforts are progressing well and expected to yield $2 billion in proceeds. Recently, we sold two U.S. gas storage facilities at attractive valuations, totaling seven business sales in the last year. We're also issuing over $900 million of BIPC shares as part of the Triton privatization, giving us significant financial flexibility for new investment opportunities. Since Dave Joynt discussed the Triton transaction, I won't elaborate but want to emphasize our excitement about these investments. It’s a highly cash-generative business, providing valuable global supply chain insights for our larger transportation networks. We expect our equity commitment to be about $1 billion at closing, which will occur in the fourth quarter, pending customary closing conditions and shareholder approval. Another significant achievement this quarter was our agreement to acquire Data4, a premier hyperscale data center platform in Europe. This platform has around 100 megawatts of existing capacity and a plan to expand by adding 400 megawatts, with much of the growth already contracted or reserved. This gives us high certainty for the first five years of our development plan. The entire growth profile is secure, with all necessary land owned and power arrangements in place for expansion. We find Data4 to be an attractive addition due to its reliable revenue base and favorable regional trends. Our focus on Europe is strategic, considering its land and power constraints, slower development compared to the U.S., and restrictive data sovereignty laws requiring data to be stored where created. Moreover, Data4 fills a geographical gap in our global data center presence, complementing our greenfield development investments across North and South America, Australia, New Zealand, India, and Korea. This transaction is expected to close in the third quarter with an equity investment of around $600 million. Having assessed several similar businesses over the years, we believe our patience and capital discipline have resulted in a favorable acquisition price, significantly below recent comparable transactions. As I mentioned earlier, we have been active in our asset sale program. Since interest rates began rising in March 2022, we've successfully completed seven asset sales, with six closed and the remaining Indian Toll Road portfolio sale set to close in the second quarter. These sales were made to core and strategic buyers at or above our expectations, reflecting strong demand for high-quality infrastructure assets. We sold our interests in two U.S. gas storage facilities to strategic buyers for net proceeds to BIP of about $100 million. These comprised our interest in Tres Palacios, Texas, and our Salt Plains facility in Oklahoma, achieving attractive transaction multiples of around 21x and 15x EBITDA, respectively. Both storage assets and the previously announced sale of Geelong Port were finalized in April. Moving forward, we remain committed to our 2023 capital recycling goal of around $2 billion and are seeing continued strong interest from potential buyers. In conclusion, I want to make a couple of observations. We believe that the long-term positive outlook for the infrastructure sector, coupled with our full-cycle investment strategy, will enable us to continue delivering significant value for investors. Our strategy is rooted in a comprehensive understanding of the sector and the market forces at play. This quarter, we've made notable progress by adding valuable pieces to our long-term growth plans with Data4 and Triton, both expected to generate strong cash flows for unitholders. We are confident that our ability to navigate near-term challenges and focus on investing in high-quality businesses with long-term growth potential will set us apart in this market cycle. Our priorities for the remainder of the year include integrating our new investments and executing our current capital recycling program, while also consistently delivering excellent financial results. These results should benefit from the full-year contributions from the Heartland Petrochemical Complex, the commissioning of new projects in our capital backlog, and the successful closing of both Data4 and Triton acquisitions. That concludes my remarks for today. I will now turn the call back over to the operator to open the line for questions.

Operator, Operator

Certainly. Thank you. One moment for our first question. And our first question comes from the line of Robert Hope from Scotiabank. Your question, please.

Robert Hope, Analyst

Good morning, everyone. First off is on the investment pipeline. You've been very successful as you highlighted in April with the two transactions. As we look forward through the year, what does the pipeline look like? And is the expectation now that more will be focused on the 2024 closing dates?

Samuel Pollock, Chief Executive Officer

Hi, Robert. This is Sam. I'll take that question. Today, I'd say our pipeline is still quite robust. We're taking this time to be selective in what we look at. Given that with the success we've had the last couple of years in deploying capital and the fact that we've secured two attractive acquisitions this year, we're obviously well placed as far as meeting our deployment goals. But we have lots of flexibility and capacity to look at high-value opportunities that are out there today. So we continue to monitor a couple of situations. And to the extent that we think they can be additive to our business, we'll look to pursue something over the next couple of months.

Robert Hope, Analyst

I appreciate the color there. And then maybe just as a follow-up, just in terms of capacity. On the financial side of the capacity, it does appear that you've been very successful in securing maybe some incremental investments. The asset sale target remains at $2 billion. As you look forward, if we do capitalize on additional investments there, could we see that asset sales target move up? Or consequently, is BIPC looking like an attractive funding mechanism right now?

Samuel Pollock, Chief Executive Officer

One of our strengths is having multiple channels to create liquidity, both through capital recycling and stock utilization. Being able to use BIPC for the Triton transaction has provided us with extra flexibility to pursue opportunities further. We will manage our deployment according to our capital availability, which we are always mindful of. The process of capital recycling is continuous; each year, we have businesses that mature and are ready for sale. After we complete this year's targeted capital recycling, I anticipate that next year we will have other businesses to bring to market and continue the process.

Devin Dodge, Analyst

Yes. Thanks. Good morning. I wanted to start with your Indian telecom tower business. So look, a two-part question. First, can you give an update on how that business has been performing? And then secondly, it appears that there may be some consolidation opportunities available. But you’re already one of the largest owners of towers in the country. Just can you speak to whether it may or may not make sense to add towers, more towers into your existing network?

Benjamin Vaughan, Chief Operating Officer

Yes. Hi, Devin. It's Ben Vaughan here. I'll certainly take the first part of that question. Look, as you noted, we do have a large tower portfolio in India. In fact, we have the largest portfolio of towers in the country. By the end of this year, we'll be up to about 175,000 towers, and that would make this one of the largest portfolios in the world. It's very well positioned, because it's a national footprint across India. And these are very modern towers built in the last several years. So it's sort of a 5G-ready national footprint of towers. What's great about the business is it's underpinned by a 30-year contract with a highly capable and creditworthy counterparty. And when we acquired the business, it really had a single tenant. So we had one tenant on the towers. We now have agreements with the two other MNOs as well as a handful of smaller competitors that also want space on our towers. So we continue to bring our co-location rate up and get those additional tenants on our towers. And we're very happy with the progress that we've made so far, and very happy with the investment overall. And in terms of India in general, maybe I'll just make a couple of comments before speaking about consolidation. We're really quite excited about the potential to continue to grow this business in India. India has a very young, talented, and capable workforce, and a very strong culture of meritocracy. As a good example, in the post-COVID period, India was the first country that we saw get back to work five-plus days a week in the office. So a very strong culture of moving forward and getting busy. And so we're excited about the future growth of this business. Because not only does it have all the tailwinds of 5G adoption and increased data consumption, but also is just in a tremendous location in terms of its growth platform. And maybe in terms of further consolidation in the industry, I guess, as always, we would look to be opportunistic as we always would to the extent we could add further towers to the portfolio, and they were attractive in terms of their location relative to our current portfolio and our ability to drive future value, we would look to do that if it made sense for us at the time.

Devin Dodge, Analyst

Thank you for the update. I'm curious about the capital recycling aspect. Have you noticed a decline in interest from pension funds or typical fixed income investors regarding your mature businesses due to the increase in bond yields? If so, has that influenced the type of assets you plan to sell in the near future?

Samuel Pollock, Chief Executive Officer

Hi, Devin. Maybe I'll take that question. This is Sam. I guess the answer to that is a little bit nuanced. First, I would say that the buyer universe today is a bit narrower than in the past. But most of the investors across the universe of infrastructure buyers, whether that's strategics, sovereigns, pension plans, are still looking for select opportunities. And so they are still in the market. There's no particular buyer that I would say is out of the market. They just may be not as growing as quickly today just for a number of factors, but we see them for our assets which we think are among the best in the world. We still see a broad base of all those types of buyers. And our expectation is that once the current market environment has progressed and normalized, that we'll see the stronger activity levels that we've seen in the past. But as far as your question of, is there any particular buyer that's pulled back? I'd say no. They're all still there, and they're all still very attracted to infrastructure. It's just the level of activity has obviously decreased. As far as sectors and areas where there's interest, I think the deal activity we see from a regional perspective hasn't really evolved that much. There's maybe less activity in South America today from institutions, but from strategics, it's still quite important for them. I think the data sector businesses related to transition or decarbonization are all still very strong. And obviously, we think that there's great opportunities in deglobalization and supply chains. And I think we'll see a movement into those assets. I think we're maybe at the forefront of that. But often people follow us and see what we're doing. And so I wouldn't be surprised if that picks up as well.

Robert Kwan, Analyst

As you're now talking about approximately $2 billion. On the last call, you were talking about being over $2 billion. So is that just valuations that you're seeing as maybe moderating? Or is there something else going on in the market, whether that's just you are expecting to sell fewer assets or some other dynamic?

Samuel Pollock, Chief Executive Officer

So, Robert, we missed a little bit of the first part of your question, but I think I got the gist of it. I think your question was just in some of our commentary, we might have referenced more than $2 billion, and now we're just referring to $2 billion.

Robert Kwan, Analyst

Yes, that's it.

Samuel Pollock, Chief Executive Officer

I think you might be reading more into the comments than was intended. We haven't really changed our views. We haven't reduced our expectations on values. I think the market is still relatively strong for high-quality businesses. One of the benefits that we have is the fact that we have a diverse portfolio of businesses across sectors and regions. So we do have the ability to sell mature businesses in areas that are the most attractive to buyers. And as far as the level of our activity, as I mentioned earlier on one of the questions, we have lots of capacity to pivot and then to move different businesses to the forefront, depending on market conditions. So no, we haven't changed our capital recycling plans this quarter, it's the same. And we'll look to continue. It's a continuous process. And once we're done, the certain businesses that we have in mind today will start other businesses next year and the year after that have reached maturity.

Dave Joynt, Managing Partner, Investments Team

Yes, sure. Hi, this is Dave here. Maybe starting more broadly with the sector and then I'll narrow in on Triton a little bit and how it fits into the overall macro picture. At a macro level, I think we find that supply chains have been underinvested for really decades. And as people start to change the way their supply chains actually work, based on some of the things you'd even mentioned, that's going to require significant capital. And I think that creates a lot of opportunity for us not only for Triton specifically but just as a business that creates a lot of opportunities for us. And so as that supply chain resilience gets pursued, you see people taking decisions they wouldn't have taken five years ago, right? And whilst the pandemic had unique and specific disruptions, it also really pulled back the curtain on the fragility of the overall supply chain network that exists today, and needs to get rebuilt over the coming decades. So with that kind of as a macro backdrop, we see Triton as very, very well positioned in that new world. This is a great franchise, the world's largest owner and lessor of containers. And more specifically, its business model is highly cash flow generative, strong contracted profile with customers that have, frankly, probably never had better balance sheets and credit positions. And then if you take a further step back, this fits really well into our overall franchise. It provides tremendous insights into the way that goods are being moved globally, reacting very quickly to changes in how goods are being moved and in what volumes, but also sets us up as one of if not the largest provider of sort of end-to-end sort of transportation services on the planet and being able to work with customers on really unique and new offerings. So I think those are the things we're kind of excited about. And as Sam mentioned, with the passage of time and getting through these approvals, we look forward to kind of talking more about the business.

Robert Kwan, Analyst

Understood. If I can just finish with a quick cleanup question, just done Heartland, you noted minimal contribution in the quarter. I'm just wondering what quarter do you expect to start receiving and booking the Alberta Petrochemicals Incentive Program grant?

Benjamin Vaughan, Chief Operating Officer

I can jump in, Robert. So the business, as a reminder, the grant you referred to is when it was operational, and we put it into service mid to late January. So it began contributing in February I think it was. So on a run-rate basis, though, it's pretty small in the grand scheme of things. And I think that that's kind of what we're alluding to that the contribution was quite minimal.

Robert Kwan, Analyst

The facility or the grant itself?

Benjamin Vaughan, Chief Operating Officer

The grants are quite minimal.

Robert Catellier, Analyst

Hi. Good morning, everyone. You've answered most of my questions at this point, so just a couple of follow-ups on Triton. Specifically, we're used to seeing investments in more fixed assets that are more fixed in nature, and it looks like Triton’s got maybe a larger component of mobile assets here. So do you see a fundamental difference here in how the risk-reward there is managed on more mobile assets compared to your fixed infrastructure? And the second part of the question is I'm just curious to the extent you can, given the transaction still in progress, can you maybe elaborate a little bit more on the interplay with the existing assets beyond just the insights that Triton will provide for you other transportation assets?

Samuel Pollock, Chief Executive Officer

Hi, Robert. I'll pick that first one. And then maybe, Dave, you can talk about the interplay a little bit. So I guess what I would maybe draw your attention to and flag is the fact that a lot of our businesses, particularly the utility businesses more specifically, have I'd say this concept of a RAB, a regulated asset base or a contracted cash flow base. And sometimes those businesses have transmission networks or other distribution networks and other times we've got our residential decarbonization businesses backstopping them. We see this leasing business very similar in the sense that we have a highly contracted cash-flowing book of income streams that we are continuously adding to and rejuvenating through a business that is critical to the infrastructure universe, in particular the supply chain. And so we very much just see it as taking part in infrastructure activities, creating a RAB base that we can then benefit from. And so in our mind, it's very much similar to our utility-type businesses just related to transportation. And so we look for these types of businesses regularly. And the main factor that's important is does it have a franchise where you can sustain and grow that book of contracted cash flows? And this business clearly has that and has been doing it for many, many years. So that's what I think attracts us to it. And as opposed to whether it's their mobile assets or other types of assets, it's still very much infrastructure-related. So with that, maybe I'll just turn it over to the interplay question.

Dave Joynt, Managing Partner, Investments Team

Yes, this is Dave here. I'll be a little bit cautious, just given the status of the overall transaction. But I think what I would say is if you think about our global footprint of port, rail, and logistics businesses, these are touching a lot of the same customers that Triton has today and actually some customers that could become Triton customers in the future. And I think we see this as an ability and opportunity to be more relevant in all of these large movers of goods, global supply chains, being able to offer them an integrated suite of rail, port, logistics, container services, and we see a lot of opportunity and what we can do with the platform. But again, I need to be a little bit cautious at this stage, given where we are in the transaction.

Naji Baydoun, Analyst

Hi. Good morning. Just a quick question on Triton and you explained kind of your investment thesis in the company, and I just wanted to see if you can provide a bit more color on how you're thinking about the capital intensity of the business, and maybe relative to your other existing transportation assets?

Samuel Pollock, Chief Executive Officer

Sorry, could you please repeat that? I didn't quite understand. The question is about the level of capital?

David Krant, Chief Financial Officer

Capital intensity.

Samuel Pollock, Chief Executive Officer

Dave, would you like to share your thoughts?

David Krant, Chief Financial Officer

What attracts us to this business is its asset-heavy nature, which leads to over 90% EBITDA margins, reflecting its capital-intensive characteristics. Our portfolio generally focuses on businesses with high margins and predictable cash flows, driven by a solid asset base. Additionally, as mentioned earlier, this creates opportunities for us to reinvest the substantial cash flow generated by the business into other cash flow generating assets over time. This strategy also benefits from various supply chain trends we discussed earlier.

Naji Baydoun, Analyst

Okay, that's very helpful. Thank you. And just last question on Australia, I know maybe there's not much you can say at the moment, it might be too early, but seems like AusNet is sort of performing well. I'm just wondering with Brookfield looking to increase their investments in the energy space in Australia with Origin, what kind of opportunity do you see for BIP to maybe accelerate transmission investments to AusNet?

Benjamin Vaughan, Chief Operating Officer

Yes. This is Ben, again. I'd say we see tremendous opportunity, especially in the AusNet footprint to develop new transmission specifically for renewables, but also for just other large load clients. And so far with AusNet, we are seeing the kinds of growth projects that we expected in underwriting on that front. So it was an important part of the underwriting and we do see it playing out. So we expect to be building new lines to connect new renewables to the network consistently over the coming probably decade to two decades. And we're off to a good start in terms of tangible projects and things getting built on the ground. So that was absolutely part of the thesis, and we are seeing it play out.

Naji Baydoun, Analyst

I guess Brookfield's potential investment in Origin is sort of, I don't think if the right word was expected, but it doesn't really I guess add a lot of incremental growth to what you're already underwriting in AusNet?

Benjamin Vaughan, Chief Operating Officer

I think that would be a fair analogy. I think Australia has a net zero target by 2050, and that's what we underwrote. Regardless of whether who owns power generation, this may accelerate the transition for certain assets a bit quicker than originally contemplated. But we knew the end game and we knew the end goal for the country. And that's kind of what we looked at when looking at this regulated transmission business.

Andrew Kuske, Analyst

Thanks. Good morning. You've got a number of businesses like water heater rentals, smart meters, and then arguably part of Triton that are effectively financing businesses. I guess to what extent, and I guess what proportion of the balance sheet overall do you see being allocated towards these kinds of businesses in the future?

Samuel Pollock, Chief Executive Officer

Hi, Andrew. I don't think we have any specific target, to be honest. Each of these areas, like smart meters and the residential infrastructure business, makes us optimistic. We believe they are all strong franchises. Over time, as we buy and sell businesses, the portion of more financially-oriented infrastructure businesses will change, but we don't have a specific percentage in mind. So, I wouldn't draw any conclusions based on this acquisition or any others.

Andrew Kuske, Analyst

Okay, I appreciate that. And then I guess maybe just as a natural extension, so there's no aspiration to be involved in railcar leasing, aircraft leasing as sort of standalone businesses unless there's an opportunity on an opportunistic basis that presented itself?

Samuel Pollock, Chief Executive Officer

We have considered railcar leasing in the past and found some promising businesses. However, we haven't really explored aircraft leasing and haven’t done much with it. That said, we believe that the assets we have acquired are superior to those other businesses. Currently, we are not focusing on either, but I would keep the door open for future interesting opportunities. I think it's interesting that we can acquire high-quality businesses at a great value in North America and Europe. The advantage of having a global presence is that we can allocate capital to areas where we find the best value at the moment. We are discovering some of the best opportunities right in our own markets, which is certainly attractive to us. While there are good opportunities elsewhere, what excites me is our ability to invest close to our core markets in excellent businesses.

Ryan Levine, Analyst

Hi, everybody. I’ve just a couple of questions on gas storage sale. Congratulations on the exit there. What was the cash-on-cash return that you received there, any color you could provide given the series of transactions that have been completed since you bought some of these assets?

Samuel Pollock, Chief Executive Officer

Hi, Ryan. First of all, the assets we sold were part of a broader portfolio. We decided that we could achieve better value by selling the business in pieces. As such, we sold two of those assets to different buyers, and we still have two other groups of assets left: our Alberta assets and our California assets. We acquired these businesses back in 2016 at attractive valuations. Our targeted returns for the entire portfolio would be in the 13% to 15% range. We feel optimistic about achieving those internal rates of return for the business, and hopefully exceeding them. At this stage, that’s what we aim to accomplish.

Ryan Levine, Analyst

I guess given the Niska debt refinancing and this exit, do you have any sense around your cash-on-cash return from they've already achieved, and the cash you've already generated as a business or just trying to stick to the IRR threshold?

Samuel Pollock, Chief Executive Officer

We would have now gotten almost all our money back from the initial investments. So we've had very strong annual cash flows as well as a couple of years where we did extremely well. This year was a pretty good year. I think returns in California, in particular, were strong. We've had other years where our Salt Plains assets did really well. Probably the business that will likely do well in the coming years that has maybe been less so has been the Alberta assets because of some maintenance issues that have existed with the Trans-Canada line. But those are, I think, nearing completion and with the LNG facility coming online, LNG Canada, we think our storage is going to be hugely valuable in that market. So those assets maybe have not done as well as some of the other ones, but will do very well, I think, going forward. Yes. I would say today, BIPC would be our preferred security to issue, but we utilize the capital markets more broadly. Often we may tap the MTN market when that's open, and we do that periodically. We have in the past accessed the preferred share market in Canada on occasion. And more recently with the strong performance of the BIPC share, we've utilized that security as well.

Operator, Operator

Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Samuel Pollock for any further remarks.

Samuel Pollock, Chief Executive Officer

Thank you, operator, and thank you to everyone for joining today's call. We're obviously excited to share our accomplishments and our objectives and look forward to speaking to you again next quarter. Thank you again for your support. And operator, you may close the call.

Operator, Operator

Thank you. And thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.