Brookfield Infrastructure Partners L.P. Aktie

Good day, and welcome to the Brookfield Infrastructure Partners 2026 Results Conference Call and Webcast.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. David Krant, Chief Financial Officer. Please go ahead.

Thank you, Sherry, and good morning, everyone. Welcome to Brookfield Infrastructure Partners First Quarter 2026 Earnings Conference Call. As introduced, my name is David Krant, and I am the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollock; and our Chief Operating Officer, Ben Vaughan. Also joining us today is Dave Joynt, a managing partner on our investments team.

I'll begin the call today with a discussion of our first quarter 2026 financial and operating results, followed by an update on our capital recycling initiatives. I'll then turn the call over to Sam, who will provide an update on our recent strategic initiatives before concluding with an outlook for the business.

At this time, I'd like to remind you that in our remarks today, we may make forward-looking statements. These statements are subject to known and unknown risk factors and future results may differ materially. For further information on known risk factors, I would encourage you to review our latest annual report on Form 20-F, which is available on our website.

So with that, Brookfield Infrastructure had a strong start to the year, delivering record results while continuing to advance a number of strategic initiatives across the business. We generated funds from operations, or FFO, of $709 million or $0.90 per unit in the first quarter. This is a 10% increase compared to the prior year. This performance was driven by strong base business results, highlighted by FFO from our data and Midstream segments increasing 46% and 12%, respectively, compared to the prior year. Results in our Utilities and Transport segments reflected resilient underlying performance with the current period impacted by higher levels of capital recycling activity achieved during 2025.

I'll now go through our results by segment in more detail. Our Utilities segment generated FFO of $201 million, up 5% year-over-year. The increase was primarily driven by inflation indexation and the benefit of over $500 million of capital commissioned into rate base, along with the contribution from our recently acquired South Korean industrial gas business.

Moving on to our Transport segment. FFO was $283 million, slightly below the same period last year. The decrease was primarily attributable to loss contributions from our successful asset sales. As a reminder, this included our Australian export and container terminal operations, the partial sale of a U.K. port operation and the majority interest in a portfolio of fully contracted containers at our global intermodal logistics business.

This was partially offset by the acquisition of our North American railcar leasing platform that closed on the 1st of January. After adjusting for all these factors, FFO was ahead of the prior year, reflecting higher volumes and tariffs generally across our rail and road operations. Our Midstream segment generated FFO of $190 million, up 12% compared to the same period last year. The increase reflects attractive commodity pricing, strong asset utilization and robust customer activity levels across our portfolio. Lastly, FFO from our data segment was $149 million, representing a step change increase of 46% compared to the prior year. The increase was driven by the contribution from our U.S. bulk fiber network, which we acquired in the third quarter of last year as well as organic growth across our data storage businesses, which included the commissioning of over 200 megawatts of operating data centers into earnings over the last year.

In addition to the strong financial and operating results we have delivered, we also made meaningful progress towards our 2026 capital recycling goal with proceeds secured of $1 billion to date. This includes closing the initial tranche of our partnership on a portfolio of stabilized and under construction data centers in North America and the closing of the sale of the largest of 4 concessions within our Brazilian electricity transmission business. We also completed a secondary sale of a 12% interest in our North American gas storage business. And finally, in April, we signed an agreement to sell our bulk liquid storage business, the largest independent storage provider in Scandinavia.

These asset sales improved our strong corporate liquidity position, which was $2.5 billion at the end of the first quarter. Our balance sheet remains well capitalized and our proactive approach to managing debt maturities has allowed us to remain opportunistic in the capital markets. During the quarter, we refinanced approximately $1.5 billion of nonrecourse debt on a net to bid basis, with no incremental borrowing costs for the business.

Before turning the call over to Sam, I would like to briefly note that we have recently begun exploring whether a single combined corporate structure would be the best path forward for the business. The goal is to determine if on a tax-free basis, we can create a single corporate security that would enhance liquidity, increase index inclusion and create value for investors. We are in the early stages of this evaluation, and we'll provide an update when appropriate.

So that concludes my remarks for this morning. I'll now turn the call over to Sam.

Okay. Thank you, David, and good morning, everyone. For my remarks today, I'm going to discuss our strategic initiatives before concluding with an outlook for the year ahead.

We have had an active start to the year with business development activity resulting in new strategic capital partnerships and continued progress under established frameworks. These partnerships are bilaterally sourced with high-quality counterparties and gives us exclusive access to investment opportunities that require long duration capital at scale. Increasingly, these frameworks are becoming a more meaningful avenue for growth, reinforcing our position as a partner of choice and expanding our opportunity set to deploy large-scale capital at attractive risk-adjusted returns. During the quarter, we established a new framework with a leading global investment-grade OEM, and launching an exclusive leasing platform for industrial equipment.

Through this platform, we will provide long-term leasing solutions that are expected to generate predictable cash flows without residual value interest rate or refinancing risk. We will have the sole discretion to enter leases under the framework with BIP's share of the equity investment expected to be upwards of $375 million.

Our $5 billion strategic partnership to install up to 1 gigawatts behind-the-meter power generation advanced further this quarter as well. We secured an additional $430 million CapEx project, bringing the total capital committed under the framework to approximately $1.6 billion. BIP's total equity commitment associated with the framework to date is approximately $60 million. Given the success of the behind-the-meter solution and strong customer demand based on speed to market, we may have the ability to expand the platform in the coming months.

We also remain on track to close Clarus. This is New Zealand's leading gas infrastructure utility in the second quarter. For an equity purchase price of approximately $70 million at our share.

Now moving to our outlook. We are progressing through 2026 from a position of strength, and remain very constructive on the backdrop for infrastructure. While recent geopolitical developments have contributed to greater market volatility, the essential nature of our businesses and the regulated or contractual profile of our cash flows continue to provide resilience and growth.

More broadly, demand for additional power, connectivity and logistics capacity continues to expand. This is being driven by digitalization, accelerating power demand, the rapid build-out of AI infrastructure and the ongoing reconfiguration of global supply chains. These tailwinds are expanding our opportunity set and providing attractive avenues to deploy capital at compelling risk-adjusted returns. Coupled with strong operating performance and a visible pipeline of organic growth projects, these factors position us well to deliver 10% plus per unit FFO growth in 2026.

As David mentioned, our capital recycling program and balance sheet continues to provide the flexibility to fully self-fund the growth ahead. With multiple sale processes underway across our business and continued access to capital markets during windows of opportunity, we are well positioned to fund our investment pipeline while maintaining financial discipline. Taken together, this supports our confidence in the outlook for 2026 and our ability to continue compounding value for our unitholders over the long term.

That concludes our remarks, and I'm going to pass it back to Sherry for -- to open the line for Q&A.

[Operator Instructions]

And our first question will come from the line of Devin Dodge with BMO Capital Markets.

Wanted to start on the recently launched equipment leasing business. I'm just trying to get a sense if this is part of the strategy for investing inside data centers, what kind of time frame you'd expect to deploy that $1.5 billion of capital and what do you view as the main risks associated with that investment?

Devin, this is Sam. I'll tackle that one. So the opportunity, I think, will likely be broader than just data centers, but initially, a good portion of the investment will be equipment for data centers. The -- we get a lot of comfort over the transaction itself because we're able to provide capital to essentially high-quality counterparties with investment-grade profiles with fully self-amortizing cash flow streams. So it's very attractive from that perspective.

We think we can scale this up as far as timing and deployment of capital. I think our hope is that on a gross basis, we'll deploy $1 billion to $2 billion of equity capital. So BIP share would be 25% of that. And we expect -- it's hard to predict flow, but I think we would hope to do that within a 24-month period.

Okay. I appreciate that. Second question, I was going to ask about that Intel JV. I didn't see any mention of it in your release, but I think Intel disclosures suggested the payments to the JV may have started in Q1. I guess, first, was that the case? And how quickly can return on investment ramp up in the coming quarters as both those fabs come online?

Devin, it's Dave here. I'll take that one. Look, I think in the past, we generally won't provide many updates specifically on the project. I think those generally come, as you said, from the Intel side. I think largely, the project has gone well. It's coming online, in line with our targets in terms of scheduling. They did make their first small wafer payments in the quarter. I would expect the initial -- the final capital contributions to go in over the next 6 months. And as those go in, I would expect the earnings to start to ramp up. And so I would expect to start seeing that come through our transmission and distribution segment of our data business in Q3 and then full run rate will be in 2027.

And that will come from the line of Maurice Choy with RBC Capital Markets.

I wanted to start with this concept of a single combined corporate structure. I have to assume that when the BIPC shares were first created back in 2020, something like this was contemplated. And if so, what were some of the obstacles back then and how those may or may not no longer be as big of an obstacle or even at all this time round.

Maurice, it's David again. But I think -- as we talked about this morning, we are in the early stages of considering this with the Board direction. And so it's probably hard to say what the obstacles are today. That's the word we'd like to complete over the next little while. As you know, the 2 companies for the last 6 years have served us well, but we're always looking at ways to improve our access to capital. And we think following a few things, obviously, the completion of our sister company BBU's process. We can now have some insights into how 1 simplified corporate structure will trade in the market. An early indication to that that's been positive, that this is the right time to reassess. And so I think that's probably all we can say at the moment in light of that, and I'll leave it that.

Fair enough. Maybe if I could just finish off more on your energy portfolio. Obviously, we've seen a series of support of federal and provincial government changes in Alberta and broader Canada. And also, there's been the conflict in the Middle East. Just your thoughts on the outlook for your business in the province notably into pipeline and NorthRiver?

Yes. And it's Ben here. I'll take that question. And look, all those developments are very positive for our Midstream business in Canada. We're seeing really strong demand from all of our clients for more access to our facilities and our pipelines. We completed about $400 million worth of growth projects in the past several months that are now starting to ramp up in terms of the revenue profile and delivering results.

And probably most importantly, we have a really tangible, meaningful pipeline of pretty bite size, relatively straightforward to execute and very low build multiple and highly accretive growth projects right in front of us. So I would expect the backlog -- our pipeline to grow. The backlog in Midstream is really attractive right now, and we expect to bring a number of those projects to FID in the coming quarters.

And maybe just to put in perspective, the magnitude of the projects that we're looking at the opco level would be roughly in the $8 billion range from a pipeline perspective. So it's a fairly meaningful size number of projects we have to look at.

One moment for our next question. And that will come from the line of Robert Catellier with CIBC Capital Markets.

I'd like to follow up on the potential corporate conversion that the Board is exploring, understanding it's quite early days. I wondered if you had any time lines for us in terms of what's reasonable to expect in terms of when a decision might be made?

Rob, as I said, unfortunately, there's probably not a ton we can share on the time line as of yet. As I said, we're just kicking off the process now.

Okay. No, that's reasonable. I just wanted to just dig into the Csquare IPO, which I understand they filed a confidential registration statement. I'm just curious as to how you chose the IPO route versus private sale and maybe you're dual tracking it, but maybe you could comment on that and how much you're expecting to sell by way of IPO.

Robert, I'll tackle that one. Look, I think in discussions with our advisers, the capital markets for IPOs are quite open at the moment. And obviously, there's a lot of anticipation for the upcoming SpaceX IPO. The one thing that public investors are looking for businesses that generate high cash flow, have still strong growth prospects and have great tailwinds related to the AI sector. And our business Csquare basically ticks all those boxes. We think it has the potential to be one of the leading IPOs of the year. And we're really excited about bringing that forward. And so just stay tuned.

One moment for our next question, and that will come from the line of Cherilyn Radbourne with TD Cowen.

I wanted to ask a couple of questions on the data segment. And I appreciate the data centers and Intel are the major growth drivers at the moment. Just curious how you think about the balance of your data portfolio in towers, fiber and so forth? And what value that provides in terms of diversity but also what you see in terms of inorganic opportunities there?

Cherilyn, maybe I'll start. But then I think you've given us a good segue to maybe talk about what's going on in the AI infrastructure sector, in particular, and we have Lief Williams here. who I think can expand on some of the things going on. But maybe just talking about some of our other businesses, we're seeing continued strong growth across the sector. One of the situations. And our colleague, Scott Peak mentioned it a number of months ago at our Investor Day. There's this domino effect. And the huge growth in data centers and AI is having impacts across basic utilities, power, Midstream and our other data businesses, including fiber -- our towers.

And the types of things that we're seeing is all our customers are looking to expand density across their networks. And so on the tower side, we have a number of build-to-suit opportunities that we continue to execute in all our businesses across Europe and Asia.

On our fiber businesses, there's still a huge amount of the U.S. in particular, but other parts of the world that have not been fiberized that are still operating on copper. And so that remains a lot of white space for us to continue to build out those networks and allow people to run all these new devices and programs more effectively.

So we see this as a continued 5- to 10-year build-out. And so all our businesses are well positioned. But maybe turning to some of the more, I'd call it even more exciting stuff going on in the AI infrastructure space. Peak, maybe just give us a little update on that.

Yes. Thanks, Sam. And good morning, Cherilyn. So the large users of AI factories and data sectors are highly, highly active in the market. There's effectively no data center inventory remaining for 2026. And even 2027 is quite scarce. What's interesting as well is that the demand profile has broadened from just data center capacity into also looking for compute. So leasing GPU as a service as well as behind-the-meter power opportunities. And so we see a large opportunity for groups like Brookfield, who have tremendous access to capital and an asset base to participate across all of those different asset classes.

Great. And then maybe just a quick follow-up on the data center side. I imagine that site selection and acquisition is particularly competitive and secretive. And so I'm not going to ask you to reveal anything proprietary. But to what extent is having a sister real estate business help in that regard?

I would say it certainly helps. And certainly, the scale of Brookfield is helpful in that regard. Just to give a sense, I would say there is a kind of dual track search for powered land. There's front of the meter options and then there's behind-the-meter options. Front of the meter options are challenging in the sense that the number of load applications going to utilities. It just kind of massively overwhelms the grid. And so utilities are now increasingly requesting large levels of credit or financial deposits, which is a huge disincentive to many of the parties out there looking for those front of the meter power solutions.

Behind the Meter also has its challenges in terms of delivering baseload power. At speed, the low emissions and highly modular. And so that's a place where, again, we think our Bloom partnership will be tremendously effective. I would say more broadly, we're starting to see some pushback in some locations in terms of the scale of these AI factories and then the risk of it pushing up rates for local ratepayers. And so again, I think Brookfield has been doing large-scale projects across a number of asset classes for many years. And so we think that we're very well positioned to help identify credible powered land sites. And help bring them to fruition.

One moment for our next question. That will come from the line of Robert Hope with Scotiabank.

Hoping to dive a little bit deeper on the AI factory and digital hub strategy. How are we progressing on those discussions with counterparties. And should we be in a position in 2026 to see some notable or sizable project announcements?

Robert, it's Peak again. I'll take this one as well. Yes, look, I think you do see, as I mentioned, tremendous demand from the large technology companies. The demand profile has broadened a little bit as well. There used to be a handful of large hyperscalers. We now have a wave of foundation model companies and inference operators who are also looking to secure the capacity.

So I would say there's a tremendous amount of noise in the market in terms of number of sites available and when does the power ramp. But what we're increasingly seeing is these users are looking for credible partners who have placed long-lead equipment orders and you have true dates for when the power is available. And we think that, that will benefit groups but Brookfield who are institutional and who have tangible sites that have a real ramp.

And so I would say the demand profile is very strong. I think you will see and we have seen strong leasing activity on the Brookfield portfolio over the last couple of quarters. And I think you'll continue to see strong demand through '26 and certainly through '27.

All right. Appreciate that. And then maybe moving over to kind of to the 10% organic growth rate or to the 10%-plus FFO growth rate for 2026. Can you comment how you're tracking on that? The organic growth at 8% seems strong, and the commodity price environment seems to be helping. Though it does appear that asset sales are coming a little quicker than M&A activity on the other side. So can you maybe talk about what the headwinds and tailwinds that you're seeing there are.

Yes, Rob, it's Dave here. And look, I think you did a great job summarizing my answer probably, but I think the -- I'll start by saying the first quarter was an excellent start. We delivered on our 10% target. And so with that behind us, I think we feel good with how the year is progressing. It's always hard to predict the timing of new investments and asset sales. But to your point, we have had some good initial success on the capital recycling. Front, I think from an all-in cost of capital is very attractive. The yield we'll see on that $1 billion, somewhere in the mid-single digits probably. And so I think from an accretion perspective, I don't expect that to be a meaningful drag on the business as we look ahead.

So all in all, I think we started the year off well. I think we feel confident with our 10% for the year still, and we'll continue to provide an update as we progress through the year.

[Operator Instructions]

our next question will come from the line of Frederic Bastien with Raymond James.

Good morning. You've historically leaned into periods of uncertainty in this location to pursue large acquisitions. How are you thinking about your ability to deploy capital into a sizable transaction this year?

Fred, I'll talk -- take that one. Yes, I think you're right. We've been historically successful in I think, taking advantage of dislocations. And when others have paused, we've seized the moment. At the moment, I'd say the market remains relatively calm and constructive, given all the volatility. There's still a fair amount of buyers out there. So I wouldn't describe this as an opportunistic market environment.

Nonetheless, I do think we're always on the lookout for large value opportunities. We -- what we're seeing is, today, the opportunity set around our AI infrastructure strategy is extremely strong. And so I'm very optimistic about us being able to do some exciting transactions there. We're also seeing an uptick in activity across Europe. And I think there's some larger value opportunities there that I think we can take advantage of.

And then we keep on monitoring the capital markets. Often some of our best acquisitions are when the public market will pull back, and we can take advantage of a take private opportunity. So those are the things that we're up to I can't give you like a time line on when we'll do our next large deal, but we're always out there. We have tremendous partnerships so that we can execute on those things and optimistic there will be some exciting deals in front of us.

That's helpful. I just wanted to tack on a Midstream related question as well, thinking switching gears on monetization. Are you -- how are you thinking about NorthRiver and a potential monetization there?

Sorry, that was about monetizing NorthRiver.

Yes.

Well, look, I could turn it over to Ben in a second if he wants to add anything. But what I would just say is the business has had tremendous commercial success in the past couple of years. We've extended our contract term, I think, to close to 12 years now. And we think it's really well positioned. Our debate internally is whether or not we continue to build out the business and take advantage of some of the additional growth that's there or whether we bring it to market and sees what is probably a pretty constructive environment for Midstream businesses.

So we're weighing those considerations. It's performing really well, and we just don't have an answer for it at this point in time.

I'm showing no further questions in the queue at this time. I would now like to turn the call over to Mr. Sam Pollock for any closing remarks.

Great. Thank you, everyone, and thank you, Sherry, for hosting this call. We appreciate you joining us today to hear about our results. And we look forward to the warmer weather that's in front of us and the hockey playoff season. I hope all you Habs fans are cheering for my team. And we look forward to providing an update in the quarter ahead.

Thank you. This concludes today's program. Thank you all for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners Fourth Quarter 2025 Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to your speaker today, David Krant, Chief Financial Officer. Please go ahead.

Thank you, Liz, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' Fourth Quarter 2025 Earnings Conference Call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollock; and our Chief Operating Officer, Ben Vaughan. Also with us today is Dave Joynt, a Managing Partner; and Udhay Mathialagan, Head of our Global Data Center businesses.

I'll begin the call today by highlighting our results for 2025, followed by a recap of our record year of capital recycling. I'll then hand the call over to Udhay who will elaborate on our approach to AI infrastructure investing and how we have been able to turn sector tailwinds into durable value for unit holders.

Finally, Sam will provide an update on our recent investments before concluding with an outlook of 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 to review our latest annual report on Form 20-F which is available on our website.

2025 was another strong year for Brookfield Infrastructure. Our key accomplishments include exceeding our capital recycling target of $3 billion. investing approximately $2.2 billion of equity into growth initiatives and completing approximately $16 billion of financings to further derisk our operating company balance sheets.

From a results perspective, we generated FFO comes from operations of $2.6 billion during 2025. Normalized for the impact of asset sales and foreign exchange, FFO increased 10% compared to 2024 in line with our target and reflective of our operational performance and the strength of our business. This result includes record FFO during the fourth quarter of $0.87 per unit.

Given this performance, a conservative ratio for the year of 66% and a strong outlook for 2026, I'm pleased to report that the Board of Directors have approved a quarterly distribution increase of 6% to $1.82 per unit, on an annualized basis. This marks the 17th consecutive year of distribution increases of at least 5%.

I'll now go through [indiscernible] the base business continued to perform well during the year. driven by inflation indexation across the portfolio and the contribution of roughly $500 million of capital commissioned into rate base over the last 12 months.

Moving on to our Transport segment. FFO totaled $1.1 billion, in line with the prior year after normalizing from $1.8 billion of capital recycling initiatives. The loss of earnings from these sales was partially offset by higher revenues across our transportation networks, particularly in our rail and toll road segments where volumes and rates grew on average by 2% and 3%, respectively.

Our Midstream segment generated FFO of $668 million for the year, representing a 7% year-over-year increase. This growth reflects higher volumes and activity levels across our midstream assets particularly at our Canadian natural gas gathering and processing operations and our recently acquired U.S. refined products pipeline system.

Lastly, FFO from our data segment was $502 million a step change increase over 50% compared to the prior year period. The increase is attributable to several new investments completed over the last 12 months, the most recent being our U.S. bulk fiber network, which is now fully contributing to earnings. -- the fourth quarter. In addition, we achieved strong organic growth across our data storage business, which included the commissioning of 220 megawatts of capacity at our hyperscale data center megawatts of new billings at our U.S. retail colocation data center operations and income generated by our global data center developers. Our global data center platform now has development potential approximately 3.6 gigawatts, including contracted capacity of over 2.3 gigawatts today.

Before turning it over to Udhay, I would like to briefly touch on our record liquidity which totaled $6 billion at the end of 2025 and included just under $3 billion at the corporate level. Contributing to this strong position was a record $3.1 billion in asset sale proceeds raised in 2025. We believe that the elevated pace of capital recycling will continue into the year ahead.

We already have 2 transactions secured that crystallize attractive returns. The first which is we agreed to sell the largest of 4 concessions within our Brazilian electricity transmission operations. We expect proceeds of approximately $150 million net to BIP generating an attractive IRR of 45% and over 8x multiple capital. closing for the transaction is expected at the end of the first quarter in 2026.

Secondly, we formed a capital partnership for a portfolio of stabilized and under construction data centers in North America. Proceeds from the sale are expected to be used to support the buildout of our powered land bank within the business.

That concludes my remarks for this morning. I'll now pass the call over to Udhay.

Thank you, David, and good morning, everyone. AI is justifying dominating headlines with many bold predictions ranging from data centers and space to breakthrough in quantum computing that could one day redefine how the world operates. At the same time, many are questioning the merits of the magnitude and velocity of capital flowing into AI and where the demand will materialize at a level that justifies this spending. The sheer scale of investment underway to build the physical backbone that makes AI possible is staggering.

In 2025 alone, corporates invested approximately $500 billion into AI-related infrastructure, with capital investment over the next 2 years expected to rise further. Much of this build-out is fundamental to the development of AI, enabling power intensive workloads to run reliably, securely and at scale in well-connected locations. The reality is driving a sustained wave of investment into the backbone infrastructure that enables AI, including data centeric capacity, good resiliency, power generation and transmission. The sector remains exposed to overbuilding, technological change and disruption.

With capital moving quickly, not all participants will be rewarded and there will be mistakes made. Our approach is designed to protect against such exuberance. Brookfield Infrastructure is applying a prudent risk-focused approach to participating in the build-out of AI infrastructure, maintaining strict guardrails to safeguard our capital.

First, our development projects are underpinned by long-term contracts with favorable terms. We do not build speculatively and earn an attractive return within the initial contract period, mitigating technology risk. Second -- the second guardrail is that we selectively focus on the strongest investment-grade counterparties was some of the largest, well-capitalized and most profitable technology companies in the world.

Third, we concentrate on top-tier workload agnostic locations for our data centers. that can support the full spectrum of demand, reducing the risk of the single theme exposure and increases the durability of demand through cycles. The fourth is our disciplined strategy, we are deliberate in how much land and powered shelves we control and develop.

We have created a self-funding model that provides funding for future development and locks in attractive developed economics. -- as well as reduces the size of our platform while maintaining the benefits of scale. And fifth, we've matched the capital structure to the tenor of the contracted cash flows with a focus on preserving flexibility and ensuring that we can finance growth responsibly.

To illustrate the benefits of our approach during 2025, we experienced exceptional demand at our data center platforms, securing record growth, commercialization, capital recycling and capital markets activities. For example, at our U.S. core location data center business, we experienced 11 consecutive quarters of record bookings, and it's now fully utilized across several markets.

During the quarter, we signed several large contracts at a data center in Illinois, achieving 100% occupancy and adding approximately $45 million of annual EBITDA on a run rate basis commencing later this year.

Without investing any further equity, we acquired and added a 40 site data center portfolio at January 2024 to our existing business and subsequently increased EBITDA from a combined base of approximately $200 million to approximately $500 million on a contracted basis. The exciting part that the growth journey is expected to continue, led by high returning under-roof densification and in-footprint expansion capacity, which total over 600 megawatts of identified growth potential.

Across our global data center platform, we achieved a significant lease-up of our land bank during the fourth quarter, which is expected to be commissioned over the next 3 years. We executed agreements for approximately 800 megawatts of capacity predominantly in North America. The vast majority of these leases are with investment-grade customers and underpinned by long-term contracts.

Since acquiring our North American and European platforms, our adherence to the guardrails outlined above has allowed us to maintain a consistent greenfield data center yield on cost. In 2025, we partnered on almost 850 megawatts of stabilized and operating sites in North America and Europe, crystallizing developer premiums and demonstrating strong demand.

Taken together, we hope these examples highlight both the strength of demand we are seeing and importance of disciplined execution converting demand into durable returns.

As AI workloads scale, the value well-located powered infrastructure intensifies. In this environment, scale, reliability and access to capital are differentiating factors to counterparties and we believe our global operating capabilities and long-standing relationships benefit us.

Our risk-focused approach and strict adherence to guardrails will enable us to continue investing in the core infrastructure needed to deliver AI at scale while protecting our downside.

That concludes my remarks for this morning, and I will now pass the call over to Sam.

All right. Thank you, David, That was great, and good morning, everyone. For my remarks today, I'm going to discuss some of our strategic initiatives and then conclude with an outlook for the year ahead. In 2025, transaction activity accelerated and as a result, we deployed approximately $1.5 billion into new investments. We expect this momentum to carry into 2026 based on our robust pipeline of new investment opportunities that continues to be diversified across sectors and geographies.

During the quarter, we completed the inaugural project under the framework agreement with Bloom Energy, installing 55 megawatts of behind-the-meter power for a data center site in the United States. We have since secured additional projects under the framework for several hyperscaler customers, bringing the total to approximately 230 megawatts of power generation. These additional projects have contract terms of at least 15 years in length. BIP's total equity investment associated with these projects to date is expected to be approximately $50 million and fully deployed by mid-2027.

Also during the quarter, we closed the acquisition of a South Korean industrial gas business which is the leading supplier of industrial gases to investment-grade semiconductor manufacturers in the country. The total equity purchase price is $125 million for our share. And on January 1, we closed the acquisition of a leading railcar leasing platform in partnership with a best-in-class railcar lessor. The business is highly cash generative, providing stable cash flows that are supported by a diversified and large investment-grade customer base. BIP's total equity consideration is approximately $300 million.

Now turning to our growth outlook. We see a highly constructive backdrop for infrastructure in 2026. The asset class has a long history of delivering resilience growing cash flow through a variety of market environments and is squarely positioned at the center of 3 powerful structural themes, which we've talked about quite a bit in the past, digitalization, decarbonization and deglobalization.

Together, these forces are driving an infrastructure investment super cycle that is broadening in both scope and scale. We have entered 2026 from a position of considerable strength as well. Our base business is delivering resilient growing cash flows, and we have clear visibility into a multiyear runway of organic growth and capital deployment.

In addition, the rapid build-out of AI-related infrastructure is materially expanding our opportunity set across data centers, power and network connectivity. As a scaled global owner and operator of critical infrastructure, we are well placed to deploy capital into these teams at attractive risk-adjusted -- these factors, combined with a stable interest rate and foreign exchange backdrop, position us well to return to our 10% or higher per unit growth target in 2026 and beyond.

So that concludes my remarks. I'll now pass it back over to Liz to open up the line for Q&A.

[Operator Instructions] Our first question comes from the line of Maurice Choy with RBC Capital Markets.

I'll just ask one question, but I'll admit it is a multipart question on data centers and data infrastructure. Udhay in your prepared remarks, you highlighted how your contract approach aims to mitigate technology risk. Can you elaborate a little bit more on that? And also what risk do you think is underappreciated by the market.

And my quick follow-up is going to be on returns. Obviously, I would expect the returns are superior to the 12% to 15% target range. So maybe you could help us understand a little better how much more better, even if it's just a range, driving some factors for us to consider and quantify these premium returns?

Hi, Maurice, it's Sam here. Maybe I'll start off with the returns. And then I'll have Udhay talk about the contract items and the risk that you also asked. So on the return front, I'll keep it high level and simple. But in essence, we develop new data centers at a yield the cost anywhere on average between 9% and 10%. And and we monetize them at cap rates actually 5.5% and 6% on average. And so that gives us a rough development profit 10 basis points.

And with leverage in the development, 70% range, that pencils into equity returns if we do everything right. into high teens or 20s. And I think that is a profitable industry. So that's the rough pull, and I think we'll leave it on that from returns perspective?

And then maybe I'll throw it over to Udhay to answer your first 2 questions.

Sure. Thanks, Sam. Look, I think taking a step back, the basis of pretty much all our data center businesses is around providing the core infrastructure and staying out of the real -- the technology that our tenants, our customers use. And so my earlier remarks around being managing the technology risk is really around the way the environment within the data centers are being designed for longer-term use and for changes that are happening at the compute infrastructure level. That predominantly translates into how power and cooling works in the data centers.

So by making sure we've got very long-term contracts, so let's say, 15-year contracts, which are very specific in terms of what we deliver, we're staying completely out of any technology change that could take place in that 15-year period at a customer's sort of end. And in this -- in case it necessitates any change in the underlying infrastructure, then those as specific changes that are not to our cost at that point in time. So that was the underlying sort of comment around how we're managing our -- the committed cash flows, I guess, over that period of time. in terms of technology risk.

Our next question comes from the line of Devin Dodge with BMO Capital Markets.

All right. Maybe to the extent that you're able, can you provide some additional color for the transaction where KKR acquired a stake and portfolio of data centers from Compass. And just trying to get a sense for how many assets are included, the timing? It sounds like it might be phased into that partnership and maybe the net proceeds to BIP. .

Dan, it's Sam here. I can't really speak to the details of it because we don't get into those level of granularity on specific transactions that are private -- what I can tell you is that -- and we mentioned this earlier in the call, we've -- we effectively entered into JV arrangements with a number of institutional investors, which I would include KKR in that group across not just North America, but Europe as well. totaling about 850 megawatts.

And effectively, the way that the intense work is these are, for the most part, passive vehicles in the sense that we retain operational control of the assets and retain a significant ownership stake to have alignment with our partners. And so we've done this, as I said, in markets, and it's kind of part of our playbook to recycle capital from developments to crystallize some profits to reinvest back in the business. So we can fund future growth.

Okay. Okay. Second question for Brookfield's is a $10 billion AI infrastructure fund. I believe BIP is 1 of the pools of capital that could be used to meet Brookfield's commitment. I was just wondering if you could provide a framework or thoughts on what types of investments made by the fund may be suitable or not suitable for BIP? .

Devin, so that's correct. So BIP is one of the entities that will fund opportunities that come from that strategy. And I think the way to think about it is transactions that have the profile that we have in our flagship funds. So returns that are let's say, 12% and higher in sectors that are suited for BIP things that are outside of renewable energy and investments that probably don't have a development profile that's too, too long.

If the development cycle is excessively long, then that may not make it appropriate for a bit. But otherwise, I think keeping in mind for pool construction objectives for BIP. If it's in the data center sector, if it's gas-related if it's utility related, those are all sectors and if the returns fit, then we would invest through BIP for those type of transactions.

Our next question comes from Cherilyn Radbourne with TD Cowen.

Thanks very much, and good morning. On the data center side, I did want to ask if you could talk about how you think about sovereigns versus hyperscalers of counterparties. And how you think the mix of your basket of counterparties could end up between those 2 groups?

Hi, Cherilyn, that's great to have you on the call. So maybe I'll touch on this and Udhay, can add anything else you'd like to. I think we like both of the counterparties because it gives diversity. One of the things that serves us well across all our business is diversity of counterparties. And obviously, the hyperscalers will amazing credits, are few in number and have similar exposures to AI and other data-related cash flows and sovereign nation diversifies from those risks.

It also -- the other reason we've been focused on some of these sovereign AI factories is because we think it gives us a differentiated strategy than many others who are just focused on building the large mega sites for the hyperscalers. Here, we can on a more bespoke basis to assist sovereign nations to build ecosystems in their countries. The challenge with it is that governments tend to move a bit slower with than corporates.

And so the time to market can sometimes be a bit longer. But as far as what the mix will be, that's a little bit too hard for me to predict at this stage. I mean we'd love to have a broad base of both hyperscalers and sovereign credit. But it's a little premature for me to speculate on that.

That's helpful color. And then more of a straight-up question for David. Can you give us a sense of what we can expect from inflation indexation across your various geographies in 2026?

Look, I think as we look forward, the 2 biggest drivers of growth from an organic perspective in 2016 will be the inflation indexation you highlighted as well as a significant commissioning of CapEx out of our backlog. As you've seen, it's a record level now. On the inflation front, I'd say in OECD markets, we're probably averaging between 2% and 3% on our escalators.

And then on the emerging markets, it ranges depending on which metric you're looking at. But I'd say between India and Brazil as the 2 biggest emerging market exposures we have inflation pass-through in -- it's probably also in the 2% to 4% depending on the metric. So I think it's more manageable, still above probably 25, 50 basis points above our historical averages that you would have observed, but certainly not as elevated that you saw in 2022.

Our next question comes from Robert Hope with Scotiabank.

Can we dive a little bit deeper into the data operations capital backlog? It looks like it's up just over $1 billion versus Q3 with about $900 million of that driven by the hyperscale backlog -- so can you maybe dive a little bit deeper into what is driving the significant increase in Q4 as well as kind of what is the outlook and how large can this get?

I can start and Udhay or Sam can jump in. Look, I think, Rob, you certainly pointed out. I think across the data segment, the data center platform had the most growth. We've also onboarded the bulk fiber backlog and order book in hot wire that we acquired in the fall. So those are another key driver in the increase in the last half of the year.

But on data center itself, I think it's a little chunky in terms of when we sign new on. And as we highlighted this quarter, we had significant momentum on the leasing activity. So there was about 100 megawatts signed globally. When we sign those contracts, that's effectively when we'll put in the backlog associated with those. And so up until then, as you heard through our call, there's very little investment until a contract is signed. And then at that point, we then effectively consider the project FID and adds into our backlog. And so as you heard, it's probably a mixture of North American, European as well as a few in Asia Pacific that drove those -- those signings drove the addition to backlog.

And then maybe sticking with data centers. So $3.9 billion of the backlog relates to Intel. Can you update us in terms of timing, how you're thinking about cash flow and returns there and any potential follow-on investments?

Ben, do you want to give an update on the in-service date for the Intel facility?

Yes, sure. So for the Intel facility, our JV has 2 fabs and 1 of which has its in-service date. So it's now producing wafers, which is great. And the second fab is making good progress towards completion. So the actual underlying operations our JV and the construction activity is progressing very well for Intel.

Next question comes from Robert Catellier with CIBC Capital Markets.

You seem to have a pretty high level of conviction in the capital recycling, having just come off a record year and you're also continuing to make new investments. But I'm curious about the rate of commissioning capital from the backlog in 2016, given this is an important part of the capital allocation process -- so wondering if you could maybe quantify and characterize what you see coming in the next couple of years there relative to $1.5 billion commissioned in 2025.

Rob, it's David here. I can give you some color on the shape of that commissioning. I think I'd split our backlog into 2 various components. As you heard from the previous question, there's an Intel component which is about $3.9 billion in the number. We'd expect that to commission from our earnings profile in the back half of 2026.

The other -- the balance of our backlog would be diversified across our utilities transport midstream and data businesses. And typically, as you've heard, it's a 3-year outlook. So those projects tend to be smaller, lower, shorter development cycles and build cycles. So I'd expect roughly 1/3 of that backlog, which should be close to $1.5 billion to come in online 2026 as well throughout the year. It is -- I wouldn't say there's a chunky element to it. It's pretty -- it will be pretty smooth across our utilities and our data centers driving the bulk of that.

Right. So exing out Intel, which is obviously a unique investment. You're really looking at about $1.5 billion-ish a year then. Is that...

What goes to our backlog, excluding Intel is $5.3 billion. And so assuming average of 3 years, you're looking close to $1.75 billion probably and the $1.5 billion to $2 billion.

Okay. Excellent. And then my other question was just what are your views on the Canada, Alberta MOU as it relates to energy development. It looks like there's a momentum building towards a bolder energy strategy here. So I'm curious how it impacts how you manage your midstream investments in Canada. So do you hang on for more growth -- or does this derisk the asset to a point where you might consider more asset sales?

Robert. Look, look, I think it's -- it's too early to say whether or not the MOU is going to have any material impact on the growth trajectory of our businesses. Irregardless of that, though, we've already have plenty of growth in the -- there's been significant producer expansions underway, which has led to some additional tie-ins particularly in our IPL facility IPO network. And we've recently undertaken a number of growth initiatives North River.

In terms of our plans to monetize the businesses, I think we have business plans in place for each of the businesses that we're looking to continue to develop. And I guess the only thing that would accelerate monetizations would be market conditions to the extent that they to us bringing some or part of these businesses to the market. We might look at that. So I appreciate some of that it's very loose.

But I think the takeaway is that the businesses today operate in a very strong environment. And with the added push by the federal government with the provincial government to encourage further growth in the sector. We think that's only helpful to our businesses and makes them more attractive to potential buyers on Yes, I totally agree with you. I think it's too early, and I too would want to say a couple of more cards slipped on how they have a MOU plays out and if they achieve the milestones as intended. So thanks for your answers.

Our next question comes from the line of Frederic Bastien with Raymond James.

During your Investor Day, you noted that Brookfield Ad form partnerships to build 7 AI factories totaling 6 gigawatt of compute capacity. Can you provide an update on how that's going and whether you get more developments to announce soon?

Fred, maybe I'll tackle that and Udhay might add some further comments, but I think the answer is relatively short. We continue to progress all those very initiatives. And today, we have discussions underway with probably 5, at least in Europe. -- some in North America as well as some of the Middle East and one actually in Oceana.

So basically, across the globe, as I mentioned I think it was Cherilyn, the -- it -- these discussions do take time, and we're probably a little disappointed that they haven't gone a little faster given the importance that each of the put towards these initiatives.

Nonetheless, I think we're hopeful that during the year, we'll have 1 or 2 of these progressed. And I think the only thing that I would caution you is that they tend to be smaller than some of the mega sites that you see announced with the hyperscalers. So most of these are anywhere between as small as 50 megawatts up to as much as maybe 250 in phases. Nonetheless, those are still represent meaningful dollars, and we're pretty excited to see it through.

And I guess your relationship with Bloom Energy is still fairly young. You've committed to delivering just under 300 megawatts of power generation. I think your original agreement was to -- was for up to 1 gigawatt of behind-the-meter power generation is. Are you comfortable that you will see through this agreement all the way to that 1 gigawatt?

Obviously, we'd be speculating on the future, so it's hard to predict. But at the moment, with the level of demand that they're seeing and the amount of developments underway, I feel pretty optimistic that we'll get to that and maybe even above that level. There's no doubt there's for Bloom at the moment.

So I mean your relationship obviously is strong and growing, obviously. .

Yes. Yes, it is.

That concludes today's question-and-answer session. I'd like to turn the call back to Sam Pollock for closing remarks.

All right. Thank you, Liz, and thank you, everyone, for joining the call this morning. With you've all had a good start to the year, and we look forward to providing our first quarter results at the end of April. Thank you, and take care.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners L.P. Q3 2025 Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, David Krant, Chief Financial Officer.

Thank you, Josh, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' Third Quarter 2025 Earnings Conference Call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollock, as well as Ben Vaughn and Dave Joynt, who will be available for the question-and-answer portion of the call. .

I'll begin today with a discussion of our third quarter 2025 financial and operating results, followed by a discussion of our financing activity and strong balance sheet position. I'll then hand the call over to Sam, who will provide an update on our strategic initiatives and conclude with 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 to review our latest annual report on Form 20-F, which is available on our website.

Brookfield Infrastructure had another solid quarter, achieving strong financial results and executing on our strategic initiatives. Beginning with our financial and operating results, we generated third quarter funds from operations, or FFO, of $654 million or $0.83 per unit. This was 9% higher compared to the previous year, driven primarily by strong organic growth, highlighting the financial strength and stability of our base business. These results were delivered despite FFO contributions for following a year of record asset sales and only a partial contribution from the new investments we've made.

Turning to our results by segment. Our Utilities generated FFO of $190 million, slightly ahead of the prior year. Results benefited from inflation indexation in addition to contributions from over $450 million of capital added to the rate base. The strong underlying performance was partially offset by higher borrowing costs and the sale of our Mexican regulated natural gas transmission business in the first quarter of this year.

Moving to our Transport segment. FFO was $286 million for the quarter. Headline results are lower than last year due to the sale of our interest in our Australian export terminal, DBI, and the sell-down of stabilized containers within our global intermodal logistics business. After adjusting for these capital recycling initiatives, our results were slightly ahead of the prior year.

The solid underlying performance reflected strong volumes across our networks and rate increases on our rail networks and toll roads.

Our Midstream segment generated FFO of $156 million, representing a 6% increase over the same period last year. We experienced strong customer activity levels and asset utilization across our portfolio, particularly at our Canadian diversified midstream operation. Notably, we completed the acquisition of Colonial Enterprises this quarter. The partial earnings contributions were offset by the lost income associated with the sale of our U.S. gas pipeline in the second quarter of this year.

Lastly, FFO from our Data segment was $138 million, representing a step change increase of over 60% compared to the prior year. The increase is driven by a full quarter contribution from the tuck-in acquisition of a tower portfolio in India completed last year as well as strong organic growth across our data storage businesses. This growth included income earned by our developers, the commissioning of 80 megawatts of capacity at our hyperscale data centers and 45 megawatts of new billings initiated at our U.S. retail colocation data center operation.

Before turning the call over to Sam, I'd like to provide an update on recent financing activity. Debt capital markets remained favorable during the quarter, with significant new issuance activity and further tightening in credit spreads. During the period, we completed financings to enhance our liquidity, support growth initiatives and refinance near-term maturities. This included a $700 million corporate issuance of medium-term notes in September. The issuance had a weighted average interest rate of approximately 4% and was priced at the tightest credit spread in our history.

As a result of our proactive approach to refinancing, less than 1% of our nonrecourse debt is maturing over the next 12 months. We maintain a well-laddered maturity profile with a weighted average maturity of approximately 7 years. Our balance sheet remains well capitalized with liquidity at the end of the third quarter totaling $5.5 billion, which includes $2.5 billion at the corporate level and over $1.4 billion in cash across our operating businesses. This strong liquidity position positions us with the confidence to pursue a variety of growth opportunities as they arise.

That concludes my remarks for this morning. I'll now turn the call over to Sam.

Great. Thank you, David, and good morning, everyone. For my remarks today, I'm going to provide an update on our transaction activity, and then, I'll conclude with an outlook for our business.

Now, starting with investments. We've already met our deployment objective for the year, securing 6 new investments totaling over $1.5 billion. This quarter, we secured 3 new investments across diverse regions and sectors, whereby BIP will deploy approximately $225 million in total.

The first investment is a $1.3 billion enterprise value New Zealand natural gas infrastructure operations. The business primarily operates a leading gas transmission, distribution and storage business that is comprised of regulated and long-term contracted revenues with inflation taxation. This value-based acquisition is highly cash generative, resulting in a short payback period of approximately 7 years. We expect the transaction to close in the second quarter of next year, subject to customary regulatory approvals.

The second acquisition is a $1 billion enterprise value company that is a South Korean industrial gas business that supplies industrial gases to industry-leading and investment-grade semiconductor manufacturers. The majority of the business is underpinned by 20-year minimum take or pay off take agreements with significant cost pass-throughs. This transaction is expected to close later this quarter.

And then lastly, we've secured our first AI-related project under a newly established $5 billion framework agreement with Bloom Energy to install up to 1 gigawatt of behind-the-meter power solutions for data centers and AI factories. This project provides a hyperscale customer with 55 megawatts of behind-the-meter power for an AI data center in the United States.

Now, with respect to capital recycling, the momentum in our asset sales program has continued. During the quarter, we progressed a number of initiatives, and we've now generated over $3 billion in proceeds for the year and are on track to achieve a further $3 billion over the next 12 to 18 months. One of the most significant asset sales completed in mid-October was the parcel sale of our North American gas storage platform and what is the largest IPO in the TSX since May of 2022. In total, we raised CAD 810 million, and BIP's share of the net proceeds from the offering was approximately USD 230 million. Since the formation of Rockpoint, which is our natural gas business, which was done through a series of acquisitions, EBITDA has grown by more than 4x, driven by operational improvements and favorable market fundamentals. As a result of various strategic initiatives, which enhance the stability and quality of earnings, along with the sale of 2 noncore assets in 2023, we have now realized a 3.2x multiple on our invested capital while continuing to own a significant interest in the business.

Now, the outlook for Brookfield Infrastructure for the balance of the year and looking into next year remains favorable. As mentioned at our recent Investor Day in September, we believe BIP is at an inflection point in its growth profile. Each of our new investments this year is expected to deliver returns above our 12% to 15% target range, and it's backed by credible business plans that support potential upside returns over 20%. We also have a robust pipeline of new investment opportunities across each of our existing segments driven by the long-term megatrends that we've talked about many times in the past of digitalization, deglobalization and decarbonization.

We're also seeing a significant new growth vertical emerging from the rapid build-out of AI infrastructure, a $7 trillion opportunity set that remains in its early stages and continues to expand. We expect to deploy up to $500 million annually into AI-related infrastructure in the coming years with AI factories and behind-the-meter power solutions, representing a natural compelling extension of our investment activities. These growth factors paired with a macroeconomic backdrop that is trending very favorably, set the stage for BIP's FFO per unit growth to inflect higher.

So that concludes my remarks, and I'll pass it back to Josh to open the line for Q&A.

[Operator Instructions] Our first question comes from Maurice Choy with RBC Capital Markets.

If I could just start off with the capital deployment opportunities, it is clear that data infrastructure and energy had been quite thematic of late, and that's consistent with your Brookfield day messaging. Just your thoughts on the rising competition for these types of assets. And if you could break it down, whether that be types of subsectors within a new vertical or even geographically? What does that mean to your ability to source these opportunities?

Maurice, this is Sam. I'll tackle that one. I think what we've -- what we flagged at Investor Day, and I guess, I think we've talked about for a number of years now, is that we have seen a significant increase in the number of opportunities to deploy capital, particularly in the data sector and in sectors impacted by digitalization.

And you're right that there's always -- there are new players who are competing for those opportunities with us. And frankly, over the last 15, 20 years, we've seen new entrants into the Infrastructure sector. We remain confident that because we have a global franchise and access to the most significant amounts of capital of any player that we remain with a distinct advantage in sourcing the best opportunities to deploy capital. And in sectors and regions where capital is plentiful, we'll avoid entering into those cost of capital shootouts and look for areas where capital is more scarce or where people are looking for partners that they can rely on and have trust in to be long-term counterparties. And those are the things that I think, historically have made us successful.

And I think today, many of the large tech companies who are making significant investments in the many billions of dollars, they're looking for players like us that they can have confidence in to deliver the projects and be there for them through thick and thin. So I know that was probably a bit of a general answer to your question, but I think, hopefully, you get the tone that, yes, there are new players; however, the opportunity set is still very large and our specific expertise and skill sets position us to get the best returns and not be competed down to the lowest common denominator, which is, I think, what you're worried about. And I don't think that's an issue.

That's great color. If I could just finish off with the question about the LP unit repurchases and the establishment of the ATM program for the BIPC shares. I wanted to get your view about the timing of any action, and also, what does success for both these 2 actions and programs look like in your view? How do you measure that? Over what time period would you measure that? And conversely, what would be an unsuccessful outcome?

Maurice, it's David. I can start. Look, I think at this point, as you would have seen in our release, it's something we're contemplating at this time. We still have, obviously, filings to do to be in a position to execute the program. So I'll just caveat with that first. I think the key point, and I don't think we'll get into measuring success or failure of the program. I think what we're looking to do and one of our objectives has been to increase the liquidity of BIPC. And I think that is, in essence, what the announcement today will look to do if we go ahead with it. And I think we -- given the success we've had on the capital recycling front, we don't need the capital. So issuing BIPC under an ATM on its own isn't helpful to the business, so we felt pairing it potentially with an NCIB would be a way to avoid any dilution to our existing shareholders and to our business. And so I think that was the ultimate intent of the program if we do decide to go ahead with it.

And maybe just a quick follow-up. And maybe this is also somewhat related to the float of the BIPC shares is the secondary target also to perhaps tighten up the spread between the 2 securities?

Yes, Maurice. Look, we obviously don't know what will happen. So that would be purely speculative I think at this stage. We're just focused on the objective that Dave mentioned, and we'll see what happens.

Our next question comes from Devin Dodge with BMO Capital Markets.

I wanted to start with Rockpoint. With the IPO now obviously completed, should we expect that to pursue more exits via the public markets going forward? Are there for the midstream assets or across the broader portfolio? Or was Rockpoint more of a one-off?

Devin, it's Sam here. Look, we've always had the public market as a potential exit strategy. We did do it with DBI a number of years ago. I think we just considered as 1 of the tools in our toolkit to monetize assets. And for a period of time, there wasn't the market conditions that allow for good execution of IPOs. I think that has changed. And to the extent that the market remains open, then we would very much look at it as a potential option. It doesn't change, though our views on favoring 1 or the other. It's really about execution, maximizing value and basically position the companies themselves for future growth and success. So we weigh all those factors, and we were thrilled with the outcome that we had, and we think Rockwood is going to be an amazing company in the Canadian markets for a long period of time. .

Okay. Second question, I wanted to ask about CenterSquare. Look, lots of progress after combining a Volcan Xtera, and there were some more sites added more recently. Just wondering what's the investment basis from here? Is this a platform that you're going to continue to add scale? Is there more proven opportunities? Or has a lot of the heavy lifting already been done?

Again, I'll start, and I don't know, Ben might jump in as well. Look, I think we're just at the beginning. I think this is an unbelievable business, and the opportunities haven't been more favorable since we've owned it, which is -- it sounds crazy given how well it's done. I think we've increased EBITDA there 4x over the last number of years through acquisitions and leasing of space. But what's really exciting is the fact that many of these sites, which are legacy telco sites, are significantly overpowered, and we have a tremendous number of under-roof expansion opportunities that have built multiples in the 3 or 4 times, which is just unheard of in this sector. So we're going to take advantage of that.

I think the capital deployment opportunity in the business, Dave, correct me if I am wrong, is in order of magnitude of $300 million to $400 million over the next couple of years of CapEx. And so you can kind of do the math on how much EBIT that can drive. In fact, the opportunity may even be bigger than that, I'm probably understating it. But suffice it to say, and I know I'm running on here, the company is incredibly well positioned. It's unique in the market in the sense that there's not really many others who are serving that smaller 1 to 5-megawatt demand from customers. And I think this -- the explosion in AI inference and agent models is going to provide us tons of customers, along with the corporate customers. So it's a great story, and I think there's lots more to come.

[Operator Instructions] Our next question comes from Patrick Sullivan with TD Cowen.

Can you just talk about the level of market interest you saw in the stabilized data center portfolio that you monetized during the quarter? I guess, how are you making decisions on the size of the portfolios you're bringing to market right now?

Yes, I can start, and it's David here. And just to make -- I'll repeat the question, I think it's around the sizing of our stabilized data center program and how we determine what to bring to market. Look, I think this was just the first of hopefully several programs that we undertake over the next few years. Data for -- in Europe had probably the largest operating portfolio of data centers when we acquired it. So it was a logical candidate to be the first for our capital recycling initiatives within it. .

As you would have seen, it was over 200 megawatts of operating sites. They weren't all commissioned, so we still have some build-out to complete. So think of it as a bit more of a program where over time, we'll continue to execute on the sites as we commission them. But essentially, we were able to identify the program in terms of the perimeter of assets that we felt would be out of revenue generating today or generated in the next 6 to 12 months. And we felt that for -- it was about $1.4 billion equity check. We thought that was the right size in the market in Europe to target financial investors to come in and partners to join us to own these types of assets. And we're seeing significant demand for this return profile in the market. So as I said, Europe will be the first of our programs, and we'll look to replicate that in other markets as well.

Yes. The only thing I'd add is we've returned capital 2 ways. One is through issuance of ABS securities, which we do very programmatically almost monthly, it feels like, but let's just say, quarterly as the facilities get established. And then similarly, we'll -- our goal would be to -- as facilities get completed to programmatically sell down pieces of the equity quarterly or semi-annually, as they get built because that's that will be what the profile will look like over the next number of years.

Okay. Great. And then, I guess more on data center stuff. So like in a recent Brookfield podcast on the Data4 deal, you discussed that Europe has 1 of the largest infrastructure gaps relative to the other regions and essentially no sovereign compute. And you've made some announcements related to these sovereign compute opportunities. But can you just talk about some of the differences between that sovereign compute opportunity set versus the more hyperscale AI lab driven opportunity set that we see in the United States. Is there anything there to contrast and compare between the two?

Yes. Look, I think the -- I think they're both very exciting. For us, we've had a focus on the sovereign compute primarily because, as I kind of alluded to in some earlier answers, it's a way to use our particular skill set to create bilateral transactions in the sector, where we can come up with more complex solutions for governments to bring all the various players together to solve what for them is a sovereign issue in a sense that they want to retain data as well as AI capabilities in their home markets. and not be dependent on just all the U.S. hyperscalers. And so it really is a distinct market. Obviously, we still focus on servicing our hyperscale customers, but we thought we could create kind of a niche market for ourselves working with -- today, it's probably 6 or 7 sovereign nations on building smaller, but more dedicated facilities for their home needs.

And we're excited about the progress we've made. The only drawback to it is often dealing with sovereigns tends to be a bit slower. And the investment cycle has probably taken longer than we might have thought initially. But we're excited about the projects we're working on, and we hope to have announcements in the coming quarters.

I would now like to turn the call back over to Sam Pollock for any closing remarks.

All right. I guess that -- it looks like there's 1 more question we can take.

One moment for questions. Our next question comes from Frederic Bastien with Raymond James.

Appreciate it. Guys, are you able to quantify the organic growth rates your various data businesses are enjoying. And how would these be tracking versus your underwriting assumptions?

We're happy to start, it's David here. I think -- look, I think the overarching team across the data businesses and maybe we'll stick to towers and transmission and then data centers are 2 separate categories. I'd say on the transmission and tower side, I'd say are -- I would say that's a much more predictable, stable execution of our backlog there. We are building out towers for our customers in France, in Germany, some in India as well in terms of rooftops and antenna. So I'd say that the case there is much more predictable. And I'd say it's slightly ahead of underwriting, but generally in line. So that's going well. .

When we bought these hyperscale platforms, we underwrote a land bank that they had in place, and we've executed and continue to actually that on schedule and on pace. And I think we're excited about what the next, call it -- what we call the shadow backlog looks like in these businesses, where we could see up to a gigawatt across the globe of new projects coming in the coming years. And that is something we never underwrote. So the pace of growth and organic growth in those businesses will be dramatic. Like the percentage, I don't think is that meaningful because it's coming from such a small base in these platforms, but that's what you're starting to see come through the numbers. I think in the last year alone, Fred, we've commissioned 175 megawatts across the globe, which is pretty impressive.

That's great color. Just building on that, you flagged some promising AI factory opportunities shaping up for a bit during your Investor Day. And I was wondering if these are along the lines of the partnership you signed with Bloom Energy to install BTM solutions? Or do they vary depending on the partnership you're pursuing?

Brad, look, as you can imagine, they vary. I think there are some that are very similar to the Bloom Energy arrangement, where we're facilitating capital needs for a number of the data center and hyperscaler companies to finance all the capital that they need to put into these data centers. But then, obviously, building out AI factories is going to be a different type of arrangements, and we expect that probably to be the majority of what we do in our AI activities.

Okay. So I think that's probably it. I'm glad we got Fred in there. So yes, thank you, operator, Josh, for today, and thank you to everyone on the call for joining us. I know this is our last call before the end of the year, so on behalf of everyone here at Brookfield Infrastructure, we'd like to wish you a healthy and happy upcoming holiday season. And we look forward to providing you more updates on the fourth quarter and year-end results early in the new year. So take care. Thanks. .

This concludes the conference. Thank you for your participation. You may now disconnect.

Well, good afternoon. I guess the only bad news is unfortunately there's not going to be a break that I think we had planned at this moment, but it's been a pretty exciting day so far. We had Bruce Flatt, we had fire drill, and then BBU just wowed at us just now. So, we're going to try and keep the momentum going and welcome you to Brookfield Infrastructure's portion of today's event.

The theme for our presentation is growth, and more specifically our view on our current growth trajectory. So, I'm going to begin by providing context on our historical growth and where we think we're headed. Essentially, what we're going to describe is our inflection point. My colleagues will then come up and provide more details on our playbook and how we're going to achieve that growth.

To set the stage not dissimilar to what [ Anuj ] did, I want to start with what our mission is and a lot of you would've heard this in prior years, but essentially it's to own highly contracted and regulated businesses that generate long-term consistent growth with minimal variability. And if we do that well, we should be able to generate FFO growth of about 10% or more annually, and this will lead to growing distributions within our 5% to 9% target range.

Now, to meet our goals, we're going to execute a full cycle business strategy that has three primary pillars. The first is we deploy capital at or above a 12% to 15% hurdle rate. Second, we'll crystallize value through our capital recycling plan. And third, we'll maintain a strong financial position to ensure that we always have ample liquidity to take advantage of opportunities that may arise. This approach has delivered a long-term track record of stable and growing cash flow with FFO per unit increasing at a compound annual rate of 14% since our inception. This in turn has allowed us to increase distributions for 16 straight years at a compound rate of 9%.

Now, while we're proud of our long-term record, we recognize that our share price will reflect either current and expected growth rates. So, it's a fair question to ask, how have we done lately? So we thought we'd look at a more recent time period, if we just look at the past five years, we've still delivered strong financial performance across all our metrics. Absolute FFO has grown about 13% per annum, cash flow per unit has increased 10% annually, and we've reduced our payout ratio by 11% from 78% to 67%. These are good results when you compare them to our Canadian midstream and utility peers that have generally grown their cash flow per unit over the same period by about 5%, but it's still lower than our long-term average of 14%.

And there's probably two macro reasons that largely explain the difference. The first headwind our business faced was as a result of being an international company was the tremendous strength of the U.S. dollar. From 2020 to the beginning of this year, we saw the U.S. dollar strengthen approximately 15% versus global currencies. In terms of our results, if you adjusted for the impact of FX, we would've delivered a 12% FFO per unit growth instead of the 10% annually.

The second headwind was higher borrowing costs from the rising global interest rates. As everyone knows, the world transitioned from a decade of low interest rates into a higher rate environment at a very rapid pace. The federal funds rate increased by 500 basis points from the trough to the peak, and similarly, the U.S. 10-year treasury rose by a magnitude of about 400 basis points. If you adjusted our results for the impact of higher interest rates, our FFO per unit would've increased by 2% to 3% with some offsetting benefit, obviously, from higher inflation in our revenues.

Now, longer term, we are better off having had the benefit of higher inflation, as that will continue to compound in our results over the long run, but in the short run, we were negatively impacted.

Okay, so you're asking why am I telling you all this? Well first, the macro environment has changed and our business is better than ever. Today, we are at an inflection point and we think we'll see substantially higher growth rates in our business than we've achieved in the last five years.

So, let's start with how the business has evolved. In the last five years, the embedded organic growth from our business, which is reflected in our capital backlog, has grown 4x. This is important because our organic growth is the highest returning investments that we can make in the business. In a similar vein, the number of high growth platform businesses that we own has more than doubled. And lastly, our asset rotation program is also 5x bigger, allowing us to self-fund our growth, which is our lowest cost source of capital to fund new investments.

The strength of the business and the strategy execution has also been showcased during 2025. We've made significant investments in growth already exceeding our annual goal, deploying $2.1 billion, $700 million of that has been deployed into organic growth projects, and $1.4 billion has been deployed into four new investments at returns we believe will exceed our target returns of 12% to 15%. We have also been successful this year in recycling capital to self-fund our growth. We have already secured $2.8 billion of sell proceeds, and that's an annual record for BIP. This includes eight transactions that involve either full or partial exits, and all together these asset sales have results where we've achieved a 20% IRR and a 4x multiple capital. These are terrific results and a testament to our ability to crystallize value.

Now, in terms of the macro environment, several factors are trending in a positive direction, from our perspective. First, in most parts of the world, interest rates are stable or decreasing, a positive for our portfolio. One recent example of the benefit of lower rates is a five-year BIP bond that we did just this week where we issued at a coupon of 3.7%. Just two years ago, in 2023, we issued a similar bond that was over 200 basis points higher than that. These are rates that we saw back five to seven years ago when rates were much lower.

Another favorable trend has been the softening of the U.S. dollar. For the first time in many years, FX rates may no longer be a headwind for us, and in fact, if this trend continues, it may become a tailwind.

And then lastly, as we've been saying for a few years, we are in a massive investment cycle across all our segments. We've been calling this an infrastructure super cycle. Now you've probably heard lots of big numbers, but it's estimated that the world needs a $100 trillion dollars in investment going up to 2040 in order to meet the new and updated infrastructure requirements across the world, and that probably is underestimated, given that AI estimates are only growing from year to year to year.

So, let's just bring this all together. BIP delivered strong FFO growth of 10% annually over the past five years in spite of interest rate and FX headwinds. We believe that with FX and interest rates normalizing, along with the strategic enhancements that we've made to the business, this will result in BIP returning to annual growth rates for the next five years approaching where we have those long-term rates of above 14%. Higher growth rates ultimately will enable us to increase dividends at the higher end of our 5% to 9% range, and we'll do that without increasing our payout ratio.

The content for the remainder of our presentation today will be on our execution playbook, and this is how we're going to deliver higher FFO growth. Now, first up is Lief Williams, a Managing Director in our AI infrastructure business, and he'll come up and preview AI infrastructure and explain why we believe this new investment category will be a massive opportunity for BIP. After Lief, Scott Peak, President of our infrastructure business, will come up and walk you through our deployment this year and how we expect to outperform our return targets. And then lastly, David Krant, our CFO, will discuss the evolution of our capital recycling program and how it creates value and growth for the company.

And with that, I'll ask Lief to come up.

Thank you, Sam. We thought we would start by recapping a little bit about what we said last year at this event, which was really two main themes. Firstly, the digitalization tailwinds continue to accelerate, and secondly, BIP is well positioned to participate both through our existing asset base and through new opportunities. With the passing of a year and the benefit of hindsight, we will be the first to admit that we may have underestimated the sheer scale of the opportunity set. The growth is exponential and is much, much larger than we imagined a year ago.

To take a couple of data points, Hyperscaler CapEx in 2024 was already at an all-time high at $270 billion. A year later, it's increased by 50% year over year up to $400 billion. We're now at the point where this is impacting U.S. economic statistics with this making up about 1% to 2% of U.S. GDP. That's already higher, for the sake of context, than the fiber build-out of the early 2000s and it's starting to approach the build-out of the railroads during the late 1800s. Now, what's driving Hyperscale CapEx is the AI race led by the largest technology companies in the world and this is supported by advancements in semiconductor chips.

So out of interest, to support AI workloads, current chips are using 10x more power density than for non-AI workloads. And so we're up to about 120 kilowatts per-rack relative to non-AI workloads, which are more like 10 kilowatts per-rack. This is already 2x higher than we were forecasting only a year ago. What's even more impressive is, if you look out five or 10 years, the leading chip designers are actually forecasting that we will increase another five to 10-fold from where we are today, and so this will be half a megawatt or 1 megawatt per-rack.

What's really important to emphasize about this is the fact that having more powerful compute infrastructure will enable more powerful agentic AI. For example, even the most powerful compute cluster in the world today is limited by memory bandwidth and by context length. And what we mean by that is that large language models will forget instructions that were previously provided or work that was previously done. And so having more powerful compute will enable us to push out the technology frontier and do things, rather than just a single topic query, it will be able to be a persistent partner that works for hours, days, or even longer periods of time.

And so with that backdrop, it will be no surprise that our data center platform has experienced a step-change in growth. We've sold effectively all of the inventory that we had available and so, in the last few quarters, we've secured additional development capacity. We will be able to deliver this product to our end customers for years to come. This land bank will provide long-term optionality. And what's really exciting about investing in the data center sector is that it hits all of the infrastructure attributes that we target. High barriers to entry, long-term contracted cash flows, investment grade counter parties, inflation protections, and ultimately attractive risk-adjusted returns. But it hasn't just impacted our existing asset base. We see a whole host of new opportunities to invest capital to support the unprecedented scale required to build out AI.

Over the next 10 years we see a $7 trillion investment opportunity in the physical assets supporting AI. This will start with AI factories, which is a next generation of digital hubs powered by specialized networking and liquid cooling to host hundreds of thousands or millions of chips. In addition, behind-the-meter power generation will be required, given shortfalls on the grid. We will also need to invest in compute infrastructure to support the AI factories and additional portions of the AI value chain.

So to dive into AI factories for a moment, what do we mean by this? Well, firstly, this is a $2 trillion opportunity set in and of itself. There are really two raw inputs that are required to feed AI: power and compute. These are also the two constraints that are slowing the deployment of AI around the world and delaying the technology frontier. AI factories are really an extension of our existing investment perimeter. We currently invest about $10 million per megawatt into building out cloud data centers. This would include the purchase of land, connecting it to the grid, investing in the building shell, and then investing in the mechanical and electrical systems that support the IT load inside the data center.

AI factories are all the same things, but even more. We would also need to invest an incremental $30 million per megawatt of IT load, so up to a total of 4x what we invest into a cloud data center. The largest part of this incremental investment is into the chips outright. Now, traditionally, chips have been funded by the data center customers, and so it's been on corporate balance sheets. But even the largest and best-funded corporate balance sheets are unable to address the physical and immense capital needs going into this space.

So again, to provide context, ChatGPT-4 was trained using 25,000 GPUs over a period of 100 days. A modern AI factory will host a million GPUs, and these are more powerful GPUs than the prior vintage of chips. And so the scale here is enormous and technology companies are looking for partners like Brookfield, who have experience owning and operating these assets and have access to capital to deploy into the space.

So, we wanted to spend a few minutes talking about some of the AI factories that we are developing. There are seven AI factories that we are pursuing in five countries. And one thing that's very exciting about the current AI market is that the universe of customers has expanded. Traditionally there were maybe a handful of hyperscale customers who could be the tenants for a data center. Today we see native AI companies, a wave of enterprise companies, and perhaps most interestingly, sovereign governments themselves are looking to be off-takers for this infrastructure.

Governments around the world are looking at AI, realizing that, firstly, for data sovereignty reasons as well as data security reasons and then, perhaps most interestingly, the transformative economic potential that AI offers, AI should be at the top of their agenda. And as a result, they would like to support the buildup of the infrastructure in their region.

The seven AI factories will -- in total comprise 6 gigawatts of compute, 3 million GPUs, and $200 billion of total capital deployment. Now, we realize that these are staggering numbers and so, to contextualize, $200 billion would occur over time. We have selected these sites to be future proof, where they can be expanded to meet our customer needs over decades to come. In addition, it includes both debt and equity. And in each of these regions we are partnering with technology companies, and so ultimately the equity would be shared between ourselves and our partners.

The other thing to note is, in terms of the GPU deployment and the leases that we have with our customers, this will follow exactly the same infrastructure model that we have with the broader data center. And so, these are take-or-pay contracts with investment-grade counterparties, and no technology risk.

To sum it all up, the AI infrastructure super cycle is here. This is a multi-generational investment opportunity. Just as the electric grid build-out took decades but was required to build out a modern world, AI infrastructure will also take many, many years, and this will be required to build out an intelligent world.

Brookfield is a partner of choice for large technology companies and for governments around the world. We are excited to be investing in this space at returns that exceed our targets and expect BIP to deploy $500 million annually to make this future a reality.

And so with that, we'll go next to Scott Peak, the President of our Infrastructure business.

Okay. Thanks, Lief. Well, hopefully you're concluding that it has been a very productive 2025 for Brookfield Infrastructure across all of our business. This year we made excellent investments. We've advanced asset management priorities and team activity levels remain very high. Therefore, we thought it's timely to share an update with you on our recent deployment activity and our deployment outlook for the business.

Let's set the stage. Three key messages. The first is that the infrastructure super cycle continues to serve as a deployment tailwind for our business, enabling us to be very selective. The second is we have a proven track record of executing marquee transactions opportunistically across cycles. And third, our active asset management approach generates a return premium incremental to our initial underwriting. And together, we continue to deliver investment returns above our stated targets.

Our results validate that we're focused on the right themes in the right regions at the right time in the market. Digitalization, deglobalization, decarbonization, our longstanding three Ds now, remain the most topical for our business. Each of these Ds continues to require an enormous amount of capital, creating a deployment tailwind, expanding our opportunity set, and enabling us to patiently select only the best investments in front of us and, together, translating to return on performance. We follow the large-scale capital needs along the economic backbone of the regions where we invest. Ten years ago, our global investment activity was focused on ports, toll roads, gas and electricity transmission, and towers.

Then the opportunity set evolved, primarily due to three reasons. The first is technological evolution led to new businesses which did not previously exist. For example, fiber. The second is certain businesses improved their contracting models to attract large-scale capital, thus becoming more suitable investments for us. Think data centers. And third, with time, frankly, we became more comfortable with certain businesses that we did not previously prioritize, such as residential infrastructure.

And the evolution continues today. This year we've added AI factories, bulk fiber networks, refined products pipelines, rail car leasing, and industrial gas platforms, among others. We have a differentiated ability to apply our learnings across industry sectors, often from and to businesses that otherwise appear unrelated. And by doing this, we unlock opportunities that others, frankly, just don't see. Let's touch on a few examples.

You see here, and you'll remember our partnership with Intel. The first of its kind semiconductor partnership that we announced a few years ago. The market viewed it to be quite innovative, but the component parts of the transaction were simply adapted from our prior investments. We took the contracting framework from our hyperscale data centers. We took the project finance framework for investments like our LNG tolling facilities, and we took the governance and risk allocation from various large scale corporate partnerships that we've done.

A similar cross-sector approach was applied for our Hotwire acquisition where we weaved together our experience from fiber and residential infrastructure and stabilized asset carve-outs, which you'll have seen us execute on over the past year in which our European data center platform, as well as our container leasing platform. And cross-sector learnings were also applied this year to our rail car leasing partnership and our investment in Colonial.

Uncertainty often leads to market volatility, creating a buyer's market for those investors who resist the tendency to simply sit on the sidelines. These are the times when we at Brookfield, find that we are the most active and we move decisively with a focus on the highest quality businesses. The large marquee businesses we acquire are rarely available, particularly on a value basis. They perform essential services typically on a regulated or contracted basis without material cross border trade activities. The investments we make in uncertain market periods typically outperform.

During the pandemic, we acquired several excellent businesses at deep value. During the macro rate shock environment, while most paused for consensus on the trajectory for rates, we quickly acquired great businesses with limited to no competition. And earlier this year during the trade disputes, we acquired marquee businesses, which are already exceeding our expectations. And while our teams are busy during the uncertain times, there's no vacations at Brookfield, they're also busy in the interim periods characterized by elevated market sentiment when the sidelines clear. These are the periods where we opportunistically recycle capital from our mature businesses.

Our transactions this year covered our sectors and our typical deal structures. In July, we closed the 100% acquisition of Colonial, a value-based acquisition of a highly cash generative and strategic pipeline system, spanning 5,500 miles from Houston to New York. Earlier this month, we closed 100% acquisition of Hotwire, the leading platform of bulk fiber to the home infrastructure. And we signed a rail car leasing partnership with GATX, a leading corporate strategic and a corporate carve out of an attractive Korean industrial gas platform.

I'll now spotlight our investment in Colonial. Colonial is the largest refined product system in the U.S., supplying almost half of the demand of the U.S. East Coast. With a multi-decade history, as the lowest option for customers with utilization over 90%. Colonial is a large, critical, and marquee midstream business that we acquired at 9x EBITDA with a high cash yield. So how are we able to do this? One, the transaction timeline overlapped with the trade war noise, limiting credible competition, particularly at this scale.

Second is our pipeline and FERC experience enabled us to quickly complete due diligence and move quickly as a single buyer on an all cash offer during an uncertain market period, enabling us to successfully sign the transaction.

Four years ago, at this Investor Day, I shared a case study on our take private of Inter Pipeline, and I outlined our self-imposed midstream rules for our investments that we do in the space. I suspect some of you may have been in the audience then, and like Inter Pipeline, Colonial is a critical midstream business which checks all of our boxes. It's highly cash generative with a quick payback. It's FERC regulated with inflation linked tariffs, an investment grade capital structure, and we underwrote it conservatively with long-term declining utilization in a finite life. And importantly, Colonial came with significant untapped opportunity to apply our operationally intensive asset management approach and materially outperform.

Our business plan for Colonial is focused on bridging from our downside protected target return to our outperformance return by focusing on three main priorities. The first is to align incentives and accountabilities where we eliminate bureaucracy and inefficient work streams. The second is to enhance margins where we look to find win-win arrangements with stakeholders. We look to drive operational excellence while we ensure that safety and reliability remain paramount. And third, to prepare the business for a future opportunistic exit with optionality for diverse products.

Now onto Hotwire. Hotwire is the leading U.S. provider of bulk fiber broadband infrastructure to home and condo owner associations, long-term take or pay contracts, a self-funding model, and an efficient in-place capital structure. We are the natural owners of Hotwire because we bring our experience in residential real estate, our homebuilder relationships, and our complementary residential infrastructure platforms. We have deep fiber and securitized asset financing expertise and an ability to incorporate the learnings from seemingly dissimilar businesses. Hotwire had been in operation for 25 years as a single business.

Given our prior stabilized asset experience, we quickly recognized Hotwire would be optimized as two businesses. Business number one, a development growth platform, including a proven development engine, 2,000 employees, and 200 homebuilder relationships. Business number two, a stabilized portfolio of contracted fiber assets, long-term contracts, high cash yield and high renewal visibility. We split Hotwire concurrently with signing the transaction and exited the majority of the stabilized business. We partnered with lower cost of capital, consistent with the low-risk nature of the stabilized business, and together this unlocked value not historically recognized and not shared with the sellers.

So, with that structural change behind us, what's next for Hotwire? Three-step outperformance plan. One, continue to sell down stabilized assets and recycle capital. Two, expand partnerships with large homebuilders and developers. And three, leverage the Brookfield ecosystem so that we can enhance Hotwire's customer service offering. And if we do this, Hotwire is well-placed to serve as another innovative and outperforming platform for us.

So, in conclusion, our business is ideally positioned. We have a robust and attractive opportunity set in front of us, and we have a differentiated ability to both originate and add value. And taken together, we expect to continue to achieve returns above our stated targets. Thank you.

We remain excited for what's next for Brookfield Infrastructure, and I'll now hand the stage over to our CFO, David Krant.

Thank you, Scott, and good afternoon, everyone. Now, last year we identified a $5 to $6 billion target for our capital recycling program. Just nine months in, we have delivered $3 billion of capital recycling proceeds, and we've done that while crystallizing excellent returns. So today I'm going to focus on how we measure success of that program and how this year's sales alone could unlock up to $6 billion of value for our shareholders in the years to come. Much of it behind the scenes and outside of our key performance metrics. Our capital recycling program has scaled with the growth of our business. It is now a key differentiator that will fuel the next phase of our growth that you've heard today.

Let's take a look at what we've achieved so far this year. We've sold $2.8 billion worth of businesses. We've done this across eight exits, they spanned six different countries, one from at least each of our segments, and truly demonstrate the broad-based global demand for high quality infrastructure businesses like ours.

Now, in addition, we've done it in a variety of ways. Looking at our toolkit, which won't surprise anyone, we have leveraged a variety of techniques to maximize value for our shareholders. As you heard, we've used stabilized asset pools for the first time this year, identifying it in our European data centers and within Triton. That's a great way of pulling out a lower risk, lower growth stream of cash flows from a broader platform to find the right buyer. It generally results in a broader investor universe and a better outcome for us as sellers.

Now, I'm going to focus the next little while on the three key ways in which recycling capital in our business creates value for us. First, it reduces the reliance on public markets to fund our future growth. Second, it creates a significant amount of value that we build and compound during our investment period. And finally, it is an accretive source of perpetual capital that we can use to redeploy and grow faster.

We'll go through each of these in succession, starting with our funding sources. We've broken up the last 15 years into three distinct five-year intervals. As you've seen our investment pace ramp up, so has our capital recycling. In fact, in the last five years, we have funded over 85% of our new investments with asset recycling. In fact, if I shorten that period to just the last three to four years, 100% of all of our new investments were funded with capital recycling proceeds. That's right, every single dollar we deployed into new investments was funded internally.

Now, the second pillar of the value creation we have here is that it crystallizes the value that we have compounded over our investment period. Now investing at 12 to 15% targets like we do is good, but what's better is if we're able to compound those returns over longer periods of time, or we're able to unlock more value and earn a higher return. That's when it becomes exceptional. I think that's what I'd characterize this year as. Across the $2.8 billion of proceeds, you can see our average IRR was 20%.

Now considering our hold period for this portfolio averaged about eight to nine years, that translated into a multiple on our capital of 4x. These are great returns by any standard, but what's more impressive to me is the fact that these were earned on either regulated utilities or highly contracted businesses. How do these returns get captured in our reported results? Well, the truth is they don't, and that's what I'm going to elaborate on in a little bit now. In terms of how this profit we earn on these investments gets captured in net income or in FFO.

Starting with net income, as we've said in years past, this measure is not great for how we track our business on an annual performance because most of the FFO or cash flow we generate and distribute is offset by amortization or depreciation. What that means is that over time, our book value or carrying value of our investments tends to deplete or reduce over time, resulting in a large gain on exit. As you can see here across these four assets, when we dispose of them, we'll recognize a total gain of about a billion dollars net to BIP.

Now, you might be wondering, "I thought you revalued your assets under IFRS?" Well, it's true. We do follow that standard. However, there are limitations to what IFRS allows you to revalue. To put it into non-accounting terms for most of those people in the room, our standards allow us to value the assets in place, the physical pipes, the processing units, the data centers, etc., but it doesn't allow you to value the business. As many know, there's a lot more that goes into running a business than just physical assets. In fact, it doesn't allow us to revalue the growth ahead of it, the intangible customer relationships we've built over time or the platform values we've built during our 10 years of ownership in many cases.

As a result, when you go to exit these businesses, you tend to sell them at premiums. This year, that's no different. We recognized a 2x uplift over our book value on exit. What's even more interesting is our key performance metric, funds from operations or FFO, also doesn't capture this benefit either.

To highlight this, what we've done is we've taken our realized multiple of capital, which is simply just the cash on cash return we earned over the investment period, divided by our day one investment, and we use that multiple to imply the realized profit that we earned on that investment. It's simple. For each of them we've highlighted that in the middle there. We then compared that to the cumulative FFO that we recognized on those same investments over our investment period.

What it tells us is that no matter which investment we look at, there were hundreds of millions of dollars of profit that we earned as the investor that never went recorded through our FFO. Meaning had we been able to capture the benefit we created over time, our reported results would've been much higher and grown much quicker than they had. Now, recognizing these limitations is the very reason we focus on IRRs and multiples of capital when we're explaining how we did as investors.

Now, the third and final value creator, and probably the most important here today, that I want to highlight is how we can create significant value when we take the proceeds from our asset sales and redeploy them into higher returning investments. This boils down to sources of capital. In terms of cost of capital, we've outlined where we think our target cost of capital is for asset sales. Obviously, it's going to be a little more expensive than issuing corporate debt or preferred shares, but we believe it's highly accretive when compared to the cost of issuing new equity to fund our growth. This year's program certainly outlines that merit.

In terms of some of the key headline metrics we delivered, our sales this year triangulated to an FFO yield of 7%. Candidly, that's a helpful number in the short term, but tells us nothing of importance over the longer term. Instead, looking at our implied EV to EBITDA multiple on these sales and the buyer's cost of capital can be much more valuable. The 10% to 11% buyer's cost of capital we achieved is an estimate. The buyers of our businesses are going to make assumptions on their own of how they expect these businesses to perform in the years ahead. However, we can imply them by looking at our business plans for these businesses and using the price they paid. This year, we averaged about 10% to 11% for that cost of equity.

I'm going to touch on what that means in a second, but first we thought we would just highlight the disconnect that we're seeing again between the public and private valuations of our businesses. Interestingly, when you compare that 15x EV to EBITDA multiple that we were able to achieve on our program, which again, not to repeat myself, was across four segments and six countries, so a pretty broad group of our assets, that 15x EV to EBITDA multiple is three to four turns higher than where BIP overall trades at, meaning there's quite a premium in the private markets for the types of assets that we own.

Pivoting back to that 10% to 11% cost of capital, what does that tell us? Well, it's a really important metric in how we decide or determine how much value we think we can create in the years ahead. To determine that value, there are three key inputs that you need. The first is that cost of capital, so for illustrative purposes, we're using 11% this year. Second is the size of our recycling program. As you've heard, we've delivered nearly $3 billion this year. The third is our expectation of what we will earn in the years ahead when we redeploy it. As you've heard, we've had some of the best investments we've made in the last 24 months that we believe will exceed our target returns. For illustration purposes, we've used a range of 15% to 17%.

When you look at the value you create by reinvesting that $3 billion at 17% relative to the 11%, it costs us on our balance sheet, we think we can create up to $6 billion of incremental value by doing this program. Importantly, that's just this year's sales alone. That is the benefit of this asset recycling programs that we're constantly selling de-risked, mature businesses and reinvesting them into higher growth, higher returning opportunities.

Now, to sum up our capital recycling initiatives this year, there are three things I want to leave you with. The first is that we will meet our $3 billion target for this year. In fact, we're already there. Second, we believe we'll sell a further $3 billion of assets in the next 12 to 18 months and then going forward a $2 to $3 billion annual run rate for our program. Finally, we expect to create significant value when we redeploy those proceeds into higher returning opportunities.

So with that, I'll now stand back up for closing remarks and questions and answers. Thank you.

Well, thank you for listening to our presentation, and I'd like to leave you with a few thoughts before we start Q&A. We coined a phrase that BIP was a "grow-tility" a couple of years ago, and we believe that's not only the case, but that we're an even better one today. As we think about the next five years, what we've talked about is the fact that we're in a moment in time when we have all the macroeconomic trends going in our favor, including the huge investment opportunity related to AI infrastructure.

In addition to that, we've had the benefit of all the enhancements that we are putting into the business that we've been able to execute, which is investing at higher returns and also recycling capital at a higher rate, which we think will compound value and increase growth over those next five years. If we do that, that's going to lead to higher FFO growth, which ultimately leads to higher dividend increases.

Good day, and thank you for standing by. Welcome to the Brookfield Infrastructure Partners Second Quarter 2025 Results Conference Call and Webcast [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to David Krant, Chief Financial Officer. Please go ahead.

Thank you, Liz, and good morning, everyone. Welcome to Brookfield Infrastructure Partners' Second Quarter 2025 Earnings Conference Call. As introduced, my name is David Krant, and I'm the Chief Financial Officer of Brookfield Infrastructure. I'm joined today by our Chief Executive Officer, Sam Pollock; and Brian Baker, an operating partner responsible for managing our Canadian midstream franchises. Also joining us today are Ben Vaughan, our Chief Operating Officer; and Dave Joynt, our Managing Partner in our transportation business.

I'll begin the call today with a discussion of our second quarter financial and operating results, followed by an update on our capital recycling initiatives. I'll then hand the call over to Brian, who will discuss the positive outlook for Canada's energy sector. And finally, Sam will provide an update on our recent new investments and conclude with an outlook for the business.

At this time, I'd 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 to review our latest annual report on Form 20-F, which is available on our website.

Brookfield Infrastructure had another strong quarter, delivering stable and increasing financial results as well as making significant progress on its capital deployment and recycling objectives. First, on results. We generated funds from operations, or FFO, of $638 million or $0.81 per unit in the second quarter, up 5% compared to the previous year. This result improves to a 9% increase when excluding the effects of foreign exchange, highlighting the strength and stability of our underlying base business performance. The increase was primarily driven by strong organic growth above our target range as well as contributions from tuck-in acquisitions completed in the prior year.

Taking a closer look at results by segment. Our utilities generated FFO of $187 million, slightly ahead of the prior year. Results benefited from inflation indexation, along with contributions from approximately $450 million of capital added to the rate base. The strong underlying performance was partially offset by the sale of our Mexican regulated natural gas transmission business that closed in the first quarter of this year.

Moving to our transport segment. FFO was $304 million. After adjusting for capital recycling initiatives and foreign exchange, results were slightly ahead of the prior year as well. The solid underlying performance was supported by high asset utilization at our global intermodal logistics operations, continued volume strength at our rail and ports businesses and increases in both traffic levels and rates on our toll roads.

Our midstream segment generated FFO of $157 million, representing a 10% increase over the same period last year, driven by strong organic growth across our franchises. In particular, our Canadian diversified midstream operation performed well due to higher customer activity levels and strong asset utilization. In a moment, Brian will speak to the strong momentum we are continuing to experience across the Canadian midstream operations.

And lastly, FFO from our data segment was $113 million, representing a step-change increase of 45% compared to the prior year. This growth was driven by the contribution from the tuck-in acquisition of a tower portfolio in India completed last year, along with the commissioning of newly built capacity and initiating new billings across our data center platforms.

In addition to strong -- our solid operating results, we continue to demonstrate strong execution of our capital recycling strategy to self-fund our growth. We have secured $2.4 billion of sale proceeds to date this year, already achieving an annual record for BIP with several incremental sales processes in the queue for the second half of the year.

Included in this total are 4 recently secured asset sales. The first is the sale of a 23% interest in our Australian export terminal, the world's largest metallurgical coal export facility. We acquired our interest in the business in 2010 and partially exited our investment in 2020 through a public listing in Australia. Since then, we have achieved several key value-creation milestones, including extending contract durations and simplifying our tariff schedule. This sale was completed in June and resulted in approximately $280 million in proceeds. We have realized a cumulative return of 22% and a multiple of capital of 4x, while still retaining a 26% interest in the business.

The second is the secure sell-down of an incremental 60% stake in a 244-megawatt portfolio of operating sites at our European hyperscale data center platform. This results in an additional $200 million in proceeds and finalizes our planned sell-down of 90% for total proceeds of approximately $300 million net to BIP. We expect to fully complete the transaction in the third quarter of this year.

The third sale is a further 33% divestiture in a portfolio of fully contracted containers at our global intermodal logistics operations, replicating the prior sale under the same established framework. We expect incremental proceeds to be approximately $115 million with closing anticipated in the third quarter of this year. We have now sold approximately 2/3 of this portfolio and generated over $230 million in net proceeds to BIP.

Finally, we agreed to terms for the partial sale of our U.K. port operation, which will generate approximately $385 million of proceeds and deliver an IRR of 19% and a 7.5x multiple of our capital. Since acquiring a 59% interest in 2009, we have successfully completed a comprehensive modernization of the port's operations, which included expanding the infrastructure to service large vessels and attracting new long-term contracts. These value-creating initiatives resulted in EBITDA tripling during our ownership so far. The transaction is expected to close in the fourth quarter of this year, after which we will own a 25% interest in the business, which allows us to participate in the next stage of growth in a highly strategic infrastructure asset.

That concludes my remarks for this morning. And I'll now turn the call over to Brian, who will highlight the attractive backdrop for Canada's energy sector.

Thank you, David, and good morning, everyone. Canada's energy industry is benefiting from several trends that support growth and strengthen the outlook for the sector in the coming years. This positive backdrop, in turn, benefits BIP's 3 Canadian midstream businesses relating to new investment opportunities, higher levels of organic growth and more optionality to exit. The Canadian government is focused on energy security and diversifying its trade relationships. This alignment provides support to 5 key trends that collectively underpin our positive regional midstream sector outlook.

The first is the strong demand profile for Canadian energy. Countries are increasingly seeking out diversification of energy supply, which is creating new demand for Canadian energy internationally. At the same time, investment in artificial intelligence is creating massive demand for electricity locally. For example, Alberta has approximately 12 gigawatts of requested power demand from data centers, up from 200 megawatts only a few years ago. This would represent a doubling of the province's current peak energy demand.

Second is that there is improved end market diversification. Several key Canadian infrastructure projects have recently been completed to enhance global market access. One of these projects, LNG Canada, is set to ramp up production over the next 12 months with a potential second phase under consideration that could double its capacity. Several other LNG projects are also on track to add over 5 million tonnes per annum of export capacity by the end of 2028.

Third, Canada has a highly economic resource. Our assets are strategically positioned near some of the most abundant and economically attractive resource basins in North America with decades of future production potential. The Montney, for example, has 80 to 90 years of remaining gas resources at a production rate that is almost 40% greater than what is being produced today. These reserves ensure Canada will be cost competitive globally, offering domestic producers attractive returns that incentivize production growth.

The fourth is social license. Public support for the responsible development of Canada's energy resources and associated infrastructure has improved considerably across the country. This presents a significant opportunity to further align the country's economic interest with its natural resource advantages. It reinforces the case for continued investment in the midstream sector by established operators like us that have a strong operating track record, prioritizing safety and sustainability.

And fifth, we are seeing improved investor interest. Strategics, financial investors and international investors have all expressed interest publicly to invest more capital in the Canadian energy sector given the critical nature of Canadian midstream assets, its world-class operating track record and attractiveness of the resource basin. We expect to directly benefit from all of these trends across our Canadian midstream portfolio with leading franchises across transportation, gathering and processing and natural gas storage.

Specifically, our natural gas gathering and processing business has experienced a 15% increase in utilization to approximately 85% over the past 2 years. We have simultaneously executed longer-term contracts that have improved contract duration by more than 2 years to reach 11 years on average. Our long-haul transportation pipelines are experiencing a resurgence of new commercial interest with over CAD 90 million of contracted EBITDA coming into service in the next 6 months and a large pipeline of new connection opportunities that are all incremental to our underwriting at very attractive build multiples.

In the last 2 years, our North American gas storage operation has benefited from contracted capacity and rates increasing to the highest levels we experienced during our ownership. We expect the lengthening of contract duration and higher rates to persist as storage demand continues to rise in support of new gas production, the build-out of Canadian LNG export capacity and other sources of demand. These commercial benefits that can be realized with no incremental capital investment will further contribute to the business' high free cash flow conversion.

These are just several examples of the positive impact that has been experienced so far within our business. We're equally enthusiastic about the strong growth outlook across the Canadian midstream franchise. At our 2 largest midstream platforms alone, we expect EBITDA growth of CAD 650 million to CAD 750 million between 2024 and 2027 with further upside related to approximately CAD 2 billion of identified organic growth projects that are being advanced and not currently in our backlog.

While these benefits accrue to our in-place franchise, we are excited by the momentum in the Canadian midstream sector as we aim to continue investing to acquire new platforms, develop new infrastructure projects and ultimately deploy our large-scale and flexible capital at strong risk-adjusted returns. That concludes my remarks for this morning, and I'll now pass the call over to Sam.

Thank you, Brian, and good morning, everyone. As David mentioned in his opening remarks, we've deployed significant capital so far this year, securing 3 new investments, including transactions in our data, transport and midstream segments. Combined, these acquisitions represent $1.3 billion of capital deployment for BIP. Most recently, we signed an agreement to purchase Hotwire, a leading provider of bulk fiber-to-the-home services that develops, builds and operates regional fiber networks that serve residential communities in key growing markets in the United States. The company employs a differentiated strategy focused on securing bulk fiber agreements with homeowner associations, providing 100% of residences in the communities with critical fiber services. These services are underpinned by a long-term, take-or-pay and inflation-linked contract with 100% contractual renewal track record.

The Hotwire platform has over 300,000 billing customers, a significant contracted backlog and credible growth potential through an addressable market of over 12 million homeowner association units within its footprint. We expect this growth will be entirely self-funded. Closing is expected late in the third quarter with an equity purchase cost of up to $500 million at our share.

In May, we entered into an agreement to acquire a leading railcar leasing platform in partnership with GATX, a best-in-class railcar lessor. The portfolio is the second-largest railcar leasing platform in North America with a critical, highly diversified and large-scale transportation network of over 125,000 railcars that are 98% utilized. The business is highly cash generative, providing stable cash flows that are supported by diversified and largely investment-grade customer base. The transaction is anticipated to close in the first quarter of 2026, hopefully a bit sooner, with an equity contribution of about $300 million to our share.

And then this week, and in fact, today, we are closing the $9 billion acquisition of Colonial, the largest refined products pipeline system in the United States, with 2.5 million barrels per day of capacity spanning 5,500 miles from Texas to New York. This acquisition was completed at an attractive transaction multiple of around 9x EBITDA. We expect to benefit from a mid-teen cash yield, resulting in a 7-year payback period. Near-term efforts will be focused on business integration and initiating our value-creation activities. BIP's equity consideration is approximately $500 million.

Now as we look ahead, we are experiencing strong momentum across our business. We believe the 3 Ds are stronger than ever. And while we've been investing in these transformative trends for many years now, the positive impact on our businesses continues to increase. We see these megatrends, particularly digitalization, as a key driver of the infrastructure super cycle, and we will capture our share of this generational investment opportunity.

As we evaluate a large and diverse array of high-quality value-oriented opportunities across our footprint, the U.S. remains one of the most attractive investment geographies at the moment. However, we're also seeing opportunities emerging outside the U.S. in many of the geographies where we have a significant presence, such as Europe and in addition to that, in several geographies in Southeast Asia, where we set up new regional offices.

So while the vast majority of our capital recycling and deployment objectives for the year have already been secured, we're now focused on bringing forward sales and new investments into our pipeline so that we get a head start on next year's objectives. This concludes my remarks, and I'll now pass it back to Liz, our operator, to open the line for questions.

[Operator Instructions] Our first question comes from the line of Cherilyn Radbourne with TD Cowen.

So clearly, 2025 has been a very active year for BIP for both new investments and capital recycling. And yet the fundamentals are arguably not that different versus 2024. So I'm curious what you think has prompted the acceleration in deal velocity and whether it's something that's specific to BIP or something that is happening more broadly across infrastructure, perhaps simply due to a pent-up demand to transact.

Cherilyn, thanks for the question. Yes, it's an interesting observation. I agree maybe at the operating level of the various businesses, trends have been consistent with the prior year. I think -- it's funny. I think people have had at times more negativity than we've had. We generally have been positive about operating conditions, and I think we've seen that in our businesses over the last couple of years.

I think last year, there might have been a bit of a lull in transaction activity, as you noted. And I think all I can say is it's probably due to people no longer sitting on the sidelines and coming back into the market to do things. Because the capital markets were strong last year. They remain strong this year. And there's always been a fair amount of capital on the sidelines, a lot of dry powder, so to speak. And I think it's just a matter of investor dynamics where people are now coming back and doing more.

But all in all, look, we're very optimistic about the current market. And in particular, we feel we're at the nexus of a lot of this activity around AI infrastructure, and it's affecting almost all our businesses in a big way.

That's helpful color. And given the very attractive backdrop that you highlighted for your Canadian midstream businesses, are there opportunities, do you think, to monetize partial stakes in some of those businesses the way that you've done very successfully in many of your other businesses?

Yes. I'll start there and Brian or Ben or Dave can jump in with additional comments. Look, I think there's always various businesses where we might look to partially sell down and return capital. That's just the nature of our business. And so there's always some of those opportunities we're looking out for.

As a whole, though, I would say we're primarily focused on all the organic opportunities that Brian touched on. I don't think we've seen this level of pent-up demand and opportunities as we see today, and so we're quite enthusiastic about that. But to the extent that we can bring partners in to help us fund some of that growth, that makes a lot of sense, and that's something we're going to do. And we're seeing a lot of interest in the Canadian midstream sector, both from retail investors, but also institutional investors internationally. So I think this is a good time for the Canadian midstream sector.

Our next question comes from Devin Dodge with BMO Capital Markets.

I was going to start with a question on the Intel JV. Look, there's been some leadership changes. I'm sure you saw that at Intel. It's brought about maybe a potential shift in the strategy around its foundry business. I believe this includes reviewing the viability of producing one of the products that were intended to be made at that fab in Arizona. Just wondering if you could remind us of the protections that Brookfield has in place for this investment and when you expect it to start generating returns.

Devin, yes. As we've mentioned in the past and as Intel itself discloses, our arrangement with them is largely financial and contractual in nature. And as a result, we don't take any commercial risk around the -- any capital cost overruns or commercialization of the various products. And so it's a relatively simple investment from that perspective as we look at it. Obviously, we take counterparty exposures, but we feel comfortable with the long-term sustainability of the sector as well as Intel's role as a national champion in the United States. So that's basically the dynamic.

And as far as when we see contributions, we should see it as early as the end of next year. So end of next year, early 2027, you'll see it coming through our results. And otherwise, I think that's -- hopefully that answers your question.

That was great. Second question, I was going to ask you about North American rails. Look, clearly, the Class 1 railroads are pursuing east-west mergers here. How should we think about the potential impact to Genesee & Wyoming?

Well, we anticipated that question might come up, and we have our rail expert, Dave Joynt, who looks after our numerous investments in the rail sector here with us. And so I won't dare take a stab at it. He knows much more than I do. So Dave, over to you.

Yes. Thanks. Devin, it's Dave here. Maybe I'll just play out what has transpired and then what the opportunity set is for us. So of course, you would have seen the announcement of the NS and UP merger, which would create the first transcontinental railroad in the United States. I think it's worth just noting that although the transaction has been announced, it's still subject to a lengthy regulatory review by the STB, and the outcome of that at this point in time is uncertain.

What I would say is that the rules that the STB looks at for that merger demand that any merger must be deemed to be pro-competitive in the eyes of customers and shippers across the United States. So as G&W, we operate as the largest short line operator in the United States with over 100 railroads, providing first-mile and last-mile access to customers. We effectively play the Switzerland role in the entire Class 1 network. So we can direct traffic to one or multiple carriers, ensuring that customers have great service.

And so all I would say is that we are probably in a unique position to assist in continuing to keep a pro-competitive market in rail, and we'll look forward to, over the coming months, engaging with both the parties of the merger, but also with the Surface Transportation Board on how we can help.

Our next question comes from Maurice Choy with RBC Capital Markets.

Maybe I'll start off with a comment you've made in the letter about how the U.S. remains one of the most attractive investment geographies at the moment. Just curious if you've seen this leading position for the U.S. expand versus other geographies over the last 3, 6 months. And also conversely, which seems to be the most attractive geography for asset sales would be interesting to know.

So Maurice, I apologize. I didn't quite get the first part of your question. I know it was related to the U.S. as an attractive destination. Were you asking why we think that? Or was there another element to it?

It's about why you think that, but also whether or not how the U.S. has gotten more attractive over time versus other countries. Why has that premium view expanded over time?

Sure, sure, sure. And look, and it's relatively simple. It's not in the sense that we have a preference over U.S. versus Canada or U.K. or Australia. We like them all. It really just happens to be that I mentioned earlier that a large part of our businesses are positively impacted by the AI infrastructure boom that's taking place that's driving the need for power, transmission, all those sorts of things, midstream investments. And the U.S. is where the vast majority of the AI deployment is taking place today, and so that's just driving a number of great opportunities that we're able to take advantage of.

We do see that other countries are trying to get their fair share of AI deployment and making sure they have homegrown talent as well and not just be beholden on the U.S. for AI expertise. And so we expect that there will be significant capital deployed in other countries. In fact, we're focused very much on a number of AI factories around the world, particularly in Europe, and I think that's going to drive future capital deployment for us in those markets. So we do see more deployment taking place in other markets.

You asked a little bit about divestitures. I think there's no -- we're monetizing assets in basically every market around the world today. And I think we've seen an appetite in virtually all markets for high-quality, cash-flow-generating infrastructure. So there's no real market that I'd say that's in or out of favor. I think most people are just looking for high-quality assets.

Understood. And maybe just finishing up on that same theme about the asset sales. Just looking at the 4 deals that you've secured during or subsequent to the quarter, all 4 transactions were sell-downs of partial stakes rather than a full exit that we've seen in some past transactions. So I wonder whether or not -- is this just unique to each of the sale processes? Or is there something to be said here about buyers wanting to BIP continue its participation?

Yes, it's a good question. I guess, look, I think each situation has its own unique circumstances. I think in some cases, there are some buyers who do want to invest alongside an asset manager like ourselves to continue to drive value. And so that's definitely a consideration. I think also in some markets, scale of the investment dictates that it gets sold in smaller chunks than in one big fell swoop. And I think it just happens that at this point in time, we just had a couple in a row that were like that. But I think you might see that we have a bunch of others coming down the road where we sold them 100%. So I don't think I should read too much into it at this stage.

[Operator Instructions] Our next question comes from the line of Frederic Bastien with Raymond James.

Deal velocity has picked up materially as discussed earlier. And you mentioned in your prepared remarks that you have incremental sales processes in queue for the second half. Is your pipeline of investment opportunities comparable? I mean could we see BIP invest another $1.3 billion in assets in the back half?

I don't usually like to make predictions like that. As you recall, we've said over the last, I think, 2 or 3 quarters that our pipeline was as full as it's ever been. And obviously, I think that's borne out. Today, it's still full, probably not to the same degree as it was in the last couple of quarters. So I think we might see a little bit of a drop in scale of transaction flow. But nonetheless, we do have multiple transactions that we're currently pursuing that I would expect would take place in the next quarter or 2.

Okay. Now my second question is around the liquidity. You mentioned $5.7 billion at the end of the second quarter, if you include the sale proceeds that you've secured. Does that include the investments that you've also announced? Or just wanted to get a bit of clarification as what your liquidity position would be on a pro forma all those deals announced.

Yes, Fred, it's Dave here. I can take that one. The $5.7 billion you referenced was as at June 30. And for the total business, at the corporate level, we had $2.4 billion of liquidity. What's not included in that number is the commitments we've made on our new investments, so the $1.3 billion going out, nor the roughly $1.1 billion of sales that we've secured, that being the container terminals in Australia, PD Ports, the second selldown of Triton and the stabilized data centers, none of those have obviously been collected either. So I'd say we have pro forma relatively a similar amount of liquidity as we look to the balance of the year as we do today.

Our next question comes from Robert Hope with Scotiabank.

So a healthy portion of the midstream business is gas focused. However, the market's view of oil assets has shifted more positively here over the last couple of years. So I wanted to get a sense of how -- when you're looking at midstream investments, is it still primarily gas focused? Or could we see some incremental focus on oil assets?

Robert, we had the bet of having Brian on the line from Calgary. So I think this is a good question to throw out to Brian. I mean the short answer is we look at both, but Brian can probably add some more color of what he sees as the opportunities for the next little while. Brian, do you want to jump in?

Yes. Thanks, Sam. Look, I think as Sam did mention, we do continue to look at assets and opportunities across various commodities. I think from an oil perspective, where we probably see the most opportunity today is investments inside our existing portfolio companies. We are seeing continued growth from a number of our oil sands customers and them looking at expansions, it's creating the opportunity to look at expansions for a number of long-haul systems that we have today.

So that's probably where from an investment perspective, we see the most opportunity from an oil standpoint. But we definitely see lots of activity across the sector, really driven by new egress opening up, which has created the opportunity for a number of those customers to continue to grow.

I appreciate that. And then maybe shifting over to kind of data center investment. You did mention AI factories in Europe. But when we're thinking about the go-forward outlook for your investments there, are we seeing the size of campuses increase just given the kind of the tailwinds that we're seeing in the sector? Or should we just continue to assume more of a cluster with a phased expansion?

Well, it depends on the customer. I mean we have a particular skill in a number of business for building campus-style data centers, and we have a number of those land banks for those in place. But we are a solution provider for the large hyperscalers for some of those significant projects that they're looking to bring on and particularly find power solutions and bring them to service quickly.

So because we are in that world, it is possible that we may bring in some large-scale projects as well. Those will probably be done on a bespoke basis outside of some of our existing platforms, but that's something that absolutely we're focused on.

Our next question comes from Amber Zhao with Citi.

It's Ryan Levine. It's Citi. A couple of questions. In terms of -- can you speak more broadly about your general interest in assets that have both renewable assets and more traditional energy infrastructure? And if you were to pursue that type of deal, how that would work within the Brookfield umbrella?

Sorry, Ryan, I missed just one of the words there. What kind of midstream assets were you saying?

Not midstream assets. If you're looking at an energy infrastructure company that had both traditional energy infrastructure assets as well as renewable assets, how you could evaluate that within the broader umbrella of Brookfield and tend that.

I see. Well, look, I guess it depends on the situation. To the extent that it's a regulated-type utility that might have an integrated business of both conventional renewable assets, that might fall within our purview or maybe our super core fund's purview. But to the extent that it was a business that was similar to some of the opportunities that were being pursued a year or 2 ago in Australia around transitioning conventional generation businesses, i.e., coal into renewables, then that's something that Brookfield Renewable would likely focus on.

I think the main takeaway, though, putting aside what pocket of capital would fund a particular investment is that within Brookfield, all our groups work very closely together. And we're able to leverage the skill sets that exist within the renewable group as well as the skill sets that exist within our midstream and utility businesses to source, originate and complete either large or complicated transactions. And so that's something that takes place often.

And probably -- and why your question is maybe is a good one is today, we are seeing that nexus where a lot of solutions, particularly for the data center sector are requiring a combination of both conventional fuels, i.e., gas, combined with renewables to complete the powering of the site. So we are doing that. I think we have the best franchise in the globe for that. And hopefully, that will lead to a lot of transactions.

Appreciate that. And then one follow-up, in that vein, there's been headlines around AES. Is there any comments that you're able to make or anything you're willing to share around that potential opportunity?

Yes. As you know, we don't comment on transactions. And so there's nothing I can really say about that particular situation.

That concludes today's question-and-answer session. I'd like to turn the call back to Sam Pollock for closing remarks.

All right. Well, thank you, Liz, and thank you for everyone who joined our call this morning in the middle of summer. We hope you've enjoyed it so far and can take some further time off in August. And we look forward to providing you a full update at our Annual Investor Day event in Toronto on September 25. We look forward to seeing many of you there. And in the meantime, take care. Thanks.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX 2025 Investor Meeting. [Operator Instructions]

I would now like to turn the conference over to Shari Hellerman, Head of Investor Relations. Please go ahead.

Thank you, Tina. Good morning, and thank you to everyone who has joined us on short notice for our call this morning. For a copy of the press release and presentation slides for this morning's call, please visit the Investor Relations section of the GATX website. After going through the presentation, we will conduct a question-and-answer session for analysts and investors.

Today, I'm joined by Bob Lyons, President and Chief Executive Officer; Tom Ellman, Executive Vice President and Chief Financial Officer; and Paul Titterton, Executive Vice President and President of Rail North America.

Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX's Form 10-K for 2024 and our other filings with the SEC. GATX assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.

And with that, I'll pass it over to Bob.

Thank you, Shari. And thank you all for taking the time to be with us here today. We really appreciate the opportunity to talk with you about this acquisition. This is an outstanding opportunity to acquire the Wells Fargo rail operating lease portfolio comprised of 105,000 railcars. And we're doing so in partnership with Brookfield Infrastructure Partners. I'll just use Brookfield from here forward to keep things short. This JV approach enables us to maintain our very strong capital structure while also giving us full capacity to continue investing in all of our global businesses, which we intend to do given the growth prospects across our markets.

GATX is in a unique position to execute this acquisition. We have the leading railcar leasing platform in North America. And this transaction will enable us to leverage the platform to better serve our customers. In addition to the 105,000 cars we're acquiring, GATX will manage the 23,000 railcars and 400-plus locomotives that Brookfield is buying directly from Wells Fargo. These railcars are primarily on finance and leveraged leases, and they fit well within Brookfield's portfolio.

As for the joint venture partnership, GATX's initial equity stake will be 30%. Importantly, we have the option but not the obligation to acquire up to 100% of Brookfield's interest over time. This is a really powerful element of this transaction. It allows us to phase in our investment over time ensuring that we can finance our initial stake in future call options via ordinary course cash flows and financing activities. This gives us a lot of flexibility.

The JV will be prudently capitalized with an overall debt-to-equity level similar to GATX's own balance sheet. And we expect that GATX will retain existing credit metrics and our solid investment-grade credit ratings. As noted in the press release, we have $3.45 billion of committed unsecured financing arranged with the consortium of banks through a 5-year term loan and a revolver.

As for transaction closing, we'll initiate the customary regulatory filings. We expect to close in the first quarter of 2026 or sooner. We have a good plan in place to move that along promptly.

Moving on to page -- the next page. I'll touch on a few highlights of the transaction and the investment and the opportunity for GATX before turning it to Paul, who'll discuss the Wells Fargo rail portfolio, and then to Tom for the joint venture mechanics and financing.

First, as I mentioned already, this is an opportunity to fully leverage our Rail North American platform. We have outstanding commercial and operational teams, and they do well with hard assets. That's the raw material of our business. We have deep experience in acquiring and integrating railcar portfolios, and we have the systems and experienced people to undertake a smooth transition. We have a maintenance network that operates safely and efficiently, the best in the industry.

Over time, we can bring this experience to bear for the benefit of the acquired fleet and the customers utilizing the fleet. Also, we have an expansive customer network as does Wells Fargo Rail, and there will be overlap as well as new customers. With a more diversified fleet, we can enhance our customer service and experience.

My last point is that the partnership with Brookfield is unique in its own right and brings numerous benefits to the forefront. It brings together our leading global railcar leasing platform with Brookfield, one of the leading global alternative asset managers in the world. The combination of our platform with Brookfield's strength put us in a very strong spot to execute on this transaction, and it will continue to put us in a good spot to maximize returns from this investment.

With that, I'll turn it to Paul, who'll cover his section and then on to Tom.

Thank you, Bob. And I'm going to start by just reminding everyone and most of the folks on this call are already familiar with this market of the underlying dynamics in the markets we serve and talk a little bit about how those dynamics are going to change and some of the aspects of the fleet in this business.

So as you can see from the chart, rail shippers have a choice of several different ways to procure railcars. They can buy them and you can see some shippers choose to do that. They can source them from their serving railroad or they can lease them. And you can see here today, almost 50% of the North American railcar fleet is sourced from operating lessors like GATX. On the right-hand side here, you can see the share of the lessor market represented by various different participants. And what I will say is this, the lessor market is going to remain a diverse and competitive market.

And one of the things I always say about the operating lease market, it is a fiercely competitive market with a number of very successful organizations competing to win lessees business. But what this transaction does is makes the GATX the unquestioned leader in this space. We are going to have one of the most diverse offerings that can be brought to the table by any participant in this railcar market, really in the history of this industry, and we're very excited about that.

As we go to the next slide, and we talk about the specific diversification benefits for GATX's fleet, you can see here that historically, GATX has always been the tank car focused operating lessor. And one thing I want to note is that, the characteristics of the tank car leasing market are attractive and GATX is going to continue to be a leader in the tank car leasing market. That's not going to change. But what the Wells Fargo integration will do for us is it will give us a lot more balance. And you can see when you look on the right-hand side of the slide and see the pro forma fleet makeup, we are still going to again be a leader in the tank car space but have a very balanced fleet across car types and importantly as well across commodities.

And if we go to the next slide, we can see some of the detail behind the commodity diversification that we're going to take on here. And this is really, I think, a point worth emphasizing. We have always stated that we believe that we can earn the most attractive risk-adjusted return for our shareholders when we have a diverse exposure to a wide range of car types and commodities.

And so growing diversification has been an objective of ours for a long time. It's one on which we have executed. But this acquisition really allows us to turbocharge that diversification and really develop one of the most balanced fleets in the industry from a commodity exposure standpoint.

Next slide. On the next slide, you can see here, this is just a history of the investment that GATX has made. And really, the point I want to hit here is while the Wells Fargo transaction is different in terms of scale, obviously, it's 105,000 railcars that we're taking on here, it is not different in terms of strategy or approach. From a strategy and approach standpoint, GATX has been focused on finding attractive opportunities to deploy capital in the secondary market. And you can see here that we've been very successful doing that. Really this is an extension of that strategy but at a scale that we've never seen before. And really, that's one of the things I think that we're so excited about is the opportunity to do what we do well and earn the kinds of returns we've been earning at this scale is really quite unique.

And finally, to my final slide before I turn it over to Tom, a little bit about the value creation opportunity for our North American rail platform. First of all, as is self-evident, there's a large revenue opportunity here from the leasing revenue. But in addition, the management fees that we're going to take on, both as manager of the joint venture and as manager of the finance lease portfolio, that's a real opportunity for GATX as well.

And we often get asked, frankly, why we don't do more in terms of leveraging our platform to manage, and this is a great opportunity to do exactly that. The platform itself, obviously, we're going to have a tremendous opportunity to take advantage of the breadth of the Wells Fargo fleet and customer base. We also do see significant opportunities to benefit from maintenance efficiencies as well as administrative efficiencies. And so those are both going to be sources of significant value creation for GATX. I would say that the administrative efficiencies will manifest fairly rapidly. The maintenance efficiencies may take a little bit longer, but we're optimistic about both.

And then finally, as all those who know GATX now, we have been a very active participant in the railcar secondary market. This gives us a lot more raw material to play in that market, and we are very excited about the value creation opportunities from doing exactly that.

Thank you, Paul, and good morning, everyone. The point of these last four slides will just be to visually illustrate some of the comments that Bob made at the opening of the presentation.

So starting on Page 11. On the left-hand side, you can see a visual illustration of the structure, which shows that the joint venture will be owned 70% by Brookfield, 30% by GATX, and will acquire 100% of the Wells Fargo rail operating lease assets. And this -- it's important to note that this is an illustration of how this will work from a financial standpoint. As Paul noted, the business will be operated very consistent with the way GATX does its overall commercial and operating activity. So serving as manager, GATX will be managing 100% of the assets.

Just highlighting a couple of points on the right-hand side. The partners will receive the cash flows proportionate to their equity interest. So at the beginning, they would be distributed on the 70%-30% basis that you see on the left-hand side of the chart.

From an accounting standpoint, this will be shown consolidated on GATX's financial statements. So all the assets, all the liabilities, all the revenue, all the expense will show up on the face of the balance sheet and the income statement. And then on the balance sheet, there will be in the equity section a noncontrolling interest number, which takes out the ownership percentage that Brookfield has. And similarly, on the income statement, after total income, you'll have the deduction for the income attributable to the noncontrolling interest. The target debt will be between 70% and 75% at the JV level, which is in line with GATX's consolidated results. And as mentioned previously, GATX will have operational control and integrate the portfolio into our platform on an operating basis.

So if we flip to the next page, this is just an illustrative description of how the call option mechanics work. So each call option will allow GATX to acquire 10% of Brookfield's initial equity interest at a predetermined price. So with Brookfield starting with 70% of the equity, each option allows GATX to acquire an additional 7% of the joint venture. At the bottom of the page, again, we just wanted to show how this works on an illustrative basis. And to simplify this, so you can just easily see the 30% and the 70%. We've shown equity of $1,000 on the page. As Bob mentioned in his opening comments, the actual equity is about $1.3 billion, which means Brookfield's initial equity interest is around $900 million and GATX is around $400 million. And you can see that if we were to exercise all the options over time, it would take 10 years for GATX to have 100% of the equity.

If we flip to the next page, the point of this page is, again, something Bob mentioned in his opening comments, which is that this is very manageable from a GATX capital spending perspective. On the January earnings call, we noted we expected to do about $1.3 billion of investment in 2025, which was a very strong level, but down a bit from the $1.7 billion we've done each of the previous 2 years. When you include $400 million of equity investment from this transaction, it's right in line with the last couple of years.

And then on the right -- far right-hand side of the page, we just wanted to show the committed CapEx that we have over the next few years, which primarily is the result of the North American rail supply agreement. And when you add the numbers -- the illustrative numbers in from the previous page, you can see that this is extremely manageable from an investment perspective and consistent with Bob's comments that the structure for the deal was designed to make this manageable, so we can continue to invest in the same way across our business segments.

And flipping to the last page. This just, again, shows our focus on maintaining a strong balance sheet. The left-hand side just shows over time what the company leverage has been and how little of the assets are secured. We do not expect any new secured debt as a result of this transaction. And on the right-hand side of the page, you can see that the leverage is consistent with our historical levels and certainly consistent with the targets that we have. And part of the reason this is possible is, again, the JV is expected to be levered in a way very similar to GATX's core business.

And with that, that ends our prepared presentation. So we'll be happy to open it up to questions.

[Operator Instructions] Our first question comes from the line of Andrzej Tomczyk with Goldman Sachs.

Congrats on the deal, everybody. Just a quick question for me first to start. You mentioned modest EPS accretion in the first full year and more meaningful accretion beyond that. Can you expand upon the magnitude of potential EPS accretion and maybe the puts and takes to think through that there? And then maybe any color on near-term dilution, if that's also a thought.

So I'll start, and I'll let others chime in. This is Tom. So as you know, we typically provide guidance for the year we're in. So we're continuing with that approach. So given the expected close of the transaction, either later in 2025 or early in 2026, we certainly would not expect any material impact on the 2025 guidance.

And as far as the -- beyond that, what we're always looking for is economically accretive investment, and we feel very good about what is happening from that perspective. One of the nice features of this transaction is, in addition to that strong economic accretion, we expect in a relatively short period of time to be -- for it to be accretive from an accounting perspective as well.

Yes. And I would just add too, Andrzej, that you mentioned dilution. There will be transaction expenses in 2025 for sure. We'll break those out separately for you, they shouldn't be too material. And the timing of the close of the transaction actually dovetails very well with when we typically would be giving our annual guidance. So we'll be in a good position to do that as we get towards year-end into the beginning of 2026.

But we're excited about the prospects. And there are certainly, as Paul pointed out, a number of different ways that this will contribute to GATX's bottom line going forward, whether it be just from the cash flows of the portfolio or the relevant fee income too as well. So different avenues to get to a positive outcome.

Makes sense. Just a little bit on the antitrust and approval process. Is there anything we should know about that process for this deal specifically? Are there any concerns there at all given the size of the deal? And then just what's underpinning the first quarter of 2026 completion guidance? Is there a specific approval that's driving that time line that we should be aware of?

Yes. There's no unique approvals outside the standard that you would expect in the DOJ regulatory filings. So that's kind of the main driver. We're giving ourselves some leeway on that outside date of first quarter of 2026. We're all motivated to make that happen sooner, and we'll try to do that.

As for the filing itself or antitrust concerns, we think the diversification of the fleet puts us in a very good spot as well as the fact that this market, whether it's railroad-owned cars, shipper-owned cars or lessor-owned cars, it's a very large fleet. We still won't have a significant position in any one particular car type going forward. And in reality, our customers and railroads still have the same access today and will in the future to acquire railcars as they have today. So we think we're in a good position on that front.

Appreciate the thoughts there. One more for me was just on the Wells' fleet makeup, maybe in terms of average age and contract composition, if you could speak to how old that fleet is on average. And then maybe just a more conceptual question. If more railcar assets are now going to be in the hands of operating lessors and not financial lessors, how does that impact overall industry pricing discipline in the future? Are there any incremental opportunities with the lower cost of capital financial lessors selling their fleets?

Not really, Andrzej. The dynamics of the market aren't going to change that significantly. We or any other lessor in the marketplace today or even after this transaction is consummated, doesn't have unfettered pricing power. That's not going to change. It's a very competitive market. It's going to continue to be a competitive market, whether the cars are in the hands of strategic players in the market like ourselves or other financial lessors.

[Operator Instructions] And our next question comes from the line of Justin Bergner with Gabelli Fund.

Congratulations on today's news. I'm not sure I heard you comment on the age of the fleet. Is that something you can speak to now? And any sort of outsized commodity exposure or car exposure?

Yes. I'll take the first one, Justin, and thank you for the congratulations. As for the specifics of the Wells Fargo rail portfolio, at that detailed level, we're not disclosing that information now. Their composition -- they're a very experienced, sophisticated lessor with a diversified fleet that wouldn't look unusually unlike ours from an overall kind of characteristic standpoint. So nothing unusual there. And I'll let Paul laying out the diversification of their fleet and how it will look on a combined basis, and I'll let Paul comment further.

Yes, sure. So as I noted in my prepared remarks, as we went through the slides, I think the diversification benefit here to GATX is quite substantial. Wells Fargo has historically been focused on the freight car markets. And so when we think about the markets that we serve, we serve all of the same markets but really in different proportions.

And so as I said earlier, the big thing this is going to do, it's going to bring a lot of balance to GATX in terms of car type exposure and commodity exposure. And so there's no -- there's really no one commodity or car type to highlight mainly because the result of this transaction is just a very nicely balanced and diversified fleet across car types and commodities.

Okay. That's helpful. I appreciate it. Secondly, is there any way you can help us understand the economics of the management of these railcars and the kind of responsibility for the commercial aspects of the leases and the maintenance and what it means for your business, because everything else that you've kind of managed and maintained has been 100% owned business.

Sure. And just from a fee structure, we're not breaking anything out in particular, Justin, at this point. It's an economically attractive investment for GATX. We're very excited about that. From an operational standpoint, the entire structure of the deal is really geared for GATX to have operational control which we will. Brookfield's position on this has been that GATX is the strategic player in this market and wants to allow GATX to do what we do best.

So the governance, the ownership structure and kind of changing over time and the day-to-day operational control is all focused on that point to let us do what we do well. So we will have full operational control on a maintenance standpoint.

Right now, as a bank lessor, Wells Fargo utilizes a third-party network. We'll continue to use -- we will continue to utilize that third-party network in the future given the scale of the fleet. And over time, if there's opportunities to bring some of that work into our facilities, we will do so.

I appreciate that detail. Maybe just one final question, if I may. With respect to Brookfield, I mean, clearly, they have an enormous balance sheet and they're going to be remaining, I guess, the owner of the 23,000 car portfolio in locomotive portfolio, which I didn't see separate terms for. But what is their desire? I mean I assume that this deal is structured for them to get attractive returns. Help me understand kind of why they are going to phase out their interest in the JV potentially and why they didn't try and do something like this outright or even bring GATX into their fold. Just help me understand what you understand their incentives to be here.

Yes. Well, the two pieces in the portfolio are very different. What we're buying in the 105,000 cars is an operating lease portfolio that all the characteristics are very similar to what GATX does today. And for us to really pursue the acquisition alongside Brookfield, our objective was to ultimately take full ownership of those assets over time. Brookfield understood that and was very creative in working with us in terms of putting together a structure that worked for both us and them on that front. So we wanted to ultimately control -- to own all of the assets in that portfolio. This allows us to do it.

The 23,000 cars in the 400-plus locomotives is a bit of a different animal in terms that it's a leverage and finance lease portfolio. Those are much more like secured loans. And so you would typically see those -- most of those that are done on the rail industry are typically done by banks or financial institutions or organizations that have access to very attractively priced capital. So with the various pockets and pools of capital within Brookfield, they have better homes for that type of financing than GATX would.

So we looked at the two very differently, but we're able to bring a full solution to Wells Fargo in terms of their full exit from the business.

And our final question comes from the line of Doug Karson with Bank of America.

Just wondering if you had a chance to speak with the rating agencies yet and then also the $3.2 billion of credit facilities, actually, I think there's loans that you're going to be taking. Are they going to be sitting on the GATX balance sheet? Or are they going to be a sitting at the JV? Just trying to get a sense of the leverage you're going to have at the company.

Yes. So we expect that the rating agencies will come out with the announcements very soon, today most likely, and we don't expect any impact on our ratings. As far as the way the debt works, as noted in the earlier comments, the leverage targets within the JV are very similar to GATX's business as a whole. The JV itself will hold the debt, but the debt in the JV is guaranteed by GATX, and the rating agencies are aware of that and will be reflected in the announcements that they come out with today or shortly.

Yes. I'd just add, obviously, with the transaction of the size of -- for sure, we have been talking with the rating agencies in advance. So there's no surprise here. And as Tom showed on his last slide, GATX's debt-to-equity today is 3.2x, on a pro forma basis at conclusion, at close, we'd be 3.5x. So those are all numbers that have been shared with the rating agencies.

Our next question comes from the line of Bascome Majors with Susquehanna International Group.

This deal has -- sorry, a sale of the Wells fleet has been rumored really since maybe a year or 2 after they bought the GE portfolio 9 or 10 years ago. What made this the right time for this to come together now where Wells could be content in you guys and your partner Brookfield could be content with the outcome?

That's a great question because it's -- you're correct, it's been rumored numerous times. First and foremost, over the course of the last few years, the Wells Fargo rail team and Wells Fargo has done a very good job of proactively addressing some issues and some challenges in the portfolio. They've sold down certain of the most challenged car types, scrapped out older equipment and really did some constructive things to the portfolio to put it in a very good position today where -- we're in a spot where we can buy and run the portfolio as opposed to buy and fix. So that was a big appeal to GATX.

And we're able to buy it at a level that makes sense for Wells Fargo as noted in their press release that they issued yesterday, while still generating very attractive returns for us and for Brookfield.

And back to Brookfield, if we look at your illustrative call option, Slide 12, I mean I don't know if the pricing here is arbitrary or if that is tied to the actual economics in the deal where you say they're fixed, but it has it going down every year in the future in an asset that's inflationary. Is that how the deal is structured? And if so, why was that contemplated in -- between you and them?

Bascome, a good sharp eye on that. So the illustrative numbers are meant to show directionally what's going on. And the reason for the phenomenon that you talked about is that we don't expect the JV to make any material additional investments over time. So as railcar scrap, the actual number of cars that are in the portfolio will decrease and the options are priced to be consistent with that pattern.

All right. So it's reflective to be a constant or semi constant measure of the value of the portfolio with some runoff as soon effectively?

Yes. That's a good way to think about it.

Yes. It's a static portfolio with a typical wind down for scrappings and car sales.

Well, I won't call this the last one yet, but your language, I know we've talked a little bit about accretion, and we'll talk more about the quantification of that in next January in your normal course of guiding. But you did have modestly accretive in year 1, effectively 2026 and then more material contributions thereafter in the press release. We think about just the drivers of your confidence in that accretion on a GAAP or accounting basis, accelerating, how much of that is coming from your equity stake rising over time? How much of that is maybe some cost synergies as you integrate the portfolio? How much of that is just renewing leases that are probably still under market on a lot of this book? I just wanted to understand why you feel that accelerates and what the key drivers of that are from an accounting basis.

Sure. Well, in some -- very good points that you raise in terms of the different ways to get to accretion and therein lies the power of the opportunity here because it's not any one specific item in particular. It truly is a combination of five, six, seven different elements that will come together and that we're confident will come together because this is the business we're in. This is what we do, and what we've done for 125 years has generated attractive returns off of the railcar leasing portfolio. So there's a lot of different tools we have at our disposal. And with a portfolio of this size, we'll use them all. And so there isn't one particular item I could point to.

We are buying the portfolio, we believe, at the right price, at a very attractive valuation for us and one that worked for Wells Fargo, and we'll be able to generate a good return off of that. As we get into it in the future, we'll be able to delineate a little bit more for you on exactly some of those different markers or different avenues we're using. And quite honestly, it's almost like looking at the existing GATX portfolio and saying, how are you going to generate very attractive income and return in the future. It's through re-leasing, it's through extending terms, it's through getting better lease rates, it's through remarketing, it's through maintaining the cars more efficiently.

All of those things apply to the portfolio we're going to be acquiring as well, with the overlay of the management fee.

Our next question comes from the line of Justin Bergner with Gabelli Fund.

First off, just the illustrative call option slide. Maybe it's just so that the numbers add to $1,000 million, but it shows GATX equity at $300 million and Brookfield at $700 million. Just to make sure the real numbers are the $400 million and the $900 million, right, and the debt is proportionately a little bit lower versus that illustrative slide?

Yes. That's exactly right. So the numbers shown here are purely so you can kind of see how the math works, but the equity investment is $1.3 billion, split $900 million, $400 million between Brookfield and GATX.

And then secondly, on the subject of cars, I mean, do you expect a proactive approach to further reduce and triage out that undesired car types from the portfolio? You mentioned that some actions have been taken over the last few years.

Yes. This is Paul speaking. I'll take that. And what I would say is, yes, I'll, first of all, commend the Wells Fargo rail team because they have put this portfolio in good shape. So as Bob said, it's not a buy and fix. And for the assets that are in the portfolio that do serve some of the challenged markets, the key thing there is have we valued them appropriately because, as I always say, we can buy almost any railcar and profitably deploy it as long as we put the right amount of capital into it.

And so in this particular case, I'm not going to get into specific fleets. But what I will say is, broadly speaking, this portfolio, both the good and the bad of it. And again, it's mostly good, but the portfolio has been valued appropriately. So some of the more challenged car types, the value at which we're taking them on is appropriate for those challenges, and we feel confident that we can manage them effectively.

Our next question comes from the line of Brendan McCarthy with Sidoti.

Just had two quick questions. I wanted to first talk about the kind of the managerial oversight of the portfolio and the Wells' assets. You mentioned you're expecting modest EPS accretion in the first year. What assumptions on remarketing income are kind of baked into that outlook? And do you expect to be as active on the remarketing front relative to the Rail North America portfolio, the current portfolio?

Yes. In terms of -- I appreciate the questions. In terms of the components of that accretion in Q1, again, we're not going to slice that here today. We can do that much more accurately for you as we get closer to the close of this transaction and into the early part of 2026. But there will be remarketing activity for sure on this side of the portfolio just like there will be on ours, and Paul will comment on that.

Yes. And what I'll just say here is we talked about the makeup and you can see in our slides, the makeup of the fleet. One of the nice things about the Wells fleet is a lot of the car types in that fleet are car types that are some of the most liquid secondary market car types out there, things like grain and plastics. So as I said, we think we have really kind of restocked the shelves with a lot of attractive assets to sell in the secondary markets, and that's -- we view that as a big opportunity as part of this.

Got it. I appreciate the color there. And then looking at the Wells assets, I'm wondering if you can comment on the current lease rate profile of that portfolio and maybe your outlook for renewal success. And I guess, do you see a similar LPI compared to the current Rail North American portfolio?

Yes. Until we get to closure on the transaction, we can't provide too much more color than we've already provided on the characteristics of the portfolio. It's a highly utilized fleet. We can tell you that. As I said, there's not a situation here where we are going to be buying a portfolio that that's got an enormous number of unutilized cars that we have to go put on lease. They're doing it. The Wells Fargo rail team is doing a really good job and has done a good job. So from a utilization standpoint, it's high.

And I was going to say from a lease price standpoint, we'll deploy all of the strengths and tools we have to continue to have success with renewal success rate and raising lease rates. But we'll provide more of those details as we get to closure.

Yes. And as far as the nature of the operating statistics, we would expect to provide the same types of information that we provide on our own fleet.

Our next question comes from the line of Bascome Majors with Susquehanna International Group.

Just one semi-related question. Now that you have a signed deal, like, is there anything material to the due diligence that you weren't able to do in the prior structure that will be a big piece of discovery over the next 6, 9 months? Or is this more about just getting through the regulatory approvals and final financing?

Bascome, it's much the latter. It's just getting through the standard regulatory filings and everything else. The Wells team did a fantastic job in building out the due diligence data room and everything else that we required. And when you have rail people talking to rail people, we know what information to ask for, and they know what to provide. So we're not anticipating anything significant.

And with that, we are at time. I will now hand the call back over to Shari for closing remarks.

I'd just like to thank everyone for joining and for your continued interest in GATX. Please contact me with any follow-up questions. Have a great day.

This does conclude today's conference call. You may now disconnect.