Brookfield drives growth with Brazil toll road investment

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Toronto's Brookfield Infrastructure Partners LP is paving its way back into the Brazilian market with a $1.7-billion (U.S.) joint venture into toll highways that stretch some 3,200 kilometres in the South American country.

The announcement on Monday came a week after BIP announced a portfolio shuffle that saw further investments in Chilean toll roads, and signals Brookfield's confidence in South American market growth.

BIP, whose parent company Brookfield Asset Management Inc. has a large team in Brazil, has been on the watch for opportunities to reinvest in Brazilian infrastructure at the right price, CEO Sam Pollock said in an interview.

"This is the best we've seen come along in a long time," he said.

Brendan Maiorana, an analyst with Wells Fargo, said that while other investors with less experience in the country might be more cautious, the venture signifies BIP is "comfortable with the long-term outlook in Brazil."

To fund its share in this and other investments announced last week, BIP hopes to raise close to $500-million in equity and finance an additional $300- to $400-million through the sale of "non-core assets," chief financial officer John Stinebaugh said. This includes timber assets and "mature utilities."

But, Mr. Pollock said, "we wouldn't sell [those assets] unless we think it's at a good price."

The highway investment in Brazil, a joint venture with Abertis Infraestructuras SA, is for a 60-per-cent interest in Obrascon Huarte Lain Brasil SA, one of Brazil's largest toll road owners and operators. Abertis will own 51 per cent, while BIP and its institutional partners will own 49 per cent of the stake.

Parent company Brookfield Asset Management has operated in Brazil since 1899. The infrastructure wing, spun off in 2008, sold its Brazilian transmission assets in 2009. Monday's announcement marks BIP's first return to the Latin American country.

The toll roads are in states that are home to two-thirds of Brazil's population with some 70 million vehicles. BIP hopes for stable cash flow and growth from the venture as toll rates rise with inflation, and traffic is expected to increase.

Mr. Pollock said it was likely that the joint venture will be asked to make an offer to acquire the remaining 40 per cent of OHL Brasil that is publicly owned, and that the company is prepared for that circumstance.

BIP intends to invest an initial $250-million into the venture once the acquisition closes, which is expected in the fourth quarter.

Last week BIP increased its ownership stake in the Autopista Vespucio Norte toll roads surrounding Santiago, Chile, to 51 per cent for $590-million including debt.

Combined with the joint venture in OHL Brasil, Mr. Pollock said BIP will have "a unique South American toll-road platform that is well-positioned for growth."

It also announced an 85-per-cent acquisition of the U.K. utility network Invesco Group.

BIP also operates ports and energy transmission and distribution facilities across the world.