Brookfield infrastructure to book $270m gain

The sale of minority stakes in Brazilian electric transmission assets represents a cash value of $7 per share for shareholders of the publicly traded infrastructure fund, which launched in January. Analysts estimate the proceeds will give it $550m of asset purchasing power.

Brookfield Infrastructure Partners (BIP), a publicly listed infrastructure fund managed by Brookfield Asset Management, has exercised an option to sell its minority interests in five Brazilian electricity transmission investments for estimated after-tax proceeds of $270 million (€184 million).

Aaron Regent, co-chief executive officer of Brookfield’s infrastructure group, said in a statement that the minority position in the assets “was not a strategic investment for Brookfield infrastructure” and that the firm is evaluating a number of investment opportunities to redeploy the proceeds.

With a book value of $195 million, the investments represented approximately 22 percent of BIP’s asset portfolio as of 30 June 2008. As a whole, the fund has 60 percent of its portfolio in transmission assets and the remainder in timberlands.

“While this action was widely expected, we view BIP’s decision to exercise the put as a modest positive,” Brendan Maiorana, an equity research analyst at Wachovia Capital Markets, wrote in a research note.

“[It] signals that management is confident that it will be able to redeploy proceeds into new opportunities,” Maiorana wrote.

Maiorana wrote that timberlands in the Pacific Northwest is among the investment opportunities to which BIP management may redeploy proceeds from the sale. He estimates that the company has $550 million of asset purchasing power from the proceeds and will realise a 40 percent internal rate of return on the two year investment.

Brookfield Asset Management listed BIP on the New York Stock Exchange in early February at $20.19 to focus on infrastructure investments primarily in Organisation for Economic Cooperation and Development-member states, such as the UK.

Since then, like many other publicly listed infrastructure funds, the stock has been trading at a significant discount to book value. As a result, on a fully diluted basis, the sale of the Brazilian transmission assets equates to a value of $7 per share, or nearly half of its current share price.

The fund is 50 percent owned by Brookfield Asset Management and its employees and directors. Besides infrastructure, the firm manages property, power generation and other specialty funds, with total assets under management of $95 billion.

BIP shares ended the day down .33 percent, closing at $15.30.