BIP Invests in Brazilian Toll Roads
Brookfield Infrastructure Partners L.P. (BIP) has decided to further expand its market share in the Brazilian toll roads platform by investing $490 million in Arteris S.A. ("Arteris"), formerly Obrascon Huarte Lain Brasil SA (“OHL Brasil”), increasing its ownership to 31%
This fresh investment is a follow-up of the investment decision taken by Brookfield Infrastructure on Aug 6, 2012. On that day, the partnership entered into a joint venture with Abertis Infraestructuras, S.A. ("Abertis") and executed an agreement to acquire a 60% interest in OHL Brasil. The deal, valued at $1.7 billion, comprised $1.1 billion of equity and $600 million of assumed liabilities.
This $490 million investment is due to a previously announced mandatory tender offer that the joint venture was required to make to the holders of 40% of Arteris not owned by the joint venture.
The investment in toll roads will create a new window of opportunity for the partnership. Arteris controls over 3,200 km of roads that account for approximately 65% of Brazil's GDP and nearly two-thirds of the 70 million vehicles that ply on Brazilian roads.
Moreover, keeping in mind the upcoming football World Cup and Olympics, Arteris has invested over R$500 million to widen its roads, which is expected to increase throughput going forward.
Brookfield Infrastructure Partners follows a strategy of monetizing its mature assets and utilizing the net proceeds in areas with higher return potential. On Jul 3, 2013, the partnership sold its 42% interest in an Australasian regulated distribution business for $410 million. Brookfield Infrastructure Partners must have utilized the net proceeds to expand its stronghold in the Brazilian toll roads, which have the potential to generate risk adjusted return in the range of 12-15% in the long run.
Brookfield Infrastructure Partners currently has a Zacks Rank #3 (Hold). Other operators in the sector having a favorable Zacks Rank are IdaCorp, Inc. (IDA), NV Energy, Inc. (NVE) and PNM Resources, Inc. (PNM). All these stocks retain a Zacks Rank #2 (Buy).
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