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BIP to Invest $350M in Brazil

Zacks Equity Research

Brookfield Infrastructure Partners L.P. (BIP) announced that it has signed an agreement along with other institutional investors to acquire a 27% stake in VLI. The total investment will be R$2 billion (US$850 million) of which Brookfield Infrastructure will invest $350 million. With this, Brookfield Infrastructure will boost its presence in the fast developing Brazilian market.

VLI controls one of the largest rail and port logistics businesses in Brazil and its operations cover eight states which represent nearly 60% of the country's gross domestic product (GDP). Infrastructure activity will pick up in Brazil ahead of the two major sporting events – the FIFA World Cup in 2014 and the Olympics in 2016.

VLI transports general cargo in Brazil through its integrated system of railroads, ports and inland terminals. Its rail consists of over 4,000 km under concession and is integrated with five inland terminals and three ports.

The upcoming sporting events will place a huge demand on the nation’s transportation infrastructure. An integrated transportation network will help in swift movements of  goods and people.

In Sep 2013, Brookfield Infrastructure expanded its market share in the Brazilian toll roads platform by investing $490 million in Arteris S.A. 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. This investment allowed Brookfield to control 31% of Arteris.

The partnership has been a consistent performer and in that process has surpassed the Zacks Consensus Estimate in the last four quarters with an average beat of 8.66%. We expect this strategic investment in South America to further boost its bottom line.

Brookfield Infrastructure Partners currently has a Zacks Rank #2 (Buy). Other operators in the industry, which look attractive at current levels, include The AES Corporation (AES), Alliant Energy Corporation (LNT) and Avista Corp. (AVA). All these stocks carry the same Zacks Rank as Brookfield Infrastructure Partners.

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