We have held a long position in Brookfield Infrastructure Partners (BIP) since the beginning of 2011 and we have been pleased with the results of the company during this time. While we typically frown on companies issuing secondary offerings in order to finance “growth”, BIP is not your typical company and the assets it owns are not your typical every-day investable assets. BIP grows through prudently acquiring high-quality infrastructure assets much as a private equity firm grows through the acquisition of desirable investment targets. We think of our investment in the partnership units of Brookfield Infrastructure as a diversification away from traditional stocks and bonds and being able to utilize a high-quality asset manager for investing in unique, hard-to-duplicate infrastructure assets. BIP’s Transportation and Energy segment accounts for 47.5% of its assets and its Utilities segment accounts for 41%, with 11.5% for its Timber operations and corporate administration.

While we aren’t happy that BIP’s per unit Fund Flows from Operations have declined on a year-over-year basis, we were happy that it exceeded the consensus estimates of Wall Street. We were expecting FFOs to decline on a per unit basis due to increased unit issuance as well as soft performance in its Timber operations. For the tenth time in the last eleven quarters, BIP’s Fund Flows from Operations exceeded consensus estimates published by sell-side analysts. BIP generated Q3 FFOs of $.58 per unit. While it was a 6.45% decline versus Q3 2011 FFOs per unit, it still beat analyst estimates by $.02/unit and was slightly better than the 7.7% decline in Q2 2012 and the 6.88% achieved in YTD 2012. BIP’s total FFOs increased by 16.5% in Q3 2012 versus Q3 2011 and reached $113M due to the issuance of shares to fund the expansion of its Australian Railroad operations as well as a slew of acquisitions in its transport and energy division and its utilities division. Positive drivers of BIP’s FFO performance were growth in its Utilities operation and expansion of the Australian Railroad and this was offset by continued weakness in its timber operations, continuing the trend we have seen in the year.

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