Canada’s Brookfield expects fewer openings for infrastructure acquisitions in Brazil, as the market counts on Latin America’s largest economy rebounding from a prolonged recession this year.
“The window on really high-value opportunities in Brazil seems to be closing pretty quickly,” Sam Pollock, the CEO of Brookfield Infrastructure Partners, said during a conference call to present its financial results for Q1 2017.
In last month’s auction of 31 transmission lines in Brazil, Pollock said by way of example, some of the licenses received more than 10 offers. In previous auctions, six or nine months ago, Brookfield was sometimes the only bidder for a transmission line, he said.
Brookfield led other investors in the recently closed acquisition of the natural gas pipeline company Nova Transportadora do Sudeste (NTS), covering $1.3bn of the $4.23bn price for the 90% stake, Pollock said. Brookfield has also completed the purchase of the water and wastewater business Odebrecht Ambiental.
Arteris, a toll road operator owned by Brookfield and Spain’s Abertis, last month won a 30-year contract for the Rodovia dos Calcados in Sao Paulo with a BRL1.21bn ($381m) bid. Brookfield plans to spend $215m on the upfront payment for the toll road concession and invest another $19m over the next few years, Pollock said.
“The returns will be within our typical target range – at the high end of the 12% to 15% threshold that we have for our business,” he said of the toll road investments.
Brookfield could look to raise debt to fund investments, keeping an eye on falling interest rates in Brazil to determine the right time, Pollock said. The DI interbank lending rate was probably more than 14% less than a year ago but now it stands around 11% and will likely drop to 9% by the end of the year, he said.
“Our hope is that there may still even be further downward pressure on our rates over the next year or two and maybe we can get them even lower,” Pollock said. “Our ability to put in debt would be, in fact, probably quite easy.”
As the window closes in Brazil, Brookfield has deployed a team to find opportunities in Mexico, Pollack said. The company tracked a few possible acquisitions in Q1 but did not close any deals, due to differences over price.