Balance Sheet and
Funding Plan
Our balance sheet remains strong, with total liquidity of
approximately $3 billion at the end of the period, of which approximately $1.9
billion is at the corporate level. Liquidity was strengthened during the
quarter by a C$100 million preferred share issuance, and the sale of a 33%
interest and a financing in our Chilean toll road business that generated
after-tax proceeds of approximately $365 million.
In-line with our
capital recycling strategy, we considered this to be an opportune time to
monetize a portion of our Chilean toll road investment, as the asset has
reached the mature phase of its lifecycle. We acquired a 51% interest in
our Chilean toll road operation through a series of transactions during 2011
and 2012, for a total of $340 million. Since
acquisition, we implemented a number of initiatives to improve operating
margins and raised investment-grade debt that lowered our cost of capital.
This, coupled with strong traffic growth and a favorable tariff regime, has
resulted in significant value appreciation. In February, we completed the partial sale of our interest and realized
a multiple on invested capital of approximately three times. Additionally,
as this investment is held at amortized cost under IFRS, the partial sale
resulted in a $350 million accounting gain that was recognized this quarter. Since we monetized a non-controlling
interest and retained control in a consolidated investment, accounting rules
require the gain to be recorded directly to our unitholder’s equity balance.
Over the course of the year, we expect to further enhance liquidity levels as we execute on our
capital recycling program. In this regard, we have entered into an
agreement to sell our bulk European port operations, with a sale expected to be
completed in June of this year, subject to regulatory approvals. We expect to receive net after-tax proceeds
of $130 million from the sale, which is approximately equal to the carrying
value of the business. We remain on-track to generate additional proceeds
of $1.5 - $2 billion in the next 12 to 18 months from several other sales
processes that are underway.
We are also focused
on managing near-term maturities amidst favorable capital market conditions.
In March, our Australian port operations
opportunistically refinanced A$1 billion of debt, on the back of strong
financial results. The offering was very well-received by lenders and
annual interest costs for the business were reduced by approximately 50 basis
points. We currently have no material individual maturity that will need to be
refinanced in the next five years, and once we complete a number of ongoing
normal course financings, our average duration across the business will be over
eight years.
Sam Pollock,
Chief Executive
Officer,
May 3, 2019
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