A Metaphysical Break from the Waking Dream...The Seven Eyes of God

The Seven Eyes Of God

The Seven Eyes Of God

This is a particularly outstanding lecture by Neville. I had to read and transcribe many other lectures by Neville before I really appreciated what he is saying here...This is truly the keys to the kingdom...

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…we must go on to higher and higher levels, for that is the purpose of the teacher. I would like to look tonight into what it is to my mind, the greatest book in the world, the Bible, and show you a section with which you may not be familiar. It concerns the Seven Eyes of God, from the visions of Zechariah. He saw a stone with seven facets, and the Voice said, this is actually the seven eyes of God that reach over the entire world. For these seven eyes are really in man, for man is the earth of God. So forget this little planet and know that man is the true earth in which God is planted. These are the seven visions of God, seven increasingly clarifying visions of the Creator. The Bible names them but you must look for them.

The first appears only once in the Bible in Isaiah 14 ~ Lucifer, the morning star. And it tells how he is fallen and cut down to the ground - this shining being. All races have taught that man has fallen. It is not something that belongs to the Christian or the Jewish faiths, but all races have held this concept. So the first Eye of God is Lucifer - cut down to the ground.

The second is Molech, the strange god that demands sacrifices (Jeremiah 32). Man offers up his sons and daughters to appease this being he conceives to be God. But the Voice said, “I command them not, neither came it unto my mind, that they should do this abomination to cause Judah to sin.” This Eye is in every man who thinks he has angered God and must make sacrifices to appease Him. All the wars of the world are an appeasement. The Inquisition with its tortures was an appeasement to God. The wicker baskets in which men were burned alive were an appeasement. They did it all to appease God that he might not be angry.

The third eye is Elohim, or gods, gods above and outside of man. The elements he worshipped, the stars and planets he thinks can regulate his life and influence his behavior. He turns to something outside of himself and it fails him and he cries that he is forsaken.

The fourth is Shaddai - almighty. In this eye, man seeks security and comfort. These are the governments, the mighty political machines, the rulers that man trusts, and all this fails him, too.

And then he turns to the fifth eye of Pahath, which means, “to dig a ditch or to snare animals, dig a pit.” It does not mean the animals of the forest; no, it is man I bring into my little trap. Much of the world functions like that today, everywhere in every business, especially in the great advertising campaigns. These people rule like tyrants over us. Every paper, every magazine, every TV commercial has another method of trapping us into buying all these things, so many things that we never get them paid for before we have still others.

And then the sixth eye is Jehovah - Yod He Vau He - or I AM. Man finally grows out of the snaring process. He does not now have to trap anyone in the world, but only boldly assert himself. Bold inner persuasion will create the condition that I AM persuaded of. That is Jehovah, the sixth eye.

The seventh is Jesus, or “Jehovah saves,” or “rescue.” Where man boldly asserts himself but his heart is torn for those still asleep, and he sacrifices for the others and gives himself for the whole vast world. Not as the churches teach it, but as the mystic tells you. You will take anyone, no matter who he is or what he has done, for he is only in a state. You do not condemn anyone but you lift him out of the state, and you do it by identifying the one you would save with the idea he wants to embody, and to the degree that you are faithful to your vision of that person, he will embody his ideal and become it. That is the eye called Jesus, or the seventh eye.

There is an eighth eye, only implied in the Bible and it is veiled. On the eighth day they circumcise the child and unveil the organ of creation. There is an eye in man and Blake names it. He says, “He did not come. He hid in Albion’s forest.” Albion is Blake’s name for universal man, male or female. This eye is hidden in “Albion’s forest” - in the dark convolutions of the brain. There this eye is hiding. When you finally begin to exercise your imagination for another and actually revel in the joy of others as they become the embodiment of what they desire, and you revel in that far beyond what you would for yourself, that is the eye of Jesus. What begins to be the perfect seeing of the seventh eye of God, then something stirs, and it stirs exactly like something trying to get out of an egg. It is something trying to break through Golgotha - and Golgotha is “the skull,” that is the meaning of the word. But it is held by five nails, the five senses. The five senses confine man to this world, and then he breaks loose from this skull as the seventh eye is clarified; and the eighth eye sees concrete reality for the first time in his life, and then, once seeing clearly, he never blames anyone. For with this eighth eye, he sees the perfect world. This is called circumcision or the unveiling of the perfect organ, which is man’s Imagination. On the eighth day, he is circumcised. It means that the eighth eye is open. It does not open by the process of time, but only after the clarifying of the seventh eye of Jesus. Then you see that God became man, that man, awakening, may become God. God contracts Himself to this very limit of opacity, so that living in this state may be called the very grave of man, and “God enters death’s door with them that enter, and lies down in the grave with them, in visions of Eternity until they awake.” (Blake) And then there are these seven visions.

First - Lucifer, the fallen one.

Second - Molech, the being that demands sacrifices. They are doing that right now, only they call it Nationalism, and they offer up their sons and daughters to Molech, though the Voice said, “I do not command them to do this and cause Judah to fall into sin.”

Man sickens of it and turns to the third eye or Elohim, but the stars, the planets, do not respond. Then he turns to the fourth eye or Shaddai - Almighty, to the financial and political “gods”. And then he separates from that and digs his little pit, Pahath, and snares all the people of the world because he can outsmart them, and because of his smartness he lives very well during this little span from the cradle to the grave, and that is the fifth eye through which much of the world is seeing today.

He sickens of it, and then he finds that I AM - or Jehovah, is the only reality, or the sixth eye of God. And I build my world, as I want it and when I sicken of it, offer myself as a sacrifice for all others and give completely of myself for the good of others, and my good fortune then becomes the joy of hearing their good fortune. As it says in Job 42:5 “I heard by the hearing of my ear, but now my eye seeth Thee.” Suddenly something happens within me, and the eighth eye opens and I am circumcised, in mind, not in the flesh, and as that something opens within you, you see the reason for it all, and you see that Eternity is, and you can take anyone in this world and pull him out of any state in the world. That is the eighth eye of God.

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You can get all you want in this world. You can use the fifth eye or the fourth eye. All those who lead us into battle are using the second and third. Few are using the sixth and only an nth part use the seventh eye or the eye of Jesus, and not until it is used and you would rather have the good of another than your own good, and rejoice for another more than for yourself, have you really opened the seventh eye and then you are ready for the opening of the eighth eye.

The seventh eye, the eye of Jesus, has nothing to do with a man born 2000 years ago; it has everything to do with the expanding mind of man. When you exercise the seventh, then something opens. It is the eighth. But until the seventh is fully open, “he hides in the forest of Albion.” He hides in the dark convolutions of the brain. It may scare you a little at first, the feeling of an electric battery moving in your head. You feel memory come back and you feel it on this side and then on that, and then you center it, and then you SEE. Something opens and you actually see a world no one else can see. The seventh eye is based purely on faith. Man does not know God will actually redeem him and he cries, “My God, why hast thou forsaken me?” And then the new world will be seen.

Man seeks security and comfort through the fourth eye. These are the dictators, the political machines, etc. They are always going to save the country, save the world, and then they are driven out - but they take a half billion dollars with them. We have seen it in this hemisphere - the very ones impoverishing the treasury that men had just called the saviors of their country.

They have not reached the sixth eye, or I AM. He who has reached that turns to no one. He knows, “I AM that I will be, I AM what I am.” You can be that or anything you want. But then you go beyond it and you want nothing for yourself but only for others. Then he starts giving himself for man and then when that is completely clarified the eighth eye opens.

Look in your Bible and read the story of the unveiling of the mind of man. But it comes only after the seventh eye is exercised. So I must learn to experience feeling and touching. That is called the Western Gate, and it is closed in man, but he must learn about it, and before I close this eye he must learn much about the Western Gate, for I was told not to hold back one secret, and having had the experience of holding on to an object and awakening not on my bed at all, I must share it with you. I awake in the world where I am holding the object. I have been shut out many times from this world by holding on to an object in that world and awakening in it, and it was just as real as this, but I came back to this. I had a body here and one there. When I returned here where was that other body? Have I not many bodies, for I am scattered over all the world, and man, as he begins to awake, collects the scattered portions of himself, and then he finally finds the being that is God. You can love everyone in this world and you will find joy beyond your wildest dreams in doing good for another; when he asks of you and you, in your Imagination create, and then you have confirmation of it, and then you rejoice as God rejoices. “These things have I spoken that my joy may remain in you.” For whenever anyone awakes, that is the eye of God.

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So there are seven stated quite clearly and the eighth implied. I tell you that you will feel it like a chick in the egg of the skull. Christ is crucified on this cross (man) with five nails - the five senses. The same meaning is in the story of the five foolish virgins. And then he tears himself free from this cross.

Now, you catch it on the wing, but I tell you that you will discover all kinds of wonderful things in the awakening of God in man. For God became man that man may become God. So this wonderful poem that existed only for God is beginning to exist for itself. Sentients begin to appear in the poem, lifting it to higher states and we become at last creators, one of an infinite society of gods.

This eighth eye is misunderstood by the priesthoods of the world and they circumcise the child. It is the Imagination that must be unveiled, not the physical organ, and it comes only after the perfect clarity of vision through the eye of Jesus. Jesus means, “Jehovah saves.” Not one is lost. He has fallen into a state, but you, through the eye of Jesus, save him. You ask him, “What do you want?” and see that condition real for him, and then seeing it embody itself, you rejoice that one has been lifted out of the mire. You do it over and over, and then your head becomes alive and you feel electric currents through it, and yet you will know what you should do, just as a chick knows what to do. It pecks its way out. And then the place where the skull grew together after birth becomes awake again, and you see another world, and you see the world was perfectly made and every state is perfect, and then you will know that you are awake to play beautifully on this eternal world, to bring out these beautiful combinations made by your Father...(Neville is describing his own experience here)

If tonight’s talk seems different from what you expected, then nothing is more practical than the sixth eye. You can make your world what you want it to be by the sixth eye; in fact the fifth has done it. You can snare all kinds of people in your little traps. Read the morning papers. Every ad is to snare us into emptying our pockets, and they will be thrilled that they can do it. Every year we find new traps to get what we have. We have new forms of credit. No one dies leaving anything behind any more. The whole vast thing is a trap. It has become the way of life, the fifth eye.

But then come the sixth and the seventh and then the eighth; and when the eighth opens you forgive everyone in the world, no matter what he has done. You, as man, have gone through every eye. You have worshipped Elohim and sacrificed to Molech.

But when the eighth opens, you will know that nothing displeases your Father but unbelief. Sin does not displease him. The priesthoods of the world tell you sin displeases him, but only disbelief displeases him, for they that come to him must believe in him. Anything you can believe is an image of truth. Could you believe that someone in dire need is now well taken care of? Then he can become as you see him. But sin does not displease your Father. It means, “to miss the mark,” and He comes to the world to show everyone how not to miss the mark. If I do miss the mark, He makes a greater effort to show me how not to miss marks.

Hebrews 11 - “Those who come to Him must believe that He is, and that He is the rewarder of them that seek…” So seek Him first and then all these things will be added.

So there are these eight eyes in man. The eighth hides in the forest of Albion, or the dark convolutions of the brain. Breathing won’t bring it out, or diets, or Yoga exercises will not do it. He will come out only when, as you look through the seventh eye, which is the vision of Jesus, you see only the good of another and glory in that beyond what is only for yourself. Then you will begin to see through the eighth eye of God.

Use the seventh eye consciously and take every person regardless of color, race or creed and ask of him only, “What do you want?” For in Him there is neither Greek nor Jew, nor bond nor free. So you take everyone, for he has only fallen into a state and you single out that individual’s request and persuade yourself that he is now the embodiment of the ideal that he wants to embody and to the degree that you use the seventh eye will the eighth come out of the “forest of Albion”. The opening of the eighth eye is actually the second coming of Jesus. For when the seventh becomes perfectly clear, then the eighth will open, as if it were released from the tomb, and then you see as God.

One cannot be born a Christian. If you are not using the seventh eye, you are not a Christian. If you are the Pope, you are using the fourth eye and all the priesthoods of the world use the fourth eye. So-called almighty powers all use the fourth eye. But you must use the eye of Jesus. Jesus is the eye of God that sacrifices itself for the whole vast world. He gives himself for every being in the world, seeing for them their ideal, their perfect state.

Now let us go into the silence.                           

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Source

Neville Goddard, Lecture, June 11, 1959

Brookfield’s latest move to spin off its asset-management business could be worth betting on

Brookfield’s latest move to spin off its asset-management business could be worth betting on

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When Bruce Flatt, the chief executive officer of Brookfield Asset Management Inc. BAM-A-T, said in his recent letter to shareholders that he was mulling the idea of spinning off the company’s asset management business, investors faced a question of their own.

Should you bet on a stock that trades at a significant discount to the value of its parts?

Initially, the answer appeared to be a resounding yes, as the share price rallied nearly 10 per cent on Mr. Flatt’s proposal.

But with the price down about 14 per cent over the past seven trading days, early enthusiasm is fading – giving curious investors another chance to examine the opportunity.

Companies with relatively unrelated operations have struggled with a so-called conglomerate discount in recent decades, as investors ascribe less value to a complex holding company than pure-play firms that specialize in a particular area.

If diversification can weigh on a stock, then surely a company that streamlines its operations can give its stock a lift, which explains why the number of conglomerates is fading in much of the developed world.

The golden era of conglomeration in the United States arrived in the 1960s. The trend faded in the 1980s, when shareholders grew concerned about lagging stock valuations and pushed many companies to streamline their operations.

Brookfield Asset Management considers spinoff of asset-management business

Though Apple Inc. AAPL-Q and other mega-sized technology companies look like modern, successful conglomerates, many others are making efforts to simplify and drive valuations higher.

General Electric Co. GE-N is planning to carve itself into three public companies over the next couple of years. AT&T Inc. T-N is divesting WarnerMedia division. And Power Corp. of Canada POW-T recently eliminated an ownership layer that had weighed on the stock’s valuation.

Where does this leave Brookfield?

Brookfield operates an asset management business, which invests on behalf of pension funds, sovereign wealth funds and endowments, along with its own money. It’s massive, with US$364-billion in capital at the end of 2021, generating enormous fees from investments in real estate, global infrastructure and other assets.

Here’s where things get interesting for investors.

Mr. Flatt estimates that the value of a separated asset management business could range between US$70-billion and US$100-billion, or US$45 to US$60 a share. The remaining parent company, composed of US$50-billion in net assets, would be valued at about US$30 a share.

Brookfield’s total value then, according to Mr. Flatt’s estimates, comes to US$75 to US$90 a share, compared with a current share price of US$55 – implying that the shares trade at a discount of at least 27 per cent.

That’s hard to ignore.

The unlocked value is based on the idea that pure-play asset managers – such as Blackstone Inc. BX-N, which has significantly less invested capital – enjoy valuations that are considerably higher than Brookfield, whose share price has lagged many of its peers over the past two years.

“Pure-play managers have been more in vogue across global markets because they are easier to value and have attracted higher multiples,” Mr. Flatt said in his letter.

Spin out the asset manager, the thinking goes, and watch that multiple expand as investors reward a higher valuation to the separated division that could trade alongside other public subsidiaries: Brookfield Infrastructure Partners, Brookfield Renewable Partners and Brookfield Business Partners.

Brookfield Asset Management, the parent company, would maintain a significant ownership stake in all these entities, including the spun-off asset manager and its substantial real estate holdings.

A number of observers have greeted the idea enthusiastically, if not fully embracing the high-end of Mr. Flatt’s estimates.

“We don’t think the spinoff changes the intrinsic value of Brookfield Asset Management but the intent is to reduce the trading discount to said intrinsic value, which we think is substantial,” Mario Saric, an analyst at Bank of Nova Scotia, said in a research note.

Mr. Saric believes that Brookfield’s share price should trade above US$70, if not higher, rewarding investors who buy into Mr. Flatt’s proposal.

There are, admittedly, a lot of moving parts here. There’s no guarantee that Brookfield will pursue a spinoff of its asset management arm, since the CEO said that doing nothing is an option.

As well, a bullish case rests on the spinoff attracting a higher valuation simply because it would be a pure play among other asset managers. That’s not a sure thing. Also, investors should note that Brookfield’s share price can be vulnerable to market downturns.

Still, if Brookfield already offers investors exceptional management capabilities and compelling exposure to operating businesses within areas such as renewable energy, real estate and infrastructure, a little structural tweaking looks like an attractive bonus.

Full disclosure: The author owns shares in General Electric Co. and Brookfield Infrastructure Partners.

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David Berman, The Globe and Mail, Feb 21, 2022

BAM...Q4 2021...Letter to Shareholders

BAM...Q4 2021...Letter to Shareholders

Overview

What a difference a year can make. In 2021, we generated a record $12.4 billion of total net income—compared with $707 million in 2020. Performance in our asset management business was very strong, resulting in total Distributable Earnings of $6.3 billion for the year. On a go forward basis, annualized asset management revenues, including carry, are now running at $7.8 billion, and we are launching new funds across all our strategies—which means that 2022 is off to a good start.

We raised $71 billion of capital during the year. This latest round of funds was not only larger, but was raised more quickly than expected. We will soon close our $15 billion Global Transition Fund, which we launched a little more than a year ago. This shows both the power of the franchise and the interest from investors in achieving net zero globally.

The launch of Brookfield Reinsurance has been successful on many fronts. With the closing of the American National deal expected before the end of the second quarter, our insurance operations will now be heading towards $50 billion of assets. This gives us critical mass and the regulatory licenses to continue assisting our insurance clients in many ways. It is still early, but with interest rates looking to continue in a low-ish range for longer, this business could become significant to us.

Irrespective of global macro issues, which always arise, we own an incredible portfolio of real assets and businesses which provide both strong cash flow and inflation protection. Our asset management business continues to establish itself as one of the pre-eminent brands globally. In an inflationary environment, backbone real assets, private credit and transition-focused investments are where you want to be invested.

BAM Stock Market Performance Was Strong

Performance in the stock market was exceptional; a 48% market return (the gain on our stock in 2021) does not happen very often. But, as an indication of the returns that can be generated over the longer term, below is our latest tabulation of annualized compound investment returns over the past 30 years. For reference, $1 million invested 30 years ago in Brookfield Asset Management is worth $111 million today. Please always remember that compounding reasonable returns over long periods of time is an incredible miracle of finance.

Compound Investment Performance

Years	$1 Million Invested in Brookfield	Brookfield NYSE	S&P 500	10-Year U.S. Treasuries
	(MILLIONS)
1	$ 1.5	48%	29%	(3)%
5	2.9	24%	18%	4%
10	6.2	20%	16%	3%
20	38.3	20%	10%	5%
30	111.1	17%	11%	4%

 

More importantly, our franchise is stronger and more durable today than it has ever been. This should help us achieve strong returns in the future. One advantage in that regard is that, despite the good returns over the past 30 years, we still trade at a discount to what we believe our businesses would be valued at if sold. If we can close the gap between share price and intrinsic value, a current stock owner will out-earn the underlying performance of the business.

The Market Environment Was Better in 2021

All in all, 2021 was a pretty good year. It didn’t always feel that way, but according to the data, it was. GDP in every country recovered and the markets quit worrying about deflation or negative interest rates. In fact, by midyear the markets were worried about exactly the opposite! The bottom line is that markets always need something to worry about—and while rates are likely going higher (a bit) and inflation is going higher (a bit), we expect rate increases will be relatively muted this cycle. (Put into perspective, even eight rate hikes will bring the U.S. short rate only to around 2%.)

As we move into 2022, markets are strong, but recent volatility has brought some sanity back to areas of the markets that were overvalued. With money available and interest rates low, this is a very constructive environment for good businesses. Economies are normalizing as central bank intervention is withdrawn. And despite some setbacks with a new variant appearing in December, these are passing as we write. We expect that the global recovery will be back on track soon, and the level-set of valuations in areas such as China and in technology businesses presents great opportunities.

Our operations are highly geared to the economic recovery. As a result, we should be able to grow the value of our businesses coming out of this recession, while working towards narrowing the gap between the intrinsic value and the trading price of a Brookfield share. We are conservatively positioned, with very substantial liquidity, to continue to capitalize on the vast number of opportunities we see every day.

Business Fundamentals Were Very Good

Distributable earnings for the full year were a record $6.3 billion. This was an almost 50% increase compared with 2020, and all parts of our business contributed to the strong results.

AS AT AND FOR THE 12 MONTHS ENDED DEC 31 ($US MILLIONS, EXCEPT PER SHARE AMOUNTS)	2017	2018	2019	2020	2021	CAGR
Distributable Earnings (DE) – Per share	$ 1.42	$ 1.63	$ 1.79	$ 2.74	$ 3.96	29%
– Total	2,092	2,389	2,657	4,220	6,282	32%
Fee-related earnings (before performance fees)	754	851	1,201	1,428	1,742	23%
Gross annual run rate of fees plus target carry	2,475	2,975	5,781	6,472	7,830	33%
Total assets under management	283,141	354,736	544,896	601,983	688,138	25%

 

Asset Management Performance Was Strong

Our asset management operations had an excellent year. We raised $71 billion of capital across our flagship and complementary strategies, which increased total fee-bearing capital to $364 billion at year-end. This included a final $16 billion close for our flagship opportunistic credit fund and $24 billion in aggregate to date for our global transition fund and our latest opportunistic real estate fund.

In addition to our flagship products, we have 35+ other strategies in the market raising capital. We recently had the final close for our sixth real estate debt fund, raising $4 billion—and in just the fourth quarter we raised over $1 billion for our open-end perpetual private infrastructure fund. We held a final close for our growth equity fund for over $500 million and expect to launch the next vintage in the first half of 2022.

Our non-traded REIT is now being distributed on four wealth platforms globally, with additional major platforms expected in the coming months. Our real estate secondaries strategy has raised $2 billion of capital, and we are now in the midst of raising our first commingled fund.

All combined, we have seen significant growth in our asset management earnings, with fee-related earnings growing by 33% in 2021, and we expect to see another step change in 2022. On top of that, we crystalized a record $1.7 billion of carried interest in 2021. With several of our earlier vintage funds having passed their preferred hurdles, we are now realizing carried interest across a variety of strategies, and we expect to continue this momentum into 2022.

Operations Keep Getting Better

Overall performance across our operating businesses continues to strengthen, as we remain well positioned around the economic recovery and own many inflation-linked assets that benefit from economic growth. Our renewable power and infrastructure businesses have been resilient over the last two years, delivering consistent, steady growth. Performance in our private equity business has been excellent, and the release of pent-up demand and de-bottlenecking of supply chains should contribute to even stronger results.

Our diversified real estate portfolio allowed us to reap the benefits of the continued reopening across most of our businesses. We saw increased activity within our hospitality assets as travel begins to return, a rebound in our retail assets due to higher foot traffic and spend per person, and a rebound in demand for our office properties and multifamily assets.

All of this drove very strong financial performance across our operations, underpinning the stable and growing distributions we receive. In total, we received $2.2 billion during the year and we expect this to continue increasing in line with the growth in the underlying businesses.

We Are Investing in 50 Shades of Green

We are in the final stages of closing our $15 billion Brookfield Global Transition Fund I. This fund was raised faster—and is larger—than expected, and we have already started putting the capital to work to help companies decarbonize their operations. We expect these opportunities to fit into three categories.

The first is our traditional new-build renewables business. For 30 years we have been developing renewable assets as a component of our infrastructure strategy, but given the sheer quantity of renewables required as the grid shifts generation to renewables, the capital required is now much larger than in the past. These new-build opportunities will provide a steady flow of investment for this Fund, and they have already begun for us with partners including Amazon, Enbridge and Scotiabank.

The second type of opportunity focuses on providing capital to industrial companies to enable them to decarbonize their operations. Industries such as steel, cement, chemicals and others require both renewable generation to lower their carbon footprint and capital to decarbonize their production processes. This investment cycle is just getting started, and we see a meaningful opportunity for investment in the years to come.

The third type is working with electricity generators, where we will help provide the capital to enable them to shift from coal to gas, and from gas to renewables. We are focused on funding the “transition”—across all 50 shades of green; those that are currently black, brown, dark green, olive, light green and all other shades of green—from coal generation all the way to solar generation. The main goal of our investments is to assist and accelerate the transition to net zero. However, a critical point in this is that everything does not have to become green today—in fact, not everything can be green today. But every business does need to transition to a cleaner future. It is therefore equally important to go where the emissions are and provide capital to convert a coal-based utility or a carbon-intensive industrial business. We intend to invest significant capital in these opportunities and bring our operating capabilities to bear, but always where we can be part of the solution, not part of the problem. That is the Transition.

We are at the start of a new era with a market leading fund and strategy that we believe will be very attractive for investment over a long period of time. As a result, this should become a very large business for us.

Our Asia Pacific Business is Growing Fast

We continue to grow our Asia Pacific business at a faster pace than any other region. Of course, this is in part because it is coming off a smaller base, but also because our operations there continue to build on their successes. We are heading towards $100 billion in total assets across the region and continue to grow in all of Australia, China, Korea, Japan and India.

Our initial business in Asia Pacific was in Australia, where today we have $30 billion of assets across our businesses. We own utilities, rail, ports, offices, hospitals, nursing homes, data centers, residential and industrial properties, and numerous industrial businesses. Most recently we committed to close our largest transaction to date: the purchase of a public company with an enterprise value of US$13 billion, which owns four utilities in Victoria. This transaction has further increased our presence in the country and opened up new adjacent opportunities. Today in Australia we have access to global capital, but truly are a local player.

We have begun to see great progress in China following the build out of our business over the years, the current lack of capital for entrepreneurs in China, and a strategic decision to have a regional office on the ground in Shanghai. In total, our business now accounts for $13 billion of assets across wind and solar projects, distributed electricity generation, office, industrial warehouse, retail and mixed-use projects, multi-family residential, and industrial businesses. We have some great partners in the country and are looking to raise RMB-denominated capital. While the fund distribution market in China is small today on a relative basis, we believe that in the long run, it could become meaningful to us. We recently created a partnership with Sequoia Capital China to invest in “new economy” infrastructure. We believe that the local presence and technology prowess of Sequoia, and our experience in property and infrastructure, will create a powerful combination for Chinese entrepreneurs as they build out their operations.

We started in South Korea 10 years ago and have one of the strongest client rosters of any foreign manager in the country. We have completed numerous real estate transactions, including our extremely successful acquisition and turnaround of IFC Seoul, a 5.5 million square foot signature mixed-use complex. More recently, we acquired a number of new-build industrial logistics warehouse projects and land for data centers. We also hired both an infrastructure and a private equity team and are excited about the opportunities we see in South Korea.

Japan is becoming more interesting all the time and we continue to increase our presence there. We started with an experienced fundraising team, and are now building solar projects and industrial logistics real estate. We also have a number of industrial businesses. We have only scratched the surface and believe that Japan will become a very meaningful investment market for us.

In India, our 14 years have taught us that if you’re careful and patient, you can do extremely well. Our business today is vast, and we have earned strong returns on every investment. Today, with 40 million square feet of IT office park real estate, 150,000 telecom towers, toll roads, pipelines, solar and wind facilities, and an IT outsourcing business, we are a brand name in alternative investments. While always careful, we believe that our early success can lead to much more.

It is quite possible that one-third of our business could be in these markets one day. This will be led by China and India due to their vast populations and need for backbone infrastructure—and while this won’t be easy because there are many very strong local players, we believe that our access to capital enables us to complete our share of deals—sometimes as a great partner to the best-of-the-best locals.

Real Estate Markets and Their Liquidity are Strengthening

The tone of the real estate markets has improved dramatically since mid-2020. While most property fundamentals were largely unaffected as leases were in place and there were few bankruptcies this down-cycle, leasing and capital markets activities for virtually all assets ground to a halt for a period of time. Since then, the markets have come back as investors witnessed the resilience of prime real estate—and continue to be attracted to the cash yield it generates in a low interest rate world. Single-family residential responded first, driven by people being at home, with industrial and life sciences next, followed more recently by urban high-rise multifamily—and now office, with the balance of sectors to follow.

The growth sectors of property have been industrial and life sciences real estate, given e-commerce tailwinds and the biotech revolution taking hold. We have been both selling more mature industrial and life sciences properties, where excellent returns have been locked in, and are buying others. We just committed to buying two life science developers—one in the U.S. and one in the U.K., and are building out industrial logistics across the U.S., France, Germany, Italy, Poland, China, Korea, Japan, Brazil and Australia.

The areas of the property markets that have exhibited “value investment characteristics” (primarily office and retail) have been incredible places to acquire assets at a steep discount over the past two years, as there have been very few competitive buyers. We bought numerous assets at a fraction of their replacement cost, including a grocery-anchored retail portfolio in the U.K. that now generates a running cash yield of 18% on our cost basis. Today, this portfolio could likely be sold for double our purchase price.

As you also know, we privatized our real estate business at around 70% of IFRS values in early 2021 and as planned, have now started to monetize some of the assets at premiums to these same IFRS values. As an example of the transaction markets today and where values have moved in a year, we note the following, which admittedly is a select group, but does represent $10 billion of assets, with a profit of $2 billion generated in the last year.

($US MILLIONS)	1/1/21 Allocated Purchase Price at Privatization	6/30/21 IFRS Value	Cash Price Received on Sale	Gain Over Purchase Price
One Manhattan West	$ 2,426	$ 2,716	$ 2,850	$ 424
U.S. Multifamily	1,136	1,273	1,550	414
U.S. Hotels	882	988	1,424	542
U.S. Net Leases	3,308	3,704	3,775	467
Brazil and India Office	773	865	926	153
	$ 8,525	$ 9,546	$ 10,525	$ 2,000

 

The above represents a total dollar gain of $2.0 billion for all of our constituents, or a 47% annualized gain on a gross asset basis over the year (equity returns are far higher). More importantly, however, the real estate investment markets are only now starting to regain a sense of normalcy, driven in large part by the attractiveness of the combined attributes of real estate—being income generation, and inflation protection. We acquired a lot of real estate early in 2021 and are now successfully unlocking value through the monetization of select assets.

To Be Asset-Light, or Not—That Is the Question

We are often asked if we would prefer to be “asset-light” or stay “asset-heavy.” For those not familiar with the nomenclature, in addition to our asset management business we have $50 billion (net of debt) of our own parent company investment capital. This capital is the result of both the retention of profits and growth in asset values over the decades. This makes us “asset-heavy” compared with most managers today, which are “asset-light”—as they were either founded more recently or have distributed their profits annually to their owners.

If we distributed most of our $50 billion of investment capital to shareholders, we could quickly and easily become asset-light. While to date that capital has been one of our great operating strengths, we sometimes hear that it makes it harder for an investor to value Brookfield, as he or she needs to both put a value on our asset-light business and understand our investments. Many of our long-standing shareholders appreciate the true value of our capital base and the benefits it brings to the broader franchise. In addition, these investors understand how and what we invest in, and have been comfortable with us making investment decisions with the capital. But for new investors who do not know us as well, this can be more time-consuming to understand.

Pure-play managers have been more in vogue across global markets because they are easier to value and have attracted higher multiples. For many decades our sole focus has been on compounding shareholder capital. In addition, our asset management business, started only 25 years ago, would not have been mature enough to consider separating it from our capital. In fact, our business has grown faster and become more profitable because of the capital we have to support it.

But our asset management business is now one of the largest and fastest-growing scale alternative investment businesses globally. This, together with the added benefit of having the longest duration of annuity-like cash flows of any asset manager, means that it could now simply be separated from our capital. Its growth path on its own is very compelling, as many of our strategies are still getting larger with each vintage and are compounding on each other.

Based on the comparable multiples of pure-play, asset-light alternative investment managers, the equity value of our separated asset management business (i.e., “our Manager”) would likely be in the range of $70 billion to $100 billion (circa $45-$60 per share). To be very clear, that excludes the equity capital that we have invested in our businesses, which today is around another $50 billion net (circa $30 per share).

Separating a part of our Manager in the public or private market, while ensuring it still benefits from the capital we have at overall Brookfield, could open up growth options to us that do not exist today, as we dislike ever issuing shares at less than what we believe to be at least their full fair value. In addition, as our reinsurance and investment operations grow, separating a part of the Manager might make sense in order to allow investors who only want exposure to the Manager, to own a separate security. As we consider these options (including possibly doing nothing), we will report in the quarters/years ahead—and will be pleased to hear any views that you have.

Closing

We remain committed to being a world-class asset manager, and to investing capital for you and the rest of our investment partners in high-quality assets that earn solid cash returns on equity, while emphasizing downside protection for the capital employed. The primary objective of the company continues to be to generate increasing cash flows on a per-share basis, and as a result, higher intrinsic value per share over the longer term.

And do not hesitate to contact any of us should you have suggestions, questions, comments or ideas you wish to share.

Sincerely,

Bruce Flatt
Chief Executive Officer
February 10, 2022

BIP - Q4 2021 Letter to Unitholders

BIP - Q4 2021 Letter to Unitholders

Overview

Over the last two years, Brookfield Infrastructure’s cash flows have demonstrated tremendous resilience and sustainability providing further validation of the attractiveness of the infrastructure sector as an asset class. In 2021, we further enhanced the quality of our business by opportunistically deploying capital into several attractive investments and organic growth projects. Furthermore, the monetization of several mature businesses at strong valuations has generated significant liquidity to fund our growth initiatives at a low cost of capital. Consequently, Brookfield Infrastructure is well-positioned to continue its growth trajectory in the years ahead.

Funds from Operations (FFO) for the year totaled $1.7 billion or $3.64 per unit, a notable increase over the prior year of 19% and 16% on a total FFO and per unit basis, respectively. We ended the year on a very strong note, generating fourth quarter FFO per unit of $0.97, which exceeded the prior year by 13% and reflects a payout ratio of 68%. These results highlight the strength of our operations, which were supplemented by accretive contributions from new acquisitions and organic growth.

As a result of Brookfield Infrastructure’s strong financial and operating performance and robust liquidity position, our Board of Directors has approved a quarterly distribution increase of 6% to $0.54 per unit in 2022. This marks the 13th consecutive year of distribution increases, reflecting our positive outlook.

Our key accomplishments for the year are summarized below:

• Organic growth of 9%. We achieved solid performance across all operating segments, reaching the high end of our annual target range.
• Deployed over $3 billion into growth initiatives.Acquired Inter Pipeline (IPL), a leading Canadian midstream company, in a $13 billion privatization, and made further investments in the data and utility sectors.
• Secured 50% of 2022’s deployment target. In the process of completing a second privatization, AusNet Services Ltd. (AusNet), a prominent regulated utility company in Australia, for A$18 billion and secured an investment in a leading Australian smart meter company.
• Generated $2 billion of proceeds from capital recycling. Completed four sale processes resulting in an average after-tax IRR of 33% and a multiple of capital of over four times.
• Maintained strong liquidity levels. Raised almost $3 billion in the capital markets, of which $1.9 billion of equity was issued as consideration for the privatization of IPL.

Stock Market Performance

Brookfield Infrastructure’s units and shares performed well over the past two years, with pricing returning to pre-pandemic levels. Our latest tabulation of compounded investment returns since inception is included below. In 2021, our units returned 28% and 27% on the NYSE and TSX, respectively, while our paired corporate security (BIPC) has experienced a significant price increase since its launch in March 2020. Long-term investors have benefited from five-year, and since-inception annualized compounded returns of 20% and 18%, respectively, which have exceeded the performance of the broader market and our peer group during a continued period of market volatility.

Annualized Total Returns

AS AT DECEMBER 31, 2021	1-Year	5-Year	Since Inception*
BIP (NYSE)	28%	20%	18%
BIP (TSX)	27%	19%	24%
BIPC (NYSE)	(3%)	N/A	58%
S&P 500 Index	29%	18%	11%
S&P/TSX Composite Index	25%	10%	9%
S&P Utilities Index	18%	12%	8%
DJBGI Index**	21%	10%	6%

Includes dividend reinvestment

^*BIP (NYSE) and U.S. index data as of January 2008; BIP (TSX) and Canadian index data as of September 2009; BIPC (NYSE) as of spin-off on March 31, 2020
^**No dividend reinvestment for this index

 

Results of Operations

FFO of $1.7 billion for the year reflects a 19% increase compared to 2020. Results were supported by strong growth from our base business, the full recovery from shutdown-related effects experienced in 2020, and the significant contribution from over $3 billion deployed in growth initiatives. Organic growth for the year of 9% reflected the initial benefits of elevated inflation levels, the commissioning of nearly $900 million in new capital projects over the last year, and higher market-sensitive revenues driven primarily by increased demand for transportation services.  FFO excludes the earnings associated with the sale of various assets, which generated approximately $2 billion of net proceeds for Brookfield Infrastructure in 2021.

Utilities

The utilities segment generated FFO of $705 million, compared with $659 million in the prior year. FFO growth on a same-store basis was 11%. This growth reflects inflation indexation, the commissioning of approximately  $430 million of capital into rate base during the year, and higher connections activity at our U.K. regulated distribution business. 2021 results also reflect the acquisition of an additional interest in our Brazilian regulated gas transmission operation completed in April. Comparative period financial results included a full year of earnings from our U.K. smart meter portfolio and North American district energy platform, both of which we sold in the first half of 2021.

Our U.K. regulated distribution operation recorded another solid quarter of sales activity, ending the year with a total of 322,000 connection sales. This was the company’s best year of sales and was 10% higher than its record set in 2019. Performance was strong across all utility offerings but was highlighted by a two-fold increase in sales for our water products relative to the prior year. New connection activity for the year ended 7% ahead of 2020 with a highly visible growth pipeline of 1.4 million connections, which equates to seven years of rate base growth at current construction levels.

Our residential infrastructure business continued its expansion through new product lines and geographies. In addition to acquiring a leading German residential infrastructure business earlier in the year, in December we invested $80 million (BIP’s share – $20 million) for a 60% interest in the second-largest independent residential heating installer in the U.K. At our existing operation in North America, we completed three follow-on acquisitions for consideration of approximately $60 million (BIP’s share - $20 million). The most notable is the acquisition of a residential solar installation and battery storage solutions provider with operations in seven U.S. states. This strategic transaction strengthens our role in the transition to green energy and provides an additional avenue for deploying our rental product offering. Following this acquisition and our partnership with a leading residential generator manufacturer, we are positioned to offer four complimentary utility offerings under long-term, inflation-indexed contracts.

At our Brazilian electricity transmission business, we recently exercised an option to acquire our joint venture partner’s 50% interest in 900 kilometers of operational lines. This increases the portfolio of lines that we fully own to approximately 2,400 kilometers. With construction of the initial set of lines now complete, this scalable platform has been significantly de-risked, leading us to launch a sales process for this portion of the business. The process is underway, and we expect to complete it in the second half of 2022. Construction of the remaining lines is progressing well, with the vast majority on track for commissioning this year.

Transport

FFO for the transport segment was $701 million, an improvement of nearly 20% compared with the prior year. Results benefited from strong organic growth driven by volume increases, inflationary tariff increases and a full year contribution from our U.S. LNG export terminal. Our transport segment is a significant beneficiary of the robust economic recovery occurring in most of our investment markets. Prior-year results included approximately $25 million of additional earnings associated with the partial disposition of our Australian export terminal and Chilean toll road operation completed in the last 12 months.

Our rail networks continue to benefit from strong demand for bulk goods and commodities that underpin the global economy. Following its robust performance last year, our North American rail operation has experienced higher carloads, as volumes are 8% ahead of the prior year, with improvements across most product groups. Due to the essential nature of the business, we have been able to protect our margins across each of our operations by reflecting inflationary cost pressures in our tariffs.

At our diversified terminal operations, performance in the current environment continues to be robust, including record FFO during the fourth quarter. Results have benefited from a number of positive tailwinds, including (i) higher container volumes following supply chain bottlenecks and limited available capacity, (ii) higher tariffs and congestion surcharges due to capacity constraints, (iii) inflation pass-through reflected in rates, and (iv) increased bulk volumes driven by higher commodity prices.

Our U.S. LNG export terminal continues to benefit from strong global demand and high LNG prices due to increasing exports to China and low storage levels, particularly in Europe. This favorable backdrop has facilitated the contracting of excess capacity under multi-year agreements at attractive rates. Additionally, construction of a sixth liquefaction train is progressing ahead of schedule, and substantial completion is expected to be achieved during the first quarter of 2022. 

Midstream

FFO for the midstream segment totaled $492 million in 2021, an increase of approximately $200 million, or 70%, compared to the prior year. This step-change increase reflects the acquisition of IPL, which was completed in the fourth quarter. Current year results also reflect elevated commodity prices across our existing businesses. This price environment and record storage volumes following extraordinary performance in the first quarter of the year led to same-store growth of 43%. Prior year results reflected an additional 12.5% ownership in our U.S. gas pipeline, which was sold in March.

In October, we successfully completed the privatization of IPL, a high-quality Canadian midstream platform providing critical long-term infrastructure. As a reminder, approximately 80% of the business is contracted, with the majority of our activities secured under long-term, cost-of-service arrangements with investment grade counterparties where we take no commodity or volume exposure. The balance of the business has benefited from strong commodity prices which we are opportunistically hedging to increase predictability of cash flows. With respect to the Heartland Petrochemical facility, we achieved a significant milestone during the fourth quarter with the Central Utilities Block being placed online and producing power to the grid. This is an important step towards the overall operation of the complex which is now mechanically complete and commissioning activities are on track with mid-2022 start-up.

Data

The data segment generated FFO of $238 million in 2021, an increase of 21%. Results reflect the construction of 12,000 telecom tower sites across our portfolios in India and France to accommodate mobile data growth and corresponding network densification requirements. Our highly contracted data transmission and storage businesses have also benefited from inflation indexation and higher rates across the portfolio.

Our data transmission business is well-positioned for the year ahead. Our Indian telecom tower business ended the year with a total of almost 150,000 operational towers, a nearly 10% increase in the size of the network from when we acquired it in August 2020. The business recently signed long-term master service agreements with a large mobile network operator (MNO) and a prominent internet service provider. With these contracts in place, we will be servicing the three largest telecom operators, and one of the largest internet service providers in India.

At our French telecom tower business, over 100 towers were added in the quarter, the second highest on record. The co-location of our build-to-suit tower portfolio increased further, given growing demand from the country’s major MNOs. Furthermore, the business connected fiber to almost 50,000 homes, the strongest quarter on record, as we continue to benefit from increased reliance on connectivity to the home. We have continued to de-risk the business through extension of major telecom site hosting and broadcasting contracts and accelerating our fiber deployment. We have also refinanced all near-term debt maturities. These factors have driven year-over-year EBITDA growth of 8%.

We continue to gain momentum with the expansion of our global data storage platform and reached several important milestones during the quarter. Our Asia Pacific operations secured a second greenfield location in Auckland, New Zealand, to support incremental demand from the anchor tenant at its initial site in the country. The business also acquired its first site in the highly attractive market of Seoul, South Korea, and is in active discussions with a number of global hyperscale customers to secure capacity. In India and Europe, we have been successful in the early stages of our land-bank strategy to drive organic data center development opportunities. Lastly, in South America, we commissioned 11 MW of capacity in 2021 and anticipate a further 28 MW to be commissioned in 2022. Looking across our global portfolio, we expect these various greenfield development opportunities to double EBITDA by the end of 2024.

Balance Sheet and Strategic Initiatives

The past year provided a supportive environment to actively implement our financing strategy. As a reminder, preserving robust liquidity and maintaining access to multiple sources of capital are central to this strategy. With interest rates remaining at historically low levels despite the onset of inflationary pressures, we accelerated opportunistic issuances and actively secured fixed rate debt with long-dated maturities. This is reflected in our robust credit metrics and strong investment grade credit rating, which was reaffirmed at BBB+ by S&P in December.

As central banks now turn to policy normalization to combat rising prices, our corporate and asset level balance sheets are significantly de-risked. We have only modest maturities over the next several years, approximately 90% of term debt (excluding local currency debt in Brazil) is fixed rate and the remaining term to maturity of our total borrowings is approximately eight years.

We raised or secured commitments for a total of approximately $18 billion at the asset level in 2021, with the primary objective of refinancing near-term maturities versus increasing leverage. The following notable initiatives were completed in the fourth quarter:

• Extended the maturity profile at IPL. Shortly following the privatization, we accessed the Canadian market to refinance near-term maturities at attractive pricing. The C$1.0 billion issuance is IPL’s largest to-date and was issued in 10- and 30-year tranches. 
• Issued eight-year bonds at our French telecom operation. Opportunistically issued €800 million of eight-year bonds at a 1.75% fixed coupon ahead of an upcoming 2022 maturity.
• Optimized the capital structure by securitizing U.S. rental contracts. Issued approximately $340 million of primarily A-rated fixed-rate bonds at our North American residential infrastructure operation through the securitization of U.S. rental contracts.
• Issued almost $400 million at our Australian regulated terminal. The issuance included 10-, 12- and 15-year tenors distributed in the private placement market, evidencing robust demand for the fully contracted transport operation with no volume or commodity risk.

In addition, we raised over $1 billion in common equity to fund the acquisition of two highly contracted utility businesses in Australia, as well as provide us with additional liquidity to fund an active and advanced deal pipeline.

Our capital recycling program secured approximately $2 billion of net proceeds in 2021. Most recently in December, we signed a definitive agreement to sell our 50% owned freehold landlord port in Victoria, Australia. At an enterprise value of A$1.3 billion and exit multiple of over 30 times, the sale reflects the stability of the business achieved through long-term contract extensions and a de-risked expansion profile. Brookfield Infrastructure’s share of proceeds is expected to be approximately $100 million. Proceeds will primarily be used to pay down asset level debt on closing of the transaction, which is anticipated to occur late in the first quarter.

With respect to new investment activity:

• The closing of our investment in AusNet is ahead of schedule and expected to occur in mid-February, after having received shareholder approval in late January. This portfolio of high-quality utility businesses in Victoria, Australia, provides electricity and gas transmission and distribution services across its critical networks. We are excited to own a highly coveted perpetual regulated utility franchise that is well-positioned to participate in the decarbonization of Victoria’s economy to meet its legislated 2050 net zero target. BIP expects to invest approximately $500 million.
• In December, we agreed to acquire a 50% interest in Intellihub, the leading provider of electricity smart meters in Australia and New Zealand. Total equity required for the investment is approximately $870 million (BIP’s share – $215 million). The business has 1.2 million meters leased and contractual relationships with energy retailers that cover 99% of the consumer market. This is an asset class we are very familiar with, as we held a smart meter portfolio within our U.K. regulated distribution business for many years. We believe that point-of-consumption metering will continue to be an essential component of the electricity network with digitalization and decarbonization goals accelerating the deployment of smart meters in the region. The transaction is expected to close in late Q1 2022.

Brookfield Infrastructure ended the year with total liquidity in excess of $5 billion, of which $3.7 billion is at the corporate level. Following the completion of the two secured utility investments, pro forma liquidity at the corporate level is $3 billion, which provides us with significant capacity to fund new investment opportunities.

Inflation – Headwind or Tailwind?

With central banks around the world signaling a transition to tightening monetary policy to control rising prices, it is a good opportunity to outline how these factors may impact our business. All else equal, this higher inflation is favorable for stable infrastructure businesses like ours. Before exploring the tailwinds and potential risks associated with elevated inflation, it’s important to caveat the underlying assumptions that frame our outlook.

First, the prevailing inflationary environment is a product of many factors, including pandemic-induced supply chain disruptions, fiscal stimulus and labor shortages. In addition, the influences of de-globalization and what some refer to as green inflation are expected to contribute to longer-term inflation. We do not expect current inflation levels to be “transitory” (i.e. one year) as a number of factors will likely lead to a period of persistent inflation. However, we also do not anticipate a return to high and long-lasting inflation as occurred during the 1970s. Accordingly, this current period of elevated inflation should ultimately stabilize in the next few years as the Federal Reserve and other central banks raise interest rates and shrink their balance sheets.

Assuming our time horizon for inflation stabilization is not significantly off, this will result in a gradual, but not dramatic, rise in interest rates over the next few years. This view is consistent with many forecasts that show U.S. 10-year treasuries reaching approximately 3% over this period. Although higher than the last few years, these expected levels are low in a historical context and can provide an accommodating market environment for highly contracted and well-capitalized businesses like Brookfield Infrastructure.
With this forecast in mind, we foresee elevated short-term inflation acting as a tailwind for our business:

• A significant portion of our business has inflation indexation. Our inflation-linked revenues and high-margin businesses should largely insulate against the impact of higher inflation, despite not being fully insulated from rising costs. Today, approximately 70% of revenues are adjusted by local inflation indexes. This benefit will largely impact our utilities, transport and data investments, where between 80-90% of revenues are contractually indexed to inflation. Further, more than 50% of our midstream business will either capture contractional inflation escalators or see EBITDA growth driven by higher commodity prices and pass-throughs on fee-for-service models. Together with a largely fixed-cost structure and prudent cost management strategies, the compounding impact of inflationary revenue increases should drive operating leverage across our high-margin critical infrastructure.

This economic environment is not without risks; however, we believe we can effectively manage or mitigate these.

• We expect a negligible impact on margins from rising labor costs and capital expenditures. A potential limiting factor to growth is the cost and availability of labor. As owners of capital-intensive, high-margin businesses, our cost structures are largely fixed. Consequently, any material increase in wages in the short term will have a modest impact on margins.
  
  Similarly, inputs and materials for capital expenditure projects must be closely managed in the current environment. Our capital backlog is comprised of two main project types; (i) short-term, low-cost connections with minimal lead time that are re-priced regularly and can capture current inflation, and (ii) large-scale, long lead-time expansion projects for which we rely on turnkey, fixed price contracts with construction partners.  A perfect example of this is our greenfield electricity transmission operation in Brazil, where we have transferred all construction risk to our joint venture partner through a buy-out price adjustment mechanism.

• Our direct interest rate exposure is minimal and effectively mitigated. We have always employed a conservative approach to financing our business through long-dated maturities and mostly fixed-rate pricing. In addition, we have actively extended maturities and opportunistically locked-in long-term fixed-rate debt to take advantage of low interest rates (approximately $18 billion of asset-level debt was raised or secured in 2021 alone). Today, approximately 90% of our term debt (excluding local currency debt in Brazil) is fixed rate with an average tenor of eight years. If we focus on the next two years, only 10% of our fixed-rate debt portfolio is maturing, meaning our earnings will largely be insulated from changes in short-term rates. Over the longer term, we expect interest rates will remain at historically low levels and our business is well-positioned to handle any associated incremental costs.

In summary, our expectation is for continued high levels of inflation for the next few years, to be countered with modest increases in interest rates, which will result in a net positive environment for our business.

Outlook

Notwithstanding the benefits for our business, as we have seen in recent weeks, expectations of quantitative tightening and a rising interest rate environment have caused significant stock market volatility. This volatility has been most pronounced in the technology sector, where we have seen a large pullback in valuations to start the year. Although our unit price will undoubtedly move with broader market sentiment, we believe the underlying value of our privately owned infrastructure assets will be much less impacted. Private buyers of infrastructure assets, especially those for high-quality, de-risked essential infrastructure, take a longer-term view and are less influenced by short-term economic conditions or sentiment.

Like most, the last two years posed many challenges, both for our people and our businesses. Although we are proud of the accomplishments of the last year, we are feeling equally optimistic about the year ahead. We are pursuing opportunities to execute our full-cycle investment strategy, having identified several mature businesses that can be monetized at strong valuations. We have also already secured half of our $1.5 billion annual deployment target. These transactions are expected to close in the coming weeks. We have a high degree of confidence regarding achieving the balance of this deployment target based on the pipeline of advanced opportunities our global teams are pursuing. Our strong liquidity position provides us with the ability to pursue and fund these new investments and meet our target returns.

On behalf of the Board and management team of Brookfield Infrastructure, I would like to take this opportunity to thank our unitholders for their ongoing support. I look forward to updating you on our progress during the upcoming year.

Sincerely,

Sam Pollock
Chief Executive Officer
February 2, 2022