bip initiation.pdf

SpecialSituations

December 22, 2011Toronto, Ontario

Bert Powell, CFABMO Nesbitt Burns Inc.(416) 359-5301 [email protected]

Associate: Luigi Di Pede(416) [email protected]

This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., and who is (are) not registered as a research analyst(s) under FINRA rules. For disclosure statements, including the Analyst’s Certification, please refer to pages 50 to 53.

Brookfield Infrastructure(BIP – NYSE)

Stock Rating: Outperform

Global Infrastructure Play; Organic and Acquisition Growth to Drive Cash Flow; Initiating Coverage at Outperform Price (21 – Dec) $26.37 52-Week High $28.00

Target Price $31.00 52-Week Low $20.56

(FY – Dec.) 2010A 2011E 2012EFFO/Unit $1.79 $2.37 $2.07

P/FFO 11.1x 12.7x

CDPU $1.10 $1.32 $1.42

Payout Ratio 62% 56% 69%

Dividend $1.40 Yield 5.4%

Book Value $16.94 Price/Book 1.5x

Shares O/S (mm) 185.1 Mkt. Cap ($mm) $4,881

Float O/S (mm) 129.6 Float Cap ($mm) $3,418

Notes: All values in US$

Highlights

• BIP’s portfolio consists of globally diversified high qualityinfrastructureassetsthatprovideessentialproductsandservicesfortheglobaleconomy.Theassetstendtobelong-lifeassetsthatrequireminimalmaintenancecapitalexpenditures.Currentlyapproximately80%ofthecashflowisgeneratedfromlongtermcontractsorregulatedbusinesses,whicharesupportedbytake-or-paycontracts.

• BIPcontinuestogrowitsportfolioandcurrentlyhasapproximately$1billionincapitalprojectstodrivefuturecashflowgrowthalongwithapipelineoffuturegrowthopportunitiesincludingacquisitions.Almostalloftheplannedcapitalprojectsaresupportedbyregulatedreturnsortake-or-paycontracts.

• WeforecastFFO/unittogrowataCAGRof3%between2011and2013,whilethedistribution/unitisexpectedtogrowataCAGRof8%overthesametimeperiodasthepayoutratio,currently56%,movestothebottomendofmanagement’stargetrangeof60-70%in2013.Managementbelievesthatlong-termdistributionincreaseswillbenearthetopofits3-7%annualrangesupportedbybothorganicgrowthandacquisitiongrowth.

• Ouroneyeartargetpriceof$31isbasedonacashflowyieldmethodology.BIPiscurrentlyyielding5.3%,basedonannualdistributionof$1.40/unitand5.8%basedonour2013forecastdistributionof$1.54/unit.Inordertosupportourvaluation,wecomplementouranalysisusinga sum-of-partsanalysis andhistoricalP/FFOmultiples.Our targetpricerepresentsa totalpotentialreturnof23%includinganannualdistributionof$1.40/unit.

• WeareinitiatingcoverageofBIPwithanOutperformratingandatargetpriceof$31.

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Table of Contents

InvestmentThesis.......................................................................................................................................................... 2

OverviewofBrookfieldInfrastructurePartners............................................................................................................. 3

EvolutionoftheBusiness........................................................................................................................................... 3InfrastructureAssets.................................................................................................................................................. 5Utilities....................................................................................................................................................................... 7ElectricityTransmission............................................................................................................................................. 8AustralianCoalTerminalOperations....................................................................................................................... 13EnergyDistribution.................................................................................................................................................. 17RecentFinancialPerformance................................................................................................................................. 18

Transport&EnergyInfrastructure.............................................................................................................................. 20

BrookfieldRail............................................................................................................................................................. 22

SignificantGrowthOpportunities................................................................................................................................ 23

Ports......................................................................................................................................................................... 24SignificantGrowthOpportunities................................................................................................................................ 25

Euroports–DiverseLong-TermCustomerBasePortendsStability............................................................................ 25

NaturalGasPipelineofAmerica(NGPL)................................................................................................................... 26

IrreplaceableStrategicAssetwithExposuretoFastGrowingShalePlays................................................................ 26DiverseGroupofCustomerswithInvestmentGradeRatings.................................................................................. 26StableCashFlowProfilewithLeveragetoRisingNaturalGasPrices...................................................................... 27

RecentFinancialPerformance.................................................................................................................................... 27

Timber......................................................................................................................................................................... 29

HighQualityTimberlandswithReadyAccesstoExportMarketsaDefiningFeatureofBIP’sTimberAssets........ 29U.S.HomebuildingExpectedtoRemainWeakovertheMediumTerm................................................................... 30IncreasingDemandforLogsfromChinaasWoodUseMovesuptheValueChain.................................................. 31Long-termSupply/DemandFundamentalsRemainsPositive................................................................................. 32

RecentFinancialPerformance..................................................................................................................................... 32

StrongOrganicandExternalGrowthOpportunities................................................................................................... 33

InvestmentinUtilitiesRateBase.............................................................................................................................. 33InvestmentinTransport&Energy............................................................................................................................ 34StrongBacklogofProjectsApproaching$1Billion.................................................................................................. 34

ExternalGrowthOpportunities................................................................................................................................... 36

UtilitiesPlatform...................................................................................................................................................... 36Transport&EnergyPlatform................................................................................................................................... 36

AccesstoCapital......................................................................................................................................................... 37

Forecast....................................................................................................................................................................... 38

EBITDA................................................................................................................................................................... 38FFO......................................................................................................................................................................... 39Distribution&PayoutRatio..................................................................................................................................... 39MaintenanceCapital&AFFO................................................................................................................................. 39

Valuation..................................................................................................................................................................... 40

DividendYieldApproach......................................................................................................................................... 40Sum-of-PartsAnalysis.............................................................................................................................................. 42Utilities..................................................................................................................................................................... 43Transport&Energy.................................................................................................................................................. 43Sum-of-the-partsValue............................................................................................................................................. 44FFOMultipleApproach.......................................................................................................................................... 46

CorporateStructure..................................................................................................................................................... 46

Risks............................................................................................................................................................................ 48

Brookfield Infrastructure Partners, L.P.

Investment Thesis

WeareinitiatingcoverageofBrookfieldInfrastructurePartners,L.P.(BIP)withanOut-performratinganda$31targetprice,whichimpliesa23%returnincludingtheannualdistributionof$1.40perunit.BIPisapubliclytradedpartnershipthatwasspunoff fromBrookfieldAssetManagement (BAM) in2008.BAMmaintainsanapproximate30%interestinBIPonafullyexchangedbasis.BIP’sportfolioconsistsofgloballydiversifiedhighqualityinfrastructureassetsthatprovideessentialproductsandservicesfortheglobaleconomy.Theassetstendtobelong-lifeassetsthatrequirerelativelyminimalmaintenancecapitalexpendituresandhavehighbarrierstoentry.Currently37%ofthecashflowsareunderpinnedbycontractualarrangementsand44%areregulated,whicharesupportedbytake-or-paycontractsdeliveringrelativelystablecashflows.Webelieveprospectivenewprojectsareexpectedtotakethispercentagecloserto50%in2013.BIPcontinuestogrowitsportfolioandcurrentlyhasapproximately$1billionincapitalprojectstodrivefuturecashflowgrowth.Almostalloftheplannedcapitalprojectsaresupportedbyregulatedreturnsortake-or-paycontracts.BIPplacesastrongemphasisondeployingcapitalwithlimiteddownsiderisk.Acquisitionshavebeenandwillcontinuetobepartofthestory.Thetiming,priceandmagnitudearedifficulttopredictanddonotformpartofourforecast.CurrentoperationsfocusonUtilitybusinesses,Transport&EnergybusinessesandfreeholdTimberlandsinNorthandSouthAmerica,AustralasiaandEurope.

Managementhas a track recordof acquiringhighquality assetsona valuebasis infavourablemarketsduringperiodsofeconomicstressandgeneratingreturnsthroughactiveoperationalmanagementandinvestinginthecoreplatformstobuildvalue.TheproductofthismodelhasbeentherecentrecapitalizationandsubsequentmergerwithPrimeInfrastructure,whichhassubstantially increasedthecashflowsofthebusinessandledtosubstantialincreasesindistributionsfrom$0.275/unitperquarterinQ1/09to$0.35/unitperquartercurrently.Basedonourforecastfor2011,thepayoutratiowillbe56%,belowManagement’stargetof60%to70%.Managementbelievesthatlong-termdistributionincreaseswillbenearthetopofits3-7%annualrangesupportedbybothorganicgrowthandacquisitiongrowth.Basedonourforecast,webelieveBIPcangrowtheFFOperunitfrom$2.37/unitin2011to$2.52/unitin2013,representingacompoundannual growth rate (CAGR)of 3%;however,we expect distributions to grow from$1.32/unitin2011to$1.54/unitin2013,representingaCAGRof8%asthepayoutratiomovesuptothebottomofmanagement’stargetrange.

Ourtargetpriceof$31isbasedonacashflowyieldmethodology.Inordertosupportourvaluation,wecomplementouranalysisusingasum-of-partsanalysisandFFOmultiplestoarriveatanequityvaluetounitholders.Inoursum-of-partsanalysis,wevaluetheconstituentpartsoftheUtilitiesandTransport&Energybusinessesbasedonapplyingthecomparablevaluemetricsderivedfrompubliclytradedcomparablesorrecenttrans-actionstoourforecast2013EEBIDTA.InthecaseoftheTimberbusiness,wereliedonBIP’sIFRSvalueforitsTimberassetsasanappraisaloffairvalue,whichwebelieveislikelyatthelow-endofthefairvaluerange.

Brookfield Infrastructure Partners, L.P. Page 3

Overview of Brookfield Infrastructure Partners

Evolution of the Business

BIPwasspunoutofBAMinJanuary2008.TheinitialassetswereelectricitytransmissionassetsinChile,NorthAmerica,andBrazil,alongwithstandingtimberassetsinWesternCanadaandWesternUnitedStates.InLate2009BIPparticipatedintherecapitalizationofPrimeInfrastructure(formerlyBabcock&Brown)acquiringa40%interestinPrime’sassets,whichadded theDalrympleBayCoalTerminal (DBCT)asset to theUtilitiessegmentandseededthecreationoftheTransport&Energysegment.Inlate2010,BIPmergedwithPrime.Thetablebelowprovidesachronologicalreviewoftheeventsthathavetranspiredsinceinception.Therecentmergerhashadasignificantimpactoncashflowsandmakesusingpriorperiodcomparisonsforanalysisirrelevant.

Figure 1: Segment Development Timeline

Source: Brookfield Infrastructure Partners, BMO Capital Markets

Transportation &Utilities Energy Timber Social Infrastructure

11% Interest in Transelec (Chilean transmission assets)

38% interest in Canadian timberlands

100% interest in North American Transmission assets

30% interest in U.S. timberlands

7% to 18% Interest in TBE (Transmissoras Brasileiras de Energia)

12-May-2008 Acquired PPP social infrastructure assets

Acquired a hospital in the U.K. and Prison Hospitals in Australia for $12 million

Acquired Melbourne Show Grounds for $3 million

30-Jun-2009Sell interest in TBE for $275 million resulting in after-tax gain of $68 million

0% Interest in TBE

20-Nov-2009

Acquire 40% Interest in Prime Infrastructure, formerly Babcock & Brown for $941 million as part of $1.6 billion Prime recapitalization.

Added a direct interest in Australian Dalrymple Bay Coal Terminal (DBCT), European Energy distribution (GTC), and the Australian Energy distribution distibution business (Powerco)

Added a direct interest in PD Ports. Through Prime added North American Gas Transmission assets NGPL, Australian Rail Road, and European Ports (Euroports)

Projects in B.C. and Ontario. $3 million in vestment

20-Nov-2009

Issued 40.7 million shares at a price of C$15.55 (~US$14.60 ) for proceeds of C$632 million. Also issued 28.1 million redeemable units to BAM at a price of US$13.71 for proceeds of $385 million allowing BAM to maintain 41% interest in BIP.

8-Dec-2010

BIP Merges with Prime increasing ownership from 40% to 100%. 50.7 million shares were issued. On a fully diluted basis BAM's interest in BIP falls to 30%.

DBCT 71.0% IEG 100.0% Ontario Transmission 100.0% Powerco 42.0% Texas Transmission 11.0% Transelec 17.8%

Brookfield Rail 100.0% Euroports 60.0% NGPL 26.4% PD Ports 59.0% IEG 100.0%

1-Jan-2011 Sells PPP portfolio

19-Oct-2011

Issues 19.4 million units at a price of $24.75 for proceeds of $479 million. Issues 8.3 million redeemable shares to BAM at the same price, net of underwritting fees, enabling BAM to maintain it's 30% interest

4-Apr-2008Transelec purchase price adjustment following resolution of 2006 rate proceeding

30% interest in U.S. timberlands maintained

11% interest in WETT. $750 million project expected to be completed by beginning of 2013

BAM contributes its interest in Wind Energy Texas Transmission (WETT) to a BAM sponsored partnership.

Interest in Transelec increased to 18%

Q3/09

2-Mar-2009 Acquired an addition social infrastructure asset

11-Apr-2008Invested $103 million in U.S. timber assets to maintain ownership interest post

BIP spun out from Brookfield Asset Management with the following interests in each of the assets

31-Jan-2008

Sells Portfolio for $16 million

No assets until Q4/09


Inthefollowingfigure,weillustratetheimpactoncashflowfromthecorporateactionssinceBIPwasspunoutfromBAMaswellthehistoricaldividenddistributionandpayoutratio.

Figure 2: Growth in FFO Driven by Corporate Activities

Figure 3: Historical Dividend Distribution and Payout Ratio

Source: Brookfield Infrastructure Partners L.P., BMO Capital MarketsNote: excludes sale of TBE in June 2009

Source: Brookfield Infrastructure Partners L.P., BMO Capital MarketsNote: excludes sale of TBE in June 2009

FFO

$9 $8 $12$20

$45$52 $55

$46

$98$102 $97

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Distribution/unit, FFO/unit & Payout Ratio (%)

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Infrastructure Assets

BIPtendstofocusitsinfrastructureinterestsonhigh-quality,long-lifeassetsthatformthebackboneoftheeconomy.ThethreemainPlatformsare:

Table 1: Operating Profile


Source: Brookfield Infrastructure Partners L.P., BMO Capital MarketsNote: Segment diversification and global footprint based on Q3/11 invested capital

Themakeupoftheseassetshaveevolvedovertimeandweremostrecentlystrengthenedwiththerecapitalization(Q4/09)andsubsequentmerger(Q4/10)ofBrookfieldInfra-structurewithPrimeInfrastructure,whichaddedinfrastructureassetsintheU.K,andAustralasiatotheexistingtimberlandandelectricitytransmissionassetsinNorthandSouthAmerica.Totalinvestedcapitalcurrentlystandsatapproximately$3.0billion.

Figure 4: Segment Diversification Figure 4A: Global Footprint

Utilities41%

Timber14%

Transport & Energy

45%

Europe14%

North America29% Australasia

47%

South America

10%

Platforms Return Drivers Assets Geography

Utilities

Regulated assets that earn a

return on a prescribed rate

base and capital structure

• Coal terminal

• Electricity transmission

• Energy distribution (last-mile

gas & electricity connections)

• Australiasia

• Chile, Ontario, Texas

• U.K.

Transport &

Energy

Long-term contracts (70% of

EBITDA), take-or-pay

contracts, high barriers to entry

• Railroad

• Energy transmission

(midstream natural gas

transmission & storage)

• Energy distribution

• Ports

• Toll roads

• Australia

• U.S.A

• U.K., New Zealand

• U.K., Europe & China

• Chile

Timber Renewable asset, standing

inventory grows in value

• Freehold standing forest • West Coast of Canada &

U.S.A.


Cashflowstendtobestablesincetheassetsareeitherinregulatedbusiness,whichearnareturnontheirassetbaseorareunderpinnedbylong-termcontracts,includingsometake-or-paycontracts,whicharedesignedtogenerateareturnoncapitaloverthelifeofthecontract.AsatQ3/11,80%ofBIP’scashflowsweregeneratedfromeitherregulatedbusinessesorlong-termcontracts.Currently44%ofthecashflowsareunderpinnedbytake-or-pay termswhereBIPhasneitherpricenorvolume risk.AsBIPcontinues togrowitsportfolio,theemphasisisondeployingcapitalwithlimiteddownside(i.e.,thenewrailaccessagreementsaretake-or-payagreements).Includingprospectivetake-or-paycontracts,webelieve50%of2013Ecashflowsareexpectedtobeunderpinnedbytake-or-paycontracts.

Figure 5: Global Infrastructure Platform

Source: Brookfield Infrastructure Partners L.P.

U.S.Timberlands

AustralianRailroad

Operations

AustralianEnergy Distribution

Operations

EuropeanPort Operations

N.A. Gas Transmission

Operations

N. A. Electricity

TransmissionOperations

CanadianTimberlands

UK PortOperations European

Energy Distribution Operations

AustralianCoal Terminal

Operations

AustralasianEnergy Distribution

Operations

S.A. Electricity

TransmissionOperations


Figure 6: Stable Cash Flow Profile

Source: Brookfield Infrastructure Partners L.P., BMO Capital Markets

44%

19%

37%

Other Contractual Regulated

Utilities

TheUtilitiesplatformconsistsofaportfolioofregulatedbusinessthatearnsaregulatedorcontractedreturnontheassetbase.Asaresultcashflowstendtobeverystableandpredictable.TheUtilitiesplatformalsobenefitsfromhavingadiverseportfolioofassets.Withoperationslocatedinfourdifferentcountries,regulatoryriskisreduced.Theplat-form’sassetsarelocatedingrowingmarketsandoffersignificantopportunitiestoinvestinsystemexpansionsatattractivereturns.Withinthissegment,therearetwoflagshipassets,Transelec,aChileanbasedelectricitytransmissionasset,andDBCT,amajorcoalportterminalinAustralia.TranselecandDBCTcombinedmadeupabout65%and68%,respectively,ofBIP’sEBITDAandFFOinthissegmentin2010.

Figure 7: 2010 Utilities EBITDA and FFO by Segment

Source: Brookfield Infrastructure Partners L.P., BMO Capital MarketsNote: Outer circle represents Earnings Before Interest expense, Taxes, and Depreciation & Amortization (EBITDA), while inner circle represents Funds From Operations (FFO), which is EBITDA less interest expense and cash taxes

2010 EBITDA and FFO by Segment

27%

12%

10%

10%

22%

12%

10%

13%

41%43%

Australasia (DBCT)South America (Transelec)North America (Ontario and Texas Transmission)Europe - GTC "last mile"Australasia - PowerCo - New Zealand


27%

12%

10%

10%

22%

12%

10%

13%

41%43%

Australasia (DBCT)South America (Transelec)North America (Ontario and Texas Transmission)Europe - GTC "last mile"Australasia - PowerCo - New Zealand


Table 2: Utilities Portfolio


Electricity Transmission

TheelectricitytransmissionassetsarecomprisedofamajortransmissionbackboneinChilealongwithtransmissionassetsinTexasandOntario.TheChileanassetsrepresent71%oftheFFOonatrailingtwelvemonthbasis.

Transelec – Electricity Transmission in Chile

TranselecwasoriginallyacquiredbyBrookfieldin2006fromHydroQuebecandtodayisownedbyBIP(18%),BAM(10%)andthebalancebetweentheCanadianPensionPlanInvestmentBoard(CPPIB)andBritishColumbiaInvestmentManagement(bcIM)andPSPInvestments.

Chile’s Largest Transmission Company

InChile,amajorityof electricity is suppliedbyhydrogeneration frommountainousregionsinthecentral-southareaofthecountry,whichiscarriedbytransmissionlinestopopulationcenterslocatedincentralandcoastalChile.TranselecisChile’slargestelectrictransmissioncompany.Itsnetworkstretchesover8,200kmfromthenorthtothesouthofChile,andisequippedwith52substationsanddeliverspowertoapproximately98%oftheChileanpopulation.ElectricgenerationcompaniesareTranselec’smaincustomers.Theyutilizethegridtotransportelectricitygeneratedtodistributioncompanieswhothendelivertheenergytoendcustomers.AsofDecember2010,threecustomersaccountedfor84%ofTranselec’srevenues,thelargestofwhichisEndsea,theprincipalelectricitygeneratorinChile,whichoperates35%ofthecountry’sinstalledcapacity.

Utilities Ownership Key Barriers to Entry Revenue DriversTranselec 18% Backbone transmission company in Chile serving Regulated monopoly

98% of populationDBCT 71% Coal export terminal that accounts for 8% of global Regulated monopoly

seaborne coal and 21% of global seaborne metallurgical coalPowerco 42% 2nd largest energy distribution company in New Regulated monopoly

ZealandGTC 100% 2nd largest independent connection company in UK; Long-term

contracts/soleprovider of service

Ontario Transmission 100% Electric transmission company in Northwestern Regulated monopolyOntario

Cross Sound Cable 23%

24 mile (39km) long submarine cable buried in Long Island Sound that connects the electric transmission grids of New England and Long Island, NY.

Merchant Transmission Facility offering Transmission Services in

accordance with the NEPOOL Open Access Transmission Tariff

ScheduleTexas Transmission 11% Electric transmission company in Texas Regulated monopoly


Figure 8: Revenue per Customer

Source: Transelec, BMO Capital Markets

8%

6%

5%11%

70%

Endesa & related Colbun Gener & related GasAtacama Others

Dominant Market Position

TherearetwomaininterconnectedgridsinChile,theSICsystem,whichservesprincipallyindustrialandhouseholdconsumersinthecentre-southregionofChile,whiletheSINGsystemmostlyserveslargeindustrialcustomers,primarilyminingcompaniesinChile’snorthernregions.TranseleccontrolsalmosttheentiretrunktransmissiongridthatservestheSICregion,whichspans93%ofthepopulation,andowns100%oftheSINGandSIGtrunksystems.

Figure 9: Main Chilean Interconnected Systems


12

Transelec’s Role in the Chilean Economy

• Transelec is the largest transmission company in Chile

Operates over 8,203 km of lines

Sole owner of the 500kV lines that form the backbone of the country’s transmission system

Operates in the SIC and SING regions and serves over 98% of the Chilean population

• Transmission is the critical link between new sources of supply and demand

New generation likely to be large-scale hydro or coal projects

Trunk transmission connects large generators (particularly hydro) in mountainous regions with population centers in central and coastal Chile

• Chile is projected to experience continued economic growth

Implies demand growth of 7% per annum over next ten years

To maintain reserve margin, requires 450 MW of incremental supply each year

• Investment in transmission will be critical to maintaining reliability and, by extension, economic growth

• Chile has a supportive regulatory environment that favours reliability over price

Transmission tariffs account for only a small proportion of overall electricity costs

Short Law I passed to encourage investment in transmission sector

SIC

SING

Transelec owns 959 kilometers of transmission lines and 5 substations in the SING region

Transelec owns: 7,244 kilometers of transmission lines and 47 substations in the SIC region


Transelec’stransmissionassetsareconcentratedonthehighestvoltagelevels–itowns100%ofChile’s500kVtransmissionlines(trunklines),thehighestvoltagelinesinthecountry,whichformthebackboneoftheelectricalgrid(suitablefortransmittingbulkpoweroverextremelylongdistancesandaresharedamongmanyusers),and45%ofthe220kVlinesand94%ofthe154kVlines.Italsoowns11%ofthe110kVand89%of66kV(andbelow)lines,respectively.

Figure 10: Transelec Market Share


500 kV lines

Transelec100%

220 kV Lines

Other53%

Transelec45%

110 and 66 kV lines

Other89%

Transelec11%

154 kV linesOther6%

Transelec94%


Electricity Demand Continues to Grow in Chile

Chile’seconomyisheavilytiedtothecopperindustry.GrowthinemergingmarketsandthecollateralimpactontheChileaneconomyhasdrivendemandforenergy.ElectricitydemandinChilehasbeengrowingatarateof6%annuallyoverthelasttwodecades.

Figure 11: Annual Electricity Demand Growth in Chile

Source: Transelec, CDEC, Banco Mundial, BMO Capital Markets

Annual Electricity Demand Growth

8%

6%

8%

3%3%

8%

11%

8%

10%

8%9%

6%

8%

6%

4%

6%

8%

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Superior Regulatory Environment

Inordertoaddresstotheinfrastructurerequirementstomeetthisdemandgrowth,newsupportiveregulatoryregimeshavebeenestablished.Mostrecently,theoriginalregula-tory framework,whichunbundledand laterprivatized the electrical system inChile,wasamended(ShortLawI)tointroduceanewtransmissionpricingstructureandtrunksystemexpansionprocedurewithadisputesmechanismarbitratedbyanimpartialEx-pertsPanel.

Unlikeinotherjurisdictionswherethereispressuretoinvestcapitaltomaintaintheratebasewhilealsoallowingforanadequaterateofreturn,thenewregulatoryframeworkinChileprovidesthetransmissioncompanywithalegislated10%pre-taxrealratereturnbasedonthereplacementvalueofthetransmissionsystem.Thisisinadditiontoannualpaymentsformaintenanceandotheroperatingcosts,whichthetransmissioncompanycanrecoverthroughtollschargedtogeneratingcompaniesthatutilizethegrid.Impor-tantly,the10%realrateofreturnisamatteroflawfortransmissionassetsinChile,andnotsubjecttoregulatoryreview.However,theassessmentofmarketvalueisreviewedeveryfouryearsandisbasedontwelvekeyinputs.WeunderstandBIPremainspositiveonthetransparencyofthereviewprocessandthatchangesinfairvaluearenotappliedretroactively.


Eighteen Percent of Sales Have Volume Risk

Transelec’smain sourcesof revenueare generated fromTrunkandSub-transmissionsystems,whichareregulatedassets,andforuseofAdditionalunregulatedtransmissionlines,whicharegovernedbylongtermbilateralcontracts.BothTrunkandAdditionalSystemrevenuesarestructuredastakeorpayagreements,whileBIPassumesvolumeriskonSub-transmissionsystemrevenues.Approximately55%ofTranselec’srevenues(excludingOthernon-transmissionbasedrevenue)aregovernedbylong-termcontracts(thelargestofwhichexpiresin2018afterwhichamajorityofthesecontractswillreverttotheShortLaw)thathavepricingframeworkssimilartotheregulatoryframework.

Figure 12: Revenue per System (2010)

Note: Trunk revenues includes 27% of revenues from contracts (at regulated rates)Source: Transelec, BMO Capital Markets

Highly Stable Cashflow Profile

SincetheChileanregulatoryandcontractualframeworksarebasedonreplacementcost,Transelecisnotrequiredtoinvestatitslevelofdepreciationtopreventadeclineinrev-enue.Aswell,weunderstandTranselec’ssystemisinverygoodphysicalcondition.Asaresult,maintenancecapitalexpendituresareatrelativelylowlevels(US$1-$2millionperyear).WithstrongEBITDAmarginsinexcessof80%combinedwithlowmaintenancecapitalexpenditures,Transelecgeneratesstrongstablecashflows.

Significant Growth Opportunities

Chile’seconomyisgrowingatanannualrateof5to7%andcommensuratelysoisitspowerdemand.Inmanycasespowergenerationisfarawayfromthepowerusers,whichdrivesdemandforincreasedtransmissioninfrastructure.GiventheregulatoryframeworkinChileandTranselec’sscaleandlocationadvantages,webelievethereissignificantop-portunitytoincreaserevenuesandcashflowsovertimethroughadditionalcapitalprojectsasTranseleccontinuestoexpanditsnetwork.

55%

18%10%

17%

Other Additional Trunk Subtransmission


North American Transmission

Therearetwoassetsinthissegment:1)anOntariotransmissionasset;and2)atransmis-siondevelopmentprojectinTexas.TheOntariotransmissionassetscomprise550kilo-metresof44kVto230kVregulatedlines.TheOntarioassetisallowedtoearna9.66%returnonequitybasedontheoreticalcapitalstructureof60/40debt-to-equity.BAMhasa50/50jointventurewithIsoluxwhichisbuildinga$750milliontransmissionlineinthestateofTexasofwhichBIPowns11%.Theprojectisexpectedtobeginoperationsatthebeginningof2013.

Australian Coal Terminal Operations

High Barriers to Entry with Significant Scale and Location Advantages

DBCTisamulti-usercoalterminallocatedintheQueenslandregionofAustraliaatthePortofHayPoint,whichisonthenortheastsideofthecountry.TheterminalisownedbytheQueenslandGovernmentandleasedtoDBCTManagement(BIP)underalongtermleasingarrangement,whichextendsfor50years(beginningin2001),withanoptiontoextendtheleaseforafurther49years.TheterminalismanagedbyDalrympleBayCoalTerminalPtyLtd,acompanyownedbyeightofthelargestusersoftheterminal.DBCTcommencedoperationsin1983,withanannualthroughputcapacityof15Mtpaandhasexpandedinthreestagessincethen,themostrecentexpansionoccurringinJune2009,inresponsetogrowthindemandforcoalintheregionandaconsequentgrowthindemandforterminalcapacity.DBCTiscurrentlyoneoftheworld’slargestcoalterminal(at85Mtpacapacity),exporting8%ofthetotalglobalseabornecoaland20%oftheglobalmetallurgicalseabornecoal.Theprimaryend-marketsareJapan,Korea,IndiaandChina,whichusethecoaltogenerateelectricityandmakesteel.


Structure Replicates and Indexed Bond

DBCTservesmanyof the largeminingcompanies thatoperate in theBowenBasin,includingPeabodyEnergy,ValeandRioTinto.TheBowenBasinislocatedincentralQueenslandandcontainsoneofthelowestcostsourcesofcoalintheworld.Capacityiscurrently100%contractedto2014throughlong-termtake-or-paycontracts,whichhavenoforcemajeureprovisions,sointhecaseofanaturaldisasterthereisnoimpactonrevenues.Customershavetogivefiveyearsnoticetoreducetheannualcontractedtonnageshippedandarecommittedtothetake-or-paytermsforfiveyearsfromnotice.Theagree-mentsaresuchthatif noreplacementvolumeisfoundafterthefiveyearsnoticethenthecostsaresocializedovertheremainingcustomers.Thesecontractshavetwocomponents:acapacitychargeandahandlingcharge.ThecapacitychargeisbasedonthepercentageofcapacityallocatedandisregulatedbytheQueenslandCompetitionAuthority,QCA,whichusesareturnonregulatedassetbasedmethodology.Thehandlingcharge(bothfixedandvariable),whichisassociatedwithoperatingandmaintainingthefacilityisdirectlypassedthroughtocustomers.ThecapacitychargeisdeterminedeveryfiveyearsbytheQCAwiththemostrecentundertakingoccurringin2010,whichapprovedaweightedaveragecostofcapital(WACC)increaseof100bpsto9.9%commencingJanuary1,2011.Asaresult,overthenextfiveandahalf years,thischangeisexpectedtoresultinanad-ditionalA$70millioninincrementalEBITDAattheBIPlevel.EssentiallythestructurereplicatesanindexedbondforBIP.

Allowed Return Formula Likely to be Maintained; Upside to WACC Supported by Recent Financings

Aspartofitsundertakingassessmentprocess,theQCAretainedthemethodologyituti-lizedinits2006regulatoryreview,includingretainingkeyparametervalues(i.e.,equitybetaandmarketriskpremium).Insodoing,theQCAutilizedaformulathatDBCT

Figure 13: Dalrymple Bay Coal Terminal

Source: http://www.farrell-associates.com.au/Papers/DBCT%20Case%20Study.pdf

13

Figure 13: Dalrymple Bay Coal Terminal Source: http://www.farrell-associates.com.au/Papers/DBCT%20Case%20Study.pdf

Structure Replicates and Indexed Bond DBCT serves many of the large mining companies that operate in the Bowen Basin, including Peabody Energy, Vale and Rio Tinto. The Bowen Basin is located in central Queensland and contains one of the lowest cost sources of coal in the world. Capacity is currently 100% contracted to 2014 through long-term take-or-pay contracts, which have no force majeure provisions, so in the case of a natural disaster there is no impact on revenues. Customers have to give five years notice to reduce the annual contracted tonnage shipped and are committed to the take-or-pay terms for five years from notice. The agreements are such that if no replacement volume is found after the five years notice then the costs are socialized over the remaining customers. These contracts have two components: a capacity charge and a handling charge. The capacity charge is based on the percentage of capacity allocated and is regulated by the Queensland Competition Authority, QCA, which uses a return on regulated asset based methodology. The handling charge (both fixed and variable), which is associated with operating and maintaining the facility is directly passed through to customers. The capacity charge is determined every five years by the QCA with the most recent undertaking occurring in 2010, which approved a weighted average cost of capital (WACC) increase of 100 bps to 9.9% commencing January 1, 2011. As a result, over the next five and a half years, this change is expected to result in an additional A$70 million in incremental EBITDA at the BIP level. Essentially the structure replicates an indexed bond for BIP.


ManagementanditscustomershadadoptedtoarriveatacustomersupportedWACC.Asaresult,webelievetheriskislowthattheformula(i.e.,CapitalAssetPricingModel)willlikelychangeinthenextregulatoryreviewgiventhattheproposedWACCwasbasedonamarketoutcome.Froma regulatoryperspective,weunderstand thebiggest riskaroundtheallowedreturnappearstobefromareductionintheequitybeta(currently“1”)fortheasset(i.e.,certaincomparatorfirmshaveequitybetasoflessthan1),andaswell,re-estimatesofthetime-variantparameters(i.e.,risk-freerateanddebtmargin).Intermsofpotentialupside,itispossibletheQCAcouldascribeahigherproportionofdebtinthetheoreticalcapitalstructure(i.e.currently60%debttocapitalization)appliedtotheasset,whichwouldresultinanincreaseintheWACC(allelsebeingsame),whichweunderstandhasbeensupportedbyrecentrefinancingofdebt(i.e.,deemedinvestmentgradewith72%debttocapitalizationratio)atDBCT.

Re-contracting Risk Low

Webelieve the re-contracting risk is lowgiven the cost advantageof the coal in theregionserved,andthereplacementcostoftheport.AveragemetcoalpricescurrentlyaveragearoundUS$250-$US300/tonneandproductioncostsareaboutA$80/tonneandtheBowenbasinisrecognizedasoneofthelowestcostcoalminingregionsintheworld.Currentlytotalterminalchargesareabout$5/tonneandareabouthalf ofwhattheywouldbecomparedtonewcapacity.Webelievethedynamicsoftheregionsup-portcontinuedvolumes,however,under thecurrentcontracts,volumesareonly fullycontractedto2018.

Capital Requests Managed by DBCT and not Undertaken Unless Factored in Rate Base

DBCTmanagementregularlyconsultswithaccessholderstoassesscapacityneeds.CapitalisonlyallocatedtotheextentitisfactoredintotheratebaseandapprovedbyQCA.Thistypicallymeansthatsolongasaccessseekershavecontractuallycommittedtoatleast60%ofthecapitalundertakings,andnomorethan60%ofaccessesholderswhodonotbenefit,donotopposeit,QCAgenerallyallowstherequests.

Significant Opportunities to Invest Capital at Attractive Returns Given Strong Demand for Coal from China and India

TheboomingdemandforcoalinIndiaandChinaplaceDBCTinaverystrongcompeti-tivepositiontoinvestcapitalatattractivereturnstoexpandthisfacility.


ThereareotheraccesspointsforcoalfromtheBowenBasin,namelytheadjacentHayPointCoalTerminal(HPCT),butthisterminalisownedbyBHPBillitonandMitsubishi,andservicesonlytheirexportrequirements.DBCTandHPCThaveacapacityof130Mtpabetweenthem.Giventhegrowingindustrydemandforcoal,thereisaprojectedneedtohaveexportcapacityincreaseto250-300Mtpaoverthenext5-10years.

Figure 14: New Demand Growth for Coal from 2010 (million short tons)

Figure 15: Coal Exports from Port of Hay Point

Source: Alpha Natural Resources, EIA, IEA

Source: Queensland State Government, BMO Capital Markets

15

Coal Exports from Port of Hay Point

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Figure 14: New Demand Growth for Coal from 2010 Source: Alpha Natural Resources, EIA, IEA There are other access points for coal from the Bowen Basin, namely the adjacent Hay Point Coal Terminal (HPCT), but this terminal is owned by BHP Billiton and Mitsubishi, and services only their export requirements. DBCT and HPCT have a capacity of 130 Mtpa between them. Given the growing industry demand for coal, there is a projected need to have export capacity increase to 250-300 Mtpa over the next 5-10 years. Figure 15: Coal Exports from Port of Hay Point Source: Queensland State Government, BMO Capital Markets

Coal Exports from Port of Hay Point

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InJuly2010,DBCTwasappointedasoneoftwopreferreddevelopmentproponents(theotherbeingAdani,anIndianconglomeratewhowontherighttodeveloptheAbbottPointterminalintheregion)fortheDudgeonPointCoalTerminal(DPCT).DPCTislocatedintheportofHayPoint,whichislocatedfourkilometresnorthofDBCTandwillhaveanexportcapacityof120-150Mtpa.WeunderstandthatBIPhasreceivedaccessrequests(i.e.,softcommitments)frompotentialcustomersfor130Mtpa.OnDecember13,2011thestateofQueensland,AustraliaannouncedthatitallocatedlandtoBrookfieldandAdaniGroupfortwocoalterminalsatDudgeonPointwitheachgetting190hectares(50%each).ThetwoproposedterminalsatDudgeonPointwillprovideexportcapacityupto180Mtpa.Theconstructionoftheterminalsisexpectedtobeginin2013andcost~A$10billion(webelieveBrookfield’sshareA$3-4billion),andbereadybytheendof2016.

Energy Distribution

GTC - UK Distribution Business

Thisisalast-milebusinessforconnectinggasandelectricityservicesintheU.Kresidentialhousingmarket,calledGTC.GTCisthesecondlargestindependentconnectionsbusinessintheU.K.withapproximately450,000naturalgasconnectionsand25,000electricityconnections.Thisisaregulatedpricebusiness.Howevertheregulatedpricesareinsuffi-cienttoattractcapital,andrequiredeveloperstosubsidizetheconnectionswithupfrontfees.Therevenueinthisbusinessiscomprisedofdeveloperfeesandongoingcustomerrevenuebasedontheregulatedprice.Thedeveloperfeeportion,whiletheoreticallyin-tendedtolevelizethereturnoverthelifeoftheconnection,isrecognizedinBIP’srevenueuponreceipt.Includingthedevelopersfee,theIRR’sforadualfuelconnection,whichmostaretoday,isinthemid-teens.Theindustrydynamicsaresuchthattheindependentsaremoreresponsivethantheincumbentsandtendtogarneralargerportionofthenewbusiness.ThenumberandtimingofnewconnectionsareafunctionofhousingstartsandcompletionsintheU.K.ItisanticipatedatthecurrentlevelofcompletionsthatBIPshouldgenerateabout$9millionaquarterindeveloperconnectionfees,whichassumesabout12,000dualfuelconnectionsaquarter.BIPcurrentlyenjoysa25%marketshareonnewconnectionsintheindustry.


Powerco

PowercoisNewZealand’ssecondlargestelectricityandgasdistributioncompanyandoneof twodual-energydistributors in thecountry.Powerco’sdistributionnetwork isspreadacrosstheupper-central,centralandlowerareasofNewZealand’sNorthIsland.Powercohasapproximately420,000customersrepresent46%ofgasconnectionsand16%ofelectricityconnectionsinNewZealand.Powerco’selectricitybusinessoperatesunderregulationadministeredbytheNewZealandCommerceCommission(NZCC),whichdeterminestheannualincreaseinpricesthatcanbeappliedandthequalitythresholdsthatmustbeachieved(i.e.,responsetimeafteranemergency).Powerco’sAuthorizationexpiresonJuly1,2012,atwhichtimethegasdistributionbusinesswillbecomesubjecttoanewpricingregime.ThereiscurrentlysomeregulatorydynamicsthatcouldforaperiodoftimeprovidesomeuncertaintywithrespecttoFFO.However,basedonregulatoryoptionstheFFOislikelytobeatorabovepriorlevelsbyJuly2014.Revenueismainlybasedonregulatedtariffs,withasignificantportionbeingfromstate-ownedbusinesses(i.e.,66%oftheelectricand49%ofthegasenergyretailersarestate-owned).Electric-ityrevenuesrepresent80%ofthecompany’ssalesandhavegrownata4.1%compoundannualrateoverthepastfiveyears.Electricityandgascustomersarelargelyresidentialandaregenerallycontractedviaretailenergycompanies.

Recent Financial Performance

TheUtilitiesplatformgeneratedFFOof$144millionin2010,upfrom$61millionin2009(excludingtheone-timegainof$68millionfromthesaleofTBE).ThestrengthinrecentperformanceisattributabletothemergerwithPrimeaswellasstrongperformancefromtheAustraliancoalterminal,electricityoperationsandUKdistributionbusiness.BIPusesAdjustedFundsFromOperations(AFFO)yieldasanon-IFRSmeasureofoperatingperformance.AFFOisFFOlessmaintenancecapitalexpendituresandmayalsoincludeincentivedistributionspayabletoBrookfield.Investedcapitalisthecashputintothebusiness,pluscashgeneratedlesscashtakenoutofthebusiness.TheAFFOyieldisAFFOdividedbyinvestedcapitalandismeantasaproxyforcash-on-cashreturnsinthebusiness.

Figure 16: Trends in Housing Starts and Completions, England, 12 month Rolling Totals

Source: UK Government

16

In July 2010, DBCT was appointed as one of two preferred development proponents (the other being Adani, an Indian conglomerate who won the right to develop the Abbott Point terminal in the region) for the Dudgeon Point Coal Terminal (DPCT). DPCT is located in the port of Hay Point, which is located four kilometres north of DBCT and will have an export capacity of 120-150 Mtpa. We understand that BIP has received access requests (i.e., soft commitments) from potential customers for 130 Mtpa. On December 13, 2011 the state of Queensland, Australia announced that it allocated land to Brookfield and Adani Group for two coal terminals at Dudgeon Point with each getting 190 hectares (50% each). The two proposed terminals at Dudgeon Point will provide export capacity up to 180 Mtpa. The construction of the terminals is expected to begin in 2013 and cost ~A$10 billion (we believe Brookfield’s share A$3-4 billion), and be ready by the end of 2016.

Energy Distribution

GTC - UK Distribution Business This is a last-mile business for connecting gas and electricity services in the U.K residential housing market. called GTC. GTC is the second largest independent connections business in the U.K. with approximately 450,000 natural gas connections and 25,000 electricity connections. This is a regulated price business. However the regulated prices are insufficient to attract capital, and require developers to subsidize the connections with up front fees. The revenue in this business is comprised of developer fees and on going customer revenue based on the regulated price. The developer fee portion, while theoretically intended to levelized the return over the life of the connection, is recognized in BIP’s revenue upon receipt. Including the developers fee the IRR’s for a dual fuel connection, which most are today, is in the mid-teen. The industry dynamics are such that the independents are more responsive than the incumbents and tend to garner a larger portion to the new business. The number and timing of new connections are a function of housing starts and completions in the U.K. It is anticipated at the current level of completions that BIP should generate about $9 million a quarter in developer connection fees, which assumes about 12,000 dual fuel connections a quarter. BIP currently enjoys a 25% market share on new connections in the industry. Figure 16: Trends in Housing Starts and Completions, England, 12 month Rolling Totals Source: UK Government


Afterdeductingcapitalexpendituresof$13million,theweightedaverageAFFOyieldin2010was15%onaninvestedcapitalbaseof$1,298.Theratebaseincreased68%in2010to$3,182million,duetothePrimemerger,whilethereturnontheratebasewas11%.

Figure 17: Utilities Segment Operating Performance – FFO/AFFO Yield (%)

Figure 18: Trailing Twelve Month Utilities Segment FFO



Utilities Segment Operating PerformanceFFO / AFFO Yield (%)

$12 $14$20

$27$32

$43 $42

$61$66

$77

$11

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AFFO

Yield (%)

Coal Terminal Electricity Transmission Energy Distribution AFFO Yield %

TTM FFO by Segment (%)

18%7%

22%

16%

37%

Coal Terminal Operations Electricity Transmission - South AmericaElectricity Transmission - North America Energy Distribution - EuropeEnergy Distribution - Australasia


Transport & Energy Infrastructure

TheTransport&Energyinfrastructurebusinessisageographicallydiverse,capitalin-tensivefee-for-servicebusinessthatiscomprisedoftransportation,storageandhandlingservicesforenergy,freightandcommoditybusinesses.Thebusinessgenerallybenefitsfromtheincreasedmovementofenergy,freightandbulkcommodities,whichoverthelong-termtendstoincreasewiththegrowthintheeconomy.Performancehastendedtoremainstabledespitethepoormacrooutlook.Thebusinessbenefitsfromtwofactors:1)highbarrierstoentryasaresultofitslocationaladvantagesandregulatoryrestric-tions,whichmitigatescompetitionandenablesBIPtonegotiatelong-termcontractswithcustomers.Weunderstandthatabout70%oftheEBITDAinthissegmentissubjecttolong-termcontracts;and2)thediversityofthebusinessestendstomitigatefluctuationsindemand fromanyone sector, commodityor customer.The segment’s twopremierassetsarePDPortsandBrookfieldRail(formerlyWestNetRail).Inaggregate,theUKportoperations,AustralianrailroadandtheNorthAmericangastransmissionbusinessaccounted for 80%and86%, respectively,of theEBITDAandFFO inTransport&Energyplatformin2010.

Figure 19: Utilities Segment Operating Performance – Rate Base / Return on Rate Base


Utilities Segment Operating PerformanceRate Base / Return on Rate Base (%)

$519 $531 $566

$1891$1939 $1816 $1838

$3182 $3252 $3474$3155

$0

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Figure 20: 2010 Transport & Energy EBITDA and FFO by Segment

Source: Brookfield Infrastructure Partners L.P., BMO Capital MarketsNote: Outer circle represents Earnings Before Interest expense, Taxes, and Depreciation & Amortization (EBITDA), while inner circle represents Funds From Operations (FFO), which is EBITDA less interest expense and cash taxes

Table 3: Transport & Energy Portfolio



39%

5%

18%

10%

37%

4%

19%

15%

28%

25%

Australasia (Brookfield Rail)North America - NGPLOther - IEG (Channel Islands/Isle of Man)UK - PD PortsEuroports

Transportation &Energy Infrastructure Ownership Key Barriers to Entry Revenue DriversBrookfield Rail 100% Sole rail provider for minerals and grain in Western AUS Long-term

contracts/regulatedPD Ports 59% Landlord port that is 4th largest port in UK by volume; harbour Status as harbour

authority for River Tees authority/long-termcontracts

Euroports 40% Seven ports with key strategic locations throughout Europe Strategic locationand China, handling over 70 Mtpa.

NGPL 26% One of the largest natural gas transportation companies Strategicin US; serves 61% of Chicago/N Indiana market; location/regulatedaccounts for 7% of storage capacity in US

IEG-other 100% Sole LPG provider in Channel Islands/Isle of Man Long-term contracts/sole

provider of serviceTasGas 100% Sole natural gas distribution company in Tasmania Sole provider of

Service


Brookfield Rail

Essential Infrastructure Asset with Stable Revenue Stream from Blue-Chip Customer Base

BrookfieldRailcontrolsapproximately5,100kmofrailwaytrackthroughoutthesouth-ernhalf ofWesternAustralia(WA)througha40yearleasewiththeWAGovernment.Brookfield’srailinfrastructureislocatednearalargenumberofironore,bauxiteandothertypesofmineraldepositsinthearea,andisalsoresponsibleformuchofthegoodstransportedfromtheeasternpartofthecountry.BrookfieldRailhandlesapproximately50Mtpaofcargo,andinmanycases,istheonlyeconomicmeanstogetcommoditiesinthisregiontogovernmentportsonthecoastforexport.Accordingly,customerstendtosignlong-termagreementswithBrookfieldinordertoensureadequateaccesstotherailnetwork.TheaccesschargesareregulatedbytheWAgovernment,butourunderstandingisthatcurrentcontractsarebelowthecurrentceiling.Inaddition,railtransportrepresentsasmallyetessentialcomponentoftheoverallcostofthecommoditiestransported,whichtendstoprovideverystablerevenuestreams.Brookfield’stop9customerscontribute90%ofitsrevenueswithcontractexpirationdatesrangingfrom2011to2026.RevenuesareapproximatelyA200-A$300millionannually.

Figure 21: Brookfield Rail Infrastructure Figure 21b: Brookfield Rail Mix of Business (2009)

Source: Brookfield Rail Source: Brookfield Rail

21

Brookfield Rail

Essential Infrastructure Asset with Stable Revenue Stream from Blue-Chip Customer Base Brookfield Rail controls approximately 5,100 km of railway track throughout the southern half of Western Australia (WA) through a 40 year lease with the WA Government. Brookfield’s rail infrastructure is located near a large number of iron ore, bauxite and other types of mineral deposits in the area, and is also responsible for much of the goods transported from the eastern part of the country. Brookfield Rail handles approximately 50 Mtpa of cargo, and in many cases, is the only economic means to get commodities in this region to government ports on the coast for export. Accordingly, customers tend to sign long-term agreements with Brookfield in order to ensure adequate access to the rail network. The access charges are regulated by the WA government, but our understanding is that current contracts are below the current cieling. In addition, rail transport represents a small yet essential component of the overall cost of the commodities transported, which tends to provide very stable revenue streams. Brookfield’s top 9 customers contribute 90% of its revenues with contract expiration dates ranging from 2011 to 2026. Revenues are approximately A200 - A$300 million annually. Figure 21: a. Brookfield Rail Infrastructure b. Brookfield Rail Mix of Business (2009) Source: Brookfield Rail


Well Positioned For Significant Volume Growth; Focus Shifts to Take-or-Pay Contracts

BrookfieldRailappearswellpositionedtobenefitfromgrowingfreightdemandtosupportincreasedeconomicactivityaswellasincreasesincommoditydemand.Weunderstandtherearecurrentlysixlargeprojectsunderwayatadvancedstagesofdevelopment(newmineprojectsaswellasextensionsofexistingmines)incloseproximitytotheseassetsthatshould,oncecompleted,increasethetonnagetransportedbyBrookfieldbyapproximately24Mtpaor45%by2014.

Table 4: Brookfield Rail Expansion Projects

Source: Brookfield Infrastructure Partners L.P., BMO Capital MarketsNote: CTAA is Commercial Track Access Agreement

BIPexpectstoinvestafurtherA$425millionofcapitaloverthenexttwoyearstoupgradeandexpandthenetwork.Combinedwithpreviousinvestmentsof~A$175million,itisexpectedtheseinvestmentswillgenerateincrementalEBITDAofA$150-$200millionperyearby2014.Specifically,BIPexpectsitsminimumtake-or-payrevenuesassociatedwiththeseexpansionswillgeneraterevenuesof~A$65millionin2012,increasingto~A$160millionin2013andafurtherA$10milliontoA$170millionin2014.Importantly,whenthebusinesswasacquiredin2009,0%oftherevenuewascoveredbytake-or-payprovisions,whilein2014thatlevelwillbecloserto60%.Todate,BIPhasfinalizedfiveofthelargestofthesixexpansioncontractsrepresenting93%ofitsincrementalrevenues,ofwhichallarebackedbytake–or-payprovisions.Thecontractsonaverageextendover15years,butimportantly,thereservesoftheminesBIPissupportingarewellbeyondthat.


Totheextentthatvolumesexceedminimumtake-or-paylevels,BIPwillgenerateincre-mentalEBITDAabovethatamount.Forexample,BIPhasthusfarcontracted24Mtpaofadditionalvolumegrowthwhentheupgradeandexpansionsarecomplete,butthatdoesnotincludeanother14–15Mtpathesesamecustomersbelievetheywillbeabletobringonline.Asaresult,actualvolumegrowthmaynotbe24Mtpa,butactuallycloserto40Mtpa,whichshoulddriveadditionalcashflowgrowth.ThereisalsothepotentialforBIPtogenerateadditionalcashflowsasnewcustomersdevelopcoalandironoreprojectsintheregionandrequirerailaccessinordertotransportthesecommoditiestogovernment

Project Commercial Status Projected Volume Expected Start DateExtension Hill iron one project Signed CTAA 3.0 mtpa Late 2011KML iron ore project Signed CTAA 10.0 mtpa 2012Worsley aluminum expansion Signed CTAA 2.0 mtpa 2012Koolyanobbing iron ore mine expansion Agreed terms 2.2 mtpa 2012Yilgarn iron ore project Signed CTAA 4.4 mtpa Late 2011Collie urea project Signed CTAA 2.0 mtpa 2014


ownedportsforexport.Currentlytheportsareoperatingatfullcapacityandappeartobeagatingissueforincrementalvolumebeyondcurrentcommitments.ApparentlythegovernmentdoesnothavethefundstoupgradetheircapacityandBIPisworking inpartnershipwithminerstoinvestcapitalinordertodebottlenecktheports,whichcouldalsorepresentanattractiveinvestmentopportunity.ItisestimatedthecapitalneededtoenhancetheseportsisinexcessofA$500millionoverthenextthreetofiveyears.

Ports

PD Ports - Strategically Located with Diverse Set of Terminals and Facilities

PDPortsisthefourthlargestportoperatorintheUKbyvolume,shippingapproximately40Mtpaofcargo.Essentially,PDPortsactsasthelandlordforthePortsofTeesandHartlepool(Teesport)andhastherighttocollectconservancytariffs(toll-likeduties)fromanyoneusingtheRiverTeestoaccesstheirownterminals.Weunderstandthatap-proximately50%ofthebusiness’FFOisrelatedtothesefeesplusrentfromthe2,000acresoflanditowns.PDPortshasanumberoflong-termcontractswithlargemultinationalcorporations,whichhaveinvestedsignificantamountsofcapitalwithintheportsandhavenootherwaytoaccessitsterminalsthanbyship.ThisgivesPDPortspricingpowerandenablesBIPtoenterintolong-termcontracts,whichunderpinstheabout40%ofitsrevenues.Inaddition,PDPortsmaintainsitsowncontainerterminalsandbulkterminals,whichitchargesafeetouse(50%ofFFO).WithinthevicinityofthePortthereareanumberoflarge-scaleindustrialplants(i.e.,chemicalproducers,coal-firedpowerplants)thataredesignedtooperateathighefficiency/volumes.Asaresult,bulkhandlingtendstobelesssensitivetoeconomicchangesthanhandlingcontainers,whicharegenerallyusedtorestockwarehousesandisaGDPsensitivebusiness.

Figure 22: PD Ports (PDP)

Source: Brookfield Infrastructure Partners L.P.

PD Ports (PDP)Locations

Description: PDP owns and operates the Port of Tees and Hartlepool (“Teesport”) which is the UK’s 3rd largest port by tonnage. PDP’s business also includes the operation of

Asset Description

Port (SHA)a number of other ports (including a container terminal at Hull) and a logistics business in support of the port operations.

Location: Middlesbrough, England (near Teesport)

ProposedOwnership:

Brookfield: 100%

Container terminals

Logistics operations

Port operator

Ownership:

CustomerBase:

Range of long-term contracts with strong, established counterparties including large multi-nationals.

Principal Operations

TeesportTeesport: PDP is the statutory harbour authority for Teesport and is

Hull

Immingham

TeesportTeesport: PDP is the statutory harbour authority for Teesport and isresponsible for the navigation of 11 nautical miles of the River Tees. Over 50% of PDP’s income is earned from conservancy fees (i.e. tolls) related to the movement of cargo on vessels using the river. Teesport also operates a wide range of facilitiesTeesport also operates a wide range of facilitiesincluding transports, bulk handling, cars, steel, forest imports and two container terminals with aggregate 215,000 TEU’s of capacity.Teesport’s freehold land base of 1,558 acres provides an additional source of income to PDP.

C f

| Brookfield Asset Management Inc.16

Hull: Container terminal operator with 300,000 TEU’s ofcapacity.

Immingham: Warehousing, loading and general cargo handling services.


TeesporthasdistinctageographicaladvantagerelativetotheportsinthesoutheastoftheU.K.

• AllmajordistributioncentresintheU.K.canbereachedwithinasingledrivingshiftofTeessport.

• ThePorthasalesscongestedroadnetworkcomparedtosoutheast,whichimprovestimeofarrivalfordeliveries.

• Therailsolutionsinthesoutheastarealsohamperedbyloadrestrictionsandcompetingtrackaccesswithhighvolumesofpassengertraffic.

As imports in theU.K.grow,webelieveTeesport’salternativegateway into theU.K.marketleaveitwellpositionedtoprovideadditionalportcapacityandlogisticalcapabili-tiesforcargotraffic.In2010,Teesportcontainervolumesincreased40%,butthisvolumegrowthwassomewhatoffsetbylowermarginsduetooperatinginefficienciesasaresultofoperatingatfullycapacity.BIPisintheprocessofexpandingthecontainerterminal’scapacityfrom235,000TEUs(TwentyFootEquivalentUnits)to450,000TEUs,whichisexpectedtorestoremarginstohistoricallevels.


ItwasrecentlyannouncedthataThaiSteelmanufacturer,SSI(SahaviriyaSteelIndus-tries)acquiredasteel-blastfurnaceinTeesportfromTataSteelthatwasclosedinJanuary2010.Atthetimeoftheplant’sclosure,theplantbroughtin25%ofTeesport’svolumes.SSIisinvesting~$1billiontobuyandupgradethefacilityandBIPiscurrentlynego-tiatingatake-or-paycontracttoservetheexpansionwithrevenuesbeginninginQ1/12.Weunderstandthecontractcouldadd~$6.5million(~£4.0–4.7millionata1.5xUS$/£exchangerate)perannuminincrementalEBITDA,whichissignificantonabaseof£24million.PDPortsisalsowellpositionedtobenefitfromcontinuedcontainerbusinessgrowthintheU.K.whentheeconomyimproves.Weunderstandthatthereareplanneddevelopmentsinthesurroundingareasbyleadingretailers.Forexample,Tesco,aleadingU.K.retailerrecentlyconstructedthelargestwarehousefacility(900,000sq.ft.)everintheU.K.inthePorts’estate.

OtherpotentialopportunitiesaretheacquisitionofTrustPortsif theywereprivatizedbythegovernment.Thereareover100TrustPortsintheU.K,eachadministeredbyaTrust,thelargestofwhichisthePortofDover.ThegovernmentislookingtoprivatizetheTrustPortsinordertoraisecapitalfundstobuildnewterminalstoprovideadditionalcapacity.

Euroports – Diverse Long-Term Customer Base Portends Stability

EuoportsiscomprisedofaportfolioofconcessionsthroughoutEuropeandChina.Thisisadiversifiedbusinessthathandlesheavydrybulk,specialtydrybulk,liquidbulk,generalcargoandcontainers.Withits16locationsinsevencountriesinEurope,Europortsisone


ofthelargestportoperatorsinEuropeandhandlesover50Mtpaofcargo.Europortoperates1terminalinChina.

Natural Gas Pipeline of America (NGPL)

Irreplaceable Strategic Asset with Exposure to Fast Growing Shale Plays

NGPLisamongthelargestnaturalgaspipelineandstoragesystemsintheU.S.Thepipe-linesystem,whichtraverses10statesintheMidwesternandSouthernU.S.,extendsover15,500kmanddeliversapproximately2.2trillioncubicfeetofnaturalgasperannum.NGPLalsohassevenstoragefacilitieswithacombinedworkinggascapacityof270bil-lioncubicfeet,whichrepresentsapproximately7%oftotalnaturalgasstoragecapacityintheU.S.NGPLsuppliesapproximately60%ofthenaturalgasusedintheChicagoandNorthernIndianamarketsandisgeographicallypositionedincloseproximitytoseveralmajorconventionalnaturalgassupplybasinsintheU.S.,aswellasfastgrowingunconventional gasplays including theWoodford,Fayetteville, andHaynesville.BIPownsa26%interestinNGPLalongwithotherinventors,includingKinderMorganInc.(KMI),whichowns20%andoperatesthesystemonbehalf ofthepartners.

Figure 23: NGPL Natural Gas transmission and Storage Network

Source: http://steelriverpartners.com/ngpl.html

Diverse Group of Customers with Investment Grade Ratings

NGPLhasadiversegroupofcustomersthatincludesinvestmentgradelocalgasdistri-butioncompanies,gas-firedpowerplantsandotherinterstatepipelines.NGPL’stop10customersaccountforover60%ofthetransmissionandstoragerevenueswithaveragecontract termsof 2.8 years for transport and3.5 years for storage customers.GivenNGPL’sstrongmarketpositionanddiversesourcesofgas,thecompanyhasahistoryofrollingovercustomercontracts.

25

Natural Gas Pipeline of America (NGPL)

Irreplaceable Strategic Asset with Exposure to Fast Growing Shale Plays NGPL is among the largest natural gas pipeline and storage systems in the U.S. The pipeline system, which traverses 10 states in the Midwestern and Southern U.S., extends over 15,500 km and delivers approximately 2.2 trillion cubic feet of natural gas per annum. NGPL also has seven storage facilities with a combined working gas capacity of 270 billion cubic feet, which represents approximately 7% of total natural gas storage capacity in the U.S. NGPL supplies approximately 60% of the natural gas used in the Chicago and Northern Indiana markets and is geographically positioned in close proximity to several major conventional natural gas supply basins in the U.S., as well as fast growing unconventional gas plays including the Woodford, Fayetteville, and Haynesville. BIP owns a 26% interest in NGPL along with other inventors, including Kinder Morgan Inc. (KMI), which owns 20% and operates the system on behalf of the partners. Figure 23: NGPL Natural Gas transmission and Storage Network Source: http://steelriverpartners.com/ngpl.html

Diverse Group of Customers with Investment Grade Ratings NGPL has a diverse group of customers that includes investment grade local gas distribution companies, gas-fired power plants and other interstate pipelines. NGPL’s top 10 customers account for over 60% of the transmission and storage revenues with average contract terms of 2.8 years for transport and 3.5 years for storage customers. Given NGPL’s strong market position and diverse sources of gas, the company has a history of rolling over customer contracts.


Stable Cash Flow Profile with Leverage to Rising Natural Gas Prices

ThemajorityofNGPL’srevenuesaregeneratedundercontractswithademandchargeandavariablechargestructure.Thedemandchargedoesnotfluctuatewithusageandisdesignedtocoverfixedcostsandprovideareturnoncapital.Thevariablechargeisdesignedtocovervariablecosts.

NGPL’stransmissionoperationsaresubjecttoregulationbytheFederalEnergyRegula-toryCommission(FERC),whichprovidesaframeworktoreachcommercialagreementswithoutdirectinterventionunderamaximumrateregime.Weunderstandthemaxrates(underFERC)NGPLispermittedtochargeonstoragearemarginallybelowmarket.Asa result,NGPL’s storage capacity effectively remains fully contracted in all priceenvironments;however,inahighpriceenvironment,NGPL’sabilitytocontractcapac-ityatmaxratesgoesupascompanies/marketersseektomovegasintothemarketswithdemand.Withrespecttothevariablehandlingcharge,NGPLispermittedtoretainaregulatedamountofgaspassingthroughitspipelinesasanoffsetofthecoststooperatethetransmissionsystem.If NGPLisefficientinoperatingitspipesanduseslessgastooperatethanNGPLispermittedtoretain,NGPLcansellthisgasintothemarket.WeunderstandthetransmissionsystemisrunveryefficientlyandNGPLregularlysellsgasinthemarket,whichbenefitsNGPLasgaspricesgoup.

In2010,FERCapprovedasettlementunderitsregulationsthatresultedinFFObeingreducedby$18milliononarun-ratebasis.TheimpactofthesettlementwasfullyphasedinbeginninginJuly2011.Thesettlementprovidedgreaterstabilityofcashflowsduetoafive-yearterminwhichcustomerscannotinitiatearatecase.


TheTransport&EnergyplatformgeneratedFFOof$91millionin2010.Afterdeductingmaintenancecapitalexpendituresof$33million,theaverageweightedAFFOyieldin2010was9%onaninvestedcapitalbaseof$1,235million.BIPusesadjustedfundsfromoperations(AFFO)yieldasanon-IFRSmeasureofoperatingperformance.AFFOisfundsfromoperationslessmaintenancecapitalandmayalsoincludeincentivedistribu-tionspayabletoBrookfield.Investedcapitalisthecashputintothebusiness,lesscashtakenoutplusAFFO.TheAFFOyieldintheAFFOdividedbytheinvestedcapitalandismeantasaproxyforcash-on-cashreturnsinthebusiness.TheAFFOyieldin2010wasimpactedbylowerFFOintheNorthAmericangastransmissionbusinessduetosoftmarketconditionsandaratesettlement,highermaintenancecapitalexpendituresatBrookfieldRailaswellasaweakfourthquarterthatwasimpactedbylowergrainharvestvolumes.TherecentincreaseinFFOwasduetothePrimermerger.ThedeclineintheAFFOyieldistheresultofareductionofreturnsoncapitalatboththeNorthAmeri-canenergytransmissionoperationsandatBrookfieldRailcombinedwithanincreaseininvestedcapitalduetothePrimemergerandinvestmentsatBrookfieldRailandtheUKportthathavenotyetbeguntogeneratecashflow.


Figure 24: Transport & Energy Segment Operating Performance – FFO / AFFO Yield (%)

Figure 25: Trailing Twelve Month Utilities Segment FFO



Transport & Energy Operating PerformanceFFO / AFFO Yield (%)

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Australasia (Brookfield Rail) North America - NGPLOther - IEG (Channel Islands/Isle of Man) UK - PD PortsEuroports


Timber

High Quality Timberlands with Ready Access to Export Markets a Defining Feature of BIP’s Timber Assets

Thedefiningattributeoftimberisitsreliablelong-termbiologicalgrowth,andthisgrowth,whichisperpetual,canbecapturedandstoredasunharvestedtimberoveranindefiniteperiodoftimeorharvestedforincomeandcapitalappreciation.Ingeneral,atree’swoodvolumeincreases2–8%annuallybasedonweather(varyingbyclimate,species,age),whichcompoundsovertime,yieldinghighervaluetreesastheymature.Theseattributesallowtimberlandmanagerstoswitchbetweenincomewhenlumberpricesarehighandcapitalappreciationwhenlumberpricesarelessfavourable,therebypotentiallymaximiz-ingtotalreturnsbymatchingharvestopportunitiestomarketconditions.

Onaproportionatebasis,BIPactivelymanagesinexcessof419,000acresofhigh-quality,freeholdand12,300acresofhigherandbetteruse (HBU)timberlands located inthecoastalregionsofBritishColumbia,CanadaandthePacificNorthwestregionoftheUnitedStates,whichprovidesreadyaccesstoexportmarkets.Combined,BIPhasanestimated29.1millioncubicmetersofmerchantableinventorythatitcanharvest,whichincludesadeferredharvestvolumeof2.8millioncubicmeters(i.e.,surplusinventory).Reflectingannualtimbergrowthwithinitsforests,itisestimatedBIPcancutatalong-runsustainableyield(LRSY)of1.6millioncubicmetersoftimberperyear(forever).Tomonetizethedeferredharvestvolume(oncepricesrecover),BIPcouldcuttreesat120%ofitsLRSYforapproximately9years.

Table 5: Timber Portfolio

* Higher and Better Use opportuniteisSource: Brookfield Infrastructure Partners L.P., BMO Capital Markets

Timberlandmanagersharvestlogsthataresoldtothirdparties,whichconvertthetimbertowoodproductssuchaslumberandotherbuildingproducts,paper,furniture,biomass,etc.Thecoststoharvesttimberlandsarepredominatelyvariable,sincetheyarelargelyafunctionofharvestlevels,andongoingcapitalrequirementstendtobeminimal.

Timber Ownership Description Competitive PositionIsland Timberlands 38% 634,000 acres of freehold timberlands in coastal BC Premium product mix

2nd largest private timberland holdings in BC Coastal accessHBU*

Longview Timber 30% 655,000 acres of freehold timberlands in Pacific Northwest U.S. Premium product mixCoastal access

Proximity to low cost customers


U.S. Homebuilding Expected to Remain Weak over the Medium Term

BIP’stimberassetshaveavarietyofend-markets,butthegreatestexposureistohomebuilding(andrepairandremodelling)intheU.S.,whichremainsdepressed.Thereces-sioninNorthAmericaandtheseveredownturnintheU.S.housingmarkethavehadasignificantimpactondemandforwoodproducts.Asaresultoftheseexceptionallylowmarketconditions,timberpricesdeclinedandtimberlandowners,includingBIPsoughttoreduceharvestlevelswiththeanticipationofbeingabletosellthisunharvestedtimberintomeaningfullybettermarketsinthefuture.

Figure 26: North American Supply and Demand - Lumber

Note: BBF is billion board feet Source: Woodbridge Associates, Canfor, USDA Capacity growth rate estimated at 2.2% based on historic figures

ExpectationsarethattheU.S.lumbermarketwillrecoverasthelabourmarketslowlyimproves,butwedonot expect that tooccur, at least inameaningfulway,until theinventoryofunsoldhomesnormalizesandpricesofexistinghomesintheUSstopsfall-ing.Foreclosuresareatrecordhighs,whichaddstotheoverhangofunsoldhomesanddistressedsalesbylendersputsadditionaldownwardpressureonresalevalues.Together,thesefactorscurtailtheconstructionofnewhomes.Forwhatit’sworth,industryfore-castssuggesta21%increaseinnewhousingstartsintheU.S.in2012to725,000,whichisbelowthelong-termaverageforsinglefamilyhousingstartsintheU.S.of1.5millionannually.

29

Figure 26: North American Supply and Demand - Lumber Note: BBF is billion board feet Source: Woodbridge Associates, Canfor, USDA Capacity growth rate estimated at 2.2% based on historic figures Expectations are that the U.S. lumber market will recover as the labour market slowly improves, but we do not expect that to occur, at least in a meaningful way, until the inventory of unsold homes normalizes and prices of existing homes in the US stops falling. Foreclosures are at record highs, which adds to the overhang of unsold homes and distressed sales by lenders puts additional downward pressure on resale values. Together, these factors curtail the construction of new homes. For what it’s worth, industry forecasts suggest a 21% increase in new housing starts in the U.S. in 2012 to 725,000, which is below the long-term average for single family housing starts in the U.S. of 1.5 million annually.

Increasing Demand for Logs from China as Wood Use Moves up the Value Chain While North American demand remains week, demand from Asia, predominately China continues to grow. China’s economic growth was 10% in 2010 and is expected to be approximately 8% in 2012 (down from ~9% in 2011). While much of the current demand from China is for low-grade lumber (utility grade) used for building concrete forms, the expectation is that as the Chinese become more accustomed to using wood in home construction, not to mention for its green attributes, that demand for more valuable lumber (i.e., used in building roof trusses and floor beams) will improve as well.


Increasing Demand for Logs from China as Wood Use Moves up the Value Chain

WhileNorthAmericandemandremainsweek,demandfromAsia,predominatelyChinacontinuestogrow.China’seconomicgrowthwas10%in2010andisexpectedtobeap-proximately8%in2012(downfrom~9%in2011).WhilemuchofthecurrentdemandfromChinaisforlow-gradelumber(utilitygrade)usedforbuildingconcreteforms,theexpectationisthatastheChinesebecomemoreaccustomedtousingwoodinhomecon-struction,nottomentionforitsgreenattributes,thatdemandformorevaluablelumber(i.e.,usedinbuildingrooftrussesandfloorbeams)willimproveaswell.

Figure 27: China – Moving Up the Value Chain

Figure 28: China Effect

Source: Brookfield Infrastructure Partners L.P., Canfor, BMO Capital Markets

Source: Canfor

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Mmfbm

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Figure 27: China – Moving Up the Value Chain Source: Brookfield Infrastructure Partners L.P., Canfor, BMO Capital Markets Figure 28: China Effect Source: Canfor In 2010, BIP sales of sawlogs to China represented 36% of sales (export volumes improved 46% year over year), up from 11% in 2009 in response to attractive pricing. In the short to medium term, we expect the rebuilding phase in Japan will also fuel demand for logs from BIP.

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In2010,BIPsalesofsawlogstoChinarepresented36%ofsales,upfrom11%in2009inresponsetoattractivepricing.Intheshorttomediumterm,weexpecttherebuildingphaseinJapanwillalsofueldemandforlogsfromBIP.

Long-term Supply / Demand Fundamentals Remains Positive

ThesawlogsforexportoverseasfromBIPcomefromitstwopremierassetslocatedonthewestcoast,IslandTimberlandsincoastalB.C.andLongviewTimberinthePacificNorthwest,whichareprimarilycompromisedofhigh-valueDouglas-fir,hemlockandcedartrees.Importantly,neitherhasbeenimpactedbytheMountainPineBeetleinfesta-tion,whichhasdevastatedpinetreeforestsacrosstheregion(predominatelyinthecentralinterior),reducingsawlogavailability.Inaddition,thefactthatlargeswathsofforestarebeingset-asidefornon-commercialuseisalsoexpectedtofurtherreducesawlogavail-ability.Asthetimberresourceavailableforlumberproductiondecreasesanddemandrecovers,wewouldexpectBIP’stimberbusinesstobenefitfrompositivefundamentalsonthesupplyside,whichBIPwillbeinapositiontocapturethroughrampingupharvestlevelsinbothitsCanadianandU.S.operations.


Improvedconditionsinbothdomesticandexportmarketshaveresultedinaveragereal-izedlogpricesincreasingbyapproximately10%in2010comparedto2009to$79/m3,whileoverallharvestvolumesincreased26%to1,225,000m3.TheneteffectoftheweakU.S.marketandthestrongerAsianmarketisthatBIPiscurrentlyproducingatitslongrunsustainableyield.

Figure 29: BIP Timber Harvest Volumes and Log Pricing


Timber Segment Operating PerformanceHarvest Volume, Average Realized Log Prices

267

198

266242

306346

272301

396

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In2010,FFOwas$11million,comparedtonegative$3millionin2009.TheAFFOyieldwas2%.Harvestvolumesandaveragelogpriceshavecontinuedtoimprovein2011rela-tiveto2010resultinginsignificantlyimprovedFFO;however,quarterlyperformancehasrecentlybeenimpactedbyhighercosts.

Figure 30: BIP Timber FFO and AFFO Yield


Strong Organic and External Growth Opportunities

BIPiscurrentlypursuingalargenumberofcapitalprojectstoexpandandupgradevari-ouscomponentsofitsnetworktotakeadvantageofcustomerinitiatedgrowthprospects.Overthelong-term,givenitscompetitiveposition,scaleandlocationadvantages,theseprojectsshoulddrivemeaningfulcashflowgrowth.

Investment in Utilities Rate Base

WhileDPCTisfurtherout,BIPisactivelyinvolvedinanumberofotheropportunitiestoupgradeitsutilitiesassetstoexpandtheratebase.Inthisregard,thecapitalprojectbacklog,includingworkinprogressstandsat$350million($105millionDBCT,$70mil-lionforTranselec,$70millionforWETT,andthebalanceevenlysplitovertheenergydistributionbusinesses)attheendofQ3/11.Thisincrementalcapitalwillformpartoftheratebaseandshouldgeneratean11%plusreturnontheadditionalcapitaldeployed.OneprojectBIPhasbeenprogressingisthe$750millionTexastransmissioninitiativetoconnectwindpowerinthestateofTexas.Thestateisattemptingtopromotedevelopmentofwindpower,whichcurrentlyrepresents8%ofthestate’selectricitysupply.Withanagingtransmissionsystemthereisnotenoughcapacitytocarrythepowerbeinggener-atedbywind.Completionofthetransmissionsystemshouldspurfurtherwindpowerdevelopmentinthestatebecauseitwillallowthepower,whichisgeneratedinremoteareastobeferriedtomajorloadcenters.

Timber Segment Operating PerformanceFFO, AFFO Yield (%)

$2

-$3

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$6

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$10$13

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Investment in Transport & Energy

There is currentlyA$600millionof capital projectsover thenext coupleof years atBrookfieldRail(combinedwithpreviousinvestments),aswementionedpreviously,thatareexpectedtogenerateincrementalEBITDAofA$150-A$200millionperyearin2014.Customershavecurrentlycontractedapproximately24Mtpa(onaminimumbasis)ofvolumegrowth,butthereisalsothepotentialthatexistingcustomerswillrequireadditionalvolumegrowthtomeettheirneeds,andweunderstandcustomersarepotentiallylook-ingtoaddanadditional14to15Mtpaabovethatamount,whichwouldhaveapositiveimpactoncashflow.BIPisalsoinvesting£17millioninPDPorts’handlingcapacityaspartoftheexpansionofthecontainerterminalsasvolumescontinuetogrow.Theplanistoeventuallyexpandportcapacitytoatleast650,000TEUs.

Strong Backlog of Projects Approaching $1 Billion

AttheendofQ3/11,thebacklogoforganicgrowthprojectswasapproximately$1billion.Webelievetherearewidearrayofadditionalrevenuegeneratingcapitalexpenditureandoperationalimprovementopportunitiesthatcouldmateriallyaddtothebacklogovertime,includingA$500millioninportopportunitiesadjacenttotheAustralianrailoperationsandtheA$5billionexpansionprojectatDungeonPoint.

Table 6: Backlog of Organic Growth Projects


Investment in utilities rate base $300Rail expansion projects $432UK ports expansion $15

Capital backlog $747Construction work in progress $246

Total capital to be commissioned $993


Table 7: Organic Growth Opportunities


Transelec Upgrades and expansion of electricity transmission system connect generationthat is miles away from customers to load centers to satisy increased electricitydemand resulting from economic growth

DBCT Increased international demand for steel and electricity should increase customerdemand, allowing for further expansion

Powerco Energy demand and consumption levels; New connections as a result of new housingdevelopment; Regional economic and population growth

GTC New connections in gas and electricity as UK housing market recovers

Ontario Transmission / Upgrades and expansion of electricity transmission system to connect generationTexas Transmission that is miles away from customers to load centers to satisfy increased electricity

demand resulting from economic growth

PD Ports Well positioned to benefit from container business growth and other income streamsresulting from recent and planned development in Teesport area

Brookfield Rail Well positioned to benefit from increased economic activity; Opportunities for growthto support expansions of mining industry and provide access to export markets

Euroports Volume growth from increasing demand for bulk and general commodities in geographic hinterlands; Cross-selling opportunities to develop additional commercialbusinesss with existing customers

NGPL Geographic proximity to emerging shale gas basin provides opportunities to expand pipeline

IEG Load increases with new connections; Co-generation opportunities

Island Timberlands Volume growth from recovery in new home construction in the U.S.; well positionedto benefit from growth in Asia

Longview Timber Volume growth from recovery in new home construction in the U.S.; well positionedto benefit from growth in Asia

Opportunities for Growth

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External Growth Opportunities

BIPisfocusedonexpandingitsinfrastructureplatformbyacquiringbusinessesinandarounditsexistingnetworkswherethereexistsynergiesorcompetitiveadvantages.GiventhesovereigndebtissuesinEurope,thefocushasbeenonbuyingassetsofEuropeancompanies thathave internationaloperationswhoarebeing forcedby theirbanks todelevertheirbalancesheetsandaresheddingassets.Aswell,Europeancompaniesarelookingforpartnerswhocaninvestalongsidetheminordertocontinueinvestinginnewprojects.Europeangovernmentsareputtingupforsaleinfrastructureassetsaswell,butthese sales are generally auction situationswhere the competitive advantage is solelybasedoncostofcapital.

Utilities Platform

Managementhas indicatedthemostcompetitionforassetstodaygiventheuncertainmacrooutlookistheUtilitiessegmentasinvestmentcapitalsearchesforsafehavenandincometypeproductswithlong-termcontractedcashflows.Despitethegenerallycom-pressedinvestmentreturns,BIPhasbeensuccessfulinbuyingassetsinthesegment.Mostrecently,BIPhasacquireda23%interestinCross-SoundCable(CSC)fromabankfor$9million.CSCisahigh-voltagesubseatransmissionlinethatconnectsNewEnglandandLongIsland.Theservicecontract,whichisavailability-basedextendsforanother21yearswiththeLongIslandPowerAuthority.Theassetwasoriginallyacquiredin2006fromHydroQuebecbyPrime(formerlyBabcockandBrownInfrastructure)foranequityinvestmentof$26million.Theasset,whichwasheld-for-saleonBIP’sbalancesheet,hadagearingratioof90%andapost-taxIRRof12%atthattime.

Transport & Energy Platform

WithintheTransport&Energyplatform,BIPseekstoestablishnewoperatingplatformssuchastollroads,airportsandstoragefacilitiesmainlythroughacquisitionsindistressedmarkets,suchasatpresentinEurope.BIPrecentlyannouncedthatitacquireda24%directinterestintwoChileantollroadsfromACS,aSpanishengineeringandconstruc-tiongroupfora$150million.AutopistaVespucioNorte(AVN)isa29kilometrefree-flowtollroadconcessionthatexpiresin2033andformspartoftheSantiagoringroad.TunelSanCristobalisa4kilometrefree-flowtollroadconcessionthatexpiresin2037thatconnectstotheeasternentrancepointofAVN.ThetollroadsactaskeyarteriesinSantiago,whichisafastgrowingcitywithincreasingmotorizationrates.Importantly,theregulatoryframeworkallowsBIPtoincreaseratesonanannualbasis,bothbyChil-eanCPIandafurther3.5%.Aswell,BIPhastheabilitytochargecongestiontariffs,sowhentherearecertaintrafficflows,BIPcanincreaseprices.Thisinvestmentisexpectedtogenerateanafter-taxIRRof12-15%by2014,inlinewithBIP’stargetreturnsforthissegment,butwill initiallygenerateareturncloserto4%until trafficpatternsandfeeoptimizationareestablished.


Importantly,thiswasnotanauctionprocess,andtheaimwasnotonlytoacquireanat-tractiveasset,butalsotodeveloparelationshipwithACS,whichisseekingtoreduceover$13billionindebt.Forexample,weunderstandACSislookingforanequitypartnertotakehalf ofthe$208millioninvestmentACSholdsitself inthenewlyconstructedI-595tollroadinSouthFlorida.ACSalsoholdsequityinvestmentsinanumberofothertollroads(i.e.,Barcelona,Vancouver),andthecompanyhasrecentlysignedconstructioncontractsworthover$4billioninthefirsthalf of2011thatlikelywillrequireasignificantamountofworkingcapital.

Access to Capital

Giventhenatureoftheassets,andthefactthatthecashflowsfromthesegrowthinitiativesaresupportedbylong-termcontractualrevenuesorbyregulatoryframeworks,manage-mentexpectsthatapproximately65-85%ofthecapitalrequirementscanbefundedbyinternallygeneratedcashflowaswellasacombinationofprojectleveldebt.Assetsalesand/ortheissuanceofequityareexpectedtofundtheremainder.

Figure 31: Indicative Sources of Funding


AtendoftheQ3/11,BrookfieldInfrastructurehad$388millionofcorporateliquidityundera$700millioncreditfacility,inadditionto$200millionofcashretainedwithinthebusinesstofundworkingcapitalanditscapitalgrowthprojects.InOctober,BIPraisedapproximately$657millionofcapital,including$200millionfromBAMtoacquirein-terestsinthetwoChileantollroads($150million),aswellastofundthegrowthcapitalexpendituresatBrookfieldRail ($150million),and to repay theamountoutstandingunderthecreditfacility.

50-60%

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Disposals and Equity Retained Cash Project Level Debt


Forecast

EBITDA

IntheUtilitiessegment,weforecastEBITDAof$405millionin2012andEBITDAof$429millionin2013withFFOof$253millionand$265million,respectively.WeassumeBIPcanachieveareturnof11%ontheratebase(excludingdevelopercontributions)andthattheratebasewillgrow6%in2012and7%in2013,respectivelyfromourestimateof$3,211million2011.Weassumedevelopercontributionsadd$9millionperquartertoEBITDA,butrealizethattheycouldvarybasedonthelevelofhousingactivityintheU.K.andmaynotberecurring.Inaddition,weassumethecompanycanmaintainacapitalbacklogof$300milliongoingforwardimplyingthatthecapitaldeployedtoincreasetheratebase($50million/quarter)willbeoffsetbynewmandates.

IntheTransportation&Energysegment,weforecastEBITDAof$384millionin2012andEBITDAof$455millionin2013withFFOof$207millionand$277million,respec-tively.ThemaindriveroftheimprovementistheincreasedcontributionfromBrookfieldRailasaresultofthenewaccessagreements.Specifically,weassumeEBITDAinthissegmentwillincreaseto$227millionin2013from$160in2012.Withrespecttotheothersegments,notablyNGPLandthePortsoperations(PDPortsandEuropePorts),wehaveassumedEBITDAremainsunchangedat$40millioninbothyearsdespitetheimprove-mentinthecontainerhandlingcapacityatPDPorts,whosecontributionweunderstandislikelyfurtherout.Notionally,weexpectnaturalgaspricestoremainrelativelystableatcurrentlevelsduetoweakeconomicdemandandincreasedgasproduction.WehavealsoassumedthecontributionoftheChileanTollroadsadds$20millioninEBITDAin2012andapproximately$24millionin2013,whichisbasedonmanagement’sAFFOguidanceof4%inthefirstyearpostacquisition.

IntheTimbersegment,wehaveassumedsalesvolumesof1.6millioncubicmetersperyearin2012and2013,respectivelyinlinewiththeLRSYandaverageprices(bothexportanddomestic)of$95percubicmeter,whichisinlinewiththecurrentpriceenvironment.Atthesesaleslevels,webelieveEBITDAmarginsinthelow30%rangeareachievable.Takentogether,weforecastEBITDAof$49millionin2012and2013,respectively.Thisisdownfromourforecastof$60millionin2011giventheexpectationforlowerharvestvolumes.WebelievethehighinventoryoflogsatChineseportsandloweraccesstocreditwillresultinsofteningdemandfromexportmarkets.Atthesametime,domesticmarketsoverthemediumtermarelikelytocontinuetoremainweak.

WeexpectG&Aexpensestoberoughly$10millionperyearandbasemanagementfeestorun-rateat$58millionannuallyin2012and2013,respectively,whichisupfromourforecastof$52millionin2011driveninpartbytherecentequityissuance.

All in,weforecastEBITDAof$771millionin2012and$865millionin2013,whichrepresentsanincreaseof5%and12%,respectivelyfromour2011EBITDAestimateof$736million.


FFO

IntheUtilitiessegment,weassumethecapitalexpenditurescommissionedintotheratebasearefinancedwithnon-recoursedebtwiththeaimtomaintainadebt-to-capitalratioofapproximately70%.IntheTransport&Energysegment,theexpansionofPDPortsisself-fundedwithinternallygeneratedcashflows,whileasignificantportionoftherailroadexpansionprogramisbeingfinancedwithanon-recourseA$430millionconstructionfacility.IntheTimbersegment,weassumecurrentdebtlevelsremainconstant.Consistentwithcurrentreportedinterestrates,weforecastfinancingcostsof$30millioninboth2012and2013.IncludingG&Aandbasemanagementfees,totalCorporateandOtherexpensesareestimatedtobeapproximately$100millionperyearoverourforecastperiod.

Asaresult,weforecastFFOof$383millionin2012andFFOof$466millionin2013comparedwithFFOof$383millionin2011.Onaperunitbasis,weforecastFFOpershare togrow from$2.37 in2011 to$2.52 in2013, representingacompoundannualgrowthrate(CAGR)of3%.

Distribution & Payout Ratio

Basedonourforecast,weexpectdistributionstogrowfrom$1.32/unitin2011to$1.54/unitin2013,representingaCAGRof8%asthepayoutratiotrendstowardsthebottomendofmanagement’stargetof60%to70%from56%in2011.Ourforecastcontemplatesan8%increaseindistributionsperunitin2012andan8%increasein2013,whichisinexcessofmanagement’slong-termgoalof3-7%inannualdistributionincreases.In2012,weexpectthepayoutratiotoincreaseto69%asaresultoftheincreasedsharecountfollowingtherecentequityissuanceandhigherdistribution.

Maintenance Capital & AFFO

Relativetotheassetbase,thelevelofmaintenancecapitalexpendituresareminorandthatisbecausetheassetsarerelativelynew.In2012,weforecastmaintenancecapitalexpendituresof$105millionandin2013maintenancecapexof$119million(onanassetbaseof$8bil-lion)comparedtomaintenancecapitalexpendituresof$94millionin2011.WehavealsoincludedtheincentivedistributiontoBAM.Asaresult,weforecastAFFOof$271millionin2012and$334millionin2013withAFFO/unitof$1.46and$1.80,respectively.

Payout Ratio

103%

61%56%

69%61%

0%

25%

50%

75%

100%

125%

2009 2010 2011E 2012E 2013E

FFO/Unit and Distributions/Unit

$1.06 $1.10$1.32 $1.42 $1.54

1.03

$1.80

$2.37$2.07

$2.52

2009 2010 2011E 2012E 2013E

Distribution/unit FFO/unit

FFO/Unit CAGR: 74%Distribution/Unit CAGR: 4%


Figure 32: FFO/Unit and Distribution/Unit


Figure 32A: Payout Ratio

Payout Ratio

103%

61%56%

69%61%

0%

25%

50%

75%

100%

125%

2009 2010 2011E 2012E 2013E

FFO/Unit and Distributions/Unit

$1.06 $1.10$1.32 $1.42 $1.54

1.03

$1.80

$2.37$2.07

$2.52

2009 2010 2011E 2012E 2013E

Distribution/unit FFO/unit




Valuation

Toarriveatourtargetprice,weusedacashflowyieldbasedmethodology.Wealsotrian-gulateusingasum-of-partsandhistoricalP/FFOmultipleanalysistoarriveatthevaluetoequityholders.

Dividend Yield Approach

ThisapproachconsidersthatBIP’sinfrastructureassetsgeneratesustainablecashflows,andtherefore,theassetscanbevaluedasyield-bearingsecurities.Specifically,ourvalua-tionanalysisappliedanexpectedyieldrangeof4.2–7.1%tothepotential2013Erangeofdistributions.In2013,ourforecastdistributionis$1.54/unitatapayoutratioof61%,butweconsideranupperandlowerboundbasedonapayoutratioof60-70%ofourFFOforecastof$2.52/unit.Thisequatestoadistributiondelineatedby$1.51/unitatthelowendand$1.76/unitatthehighendwiththetargetpriceof$31yielding5.0%.

Table 8: Summary BIP Model


in millions of US$ (IFRS)2009 2010 Q1A Q2/A Q3/A Q4/A 2011E Q1A Q2/A Q3/A Q4/A 2012E 2013E

EBITDA by SegmentUtilities $89 $227 $97 $102 $113 $97 $409 $99 $100 $102 $103 $405 $429y/y% 155% 102% 100% 82% 47% 80% 2% -2% -10% 6% -1% 6%Transport & Energy $24 $169 $84 $78 $79 $86 $327 $91 $91 $91 $113 $384 $455y/y% 604% 83% 95% 114% 86% 93% 8% 16% 15% 32% 18% 18%Timber $21 $36 $17 $20 $12 $11 $60 $12 $12 $12 $12 $49 $49y/y% 71% 113% 43% 71% 55% 66% -28% -39% 1% 12% -19% 0%Total $134 $432 $198 $200 $204 $194 $796 $202 $203 $205 $228 $838 $932y/y% 222% 94% 90% 92% 63% 84% 2% 2% 0% 18% 5% 11%General & administrative -$6 -$14 -$2 -$2 -$2 -$2 -$8 -$2 -$2 -$2 -$2 -$9 -$9Base management fee -$10 -$28 -$11 -$13 -$13 -$15 -$52 -$15 -$15 -$15 -$15 -$58 -$58Total Operating Expenses -$16 -$42 -$13 -$15 -$15 -$17 -$60 -$17 -$17 -$17 -$17 -$67 -$67y/y% 163% 49% 50% 36% 34% 42% 29% 12% 12% 2% 13% 0%EBITDA $118 $390 $185 $185 $189 $177 $736 $185 $186 $188 $212 $771 $865y/y% 231% 98% 95% 99% 66% 89% 0% 1% -1% 19% 5% 12%FFO by SegmentUtilities $61 $144 $61 $66 $77 $61 $265 $62 $63 $64 $64 $253 $265y/y% 136% 126% 106% 79% 46% 84% 2% -5% -17% 5% -5% 5%Transport & Energy $13 $91 $45 $39 $39 $45 $168 $46 $46 $46 $68 $207 $277y/y% 600% 67% 50% 95% 149% 84% 3% 18% 18% 52% 23% 34%Timber -$3 $11 $10 $13 $5 $4 $32 $5 $5 $5 $5 $21 $21y/y% nmf 400% 117% nmf 29% 190% -48% -60% 3% 33% -35% 0%Corporate Expenses & Other -$22 -$48 -$18 -$16 -$24 -$24 -$82 -$24 -$24 -$24 -$24 -$97 -$97y/y% 120% 65% 33% 200% 37% 69% 35% 51% 1% 1% 18% 0%FFO $49 $198 $98 $102 $97 $86 $383 $89 $90 $91 $114 $383 $466y/y% 303% 117% 96% 76% 89% 94% -9% -12% -7% 32% 0% 22%W.A Units 48 110 157 157 157 176 162 185 185 185 185 185 185FFO / Unit $1.03 $1.80 $0.62 $0.65 $0.62 $0.49 $2.37 $0.48 $0.49 $0.49 $0.61 $2.07 $2.52y/y% 74% 47% 33% 20% 28% 32% -23% -25% -21% 25% -13% 22%Distribution per Unit $1.06 $1.10 $0.31 $0.31 $0.35 $0.35 $1.32 $0.35 $0.35 $0.36 $0.36 $1.42 $1.54y/y% 4% 13% 13% 27% 27% 20% 13% 13% 3% 3% 8% 8%Payout ratio on FFO 103% 61% 50% 48% 57% 72% 56% 73% 72% 73% 59% 69% 61%Mainteance Capex $18 $49 $27 $20 $21 $26 $94 $25 $25 $25 $30 $105 $119AFFO by SegmentUtilities $49 $131 $55 $58 $73 $53 $239 $56 $57 $58 $58 $229 $241Yield % 15% 15% 13% 15% 19% 13% 15% 14% 14% 14% 15% 14% 15%Transport & Energy $13 $58 $25 $28 $23 $28 $104 $28 $28 $28 $46 $130 $186Yield % 15% 9% 8% 8% 6% 8% 7% 8% 8% 8% 12% 9% 13%Timber -$9 $8 $9 $12 $4 $3 $28 $4 $4 $4 $4 $17 $17Yield % -2% 2% 8% 10% 4% 2% 6% 4% 4% 4% 4% 4% 4%Corporate Expenses & Other -$22 -$49 -$18 -$16 -$26 -$26 -$86 -$26 -$26 -$26 -$26 -$104 -$110AFFO $31 $148 $71 $82 $74 $58 $285 $62 $63 $63 $82 $271 $334AFFO / Share $0.65 $1.35 $0.45 $0.52 $0.47 $0.33 $1.76 $0.34 $0.34 $0.34 $0.44 $1.46 $1.80

2011E (IFRS) 2012 (IFRS)(GAAP) (IFRS)


Figure 33: Historical TTM Yield


Table 9: Yield Based Valuation Based on Target Payout Ratio

Source: BMO Capital Markets

TTM Yield %

2%

3%

4%

5%

6%

7%

8%

Apr-

2010

May

-201

0

Jun-

2010

Jul-2

010

Aug-

2010

Sep-

2010

Oct

-201

0

Nov

-201

0

Dec

-201

0

Jan-

2011

Feb-

2011

Mar

-201

1

Apr-

2011

May

-201

1

Jun-

2011

Jul-2

011

Aug-

2011

Sep-

2011

Oct

-201

1

Nov

-201

1

Dec

-201

1

Min: 4.2%Max: 7.1%

Yield Based Valuation High Target LowSustainable Cash Available for Distribution (2013E) $2.52Estimated Target Payout Ratio 70% 61% 60%Potential Distribution $1.76 $1.54 $1.51

Target Yield Based on Sustainable Distribution 4.2% 5.0% 7.1%Yield Based Valuation $41.95 $30.71 $21.27

Current Share Price (December 21, 2011) $26.37 $26.37 $26.37Implied Yield Based on Sustainable Distribution 6.7% 5.8% 5.7%


Sum-of-Parts Analysis

WeusecomparablepubliclytradedcompaniesandappliedtheappropriatemetricstoBIP’sUtilitiesandTransport&Energyinfrastructurebusinesses.Thevalueofstandingtimberlandsismuchmorecomplextodeterminebecausemanyoftheattributesinclud-ingspeciesmix,topography,andcosttoharvestthelumbervarysignificantlyfromforesttoforest,and,thereforearemuchmoredifficulttocompare.Asaresult,wehavereliedonBIP’sIFRSvalueforitsTimberassetsasanappraisaloffairvalue.AsattheendofQ3/11,Timberassetswerevaluedat$607millionor$3.28perunit.Webelievetheas-sumptionsusedtoderivethisvaluearefairlyconservative,andthereforelikelyrepresentsanassessmentatthelow-endofthefairvaluerange.

InthefollowingweprovidealistofcomparablesweusedinourvaluationoftheUtilitiesandTransport&EnergyPlatforms.

Table 10: Trading Comparables

Source: Thomson, BMO Capital Markets

Market Enterprise21-Dec Cap Value

Ticker Close ($mm) ($mm) 2012E 2013E YIELD

Regulated Utilties Yesterday's CloseCanadian Utilities CU $60.00 $7650 $12753 8.7x 8.3x 2.7%Emera EMA $33.10 $4045 $7678 11.0x 9.8x 4.1%Fortis FTS $32.27 $6031 $12785 9.7x 9.5x 3.7%ITC Holdings ITC-US $74.10 $3792 $6321 10.6x 9.0x 1.9%Average 10.0x 9.2x 3.1%Median 10.2x 9.3x 3.2%

Ports & TerminalsWestshore Terminals Income Fund WTE.UN $23.33 $1733 $2035 16.2x 12.9x 4.5%Cosco Pacific 1199-HK CNY 8.59 $493 $6161 16.9x 15.3x 2.6%Dalian Port 2880-HK CNY 1.68 CNY 967 CNY 16,232 8.8x 8.1x 16.8%DP World DPW-NDB $9.95 $8300 $14367 16.1x 13.9x 0.0%Hamburger Hafen HHFA-XE € 21.65 € 1,981 € 1,766 5.1x 4.5x 1.8%Luka Koper LKPG-LJ € 7.30 € 134 € 311 6.3x 5.8x 0.0%Port of Tauranga Ltd. POT-NZ $9.90 $1327 $1513 13.0x 12.2x 2.9%Average 11.8x 10.4x 4.1%Median 13.0x 12.2x 2.6%

Energy DistributionNational Grid NG.-LN £6.07 £21,718 £45,077 8.7x 8.3x 6.3%NiSource NI-US $22.90 $6618 $14175 8.7x 8.4x 4.0%Average 8.7x 8.3x 5.1%Median 8.7x 8.3x 5.1%

RailroadsCP Rail CP $64.78 $11045 $15295 8.7x 7.8x 1.8%CSX CSX-US $20.94 $22552 $30565 6.3x 5.8x 2.3%CN Rail CNR $76.92 $34214 $40425 8.9x 8.4x 1.7%Kansas City Southern KSU-US $64.83 $7125 $8657 9.6x 8.5x 0.0%Norfolk Southern NSC-US $70.86 $24092 $30535 6.8x 6.2x 2.4%Union Pacific UNP-US $101.20 $49396 $57156 7.0x 6.3x 2.3%Average 7.9x 7.1x 1.8%Median 7.9x 7.1x 2.1%

Pipelines & StorageEnbridge ENB $37.09 $28060 $44691 13.1x 12.0x 3.0%Kinder Morgan KMI-US $30.14 $21309 $41655 16.6x 14.2x 3.9%Southern Union SUG-US $42.20 $5264 $8949 8.8x 8.8x 1.4%Spectra Energy SE-US $30.03 $19530 $31788 9.7x 9.4x 3.7%Average 12.0x 11.1x 3.0%Median 11.4x 10.7x 3.3%

EV/EBITDA


Utilities

IndeterminingthevalueoftheUtilitiesassetsweconsideredanumberofpubliclytradedcomparables.Forexample,ITCHoldings(ITC-NYSE)isthelargestindependentelectric-itytransmissioncompanyintheU.S.ITC’stransmissionassetsarelocatedinMichiganandsurroundingstates.WestshoreTerminals(WTE.UN-TSX)isacoalexportterminalonNorthAmerica’sWestCoast.Itenjoyssignificantnaturaladvantages,includingitsproximitytolow-costproducingminesanddeepwaterberthcapacity,whichprovidesaccesstolargeships.Aswell,weunderstandasignificantportionoftheWestshoreTerminal’s27milliontonneannualcapacityhasbeenaccountedforbyexistingcustomersthroughtake-or-paycontracts.NationalGrid(NG-LON;NGG-NYSE)isanelectricitytransmissionandgasdistributionandtransmissioncompanywithassetsinboththeU.S.andU.K.

ITCtradesat10.5xtheEnterprisevalueto2012EBITDAmeanestimate,inlinewithregulatedutilitiesinCanada.WebelieveTranselecshouldtradeatapremiumtoITC,astheChileanregulatoryregimeallowsforTranselectoearnarealrateofreturnonitsratebase.Incontrast,NorthAmericanutilitiesarerequiredtoinvestatleasttheirassets’depreciationchargestomaintaintheratebase.NationalGridtradesat9xtheEnterprisevalueto2012EBITDAmeanestimate,whileWestshoreTerminalstradesatapproximately16x.WebelievethehigherrelativevaluationofWestshoreTerminalsisinpartduetoinvestorappetiteforhighyieldstocksbyCanadianinvestorsandthegrowthoutlook(giventhecapacityexpansionplansto33Mtpaofthroughputcapacitytobecompletedin2012),whileNationalGridtradesatalowerrelativemultiple(9x)giventhenthelowerearnedreturnsonequityfordistributionassetsintheU.S.

Basedonourestimateofthebusinessmixin2013,weappliedablendedmultipleof13.0xtoourforecastEBITDAof$393million(excludingthedevelopercontributionfromtheU.K.distributionbusiness).Ourblendedmultipleassumesthecomparablestradeatthesamemultiples,oneyearfromnow.WehaveappliedalowermultipletoourestimateoftheannualdevelopercontributionsbecausetheyvarybasedonthelevelofhousingactivityintheU.K.andarenotrecurring.Basedonapplyingthesevaluationmetricstoour2013EEBITDAestimate,wearriveatablendedmultipleof12.5xtoourforecastEBITDAof$429million.Aftertakingintoaccounttheforecastindebtednessofthesegment,wearriveatanequityvaluefortheUtilitiesbusinessofapproximately$2.5billion.

Transport & Energy

FordeterminingthevalueoftheTransport&EnergyassetsweconsideredtypicalNorthAmericanrailroadEV/EBITDAmultiples,whichrangefrom6–10x,andtypicalNorthAmericanpipelineandstorageEV/EBITDAmultiples,whichrangefrom9xto13x.WebelieveBrookfieldRailshouldtradeatapremiummultiple(12xEV/EBITDAmultipleoneyearfromnow)relativetoitsNorthAmericanpeersgiventhehighergrowthprospectsinAustraliaaswellasgreaterprotectionfromvolumeandpriceriskduetothelargerproportionoflong-termtake-or-payarrangementssimilartoDBCTforthenewaccessagreements.InthecaseofNGPL,wehaveapplieda12xmultipletoour2013EEBITDAforecast,whichisconsistentwithtypicalNorthAmericanpipelineandstoragemultipleshighlightedpreviouslyandrecentlyannouncedtransactionmultiplesinthesector.Specifi-


cally,KinderMorganisintheprocessofacquiringElPaso,whichownsNorthAmerican’slargestnaturalgaspipelinesystemfor13xLTMEBITDA.Incomparison,thegroupofinvestorsthatacquired80%ofNGPLfromKMIin2007paid10xLTMEBITDA.

ForourvaluationofthePortsassets,weconsideredtypicalinternationalportsectorEV/EBITDAmultiples,whichrangefrom5xto17x.Wehaveapplieda13xmultipletoour2013EEBITDAforecast,whichisabovethemid-rangeofthepubliclytradedpeers,butbelowrecentlyannouncedtransactionmultiplesinthesector.Specifically,theForthPorts,thelargestportownerandoperatorinScotlandwasacquiredin2011byArcusInfrastruc-turePartners(formerlyprincipalsfromBabcockandBrownInfrastructure)for15xLTMEBITDA.TheForthPortshassubstantialpropertyholdings(andsurpluslandforfuturedevelopment)andcapacityhasbeenexpandedsignificantlyinrecentyears,andthereforehasscopetoexpandvolumeswithoutsignificantinvestment.Incomparison,BabcockandBrownacquiredPDPortsin2006for13xLTMEBITDA,andtheportoperatorispresentlyintheprocessofexpandingtheterminal’scontainercapacityforservicewiththebenefitslikelytobehadfurtherout(i.e.,2014).Atthesametime,asignificantportionofPDPorts’revenuesarefromconservancytariffsandpropertyrental,whichprovideshighrevenuecertaintyandlongtermstablegrowth.

Basedonapplyingtheappropriatevaluationmetricstoour2013EBITDAestimateforeachofthesub-segments,wearriveatablendedmultipleof12xtoourforecastEBITDAof$455million.Aftertakingintoaccounttheforecastindebtednessofthesegment,wearriveatanequityvaluefortheTransport&Energybusinessofapproximately$3.0billion.

Sum-of-the-parts Value

Wehavecapitalizedour2013managementfeeandG&Aestimateat10x.Aftertakingintoaccountourforecastofthecashretainedinthebusinessandcorporateandsubsid-iarydebtin2013,wearriveatasum-of-thepartsvalueofapproximately$5.7billionor$31,whichisa23%premiumtocurrentsharepriceof$26.37.Wearevaluingthecashascash,butbelieveitwillbedeployedtoearnareturn,theoptionalityofwhichishasnotbeencapturedinourvaluation.


Table 11: Sum-Of-Parts Valuation


2013E NetEBITDA Asset Value($MM) Multiple ($MM)

Utilities: Regulated EBITDA $393 13.0x $5,103 Excludes developr contributions of $9 million per quarter Developer Contibutions $36 6.0x $216 Reflects non recurring nature of developer contributions

$429 12.4x $5,319 Segment Debt -$2,828

Value $2,491

Transport & Energy: Brookfield Rail 227 12.0x 2724 Premium multiple to North American peers North America - NGPL 100 12.0x 1200 Multiple in line with publicly traded North American pipeline and storage peers OTHER - IEG (Island of Man) 24 8.0x 192 Multiple in line with publicly traded Energy distribution peers UK PD Ports 40 13.0x 520 Transaction multiple for PD Ports acquired by BBI Euroports 40 13.0x 520 Premium multiple to publicly traded International Port operators Chilean Toll Road 24 12.0x 288 Reflects recent precedent transactions Segment EBITDA $455 12.0x $5,444

$5,444 Segment Debt -$2,400

Value $3,044

Timber: Partnership Capital $607 Reflects external valuation of Timberlands

Value $607

Total $6,142

Cash $663 2013 Cash retained in the businessCorporate Liabilities -$424 2013 Corporate and subsidary debtManagement Fee -$67 10.0x -$670 2013 Management fee capitalized at 10x

Net Asset Value (NAV) $5,711Shares 185.1NAV / Share $30.85

Premium (Discount) to Current Price $26.37 17%


Corporate Structure

BIPisaBermudabasedlimitedpartnershipstructurethatholdsa71%interestinaprivateentitycalledBrookfieldInfrastructureL.P.(“Holdings”).BrookfieldAssetManagement(“BAM”)holdstheother29%throughredeemablesharesthatrepresenta28%interestinHoldingsplusa1%GeneralPartnership(GP)interestinHoldings.Figure37showsBIP’scorporatestructureaswellastheeconomicinterestsofvariousstakeholders.

Figure 34: Historical Price / TTM FFO/Unit


FFO Multiple Approach

BIP’saverageprice-to-TTMFFO/unitmultiplehasaveraged13x.If weappliedtheaver-agemultipletoour2013EFFO/unitforecastof$2.52,wearriveatanequityvalueof$32.75.

Price to TTM FFO/Unit

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Apr

-201

0

May

-201

0

Jun-

2010

Jul-2

010

Aug

-201

0

Sep

-201

0

Oct

-201

0

Nov

-201

0

Dec

-201

0

Jan-

2011

Feb-

2011

Mar

-201

1

Apr

-201

1

May

-201

1

Jun-

2011

Jul-2

011

Aug

-201

1

Sep

-201

1

Oct

-201

1

Nov

-201

1

Dec

-201

1

Average:13x


Figure 35: Corporate Structure

Source: BMO Capital Markets, Company reportsNote: A portion of DBCT, PD Ports and Texas transmission project are owned through a Brookfield Asset Management sponsored fund. Assumes Toll Road purchase closes.

RedeemablesharescanbeputtoHolding’sforcashequaltothePartnership’sunitvalue;howeverthePartnershiphastherightoffirstrefusalandatitsdiscretioncanelecttosettletheobligationwithPartnershipunits.Accordingly,theredeemablesharesandunitsaretreatedasone-in-the-same.ThePartnershiphascontroloverHoldings,andPartnerspresentstheconsolidatedfinancialresults.UnderIFRSpartialinterestsinassetswherethereisnocontrolareone-lineequityaccounted.ThefinancialinformationinthisreportwillpresentthePartnersproportionateinterestsincashflow,liabilities,andassets,whichisinstructive,butnotanIFRSpresentation.

46

LP Interest28% LP Interest

71%

BIP Unitholders

LP Interest98.99%

GP Interest0.01%Brook�eld Asset

Management Inc.("BAM")

Brook�eld Infrastructure Partners L.P.

("Partnership")

GP Interest1% Brook�eld

Infrastructure L.P. ("Holding LP")

LP Interest1%

Common Shares100%

Utilities Infrastructure DBCT ………………..............71.0% IEG…….......…….…..... ........ 100.0% Ontario Transmission.....…....100.0% Powerco…...……….….….......42.0% Texas Transmission...........…11.0% Transelec……..…...……........17.8% Cross Sound Cable. ........... ......23%

Transport & Energy Brook�eld Rail.…... .........….. ..…100.0% Euroports………..….................…40.0%

NGPL……...…..………….............26.4%

PD Ports….…...….....................…59.0% IEG…...…...............................…100.0% Autopista Vespucio (Toll Road) Norte………………….….................24.0% Tunel San Cr istobal ................ ........ 24.0%

Timber Infrastructure Island Timberlands …..….37.5% LongviewTimber…............30.0%

Post October 26, 2011 Equity issue, there are 185.1 million units outstanding.

BAM - Owns 53 million redeemable* shares.Public Unit Holders - 132 million units.

*redeemable shares are redemable for cash equal to Partnerships unit market price; however, the Partnership may settle the obligation with Partnership units.

Corporate Structure BIP is a Bermuda based limited partnership structure that holds a 71% interest in a private entity called Brook�eld Infrastructure L.P. (“Holdings”). Brook�eld Asset Management (“BAM”) holds the other 29% through redeemable shares that represent a 28% interest in Holdings plus a 1% General Partnership (GP) interest in Holdings. Figure 37 shows BIP’s corporate structure as well as the economic interests of various stakeholders. Figure 37: Corporate Structure Source: BMO Capital Markets, Company reports Note: A portion of DBCT, PD Ports and Texas tran smission project are owned through a Brook�eld Asset Management sponsored fund. Assumes Toll Road purchase closes. Redeemable shares can be put to Holding’s for cash equal to the Partnership’s unit value; however the Partnership has the right of �rst refusal and at its discretion can elect to settle the obligation with Partnership units. Accordingly, the redeemable shares and units are treated as one- in-the-same. The Partnership has control over Holdings, and Partners presents the consolidated �nancial results. Under IFRS partial interests in assets where there is no control are one-line equity accounted. The �nancial information in this report will present the Partners proportionate interests in cash �ow, liabilities, and assets, which is instructive, but not an IFRS presentation. Unitholders of BIP are limited partners and their rights are subject to a partnership agreement that is contractual in nature and not �duciary. The partnership agreement outlines unit holders’ rights, and


UnitholdersofBIParelimitedpartnersandtheirrightsaresubjecttoapartnershipagree-mentthatiscontractualinnatureandnotfiduciary.Thepartnershipagreementoutlinesunitholders’rights,andamongstotheritems,doesnotgiveholdersrightswithrespecttoremovingBAMasthemanaginggeneralpartner,appointingdirectorsorpreventingachangeofcontrol.Unitholdersreceivequarterlycashdistributionsasdeterminedbymanaginggeneralpartner.Holding’sexpectstodistribute60–70%ofthepartnership’sFundsfromOperations(FFO)tounitholders,subjecttoanyincentivedistributionspaidtoBAMasthegeneralpartner.CurrentlyBIP’squarterlydistributiontothelimitedpartnersis$0.35perBIPunit,representingapayoutof56%ofour2013EFFOforecast.BasedonthegrowthinperunitFFO,thecompanyistargeting3%to7%annualdistributiongrowth.

BAMisthegeneralpartnerandmanageroftheInfrastructurePartnership.ThePart-nershipdoesnotemployanypersonnelandreliessolelyonBAMtoprovideday-to-daymanagementandadministrativeservices.InexchangeforBAM’smanagerialservices,BAMreceivesabasemanagementfeeequalto1.25%annuallyofthemarketcapitaliza-tionofBIP,includingredeemableshares.BasedonthemarketvalueofthepartnershipasofDecember5,2011,thefeewouldbeapproximately$60millionperyear.BAMisalsoentitledtoreceiveincentivedistributionsbasedontheamountbywhichquarterlydistributionsonthelimitedpartnershipunitsoftheInfrastructurePartnershipexceedspecifiedtargetthresholds.TheincentivedistributiontoBAMrangesfromzerotoasmuchas25%ofincrementaldistributionsover$0.33perunitperquarter.BAMisen-titledto15%ofdistributionsbetween$0.305and$0.330perunitperquarter,and25%ofdistributionsabove$0.33perquarter.

Risks

Limited operating history:BIPwasspunoutofBAMinJanuary2008andunderwentatransformationalmergerinlate2010.Accordingly,thereislimitedoperatinghistorytodrawfrominevaluatingeachsegmentofthebusinessandthebusinessasawhole.

Tax:BIPisaBermudabasedlimitedpartnershipstructurethatsitsontopofcorporatestructures.ThetaxstructureiscomplexanditisdifficulttodeterminetheimpactofachangeinregulationsorlegislationinanycountrywhereBIP,oraninvesteeentityresides.ChangesintaxlawmayalsoaffectthetaxstatusofaunitholderwithrespecttoreceivingBIPdistributions.

Regulatory:BIP,orassetsthatBIPhasinterestin,aresubjecttovariousregulatoryregimesandmayundergoregulatoryreviewsthatcouldresult inareductioninthecashflow.Further,BIPissubjecttoenvironmentallawsandregulationsthatcouldimposefinesorcauseBIPtoincurcapitalexpenditurestobringintocompliance.

Weather:SomeofBIP’sassetsarecollaterally impactedbyweather.Forexample,thegrainharvestinAustraliausedBrookfieldRail.Totheextentthatweatherdiminishestheharvesttherailwaycansufferlowervolumesandpricing.


Interest rates and liquidity:BIPusesthedebtmarketsandreliesonaccesstobankfacilitiestomanageandgrowitsbusiness.Events,eitherexogenousorinternalthatleadtolimitedaccesstoliquidityorhigherinterestratescouldmateriallyimpactthebusiness.

Foreign Exchange:BIPreportsinU.S.dollars,buthasassetsandcashflowdenominatedinothercurrencies.AsignificantstrengtheningoftheU.S.dollaragainstthesecurrencies,dependingonhedgesinplaceatthetime,couldimpactcashflows.

Counter Party Risk:BIPreliesonanumberofcounterpartiesinconductingitsbusiness.Insomecasesthereisriskintheformoftake-or-paycontractsforassetsthataregeographi-callylimitedtoservingafewcustomersandBIPisreliantonthosecustomersalone.

Reliance on Brookfield Asset Management (BAM):BIPisreliantonBAMformanage-mentservicesinwhichitpaysafeeforBAMprovidingtheseservices.Further,BAMisthegeneralpartnerandBIPismanagedinthecontextofthepartnershipagreement.BIPunitholdershavevotingrightswithrespecttochangeofcontrolandliquidation,amongstotherrights,buttheagreementwithBAMiscontractualnotfiduciary.

Insurance:Thetimberassetsarenotinsuredandaresubjecttonaturaldisasterssuchasfireandinsectdestruction.


Brookfield Infrastructure Partners (BIP)

Last Daily Data Point: December 20, 2011

10

15

20

25

10

15

20

25

Quarterly Price (US$)

1980 1985 1990 1995 2000 2005 2010

100

120

140

160

180

100

120

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160

180

BIP Relative to S&P 500BIP Relative to Auto Components

0

1

2

0

1

2

Revenue / Share - (US$) Price / Revenue

1985 1990 1995 2000 2005 20100

2

-0.01

0.01

EPS (4 Qtr Trailing) - (US$) Price / Earnings

FYE EPS P/E DPS Yield Payout BV P/B ROE(Dec.) US$ US$ US$ % % %

2008 nm 1.06 9.5 nm 23.09 0.5 nm2009 nm 1.06 6.3 nm ND nm nm2010 nm 1.10 5.2 nm 48.43 0.4 nm

Current* ND nm 1.40 5.5 nm NA nm nm

Average: 5.8 0.5

* Current EPS is the 4 Quarter Trailing to Q2/2011.

5

10

15

20

25

30

5

10

15

20

25

30

1) Mkt

2) OP3) NR

4) R5) NR

Target Price(US$) Share Price(US$)

2009 2010 20110

50

100

150

0

50

100

150

BIP Relative to S&P 500BIP Relative to Auto Components

2009 2010 2011-100

100

-100

100

BIP Relative to S&P 500 Y/Y (%)BIP Relative to Auto Components Y/Y (%)

BIP - Rating as of 8-Jan-09 = OP

Date Rating Change Share Price

1 4-Feb-09 OP to Mkt $13.75

2 8-Oct-09 Mkt to OP $17.01

3 23-Oct-09 OP to NR $17.69

4 18-Oct-11 NR to R $25.48

5 26-Oct-11 R to NR $25.11


IMPORTANT DISCLOSURES

Analyst’s Certification

I,BertPowell,CFA,herebycertifythattheviewsexpressedinthisreportaccuratelyreflectmypersonalviewsaboutthesubjectsecuritiesorissuers.Ialsocertifythatnopartofmycompensationwas,is,orwillbe,directlyorindirectly,relatedtothespecificrecommenda-tionsorviewsexpressedinthisreport.

Analystswhopreparedthisreportarecompensatedbasedupon(amongotherfactors)theoverallprofitabilityofBMOCapitalMarketsandtheiraffiliates,whichincludestheoverallprofitabilityofinvestmentbankingservices.Compensationforresearchisbasedonef-fectivenessingeneratingnewideasandincommunicationofideastoclients,performanceofrecommendations,accuracyofearningsestimates,andservicetoclients.

Company Specific Disclosures

1-BMOCapitalMarketshasundertakenanunderwritingliabilitywithrespecttothisissuerwithinthepast12months.

2-BMOCapitalMarketshasprovidedinvestmentbankingserviceswithrespecttothisissuerwithinthepast12months.

3-BMOCapitalMarketshasmanagedorco-managedapublicofferingofsecuritieswithrespecttothisissuerwithinthepast12months.

4-BMOCapitalMarketsoranaffiliatehasreceivedcompensationforinvestmentbankingservicesfromthisissuerwithinthepast12months.

6-Thisissuerisaclient(orwasaclient)ofBMONesbittBurnsInc.,BMOCapitalMarketsCorp.,BMOCMLtd.oranaffiliatewithinthepast12months:InvestmentBankingServices

8-BMOCapitalMarketsoranaffiliatehasafinancialinterestin1%ormoreofanyclassoftheequitysecuritiesofthisissuer.

18-Aredacteddraftofthisreportwaspreviouslyshowntotheissuer(forfactcheckingpurposes)andchangesweremadetothereportbeforepublication.

ForImportantDisclosuresonthestocksdiscussedinthisreport,pleasegotohttp://research-ca.bmocapitalmarkets.com/Company_Dis-closure_Public.asp.

Methodology and Risks to Price Target

Methodology:OurtargetpriceisbasedonacombinationofBIP’sforecastcashflowyieldin2013,historicalP/FFOmultiplesandourestimateofitsNAVoneyearfromnow.

Risks:BIP’slimitedoperatinghistory;potentialchangesintaxationlaws;regulatorychanges;changesinweatherpatterns;risinginter-estratesandliquidity;foreignexchange.

Distribution of Ratings (September 30, 2011)

Rating Category

BMO RatingBMOCM US

Universe*BMOCM US IB

Clients**BMOCM US IB

Clients***BMOCM

Universe****BMOCM IB Clients*****

Starmine Universe

Buy Outperform 39.2% 12.6% 38.8% 42.5% 48.1% 57.2%

Hold Market Perform 58.9% 13.2% 61.2% 54.6% 50.9% 38.5%

Sell Underperform 1.9% 0.0% 0.0% 2.9% 0.9% 4.3%

* ReflectsratingdistributionofallcompaniescoveredbyBMOCapitalMarketsCorp.equityresearchanalysts.

** ReflectsratingdistributionofallcompaniesfromwhichBMOCapitalMarketsCorp.hasreceivedcompensationforInvestmentBankingservicesaspercentagewithinratingscategory.

*** ReflectsratingdistributionofallcompaniesfromwhichBMOCapitalMarketsCorp.hasreceivedcompensationforInvestmentBankingservicesaspercentageofInvestmentBankingclients.

**** ReflectsratingdistributionofallcompaniescoveredbyBMOCapitalMarketsequityresearchanalysts.

***** ReflectsratingdistributionofallcompaniesfromwhichBMOCapitalMarketshasreceivedcompensationforInvestmentBankingservicesaspercentageofInvestmentBankingclients.

http://research-ca.bmocapitalmarkets.com/Company_Disclosure_Public.asp

http://research-ca.bmocapitalmarkets.com/Company_Disclosure_Public.asp


Ratings and Sector KeyWeusethefollowingratingssystemdefinitions:OP=Outperform-Forecasttooutperformthemarket;Mkt=MarketPerform-Forecasttoperformroughlyinlinewiththemarket;Und=Underperform-Forecasttounderperformthemarket;(S)=speculativeinvestment;NR=Noratingatthistime;R=Restricted–Disseminationofresearchiscurrentlyrestricted.MarketperformanceismeasuredbyabenchmarkindexsuchastheS&P/TSXCompositeIndex,S&P500,NasdaqComposite,asap-propriateforeachcompany.BMOCapitalMarketseightTop15listsguideinvestorstoourbestideasaccordingtodifferentobjectives(Canadianlarge,small,growth,value,income,quantitative;andUSlarge,USsmall)havereplacedtheTopPickrating.

Other Important Disclosures ForImportantDisclosuresonthestocksdiscussedinthisreport,pleasegotohttp://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspxorwritetoEditorialDepartment,BMOCapitalMarkets,3TimesSquare,NewYork,NY10036orEditorialDepartment,BMOCapitalMarkets,1FirstCanadianPlace,Toronto,Ontario,M5X1H3.

Prior BMO Capital Markets Ratings Systemshttp://researchglobal.bmocapitalmarkets.com/documents/2009/prior_rating_systems.pdf.

Dissemination of ResearchOurresearchpublicationsareavailableviaourwebsitehttp://bmocapitalmarkets.com/research/.InstitutionalclientsmayalsoreceiveourresearchviaFIRSTCALL,FIRSTCALLResearchDirect,Reuters,Bloomberg,FactSet,Capital IQ,andTheMarkets.com.AllofourresearchismadewidelyavailableatthesametimetoallBMOCapitalMarketsclientgroupsentitledtoourresearch.Ad-ditionaldisseminationmayoccurviaemailorregularmail.Pleasecontactyourinvestmentadvisororinstitutionalsalespersonformoreinformation.

Conflict StatementAgeneraldescriptionofhowBMOFinancialGroupidentifiesandmanagesconflictsofinterestiscontainedinourpublicfacingpolicyformanagingconflictsofinterestinconnectionwithinvestmentresearchwhichisavailableathttp://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx.

General Disclaimer“BMOCapitalMarkets”isatradenameusedbytheBMOInvestmentBankingGroup,whichincludesthewholesalearmofBankofMontrealanditssubsidiariesBMONesbittBurnsInc.andBMONesbittBurnsLtée./Ltd.,BMOCapitalMarketsLtd.intheU.K.andBMOCapitalMarketsCorp.intheU.S.BMONesbittBurnsInc.,BMOCapitalMarketsLtd.andBMOCapitalMarketsCorpareaffiliates.BankofMontrealoritssubsidiaries(“BMOFinancialGroup”)haslendingarrangementswith,orprovideotherremuneratedservicesto,manyissuerscoveredbyBMOCapitalMarkets.Theopinions,estimatesandprojectionscontainedinthisreportarethoseofBMOCapitalMarketsasofthedateofthisreportandaresubjecttochangewithoutnotice.BMOCapitalMarketsendeavourstoensurethatthecontentshavebeencompiledorderivedfromsourcesthatwebelievearereliableandcontaininformationandopinionsthatareaccurateandcomplete.However,BMOCapitalMarketsmakesnorepresentationorwarranty,expressorimplied,inrespectthereof,takesnoresponsibilityforanyerrorsandomissionscontainedhereinandacceptsnoliabilitywhatsoeverforanylossarisingfromanyuseof,orrelianceon,thisreportoritscontents.InformationmaybeavailabletoBMOCapitalMarketsoritsaffiliatesthatisnotreflectedinthisreport.Theinformationinthisreportisnotintendedtobeusedastheprimarybasisofinvestmentdecisions,andbecauseofindividualclientobjectives,shouldnotbeconstruedasadvicedesignedtomeettheparticularinvestmentneedsofanyinvestor.Thismaterialisforinformationpurposesonlyandisnotanoffertosellorthesolicitationofanoffertobuyanysecurity.BMOCapitalMarketsoritsaffiliateswillbuyfromorselltocustomersthesecuritiesofissuersmentionedinthisreportonaprincipalbasis.BMOCapitalMarketsoritsaffiliates,officers,directorsoremployeeshavealongorshortpositioninmanyofthesecuritiesdiscussedherein,relatedsecuritiesorinoptions,futuresorotherderivativeinstrumentsbasedthereon.ThereadershouldassumethatBMOCapitalMarketsoritsaffiliatesmayhaveaconflictofinterestandshouldnotrelysolelyonthisreportinevaluatingwhetherornottobuyorsellsecuritiesofissuersdiscussedherein.

Additional MattersToCanadianResidents:BMONesbittBurnsInc.andBMONesbittBurnsLtee/Ltd.,affiliatesofBMOCapitalMarketsCorp.,furnishthisreporttoCanadianresidentsandacceptresponsibilityforthecontentshereinsubjecttothetermssetoutabove.AnyCanadianpersonwishingtoeffecttransactionsinanyofthesecuritiesincludedinthisreportshoulddosothroughBMONesbittBurnsInc.and/orBMONesbittBurnsLtee/Ltd.

http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx

http://researchglobal.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx

http://researchglobal.bmocapitalmarkets.com/documents/2009/prior_rating_systems.pdf

http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx

http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx


July 22, 2011

To U.S. Residents: BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO NB, furnish this report to U.S. residents and accept responsibility for the contents herein, except to the extent that it refers to securities of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Capital Markets Corp. and/or BMO Nesbitt Burns Securities Ltd. To U.K. Residents: In the UK this document is published by BMO Capital Markets Limited which is authorised and regulated by the Financial Services Authority. The contents hereof are intended solely for the use of, and may only be issued or passed on to, (I) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (II) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together referred to as “relevant persons”). The contents hereof are not intended for the use of and may not be issued or passed on to, retail clients.

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and corporate banking products. BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and commercial banking clients are served by BMO Harris Bank N.A. (Member FDIC). Investment and corporate banking services are provided in Canada and the US through BMO Capital Markets.

BMO Capital Markets is a trade name used by BMO Financial Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A, (Member FDIC), BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses of BMO Capital Markets Corp. (Member SIPC), BMO Nesbitt Burns Trading Corp. S.A., BMO Nesbitt Burns Securities Limited (Member SIPC) and BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc. (Member Canadian Investor Protection Fund) in Canada, Europe and Asia, BMO Nesbitt Burns Ltée/Ltd. (Member Canadian Investor Protection Fund) in Canada, BMO Capital Markets Limited in Europe, Asia and Australia and BMO Advisors Private Limited in India.

“Nesbitt Burns” is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license. “BMO Capital Markets” is a trademark of Bank of Montreal, used under license. "BMO (M-Bar roundel symbol)" is a registered trademark of Bank of Montreal, used under license.

® Registered trademark of Bank of Montreal in the United States, Canada and elsewhere. TM Trademark Bank of Montreal

©COPYRIGHT 2011 BMO CAPITAL MARKETS CORP.

Financial GroupA member of BMO

ToU.S.Residents:BMOCapitalMarketsCorp.and/orBMONesbittBurnsSecuritiesLtd.,affiliatesofBMONB,furnishthisreporttoU.S.residentsandacceptresponsibilityforthecontentsherein,excepttotheextentthatitreferstosecuritiesofBankofMontreal.AnyU.S.personwishingtoeffecttransactionsinanysecuritydiscussedhereinshoulddosothroughBMOCapitalMarketsCorp.and/orBMONesbittBurnsSecuritiesLtd.

ToU.K.Residents:IntheUKthisdocumentispublishedbyBMOCapitalMarketsLimitedwhichisauthorisedandregulatedbytheFinancialServicesAuthority.Thecontentshereofareintendedsolelyfortheuseof,andmayonlybeissuedorpassedonto,(I)personswhohaveprofessionalexperienceinmattersrelatingtoinvestmentsfallingwithinArticle19(5)oftheFinancialServicesandMarketsAct2000(FinancialPromotion)Order2005(the“Order”)or(II)highnetworthentitiesfallingwithinArticle49(2)(a)to(d)oftheOrder(allsuchpersonstogetherreferredtoas“relevantpersons”).Thecontentshereofarenotintendedfortheuseofandmaynotbeissuedorpassedonto,retailclients.

R38861

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