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Preparing For The Rebound In Energy Stocks

Declining oil prices offer investors the same opportunity as declining stock prices: a chance to buy low. Despite short-term uncertainty, the long-term story for oil and natural gas remain unchanged. For investors willing to ride out the volatility, there are a lot of good deals out there. Last month, I wrote about how l ow oil prices are likely to benefit the U.S. economy by acting as a tax cut. That’s great for most consumers, but what if you’re an investor in the energy sector? The price of West Texas Intermediate crude has fallen more than 50 percent since last summer, and despite an uptick in the past few days , there are signs it may keep falling. Subsequently, oil companies are cutting production, laying off workers and re-evaluating their capital spending as their stock prices fall. For investors, though, declining oil prices offer the same opportunity as falling stock prices: a chance to buy low. In the short-term, there’s a lot of disagreement about what oil prices will do and how long they will remain low. The economies of Asia, a key energy consumer, are slowing and Europe is on the verge of deflation. Despite the cutbacks by oil companies, U.S. production is expected to increase at least for the first half of this year, adding to pressure on prices. But the long-term story for oil and natural gas remains unchanged. Hydraulic fracturing has opened up new reserves, but oil and gas remain finite resources. Global demand for energy is not going to wane over the next decade. China and India alone are working to lift billions of their citizens out of poverty and they need energy to do it. Much of that will come from oil and gas. In other words, if you’re willing to ride out some volatility over the next couple of years, there are lots of good investments in the energy sector. For example, you might decide that the outlook for exploration and production is too risky for your investment needs, but the “midstream” business – pipelines, storage and gathering systems – offers more stability. After all, pipeline operators are basically toll collectors. They care less about the price of oil than they do how much of it is moving through their networks. Many pipeline companies are also master-limited partnerships, which offer certain tax benefits to investors. MLPs were popular as the U.S. energy industry boomed, but they remain some of the best buying opportunities in the energy sector. Refiners also offer a way to play off the oil price decline. They have to buy crude oil to process into gasoline and other fuels, so lower oil prices actually help their profit margins. In recent years, several integrated oil companies have spun off their refining businesses, offering investors a broader choice of pure refinery plays. For investors who don’t have the time or the inclination to analyze individual stocks, energy-focused exchange-traded funds offer exposure to the energy space while shielding them from some of the volatility that comes with fluctuating oil prices. With ETFs, you can target a specific sector of the energy industry, such as oilfield services or exploration and production. The midstream business, for example, has an ETF, the Alerian MLP (NYSEARCA: AMLP ), that contains names like Enterprise Pipeline Partners (NYSE: EPD ) and Energy Transfer Partners (NYSE: ETP ). The energy sector ETF is represented by the Energy Select Sector SPDR (NYSEARCA: XLE ), which contains 45 stocks. Remember that the fund is capitalization weighted, so the biggest companies get the biggest allocation in the fund. Accordingly, Exxon (NYSE: XOM ) and Chevron (NYSE: CVX ) alone comprise almost a third of the fund’s assets. The fund charges just 0.15% annually for keeping the fund together and accounted for. If you like the racier service sector, you can buy an ETF for that too. Schlumberger (NYSE: SLB ) and Halliburton (NYSE: HAL ) would be typical holdings in either the PowerShares Dynamic Oil & Gas Services ETF (NYSEARCA: PXJ ) or the Market Vectors Oil Services ETF (NYSEARCA: OIH ). ETFs don’t often change their holdings by buying or selling stocks. That usually results in lower costs and lower taxes than other types of funds. ETFs are also structurally different than a typical open-ended fund like you might see from Fidelity or Putnam. When buyers and sellers of ETFs don’t match up in the open market for shares, underlying securities are added or redeemed from the fund. But unlike an open-ended fund, the underlying share activity takes place in the open market, rather than within the walls of the fund. This means that ETFs are unlikely to generate a year-end capital gain distribution. This provides better deferral of taxable profits and adds compounded return to shareholders. Because of their concentrated risk, ETFs offer investors the chance to get the most out of the energy rebound. Be aware, though, that in the short-term, they also can intensify any additional decline in oil prices. Given the long-term outlook for global oil demand, it’s a risk that for many investors may be worth taking. Disclosure: The author is long XLE. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Atmos Energy’s (ATO) CEO Kim Cocklin on Q1 2015 Results – Earnings Call Transcript

Atmos Energy Corporation (NYSE: ATO ) Q1 2015 Earnings Conference Call February 04, 2015 08:00 a.m. ET Executives Susan Giles – Vice President of Investor Relations Kim Cocklin – Chief Executive Officer, President and Director Bret Eckert – Chief Financial Officer and Senior Vice President Analysts Christopher Turnure – JP Morgan Spencer Joyce – Hilliard Lyons Andy Levi – Avon Capital Advisors Operator Greetings, and welcome to the Atmos Energy First Quarter 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Susan Giles, Vice President of Investor Relations for Atmos Energy. Thank you. Please begin. Susan Giles Thank you, Melissa, and good morning, everyone. Thank you all for joining us. Our speakers this morning are Kim Cocklin, President and CEO; and Bret Eckert, Senior Vice President and CFO. There are also other members of our leadership team here to assist with questions as needed. Our earnings release and conference call slide presentation are available on our website. To access these materials, please visit our website at atmosenergy.com. We will refer to just a few of the slides during this live call, but we’ll take questions on any of them at the end of our prepared remarks. Additionally the company’s Form 10-Q was filed last night and is also available on our website. As we review these financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Please see Slide 17 for more information regarding the risks and uncertainties we consider in making these forward-looking statements and where to go to get more information on such risks and uncertainties. Now I’d like to turn the call over to Kim Cocklin. Kim Cocklin Thank you very much, Susan, and good morning to everyone. We certainly appreciate you joining us and your interest in Atmos Energy and congratulations to anybody that is a New England Patriots fan. Next year is the Cowboys year again. Yesterday we did report first quarter consolidated net income of $98 million or $0.96 per diluted share and after excluding the unrealized margins, net income was $93 million or $0.91 per diluted share. The regulated operations drove substantially all of our quarter-over-quarter growth. These operations are driven by very focused rate and regulatory strategy, which render stable and predictable earnings. The rate relief for our regulated distribution and pipeline operations combined generated about $32 million of incremental margin in our first quarter of fiscal ’15. Our liquidity and financial position remained very strong. In October you will recall we issued $500 million of senior notes at a rate of 4.125%, replacing $500 million of senior notes with a rate of 4.95%, and our debt-to-capital ratio was 49.5% at December 31 compared with 54.2% one year ago. Yesterday at our board meeting our board of directors declared our 125th consecutive quarterly cash dividend. The indicated annual dividend rate for fiscal ’15 is $1.56, and then last month we announced the appointment of Mike Haefner as Executive Vice President. This allows us the opportunity to strengthen the bench within the organization as Mike will become more involved in managing the operations of the company and the appointment also affords me the luxury and time to focus on building shareholder value, devoting more time to existing and potential investors and to continue to promote the exceptional value proposition of Atmos Energy. Our CFO, Bret Eckert, is going to now review our financial results in greater detail. Bret? Bret Eckert Thanks Kim, and good morning, everyone. If you follow me on Slide 2, as Kim mentioned reported net income for the quarter was $98 million or $0.96 per diluted share compared with $87 million or $0.95 one year ago. After excluding unrealized margins in both periods net income was $93 million or $0.91 per diluted share, compared with $81 million or $0.88 per share last year. We experienced business as usual in the first quarter of fiscal 2015. With return to more normal weather conditions during the quarter, spending levels for maintenance and capital activities were more in line with expectation compared to last year. We continue to execute on our long-term strategy of enhancing the safety and the reliability of our infrastructure coupled with constructive regulation across our service areas. Turning now to Slide 3 quarter-over-quarter gross profit in our regulated distribution segment increased by about $25 million. $19 million of the increase is the result of rate outcomes received during fiscal 2014 primarily in Texas and Kentucky. We also experienced a 13% increase in transportation volumes in the current quarter versus last year’s quarter primarily due to increased economic activity in our West Texas and Kentucky/Mid-States division, which added about $2 million of incremental gross profit. Service fee revenues were up quarter-over-quarter by about $2 million and was largely driven by increased customer reconnection activities following our fiscal 2014 customer collection efforts. These increases were partially offset by lower margins resulting to a return to more normal weather conditions during the quarter. Weather during the current quarter was slightly colder than normal and was 14% warmer than the prior year quarter. Therefore, although we experienced a 12% decrease in sales volume gross profit declined by just $2 million or less than 1%. This demonstrates how our weather normalization mechanisms insulate both the company and our customers during periods of atypical weather. Turning to Slide 4, our regulated pipeline generated over $12 million of incremental margin quarter-over-quarter primarily as the result of $12.5 million increase in rates from the approved 2014 GRIP filings. APT experienced an increase in third-party transportation volumes, transportation rates and pipeline demand fees and that generated about $3 million of additional revenue. However, these increases were partially offset by declines in other third-party ancillary services of blending, [Indiscernible] treating and storage of about $1 million, and as a reminder the prior year quarter included a non-recurring $2 million benefit associated with the renewal of APT’s annual adjustment mechanism. Turning now to our non-regulated segment and you may want to turn to Slide 12. Gross profit decreased about $2.5 million in our non-regulated segment due to a decrease in unrealized margins quarter-over-quarter. Realized margins for gas delivery and related services decreased $1.7 million, marginally due to a decrease in gas delivery per unit margins to $0.10 per MCF from $0.12 a year ago, and a 2% decrease in consolidated sales volumes. The decrease in both per unit margins and consolidated sales volumes reflects the impact of warmer weather during the current quarter compared to last year’s quarter. Additionally, increased transportation cost adversely impacted per unit margins. offsetting the decrease in delivered gas margins was a $2.2 million increase in other realized margins, primarily due to a reduction in third-party storage fees and the timing and magnitude of settled financial positions quarter-over-quarter. Turning briefly to the expense side of the income statement. O&M increased by almost $3 million quarter-over-quarter, mainly due to higher labor and benefits expense and increased pipeline maintenance spending. Offsetting these increases was a reductions in legal expenses. As expected interest expense decreased about $2 million quarter-over-quarter due to the replacing of the $500 million of ten-year debt at an interest rate of 4.95% with $500 million of 30-year debt at an interest rate of 4.125%. Details about our capital spending are presented on Slide 5. As you can see CapEx increased almost $81 million in the first quarter compared to one year ago. Spending in our regulated pipeline segment increased by almost $42 million due to the enhancement and fortification of the Bethel and TriCities storage field. We are drilling horizontal wells to improve the storage capabilities of the TriCities facility and installing pipelines to connect the [Indiscernible] Salt Dome Bethel storage to TriCities to better utilize the combined compression capabilities of the storage facilities and to better meet peak day requirements at the Mid-Tex and other LDC customers. Spending in the regulated distribution segment increased to almost $39 million primarily due to our continued focus on the safety and reliability of our system. You may recall our construction crews were sidelined for a portion of December 2013 due to the wintry weather, which also contributed to the increase in spending in the current quarter compared to the prior year quarter. Moving now to our earnings guidance for fiscal 2015 and you may want to turn to Slide 14. We expect fiscal 2015 earnings per share to be in the previously announced range of $2.90 to $3.05 per diluted share, excluding unrealized margins at September 30, 2015. Details on this slide are the expected contributions from our regulated and non-regulated operations, as well as selective expenses for the year none of which has changed since our year-end earnings call in early November. We expect the continued execution of our infrastructure investment strategy coupled with constructive regulation to be the primary driver for this year’s results. Looking on Slide 24, we anticipate annual operating income increases of $105 million to $125 million from approved rate outcomes in the year. Looking now on Slide 15, our capital budget range has not changed and remains between $900 million and $1 billion for fiscal 2015. Thank you for your time and now, I’ll hand the call back over to Kim. Kim Cocklin Thank you, Bret. Exceptional report and solid earnings report for the fiscal first quarter of ’15. Regulated rate relief does remain the primary driver of our financial performance and through the first quarter of ’15 rate outcomes and incremental deferrals have provided annual operating increases of about $6 million. Additionally yesterday we settled the Mississippi stable rate filing, which will provide an increase in annual operating income of $4.4 million. Other rate actions year-to-date that are filed and pending total about $18 million of annual operating increases and the more significant filings include the Tennessee rate case seeking an increase of about $6 million, the rate review mechanism for the West Texas cities seeking an increase of about $5 million and the Mid-Tex rate review mechanism for the city of Dallas, which is requesting about $7 million. We do expect an additional 10 to 12 filings in fiscal ’15 requesting between $80 million and $90 million of additional increases to operating income and you can see those details on slides 7 through 11 in the deck that was provided. Our earnings are straightforward with the business model of delivering safe and reliable natural gas in the States we serve are companies totally domestic with no direct exposure to risk associated with foreign currency or unstable economies. Outside the United States, Atmos Energy and our regulated distribution customers are significant beneficiaries of the following energy prices. We are able to pass through these lower natural gas prices to our customers and this has provided us the continued opportunity to proactively upgrade our system as we strive to be the safest gas utility in the nation, while keeping customers’ bills affordable. And assuming normal weather and pricing conditions we do expect through at least fiscal 2018 that our customer bills will be flat to lower than the average bill that they have incurred for most of the last 10 years. As a result our customers will be able to affordably benefit from a much safer and more reliable system as we continue to invest, and as Bret said these quarter results really are a result of business as usual for us. Our earnings report should come as no surprise as we have continuously communicated our growth through investment – in infrastructure investment. We remain dedicated to this strategy and remain focused on spending between $900 million to $1.1 billion of capital annually through fiscal 2018 to enhance the safety and reliability of our system. The enhanced value of the rate base is expected to generate earnings per share growth of 6% to 8% through fiscal 2018. We thank you very much for your time and now we will open up the call for your questions. Melissa? Question-and-Answer Session Operator [Operator Instructions] Our first question comes from the line of Brian Russo with Ladenburg Thalmann. Please proceed with your question. Brian Russo Hi, good morning. Kim Cocklin Good morning. Brian Russo Just noticed the debt-to-cap ratio now at 49.5% up from 46%, and I noticed the short-term debt balance up meaningfully at $550 million, just kind of curious when you might term that out or kind of where you see the debt-to-cap ratio kind of play out towards the end of 2015? Bret Eckert Brian this is Bret Eckert, the debt-to-cap ratio that you saw move obviously is through the growth of the short-term [debt balance]. We use that to fund seasonal gas purchases, but you are always going to see it spike when you get to the end of our first fiscal quarter and then those balances tend to come down as you come out of the spring and into the summer. So last year at the same time there was about $690 million of short-term debt outstanding and so it is lower than last year, but it really is just the ebb and flow of gas purchases. Brian Russo Okay, got it and with the first quarter now behind you are – any sense of where you might fall within that $105 million to $125 million rate revenue range that you are forecasting for ’15? Bret Eckert No, we – we still remain confident we’re going to fall within the $105 million to $125 million range based on what we have seen so far this year. Brian Russo Okay, and then just with the decline in oil and expected impacts to the Texas economy can you just talk about any impact if at all to your Texas based regulated operations? Kim Cocklin Brian this is Kim, there is really as we have said our significant beneficiary of the falling oil prices are all of our customers and consequently it gives them much more discretionary income as their utility bills continues to fall and it has an immediate benefit primarily to our the uncollectibles or the [Indiscernible] account balance as well is reduced as a result of the reduced oil price or gas prices and oil prices. So – Brian Russo No, I noticed an increase in transportation revenues, is that tied to kind of the energy industry or is that separate from that? Kim Cocklin It is separate from that, I mean, we have, traditional customers commercial and industrial customers and we are picking up additional loads as some of the economies continue to come back that we have been serving primarily because of the reduction in oil and gas prices as part of their process for their manufacture of the products that they are manufacturing. Brian Russo Okay understood, and then lastly if you annualize your first quarter ’15 O&M it is tracking below 495 million to 515 million assumption in your guidance, I’m just curious is there any kind of seasonality around that O&M, where would be higher in subsequent quarters? Kim Cocklin Well, you always have the weather to contend with in our first fiscal quarter Brian, and so we still feel confident in the 495 million to 515 million O&M range that we have put out, but you will see if you look back at the first quarter last year O&M was clearly lower, but we had such wintry weather at the time that it was difficult to get out and get things completed. So, I think you still will find us falling in the range disclosed. Brian Russo Okay, great. Thank you very much. Kim Cocklin Thank you. Operator Thank you. Our next question comes from the line of Spencer Joyce with Hilliard Lyons. Please proceed with your question. Spencer Joyce Good morning folks. Great quarter. Kim Cocklin Hi, Spencer, thank you. Thank you very much. Spencer Joyce One question here kind of in the [Indiscernible] have you all noted the potential size of this year’s GRIP filing for the pipeline segments? Bret Eckert Well, Spencer, the teams obviously are in the process of putting that filing together, but it is going to fall within the range that is driving the 105 million to 125 million of annual increases that we disclosed. Spencer Joyce Okay, great, great. Fair enough, and from a filing standpoint we are still looking at a filing on that this month sometime? Bret Eckert That is correct. Spencer Joyce Okay. finally and you all have sort of have touched on this a little bit throughout the call, can you just spend a little bit more time explaining to us the impact to you all of the low gas prices, I know it is pretty easy on the retail side to understand the falling customer bills and the ability for you all to perhaps do some extra infrastructure on the retail side, but particularly on the pipeline segment is there a risk that perhaps some contraction on the industrial growth could either hamper growth or perhaps even drive a decline there, just hoping to get a little better handle on what the falling energy prices could do there? Kim Cocklin No, they will not impact the pipeline operations or the expected assumptions we have around the margins and the income associated with that. Primarily, we have fixed contracts on sort of a pretty good term and they are designed on the straight fixed variable basis so they are not tied to throughput. We are not experiencing any reduction in throughput on the pipeline system either, I mean, we are continuing to see although they are laying down rigs in many of the production areas, they are going back in on the wells that they’re currently producing and doing some secondary and territory recovery. Mechanisms to continue to increase the production, so we looked at that and we see no threat to the pipeline operations through what we consider the near and the midterm for sure. Spencer Joyce Okay, fantastic. That’s all I had, nice quarter. Kim Cocklin Thank you very much, Spencer. Operator [Operator Instructions] Our next question comes from the line of Joe Zhou with Avon Capital Advisors, please proceed with your question. Andy Levi Hi, it’s Andy Levi, how are you? Kim Cocklin Hi, Andy, how are you? Andy Levi I am alright. Just a few questions. Just on bonus depreciation and also on pension/discount rates, I guess, since your Analyst Day and since you gave guidance, the year ended in bonus appreciation was extended. So, I was just wondering if that has any effect on the numbers that you had given us and then also as far as pensions and mortality rates and things like that whether that has any change there? Kim Cocklin No. No, on both counts Andy, both the bonus appreciation where we thought that was coming out, it doesn’t really impact the income statement more of a cash flow item and from the discount rates there, we are in-line with what we expected coming into the year. Andy Levi Okay and just remind us pension wise kind of where you are as far as what percentage is funded? Kim Cocklin It’s over 90% on a pre-map 21 basis and map 21 basis higher than that. I don’t have the exact percentages, I think Susan, we could look at that but its north of 90%. Andy Levi Okay, thank you. And then, one last question. Just a little bit of that happening on the electric side, it’s happened on the gas side already but just your thoughts on, I guess, in Texas it probably won’t make any sense, but in some of your other jurisdictions on rate basing, net gas prices are low right now? Kim Cocklin You are talking about like regulated production? Andy Levi Yes. Kim Cocklin Yes, [indiscernible] we are not, no I mean, there is no need to do that with where gas prices are currently and certainly where they’re anticipated to be if you look at any of the forecast from the EIA or any other forecasting services that are reputable and reliable. They have through the next 10 years, gas prices in the $4 to $6 range and I think, I was looking, yesterday our [indiscernible] dropped from last year to this year of about $0.70. We were at $4.40 I think last year and this year we have [indiscernible] of about 370 and that’s all driven as a result of the 50% market purchases that we make annually to fulfill those requirements. So, if you set that up, you got to assume production of the field and then you got to assume an ROE and by the time a lot of that stuff puts you out of the market or above market prices which I don’t think it’s a – it’s not a good – it’s not anything that we would consider doing right now. Our highest and best uses to put the dollars we have in our infrastructure and we have a significant amount of infrastructure that we can invest in for a long period of time and as long as we are able to have the balanced regulation and all of the jurisdictions where we are situated and achieve the returns and continue to reduce the regulatory lag and continue to improve the recovery of the fixed cost in a customer charge that’s our strategy. But, we want to put it, I mean, the production side doesn’t help us with our continued desire and highest priority to become the safest utility in the country either. Andy Levi Got it and one last question. I don’t know if you can quantify this, but just price of gasoline has clearly dropped, you guys have a lot of trucks, I am just curious if the prices were to stay kind of where they are what the angle benefit could be? Kim Cocklin Our trucks run on natural gas. We don’t have anything on [just getting] no, I don’t know. Bret Eckert Hi Andy, we don’t think if that had the impact. On moving items, I think we will still be in that same [indiscernible] Kim Cocklin We’ve got a system which dispatches those trucks very efficiently and effectively so that we minimize the mileage that they travel every day. But that’s not a needle move or either. Andy Levi Right, thank you very much. Kim Cocklin Thank you very much. Operator Thank you. Ms. Giles, there are no further questions at this time. I would like to turn the floor back to you for any final remarks. Susan Giles Well, thank you Melisa and I just want to remind all of you that a recording of this call is available for replay on our website through May 6. We appreciate your interest in Atmos and thank you for joining us. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. 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Brookfield Infrastructure Offers Investors A 5% Dividend Yield And 13% Discount To Intrinsic Value

Summary BIP recently increased its dividend by 10% and now sports a 5% dividend yield. We believe BIP’s long-term dividend growth rate is 9%, up from 7% in our previous report. BIP’s shares are still 13% below its fair intrinsic value and we expect its intrinsic value to steadily increase as BIP steadily grows its FFOs per share. BIP’s disciplined approach to investing and its ability to continually identify new investment opportunities. We expect 15% FFO/share growth in 2015 and at least 6.5% growth thereafter. Brookfield Infrastructure Partners (NYSE: BIP ) recently announced it increased its dividend distribution by 10%. Although it was lower than our previous single year dividend growth in 2015, it was higher than our previous 7% estimated long-term dividend growth rate. BIP’s dividend increased by 13% annually since its 2008 IPO and BIP expects its long-run dividend growth rate will be 5%-9%. We believe that future dividend growth will be closer to the higher end of its forecasted range as it offers strong, steadily growing cash flow funds from its operations, which enables BIP to provide investors with strong dividend yields and dividend growth. BIP offers investors a 5% dividend yield and we believe its share price is 13% undervalued relative to its fair intrinsic value. For these reasons, we reiterate investors accumulate shares in BIP, especially income-oriented investors as BIP continues its consistent performance . Source: BIP’s Investor Relations and Our Estimates Companywide Highlights: BIP’s Q4 2014 FFOs/unit was $.86, slightly missing analyst expectations for the fourth time in the last 5 quarters but increasing by 3.6% versus Q4 2013. Key drivers of this performance were as follows Incremental contributions from the mid-August close of its investment in Vale’s cargo transportation division VLI, Improved volumes at its UK ports and Australian railroads, Soft volume demand from its North American energy transmission businesses due to mild weather and The absence of incremental contributions from its former Australasian regulated distribution operations, which BIP sold last November. Source: BIP’s Q4 2014 Report Business Segment Highlights: BIP Transport saw a 20% increase in its FFO’s for 2014 versus 2013 primarily driven by contributions from the additional investment in BIP’s Brazilian toll road in Q3 2013 as well as increased volume from its ports division and a partial quarter’s contribution from its investment in Vale’s cargo transportation VLI. Not only is this a high-quality asset, but Vale provided BIP with a minimum return mechanism to ensure that a minimum return is achieved over a period of up to six years from closing. As the Brazilian economy is facing some negative headwinds , this minimizes the risk of BIP failing to generate a positive return from its investment in VLI. Highlights from BIP Transport’s business units were as follows: BIP Transport’s Ports business enjoyed 21.4% FFO growth due to improved volumes from its UK port operations and incremental contribution from its newly acquired North American container port acquired during the year. BIP Transport’s Railroad business’s FFOs increased by $14M year-over-year (7.5%) because of a partial year’s incremental contribution from its Q3 2014 investment in Vale’s cargo transportation division as well as increased harvest grain volumes from its Australian railroad operations. BIP Transport’s Toll Road business saw its FFOs increase because of additional investment in its Brazilian toll roads completed in Q3 2013. On a “same-store basis”, toll revenues increased by 8% year-over-year due to tariff increases and higher volumes on Chilean roads. Source: BIP’s 2009-14 Annual Reports BIP Utilities saw a 2.65% decrease in its 2014 FFOs versus 2013 on a reported basis but increased 12% on an adjusted comparable continuing operations basis. The decrease in reported FFOs was primarily attributable to the sale of its Australasian regulated distribution operations on November 30, 2013. Excluding the impact of the sale, the segment’s FFOs increased by $39M versus the prior year as of the result of improved performance at BIP’s UK regulated distribution business. Source: BIP’s Financial Reports, Supplemental Reports BIP Utilities’ maintenance capital expenditures in 2014 were $14M and were $27M less than YTD 2013. BIP Utilities’ Regulated Terminal grew by 2.2% as negative movements in foreign exchange offset incremental pro forma operating income growth due to additions to its rate base. BIP Utilities’ Electricity Transmission business increased its FFOs by 7.4% due to inflation indexation, commissioning of projects into rate base and lower operating costs, partially offset by impact of foreign exchange. BIP Utilities’ Regulated Distribution’s adjusted FFOs from continuing operations grew by 22.5% as its United Kingdom regulated distribution operations benefited from a higher rate base, inflation indexation, lower costs and higher customer connections revenue. Source: BIP’s 2009-14 Annual Reports BIP Energy’s FFOs decreased by $2M year-over-year as incremental contribution from the acquisitions district energy businesses during the last 12 months was not enough to offset lower transportation volumes at its Energy Transmission, Distribution & Storage Business. BIP North American gas transmission business continues to see headwinds from the weak natural gas market, which resulted in a $275M asset impairment charge in 2013. Although BIP Energy’s performance has been flat since 2011, at least its capital expenditure backlog more than doubled during the year, which signals potential future growth. Other sources of potential future growth for BIP Energy include the closing of three previously announced acquisitions including gas storage businesses in California and Texas and a district energy system in Seattle. BIP also acquired a district energy business in Australia recently and is closing the acquisition of another one as well. Source: BIP’s 2011-14 Annual Reports BIP’s Corporate and Administrative segment’s FFO decreased by $12M (13%) in the year as increased interest and distribution income and reduced financing costs were offset by the absence of BIP Timber’s results as BIP sold BIP Timber in H1 2013 and higher management fees paid to Brookfield Asset Management. Corporate highlights include the following: BIP’s previously announced acquisition of a 23% interest in the French communications tower infrastructure firm TDF is expected to close in March 2015. BIP Corporate refinanced $4B of its debt in 2014 in order to capitalize on the historically low interest rate environment. BIP’s weighted average cost of debt is 5.9% and the average maturity profile is over 10 years, with minimal maturities over the next 5 years. BIP identified $1B in non-core assets that it seeks to sell in order to redeploy towards areas of growth and core operations, on top of its $1B capital-recycling program in 2013. BIP finished the year with $2.1B worth of total liquidity through its cash and available credit facilities. BIP has a BBB+ credit rating and it expects strong demand for its future offering $300M-$500M corporate debentures, which it seeks to bring to market in H1 2015. BIP’s opportunities for investment Government Privatizations-In Australian alone, BIP identified $50B worth of potential privatizations by the federal and state governments there Brazilian Construction Companies-BIP recognizes that many Brazilian construction companies are facing financial challenges and may seek to part with high-quality infrastructure related assets in order to shore up liquidity. Corporate deleveraging and carve-outs-BIP had success in acquiring utility assets from capital constrained European companies and is now Maturing Infrastructure Funds- Many investment funds raised between 2005 and 2008 are approaching the expiry of their funds. BIP has started to see the first wave of divestitures from this ownership group. Lastly, BIP focuses on investing capital to meet its long-term return targets of 12%-15% and will not reduce its return thresholds to make it easier to acquire assets Conclusion: In conclusion, investors looking for high yields and non-equity correlation should consider accumulating a position in BIP due to its portfolio of unique, hard-to-replicate assets. BIP provided unit-holders with strong returns from capital appreciation and partnership unit distributions since it went public in 2008. BIP offers a 5% dividend yield and its unit price is within 13% of its fair intrinsic value. We expect BIP’s FFOs to increase by at least 6.5% annually over the next seven years and its dividend distributions to increase by at least 9%. We can see why over 50% of BIP’s shares are held by leading asset managers such as Brookfield Asset Management, Legg Mason, BAMCO, Principal Global Investors and Scotia Bank’s asset management divisions. For these reasons, we believe investors should realize that BIP is a great alternative to the S&P 500 and traditional utilities as represented by the XLU and take advantage of market weaknesses to strategically accumulate units of BIP. Source: FactSet Marquee and our Estimates Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.