No. of Recommendations: 12
It was generally a strong start to 2012 thanks mostly to a good grain harvest in Australia doubling cash flows from the rail operations there (the three new mining contracts also helped).

Funds from operations (FFO) were up 10% but thanks to last fall's equity issuance to fund the Chilean toll road acquisition, FFO per share were down 6%.

This combined with the recent dividend hike puts us at a payout ratio of 65% - right in the middle of management's target range, we're not likely to see any dramatic hikes any time soon. With shares right in the middle of my estimate of value ($30-$33), I'm also not looking to change my Hold rating any time soon.

As you might expect, not much exciting going on here. Dalrymple is protected by its take-or-pay contracts, so the fears of a Chinese slowdown are a bit dulled. I have an email into BIP to get an idea of how long the current contracts run, but even if China's growth does slow, it's hunger for coal isn't likely to slacken much in the next several years, so I'm not too worried.

Also reassuring is the early discussion for the Dudgeon Point port. BIP has been feeling out miners for demand and management said there was still a good amount of interest despite what we've been reading in the headlines. Of course, this is still early days and it will take more than interest to justify the spending necessary to build the new port.

The Chilean transmissions continued to see modest increases in FFO thanks to the economy continuing to grow and inflation adjustments to the rates. Recent headlines about Chile suffering from power shortages should mean the growth cap ex will continue to be supported by strong demand.

The new Colombian distribution network helped offset a drop in UK activity. The current stake in Colombia is small, but management highlighted the fact that they are partnered with several of the largest pension funds in the country and the industry is quite fragmented. This should position them well for growing their operations in the country.

Construction started on two of the three power lines in Texas and management expects these to be on line in 1H 2013.

Trasport & Energy
The Australian rail operations had a bumper first quarter as higher harvest yields meant more demand for shipping. Add in the start of three of BIP's six new mining deals and all seems well on this front.

Interestingly, BIP is investing A$100m over the next two years to build out its rail network above and beyond current customer-supported projects. This is in anticipation of new demand coming from some projects that are in the pre-feasibility stage. This is a significantly riskier investment as none of it is prefunded and there is no guarantee there will be a customer wanting to use the new and improved lines when they're done.

This is something to keep an eye on going forward, especially any announcements of new customer contracts (though this won't happen for a while I would assume).

The UK ports are doing alright considering the dropping demand in the EU. Good news is the Teeside Cast Products blast furnace is being fired up again and should provide $6-8m in incremental EBITDA once it is up to full speed. An article in the FT today said it could reach full run rate later this year.

The big news is at the N Am gas transport network which was hit by regulators lowering rates last year and has been struggling under low gas prices and reduced industrial activity in the upper midwest. While BIP thinks these operations have bottomed, the expected cash flow isn't enough to support the current debt level.

To address this, BIP and its partners are injecting equity - $200m from BIP - to delver the assets. To support this, BIP will be issuing $300m worth of debt at the corporate level. This is a departure from normal operating procedure, so you know things are a bit touchy here. The good news is that because this is not normal, BIP was able to garner a BBB+ investment grade rating from S&P recently. That should help contain financing costs, but this isn't something we want to see becoming a habit.

BIP's subs have $567m in debt maturing this year (and BIP has $120m of its own debt maturing), most of this at the Transport & Energy level. I'm asking IR how much of this is tied to the N Am nat gas pipes, but we'll be watching this to see how the refinancing progresses.

Management also said they had turned their focus to 2013 refinancings - there is almost $1bn that matures next year, so this is probably a good idea. Most of it is in the Utility division, which is operating pretty well, so this should be less of a problem, but again something to watch as the year goes on.

Timber got hurt by the slowdown in China and lower prices. Costs were up too, so that didn't help. This is a division that won't fully recover until US housing does, but that offers us a nice upside kicker (along with the new Aussie rail contracts) down the road.

We're seeing the benefit of BIP's diversification here - some areas doing well, some not so well - and we aren't likely to ever see everything clicking at the same time, but it was a decent quarter.

I'm watching the developments in the refinancing as well as looking out for any acquisitions that may come out of the mess in Europe (looking mainly for transportation-type assets) or in America (natural gas and possibly port properties).

I'm keeping the shares on Hold mainly for valuation reasons, but if we see a broad sell-off because of fears in China and Europe, we could get a chance at more attractive prices (under $27, say).
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