Brookfield Choices

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Have been looking at and debating between BEP.UN and BIP.UN.
Can one of you give me some pros and cons on these two and which may be the steadier option going forward?
Cheers!

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Asked on November 15, 2022 9:50 am
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Private answer

Hi there,

By their very nature, Brookfield Infrastructure is likely to be less volatile than BEP. While the business models are the same (buying, selling, building assets), they operate in two very different areas.

Brookfield Renewable is an owner and operator of clean energy assets like wind, solar, hydro and most recently, struck a deal for nuclear energy. It has assets assets worldwide It aims to achieve 12-15% annual total returns and 5-9% annual distribution growth

BIP is focused on infrastructure assets like utilities, pipelines, data centers and transportation. The company doesn't have an annual return target but much like BEP aims to achieve 5-9% annual distribution growth. That said, it has achieved an FFO CAGR of 15% over the past decade.

Of note, both companies are exposed to higher interest rates as they both operate in high CAPEX industries. If you are looking for the 'steadier' option, then I'd look to BIP given that 90% of FFO is generated from regulated or contracted assets and 70% is indexed to inflation. By that account, it is lest exposed to the potential volatility of inflation and rising rates as BEP.

Of note, one can make the case to include both in one's portfolio since their asset base and industries in which they operate are different with some small overlap in the utilities segment (although BIP is focused on regulated, not renewables).

Mat

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Posted by Mathieu Litalien
Answered on November 15, 2022 5:50 pm