Company: BIP-PB
Filing Date: 2025-03-24
Form Type: 20-F
Source: 0001628280-25-014380
Chunk: 279

Company: Brookfield Infrastructure Partners L.P.
Filing Date: 2025-03-24
Form: 20-F
Item: Item 5
Chunk 279
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 plant and equipment (“ PP& E”) annually under IFRS. Each year we assess the fair value of our PP& E by reviewing the discounted cash flows that we expect to receive from the underlying business. The revaluation gains we have recorded reflects our ability to increase the cash flows generated from these businesses, the reinvestment of cash flows into both maintenance capital and accretive organic growth projects, and the increasing institutional demand for de-risked mature investments. While revaluation gains correspond to increasing values for our shareholders, they also lead to higher depreciation expense as we amortize a higher asset valuation over the same useful life estimate. However, this increase in reported depreciation often does not correspond to an increase in the cost to maintain the physical asset base. We estimate that revaluation gains have historically resulted in an increase in our reported depreciation by almost 25%.

156 Brookfield Infrastructure

ii) Due to the nature of our investments, historically, a significant portion of purchase price allocations was ascribed to PP& E. This allocation has a similar effect to the revaluation approach in that it increases depreciation expense during our ownership period. An example of this would be our acquisition of the leading independent telecom tower operator in France. The business generates stable, inflation-linked cash flows underpinned by long-term contracts with its customers. For the purposes of the purchase price allocation, we used an internal discounted cash flow model to allocate the consideration paid to PP& E (the physical towers) and intangible assets (the long-term customer relationships with our tenants). This business had limited goodwill ascribed to it and therefore resulted in a carrying value of PP& E far in excess of the seller’s previously depreciated cost base. As a result, the annual depreciation expense that we recognize is significantly higher than would have been recognized by the seller. Similar to the first point, the cash flow expected to be generated from the investment results in a premium to the physical replacement cost which further expands the disconnect between accounting depreciation and the true cost to maintain these assets. Today, we estimate that almost 30% of our partnership’s share of depreciation and amortization expense is the result of the method of allocating the initial purchase price allocation primarily to depreciable asset classes.

iii) Depreciation over accounting useful life is not always reflective of annual maintenance expenditures as many of our infrastructure assets have very minimal maintenance requirements. An illustrative example of this is our U. K. regulated distribution business, the largest independent ‘last mile’ gas and electricity connection provider in the country with over two million multi