Introduction to infrastructure

Infrastructure businesses are the providers of the basic services, facilities and institutions upon which the growth and development of a modern community depends. Infrastructure businesses tend to generate sustainable and growing long-term cash flows as a result of consistent demand for the basic, everyday services they provide.

Characteristics of infrastructure businesses include:

• Provision of basic, essential service;
• Operations within a regulated or contractual framework
• Consistent demand throughout the economic cycles;
• Sectors where there are high barriers to entry, which creates a sustainable competitive advantage;
• Long-lived, high-value physical assets that are difficult to replicate or substitute around; and
• Predictable maintenance capital expenditure requirements;
  scalability, such that relatively small amounts of growth can generate significant increases in earnings before interest, taxes, depreciation and amortization, or EBITDA.

In addition to the benefits related to these characteristics, the revenues generated by our infrastructure businesses generally can be expected to keep pace with inflation. The price escalators built into the agreements with customers of contracted businesses, and the inflation and cost pass-through adjustments typically a part of pricing terms in user pays businesses or provided for by the regulatory process to regulated businesses, serve to insulate infrastructure businesses to a significant degree from the negative effects of inflation and commodity price risk. We also employ interest rate swaps in connection with our businesses’ floating rate debt to effectively fix our cash flows for the interest costs and hedge variability from interest rate changes.