Aug 6, 2013
Executives
Tracy Wise - VP of Investor Relations John Stinebaugh - Chief Financial Officer Sam Pollock - Chief Executive Officer
Analysts
Frederic Bastien - Raymond James Brendan Maiorana - Wells Fargo Bert Powell - BMO Capital Markets Robert Kwan - RBC Capital Markets Andrew Kuske - Credit Suisse Michael Goldberg - Desjardins Securities Cherilyn Radbourne - TD Securities
Operator
Hello, this is the conference call operator. Welcome to the Brookfield Infrastructure Partners conference call and webcast to present the company's 2013 second quarter results to unit holders.
As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.
(Operator Instructions) At this time, I would like to turn the conference over to Tracy Wise, Vice President, Investor Relations.
Tracy Wise
Thank you, operator and good morning. Thank you all for joining us for Brookfield Infrastructure Partners' second quarter 2013 earnings conference call.
On the call today, is John Stinebaugh, our Chief Financial Officer, who'll review our financial results and Chief Executive Officer, Sam Pollock, who will discuss highlights from the quarter, provide comments on our strategy and the outlook for our business. Following their remarks, we look forward to taking your questions and comments.
At this time, I would like to remind you that in responding to questions and in talking about our growth initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially.
For further information on known risks factors, I would encourage you to review our annual report on Form 20-F, which is available on our website. With that, I would now like to turn the call over to John Stinebaugh.
John Stinebaugh
Thanks, Tracy. I'll spend a few minutes walking through our results and balance sheet then turn the call over to Sam.
In my remarks I'll focus on FFO, which is a proxy for cash flow from operations, I'll also focus on AFFO yields, which is a measure of how effectively we deploy our capital. The second quarter 2013, was a most profitable in our history as virtually all of our operations performed well.
FFO increased with $180 million or $0.88 per unit, representing a year-over-year increases, 52% and 47% respectively. Our results also exceeded the first quarter with FFO and FFO per unit up 13% and 10% respectively this strong performance was driven by our recently commissioned Australian railroad expansion and contribution from acquisitions that we closed in the latter part of 2012.
We're very encouraged that many of our operations are performing ahead of expectations with outlooks that remained positive. For the quarter, we generated an FFO yield of 13% and our payout ratio of 55% with conservative versus our target range of 50% to 70%.
Our utilities platform produced FFO of $96 million in the current quarter compared with $78 million last year. The increase was primarily due to the acquisition, which doubled the size of our UK regulated distribution business and the increased ownership in our Chilean electricity transmission systems.
Excluding the contribution from these investments our underline performance was solid benefiting from inflation indexation, the commissioning of certain capital projects into our rate base and favorable weather conditions. Our transport platform generated FFO of $83 million in the second quarter of 2013 versus $36 million in the prior year.
The increase was attributable to a doubling of FFO from our Australian railroad following completion of our expansion program, the final portion of which was commissioned in March of 2013. Our results also benefited from a strong performance from our toll roads which posted FFO the exceeded expectations due to higher traffic volumes and tariffs.
Our energy platform, earned FFO of $18 million in the quarter compared to $17 million last year, we benefited from strong results at our UK energy distribution operations due to unseasonably cold spring and the contribution from our recently acquired district energy system in Toronto both of which more than offset a decline in performance at our natural gas transmission business. I'll now talk about some of our recent balance sheet initiatives.
During the first half of the year, we undertook a number of initiatives to further strengthen our balance sheet in order to position ourselves to capitalize on attractive, large-scale acquisition opportunities. We increased the availability under our corporate revolving credit facility by $500 million to $1.4 billion, adding nine new lenders to our bank group.
The commercial terms of these bilateral agreements are the same as our existing facilities, providing us with access to additional capital at a very low cost. In early May, we issued $340 million of equity in a transaction that was two and a half times oversubscribed, further demonstrating the strong appetite for our units as well as investor confidence in our ability to grow our business in an accretive manner.
Including the expected proceeds from the sale of our New Zealand regulated distribution business, we'll have access to approximately $2.5 billion of liquidity at the corporate level, with $1.1 billion of cash on hand. During the last few months, we completed several re-financings at our operations, capitalizing on the opportunity to issue long term debt in this historically low interest rate environment.
And our Chilean transmission system, we completed $440 million of local and international bond issuances. At our European port business we closed a €450 million bank facility with a syndicate comprised primarily of European lending institutions; and at our district energy business in Toronto we raised C$215 million in a private placement that was rated A- by DBRS.
With the completion of these financings, we have no significant near-term maturities at any of our operations. One last comment, before I turn the call over to Sam.
During the quarter, we won a stamp duty dispute with the government of Western Australia relating to our Australian railroad business. Following our acquisition of Prime in 2010, we deposited $46 million in escrow to reserve against this potential stamp duty obligation.
In April 2013, the Western Australia Court of Appeal ruled in our favor and our deposit was returned with $6 million of interest. I'll now turn the call over to Sam to walk through capital recycling initiatives and the outlook for our business.
Sam Pollock
Thanks, John and good morning, everyone. Let me begin by reviewing our successful capital recycling efforts.
A year ago, we announced the plan to divest certain non-core assets in timberland to fund a portion of the capital we invested in 2012 and to provide further liquidity for new investments that we're pursuing. We define non-core assets as ones in which Brookfield does not have sufficient control in order to deploy our operations oriented approach to enhance value as well as assets at are mature or as limited incremental upside.
In relations to our timber assets, while they were a core component of our business, we had an opportunity to dispose-off these assets to strategic buyers who are prepared to offer prices that fully reflected our view of future log prices. In the current market environment, buyers are generally valuing both mature regulated assets and timberland, our rates of returns that are meaningfully lower than our target range of 12% to 15% per annum.
As a result, we felt that a sale of these assets would provide a very low cost source of financing for our business. When we embarked upon our plan, we appreciate that we would not necessarily be able to time asset sales in order to match fund new investments.
However, we're confident that we will be able to recycle this capital into new investments that offer superior returns for our unit holders in a relatively short period of time. Over the last nine months, we have worked very hard to progress this initiative, executing definitive agreements for five divestitures totaling $1.5 billion of equity proceeds.
Once completed, these transactions will generate approximately $500 million of capital gains and average annual returns on our invested capital in excess of 25%. As we regularly revalue the asset on our balance sheet in accordance of IFRS, many of these gains were recognized in our financial statements in prior periods either through net income or our capital accounts.
We believe that the returns that we achieved on these investments highlight our ability to buy and sell assets for good value and demonstrate our deponents towards the capital. Turning to our recent transactions, during the quarter, we announced the sales the last of our Canadian and US timberlands for combined proceeds of $640 million.
These sales were complete at a modest premium to our recent appraisals that reflect a full recovery of log prices and historically low discount rates. Furthermore, our US timberlands sold for a price that equates to $4,100 per acre, a notable premium to most sales that have taken place over the past 10 years in the Pacific Northwest.
In July, we now for signing of definitive agreements to sell our 42% interest in our New Zealand regulated distribution business were 525 million New Zealand dollars, which equates to approximately US $410 million. This business generates very strong cash flows for since we first acquired it in 2009 as part of our recapitalization of Babcock & Brown Infrastructure.
Upon closing of this transaction, we will generate internal rate of return on this investment in excess of 25% largely attributable to the favorable price at we which acquired these assets during the financial crises in 2009. We expect to receive proceeds from this sale by the end of this year, form the approval to New Zealand overseas investment office.
Now let me walk through our outlook for the business, in our first quarter conference call, I highlighted our general optimism regarding the long-term outlook for markets in which we operate and the strength of our deal pipeline, since then there has been considerable volatility in the global markets as investors scramble to reposition themselves in advance of the impending tapering of quantitative easing by the US Federal Reserve. In the past three months, yields on 10-year US treasuries have increased by approximately 100 basis points to 2.6%.
Our business development teams around the world continue to focus on a number of strategies that we believe we yield attractive investments opportunities. For instance, we continue to look at opportunities to acquire non-core infrastructure assets from industrial companies they are looking to delever their balance sheets and raise alternate source of capital to fund their investments programs.
We are also looking to buy GDP sense of infrastructure assets from constructions companies they are seeking to refocus on their core construction business and strengthen their balance sheets. In addition to those areas, we are also looking to build out our North American district energy business.
I am pleased to say that we are making progress on this front and yesterday we signed definitive documents to acquire 100% of Entergy Solutions District Energy for $130 million in partnership of institutional investors. This business owns and operates district energy assets serving the business districts Houston and New Orleans and Brookfield Infrastructure will own a 40% interest in the business.
This operation will complement the system that we acquired in downtown Toronto last year and this acquisition is expecting to close in the third quarter of 2013. With the recent volatility in the capital markets, raising capital in the debt and equity markets now carries considerably greater uncertainty.
Our ability to take a long-term view and to commit capital on a timely basis provides an attractive alternative for those companies looking to sell assets or raise capital. Furthermore, a number of these opportunities are very large scale.
With our liquidity position and proven asset to the capital markets, we believe that we are one of a shortlist of buyers that can readily execute these types of transactions. We have a great amount of confidence in our ability to deploy significant amounts of capital at attractive returns as demonstrated by the approximate $4 billion that we invested in acquisitions over the last couple of years.
As we said last quarter, our pipeline and investment opportunities are stronger than ever. We feel fortunate to have a significant war chest to invest at a time when we believe equity return expectations are on the rise.
The deployment of this capital will drive further distribution growth which should support our attractive valuation relative to other yield or in investments. With that, I'd like to return the call back to the operator to open the line for questions.
Operator
Thank you. We will now begin the question-and-answer session.
(Operator Instructions) Our first question today comes from Frederic Bastien of Raymond James. Please go ahead.
Frederic Bastien - Raymond James
Just wondering if your areas of investment interests have changed dramatically since the last quarter, at that time I believe you highlighted ports and potentially additionally pro-loans as an area of short-term focus. I am wondering if that has changed.
Sam Pollock
Frederic, it's Sam. And I guess the short answer is no.
Those would be categories that would be captured under the infrastructure assets that we're looking to buy from both construction companies and industrial companies.
Frederic Bastien - Raymond James
Okay. If we go to geographies, how are you thinking about Australia right now replacing (Benjamin)?
I assume that prices for commodity related assets have come off in recent months. So, how would you reconcile the potential attractiveness of an investment there with your long-term goals to be a bit more globally diversified?
Sam Pollock
Well, I guess there is two questions in that. I think the first question is what do we think of Australia and we continue to think that's a very attractive jurisdiction to invest in.
It's got a very stable regulatory regime. We can access capital quite well in that market and we think the types of assets that we can acquire there would be very attractive.
I would say, for next little while, the number of development opportunities are probably limited given that a number of the resource companies are probably delaying or postponing some of their expansion plans, but I think there could be some great brownfield there in the not too distant future and we think it's a great market investment.
Frederic Bastien - Raymond James
Okay. That's helpful.
Sam Pollock
With respect to diversifying our business, our strategy is to invest in markets, where we can earn the best risk adjusted returns, so we are not as necessarily focused on trying to be in one market versus another, it depends on where the opportunities arise. We do see lots of growth opportunity today in South America, and so that's a particular focus.
And we have seen some new opportunities arise for us in our pipeline in North America and Europe. So I would say today the opportunity set for us is quite balanced much around the world.
Frederic Bastien - Raymond James
Great that's helpful. Last one I have for you is just housekeeping, were the results of the timber platform consolidated with corporate in the current quarter, in the second quarter?
John Stinebaugh
Frederic, it's John. That's absolutely right the results were included in corporate.
So if you look at our adjusted EBITDA as well as our FFO, the timber results are reflected in those numbers.
Frederic Bastien - Raymond James
Got it, okay. Thank you.
I'll turn it over.
Operator
The next question comes from Brendan Maiorana of Wells Fargo.
Brendan Maiorana - Wells Fargo
So Sam have you given that (inaudible) 10 year up significantly, it sounds like maybe there is better return options that are out there. Have you guys adjusted your return requirements, you've been pretty consistent sort of that ‘12% to 15% levered IRR targets since you came out, but is that higher rates caused any revaluation of those targets?
Sam Pollock
Hi, Brendan. I guess the short answer again on this one is no.
I'd say when rates went down, we didn't think that they were sustainable at that level, so we never adjusted in downwards. We have always been what I'd describe as absolute return investors and so we have always felt that for the type of business that we are buying and our view of sort of long-term interest rate levels and inflation levels that thought the 15% is appropriate.
I guess what I would just add to that is obviously the ability to achieve those levels of returns is easier during periods of the stress or during periods where interest rates move. So I think our ability to achieve or over achieve those rates should be easier now than they were over the last couple of years.
Brendan Maiorana - Wells Fargo
Yes, I guess you don't have to push as many lever to kind of get there, And it sounds like there is probably a wider basket of opportunities to pick from now that meet those return requirements given that there is maybe less investors at the margin or there is last levered investors at the margin. Is that fair?
Sam Pollock
Yeah, I think that is fair. And I think we have in certain regions particularly South America and from India and a few of the emerging markets, there were a number of aggressive buyers the last couple of years and I think certain investors know there is -- are now far more cautious and have a lot less capital available.
So I think that's reduced competition somewhat.
Brendan Maiorana - Wells Fargo
Sure. In Brazil I think there is news out during the quarter about the potential rate freeze on toll roads.
Can you give an update on what if any impact that could or may have on your business there? And how do you feel about the valuation of the investments that you made in the Brazil toll road late last year relative to maybe where pricing is for those assets today?
Sam Pollock
So let me start and then John might want to add a few things. Just dealing with your second question first, we think our timing was quite good to know that.
As you know the value towards the business we bought in Brazil have gone up quite significantly since that time. And putting aside just where that the share price is gone, I'd just say more generally, the performance of the roads despite what I would describe as relatively weak GDP in Brazil, the traffic levels has been quite strong and we're quite pleased with that.
And it just shows I think the demographics of that region coming through. And I'd say the same goes for Chile, the GDP in Chile has been obviously stronger than what's going on in Brazil and the performance of our roads there have been just fantastic.
So we're quite pleased with those, both of those opportunities today. With respect to some of the announcements in particular in Sao Paulo State regarding putting a cap or at least say a short-term freeze on some of the inflationary increases to tariffs.
There still hasn't been any formal announcement of exactly what the regulator intends, but I'd say two things. One, the regulator has indicated that all the concessionaries would be kept hold and so this is really something that they're doing for their own population.
There is a long history that Brazil has a compensating concession holders when they make changes to the (inaudible) regime and we're still very comfortable with the concessionary framework there. And so some of these things are in response to some of the tensions going on in the country but as far as performance of roads and the concessionary framework, everything is as we expected.
Brendan Maiorana - Wells Fargo
And so do you think, so there hasn't really been any real change in terms of where you think roads would price today. And is that the case and if it's not the case, does that make you feel more optimistic about investments in additional toll roads in Brazil or surrounding areas in South America?
Sam Pollock
Well, I would say the challenge for new investments in Brazil at the moment is that the government in its privatization efforts that have been underway for the last six months or so, has been trying to push the envelope down on [allowed] rate of return and so they have had a few false starts in the privatization process. We've been encouraged with the direction that they are heading in as far as providing an opportunity to earn a better rate of return.
We'll still have to wait to see how that all shakes out because those are probably the best opportunities to invest meaningful amount of capital in that market. But I guess to summarize, we do still think it's a great place to invest, we like what we have today.
And we obviously need to digest that investment for next little while, so I wouldn't say that we are actually looking to do new things at the moment.
Brendan Maiorana - Wells Fargo
Okay. All right that's helpful, thank you.
Sam Pollock
Okay.
Operator
The question comes from Bert Powell of BMO Capital Markets. Please go ahead.
Bert Powell - BMO Capital Markets
Thanks. Sam, you talked about the acquisition pipeline being stronger than ever, wondering if you can just give us a sense as to how that splits between your distressed or situations where you offer something that's unique and precludes competition versus option situations?
Sam Pollock
I can't go in too much detailed around the specific opportunities, but to give you a flavor for why we feel pretty good about the current situation, for the first I wouldn't say anyone is distressed. I don't think in this market, I would describe it as a distressed market, I think there is motivated sellers because they have a number of initiatives they are looking to do and then they are trying to right size our balance sheets, or generate cash flow investment programs, but it's not distress market.
But to give you an example of why I think we have a unique business development platform, we today have about six opportunities that we're currently evaluating that would be exclusive or affectively exclusive opportunities. These would be non-option situations.
And there would be situations around the world, some are more mass in size and some are large scale, and it's hard to predict how many of those we can turn into completed transactions because obviously there's still lots of negotiations to take place and due diligence to undertake, but that's a pretty robust pipeline that are proprietary transactions.
John Stinebaugh
And Bert it's John, another thing we look to do, we're targeting acquired infrastructure from industrial companies, and these types of opportunities really do leverage our structuring capabilities because not only do we have to acquired an asset but you also have to negotiate a contractual framework with the counter party because they still want access to the infrastructure assets. So in those types of transactions, it really does give or take, good opportunity to leverage not only our acquisition skills, restructuring skills in order to put yields together where we think we can get good overall value.
Bert Powell - BMO Capital Markets
Okay, that's very helpful, John. And in the rail which had a good show in this quarter, can you give us a sense as to I guess the plan how much of it is take versus pay they are running at plan or below but they're paying you anyway, so I'm just trying to get sense as to how strong the underlying fundamentals are for that asset?
John Stinebaugh
Bert, it's John, in terms of where the rail is right now with the take-or-pay framework, we're pretty much running at the take-or-pay levels right now. So even though, we've got that contractual framework in place, we're a bit in excess of the take-or-pay levels.
So all in all the production of our customers is according to their plans, we think that there may well be some additional upsides we've talked about in previous quarters that to the extent they continue to wrap up their operations. But we definitely are in a situation where they are operating at levels that exceed the minimums that are in the take-or-pay contracts.
Bert Powell - BMO Capital Markets
Okay. And just last question, I know Euro ports and PD ports, that's been a more challenged part of the business.
But are you seeing, is there any signs that you can see that would be kind of very recent data points that would tell you the things are improving there or is it still a challenge?
Sam Pollock
I would say it's still a challenge. I'm trying to search for little glimpses of a strong turn around.
I'd say we have months that are pretty good but then things slow down again. I think the only thing I would say we have a number of things we've looked at in mainland Europe and the rate of decline or the slowdown does appear to be tapering off and I think the region is hitting bottom.
But we really don't have any visibility at this stage as to what the recovery would look like. So I would say, its flat to, looking like it's turning the corner but what that rate of recovery will be it's just too early to tell.
Bert Powell - BMO Capital Markets
I was hoping for a little bit of return to Sam.
Operator
The next question comes from Robert Kwan of RBC Capital Markets. Please go ahead.
Robert Kwan - RBC Capital Markets
You mentioned in the outlook, just a couple of rows back it's around specific assets. I am just wondering what your appetite is or where do you see the opportunities for larger corporate type acquisitions?
Sam Pollock
Robert, I didn't quite follow. You were asking what the appetite was for larger corporate acquisitions.
Robert Kwan - RBC Capital Markets
Either corporate acquisition or a company that has a larger number of assets, I guess, somewhat similar to what you did Babcock & Brown?
Sam Pollock
We do keep an eye up for opportunities like that, that are a bit more multi-facet and complex. I would say, our business is focused on pursuing those type of M&A activities, generally because the success rate of translating public transactions to conclusion are often relatively modest but we do have a number on the radar screen and depending on market conditions that's something we could always do, we have the capability of executing them, but I wouldn't say that's where we generally focus our attention.
Robert Kwan - RBC Capital Markets
It sounds like its more backburner item than just even in terms of what might be in front of you in terms of most immediate acquisition?
Sam Pollock
It's just not what I describe is our bread and butter. I would say our bread and butter is going out to meet companies, finding out what's their business plans require for them to be successful and whether they need to raise capital or they are looking for a partner to grow, then we think for that ideal partner.
For companies looking to sell themselves, generally, they will run a process and often that's not something that we can focus on too much. And we don't tend to really do hostile transactions.
So we are not really going out there looking to take advantage somehow.
John Stinebaugh
But Robert, John. As you know, the infrastructure industry is very capital intensive and transactions where we buy infrastructure assets from industrial companies were the types of they are bread and butter.
There is a range of sizes that some of which can be quite large just given the capital intensively of the sector.
Robert Kwan - RBC Capital Markets
And just with the [upside] corporate credit facility are you still looking at that more of an equity bridge or do you think you know how the capacity for more permanent debt at the healthcare level?
Sam Pollock
Our thoughts on that haven't changed Robert so that's more of a source of liquidity for us that we would look to replace with permanent capital like it's with our credit rating we were able to increase the size of facility at very well cost and thought that in light of the opportunities that we are seeing in deal pipeline that was something that's intensive.
Robert Kwan - RBC Capital Markets
Okay, and the last question I have is Sam you mentioned earlier around concessions coming at the front end being a good way to invest, basically, one-time rate base similar to what you are doing in Texas, what is the appetite for greenfield in terms of size, particularly given you need to carry some of that construction on the multiyear basis, how big, would you feel comfortable taking that on knowing that you are paying out a good portion of cash flow?
Sam Pollock
Robert, I think that all depends on the nature of the opportunity. I think we feel pretty comfortable that we have the capacity to take on relatively large projects and we can explain it to our shareholders, if there is a timeline between when we invest the capital to when the FFO shows up in our results.
I think that is what really took place with the Australian railroads expansion where there was a good year and year and half gap from the time we invest the capital to time. They came through our results and that really would have been the case with endpoints that if we were proceeding with that, that is a very large transactions that used to give an order of magnitude probably would have required equity well in the excess of $1 billion and if we were able to proceed with that with the framework that we were negotiating with various parties, that's a very comfortable going ahead.
John Stinebaugh
But in light of the issue that you mentioned Robert and just the overall risk profile was even though we focused on low risk development projects, they do have greater risk than operating projects. So we would look for a premium in return for those types of opportunities.
Operator
The next question comes from Andrew Kuske of Credit Suisse. Please go ahead
Andrew Kuske - Credit Suisse
I guess the first question is just for Sam and it's really along the lines of how do you think about the scalability of your business, I guess there is a few ways to sort of think about this you are in the context of WestNet Rail or I guess not Brookfield rail to the degree you have an appetite to move into the ports or move further upstream in this let's say storage and handling of materials to a greater degree. And I guess the other way you mentioned this earlier in your commentary, I'm just repeating, I guess scale is just having a lot of individual one-off facilities that are scattered across North America where there is only really synergies at a hold co level managing all of those assets, not on individual asset basis.
And so I guess how do you think about scalability as that continues to grow around the globe?
Sam Pollock
Andrew, I think the comments you made in reference to those assets I think are all great on as far as how you evaluate them. I would say that there is, in all our businesses generally, top gain opportunities where we can achieve synergies, the example of what we did with our regulated distribution business the U.K.
was a good example of where we are able to grow the platform through an acquisition, add new products to the product line that really was able to leverage the sales channel. I think there are opportunities to do that in various parts of our businesses.
In another parts of businesses really the scalability comes from being able to replicate an acquisition or a rollup model that we can then manage more from a corporate perspective and I think the district energy example, the one you use is probably good one. I do think also with that business and with our toll road business, there are opportunities to take advantage of best practices that can also drive some cost synergies and may not be as obvious from the outset, but we're seeing good examples of that, working with the [Vertis], who are helping us drive that practices in our tariffs business.
And so I think as our business grows, we can do that as well.
John Stinebaugh
In another aspect of it, Andrew, is this, what we're really doing is we're leveraging the knowledge and operating capabilities that we've got within Brookfield and we deploy that in new acquisitions. So as an example, if we bought another railroad, we have the expertise in-house to be able to execute, upgrade an expansion projects that would drive value and I think that aspect of our business model is very scalable.
Andrew Kuske - Credit Suisse
And I guess, just on that point, in relation with the districts heating, do you see an interest in crossover between the power group at BAM and also the property group at BAM, is they all are somewhat interrelated?
Sam Pollock
Well, there is no doubt that we can leverage the knowledge in each of those businesses to help that business and leverage the relationships. It's not a coincidence that we had an interest in this Houston district energy business given the footprint that Brookfield properties has in Houston.
So obviously that creates some potential opportunities for growth. In addition to that a big component of cost for district energy and district cooling is power cost and so leveraging the knowledge that our power group has in relation to at managing power cost and managing risk in relation to power price increases is usually valuable for us.
So that is a particular business where the power of the Brookfield franchise is particularly relevant.
Andrew Kuske - Credit Suisse
Okay. That's very helpful.
And then if I may just a question directed towards John. I think in the last 20-F filing you had tax losses carry forward of about $250 million, just trying to get a better understanding on where your current tax position is right now, how much do you have, is that NOL number still accurate at the stage after the quarter?
John Stinebaugh
In terms of the tax position, I think our tax profile over the next few years is going to be pretty similar to how it's been over the last couple of years in terms of the amount of cash taxes that we're paying out. When we do acquisitions, we do a lot of structuring in order to minimize tax we get across the various businesses that we acquired being able to get cash out in order to be able to distributed, but I think the profile is going to be pretty flat and pretty similar to how it's been over the last few years.
Andrew Kuske - Credit Suisse
Okay, that is very helpful. Thank you.
Operator
The next question comes from Michael Goldberg of Desjardins.
Michael Goldberg - Desjardins Securities
Thank you. With $2.5 billion of liquidity $1.1 billion cash on hand and the 12% to 15% targeted return, how much could you invest on a leverage basis while still maintaining a desired liquidity cushion and how much could this add to annualize FFO in relation to recent contributions from assets that have been sold?
John Stinebaugh
Michael, it's John Stinebaugh. In terms of the amount that we can invest, as we talked about in the past, the capital structure is going to be dependent upon the types of assets, so utility assets might have add investment grade metrics 60% debt, maybe even 65% debt, whereas transportation assets are going to be a bit less and perhaps maybe 35% to 40%.
So if you basically just took 50% as an average, then the $1.1 billion of cash that we have got on hand, we can basically double that in terms of the amount of enterprise value that we will be able to buy. And in terms of the cash yield on the investments, once it get it does depend a bit by the type of assets, but we're targeting as you know 12% to 15% overall returns.
So I think high single digit cash yields initially with the growth to get to the 12% to 15% ballpark would be a reasonable assumption. So I think that gives you some metrics in order to kind of frame how to think about it.
The credit facility as I mentioned in my earlier remarks, it is $1.4 billion, it is not permitted capital. We could well end up drawing down on the facility to fund acquisitions and then that's why we have it in place, but we wouldn't look at that as a permitted capital.
Michael Goldberg - Desjardins Securities
Okay. And I do have a question also about the credit facility.
Do you have any idea how much commitment fees might go up in light of emerging leverage rules for banks, then included undrawm commitments and with higher fees change stands towards the use of term-able facilities?
Sam Pollock
It's something we would definitely evaluate as we thought about the exiting to upside the facility from $900 million to $1.4 billion, a part of thought process is that it is low cost for that additional committed capital, we will pay about 50 basis points for the committed but undrawn facilities. If that were to a material increase, then I think we would evaluate whether $1.4 billion is the right number.
We haven't seen any indications in discussions with our bank group. The things are going up however.
It's been a pretty good market for strong credits like ourselves to borrow money at low cost of recent.
Michael Goldberg - Desjardins Securities
Okay, and with respect to the dispute with Western Australia, is it now fully resolved or could it take any other steps and will there be any impact on your financials? If so, what will it be?
Sam Pollock
It is fully resolved, the government decided not to appeal. So it's a final decision.
So the impact on the financials is we had the money that was in escrow as an asset on the balance sheet that is going to be converted in to cash or has been converted in to cash. And then the other impact is we've mentioned because we do have certainty now or we have taken the interest income on the money that was in escrow in to the P&L.
Michael Goldberg - Desjardins Securities
That is in the second quarter?
Sam Pollock
That was this quarter. That's correct.
Operator
The next question comes from Cherilyn Radbourne of TD Securities. Please go ahead.
Cherilyn Radbourne - TD Securities
I wanted to ask you a question on currency. Clearly, your hedging program would have cushioned your cash flow this quarter and I am just curious whether you have a view on the Australian dollar in particular that would cause you to pull back your hedging at the margin or where do you think your hedging program is just prudent maintain in light of your distribution policy?
John Stinebaugh
Cherilyn, it's John. I think it's more of the latter.
When we ended up putting in place the FFO hedging program that we talked about, we thought that it just made a sense to put that level of hedges in place in order to protect the FFO that we've got and support the dividends that we're paying out. So we have no thought that at this point about changing that program and we basically continue to rode over as quarters roll-off.
So we got the target of minimum of 12 months of FFO hedges up to probably 18 months, but that's something that we are planning on continuing at this point.
Cherilyn Radbourne - TD Newcrest
Okay. And I miss part of the call, so I apologize, if someone has asked this question or something like it, but the mining sector is one area where access to capital has clearly changed, I wonder if you could just talk about your interest in acquiring infrastructure assets from mining companies and how you think about counterparty risk in those situations?
Sam Pollock
Hi Cherilyn, it's Sam. I guess in our prepared remarks, we spoke about looking at asset sales from industrial companies as being a key strategy for us and I would include mining companies within that broader category of industrial companies.
We are seeing a number of situations in South America and in Australia and even in North America where companies are looking at ways to generate cash through sale of infrastructure assets and so given our background at Brookfield with the mining sector, it is a business we feel that we understand well and have comfortable making those types of investments. With respect to counterparty risk, it was the main crust to your question, obviously every situation is different.
We need to look at the quality of the resource, the quality of the management team and just a general jurisdiction in which the business operates and to take a view on that counterparty risk, but obviously I can't make broad statements of which commodity or which companies we would favor the most, but it's suffice to say that I think we have the internal capabilities to assess those counterparty risk properly.
Cherilyn Radbourne - TD Newcrest
Okay, thanks.
Operator
There are no further questions at this time. I'll turn the call back over to Mr.
Pollock for any closing comments.
Sam Pollock
Great, thank you, operator. And I'd just like to thank everyone for participating on the call today and we look forward to speaking with you again next quarter to review our progress.
Thank you.
Operator
Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines.
Thank you for participating and have a pleasant day.