Brookfield Infrastructure Partners(BIP) - 2024 Q4 - Annual Report

Market Risks - The company faces risks related to demand for commodities, including natural gas and minerals, which could impact financial performance[52]. - The company is exposed to risks related to economic regulation and adverse regulatory decisions in the countries it operates[52]. - The company may experience challenges in maintaining or improving revenue due to competition and the ability to renew contracts[68]. - Economic conditions and political uncertainties can significantly impact demand for services and overall profitability, with potential adverse effects from inflation and rising interest rates[230]. - The ongoing geopolitical conflicts, such as the war between Russia and Ukraine, have contributed to volatility in fuel prices and supply chain challenges[233]. - Changes in U.S. laws, including potential tariffs on Canadian exports, could materially affect the company's financial condition and operations[236]. - The company is exposed to risks associated with pandemics and public health emergencies, which could adversely affect operations[239]. - The ongoing prevalence of contagious diseases could materially and adversely affect the company's results of operations and financial condition due to disruptions to commerce and reduced economic activity[240]. Operational Risks - The company has a significant amount of committed backlog for capital projects, but there is no assurance these will be completed on time or within budget[72]. - Future capital expenditures are required for utilities, transport, data, and midstream operations, which are capital intensive[73]. - There are risks associated with the construction and expansion of projects, including potential delays and cost overruns[70]. - Supply chain disruptions could inhibit the ability to maintain existing facilities and complete development projects on time and within budget[97]. - The company’s operations may be affected by supply chain disruptions and cyber-security incidents[52]. - Cybersecurity threats pose risks to the company's information systems, potentially leading to data breaches and operational failures[103]. - The company faces significant risks related to cyber security, including potential material consequences from breaches or failures of computerized business systems[107]. - The company may face challenges in obtaining necessary permits and licenses, which could materially affect business operations and financial condition[84]. Environmental and Regulatory Risks - Brookfield Infrastructure's operations are exposed to risks related to environmental damage, including potential fines and penalties from regulatory authorities[75]. - The company faces increasing environmental legislation and climate change impacts, which may reduce consumer demand for certain energy sources[77]. - Future carbon emissions regulations could lead to increased operational costs that may not be passed on to customers, adversely affecting financial performance[78]. - Compliance with environmental laws may result in increased costs and liabilities, impacting the financial performance of infrastructure operations[79]. - Climate change may lead to more severe weather conditions, affecting business operations and customer demand for services[80]. - Regulatory commitments expose Brookfield Infrastructure to higher levels of control, increasing the risk of adverse financial outcomes due to changes in laws or regulations[81]. Financial and Investment Risks - The partnership's ability to pay distributions is subject to the discretion of its General Partner, with no guarantee of maintaining or increasing distribution levels[158]. - The partnership relies on distributions from the Holding LP and its operating entities to meet financial obligations, with no independent revenue generation[156]. - The partnership's effective economic interest is approximately 26.6% on a fully-exchanged basis, which may lead to conflicts of interest due to Brookfield's controlling influence[166]. - The partnership may acquire distressed companies, which involves substantial financial and business risks, including potential total losses[154]. - Credit facilities contain covenants that restrict financial activities, and failure to meet these covenants can lead to immediate repayment requirements[151]. - The use of leverage increases sensitivity to revenue declines and adverse economic conditions, heightening the risk of loss[150]. - The partnership's credit facilities may or may not be rated, and a credit downgrade could adversely affect the cost of debt[152]. - The company may face material adverse effects on its business and unit prices due to ineffective internal controls over financial reporting, which could lead to significant deficiencies and errors in financial statements[167]. Taxation Risks - Changes in tax laws may adversely affect the company's operations and the net amount of distributions payable to unitholders[179]. - The partnership's cash available for distribution is indirectly reduced by local taxes, impacting the post-tax return to unitholders[180]. - Unitholders may face tax obligations in jurisdictions where they do not reside, potentially leading to additional compliance burdens[183]. - The company may be exposed to transfer pricing risks, which could result in increased tax liabilities and reduced returns for investors[184]. - The partnership may face tax adjustments under transfer pricing rules, potentially affecting income allocations to unitholders[186]. - The partnership's gross income must consist of 90% or more qualifying income to maintain partnership status for U.S. federal income tax purposes[190]. - U.S. backup withholding tax may apply if unitholders fail to comply with tax reporting rules, impacting cash available for distribution[191]. - Non-U.S. persons may face adverse U.S. tax consequences if the partnership is deemed engaged in a U.S. trade or business[195]. Governance and Management Risks - The General Partner has sole authority to determine distributions and their timing, which may incentivize actions that benefit Brookfield over unitholders[134]. - The base management fee is set at 0.3125% quarterly (1.25% annually) of the market value of the group, potentially creating conflicts of interest[133]. - The Limited Partnership Agreement modifies fiduciary duties, allowing conflicts of interest to be resolved in ways that may not favor unitholders[130]. - The partnership's arrangements with Brookfield may contain less favorable terms than those negotiated with unrelated parties[145]. - The General Partner's discretion in resolving conflicts may prioritize Brookfield's interests over those of the partnership and its unitholders[132]. - The departure of key professionals from Brookfield could adversely impact the company's ability to achieve its objectives[120]. - Changes in Brookfield's ownership or control could result in significant shifts in the company's management and growth strategy[121]. Currency and Market Risks - A significant portion of the company's operations are in countries where the U.S. dollar is not the functional currency, exposing it to foreign currency risk[244]. - Fluctuations in currency exchange rates could reduce cash flows generated by operating entities, potentially decreasing demand for services[244]. - Non-U.S. unitholders are subject to foreign currency risk, as distributions are denominated in U.S. dollars and may be adversely affected by exchange rate fluctuations[173]. - The market price of the company's units and preferred units may experience high volatility due to various factors, including economic conditions and changes in market interest rates[170]. - The company may need additional funds in the future, potentially issuing more units or preferred units, which could dilute existing holders[172].