GWI: FT Columnist Notes Brookfield’s Sleight-Of-Hand

Veteran Financial Times Columnist John Dizard Cocks a Prominent Eye at Brookfield's Conflicting Claims Before the STB and Investors.

30 August – From Dizard’s 30 August FT column:

” Brookfield Infrastructure Partners, like other components of the Brookfield Asset Management group … seem to assume that various sets of regulators, customers and outside investors will never find out what the others have been promised. ”

Dizard cites the blatant contradiction between BIP’s self-characterizations before the Board and the investor community.

The Notice of Exemption filed by Brookfield with the STB states:

” DJP and Brookfield are not rail carriers. They do not control any rail carriers in the United States, and are not commonly controlled by or with any rail carrier. Furthermore, they are not affiliated (within the meaning of 49 U.S.C. § 11323(c)) with any rail carrier” {STB Docket #FD_36326_0, Notice of Exemption}.

That carefully-carved statement isn’t untrue. But should the Board take it seriously if BIP itself doesn’t? BIP chief executive Sam Pollock sang the words differently when announcing the $8.4 billion G&W takeover to his Wall Street homeys: “ G&W will be a significant addition to our global rail platform, and will expand our presence in this sector to four continents,” by leveraging “our significant experience owning and operating rail, ports and other large-scale transportation infrastructure businesses .”

Dizard cites comments on the exemption filed with the STB by Victoria Dalrymple, a hedge-fund analyst and G&W shareholder, regarding Brookfield’s management of the 5,500-mile Australian rail network:

“For example, CBH Group, which uses Brookfield’s Arc Infrastructure-managed rail network to ship grain, wrote to the Western Australian government that despite investing A$175m (US$118m) in rolling stock, it had been unable to achieve operating efficiencies due to “the railway owner’s attempts to extract higher prices .

“ Access payments to [Arc Infrastructure] make up over 50 per cent of CBH’s rail supply chain costs. Comparatively, CBH estimates that Western Australia grain growers are paying approximately 2.6 to 5 times what growers in eastern Australia pay for track access . . . Due to a lack of transparency around issues such as access pricing and performance standards, there is also considerable uncertainty over how these access fees are being expended.

“Also, there was discontent with Brookfield-Arc’s operating management. “Track performance standards have been steadily decreasing. The present performance of the grain rail network has caused grave concerns as to how it is being managed and as to its sustainability.” {STB Filing, document # 248352. }