Brookfield Infrastructure Partners (BIPC) held their Q1 2024 earnings call on May 1st. While the market focused on standard metrics like FFO growth and capital recycling initiatives, a much bigger story may be developing: a potential data center powerhouse silently gaining strength.

A casual observer might only see the Data segment's relatively small FFO of $68 million, similar to last year. However, this number hides a story of explosive growth waiting to happen. David Krant, BIPC's CFO, revealed a massive 670 megawatts of "booked but not built" data center capacity. This capacity, already contracted but not yet operational, is expected to come online over the next three years.

To understand the scale, BIPC commissioned roughly 40 megawatts in the past year, generating an estimated $45 million of run-rate EBITDA on a 100% basis. Projecting this forward, the 670 megawatts of future capacity could mean over $750 million in annual EBITDA - almost a tenfold increase from current levels.

This potential windfall isn't just speculation. The data center market is booming due to the increasing digitalization of our world and the rise of AI. BIPC's global data center platform is well-positioned to benefit from this trend, attracting major hyperscale clients and securing long-term contracts with financially strong counterparties.

"Adding to the intrigue, BIPC's management stressed their focus on high risk-adjusted returns, even holding back on some investments to possibly seize even better opportunities later. They're aiming for returns in the 15-20% range, with the potential to go beyond that. This suggests a strategic bet on data centers, a sector known for strong and consistent cash flow."

Consider this: BIPC's Data segment currently represents about 10% of their total FFO. If the 670 megawatt pipeline delivers as anticipated, data centers could become the company's main earnings driver, potentially even surpassing their traditionally strong Transport segment.

Potential Data Center EBITDA Growth

The following chart illustrates the potential tenfold growth in BIPC's data center EBITDA over the next three years.

The implications are substantial. BIPC, traditionally known for its stable utility and transport infrastructure, could be evolving into a data-driven growth story. This transformation, still largely unnoticed, might attract a new group of investors eager to invest in the thriving digital economy.

There are, naturally, challenges ahead. Construction delays, cost overruns, and changes in client demand could impact the data center rollout. However, BIPC's history of careful capital allocation and operational expertise inspires confidence.

The sleeping giant is stirring. As the market focuses on quarterly ups and downs, BIPC is quietly constructing a data center empire. Investors who recognize this change early could see significant rewards as the company's digital transformation takes shape.

Hypotheses:

BIPC is intentionally downplaying the scale of their data center growth to avoid increasing acquisition costs and maintain a competitive edge.

The company is using its current "booked but not built" capacity as a starting point for even more aggressive expansion in the data center market.

Supporting Data:

670 megawatts of booked but not built data center capacity.

$45 million in run-rate EBITDA on a 100% basis from 40 megawatts commissioned in the past year.

Potential for data center EBITDA to reach $750 million annually, a tenfold increase from current levels.

BIPC's Data segment currently represents 10% of total FFO, with the potential to become the dominant earnings driver.

"Fun Fact: Brookfield Infrastructure's parent company, Brookfield Asset Management, manages over $825 billion in assets globally. They are a true infrastructure giant, investing in everything from real estate to renewable energy."