Brookfield Business Partners L.P Investor Day Presentation Transcript

Transcription

1 Brookfield Business Partners L.P Investor Day Presentation Transcript Date: September 27, 2017 Time: 11:15 AM ET Speakers: Cyrus Madon Chief Executive Officer Craig Laurie Chief Financial Officer

2 Brookfield Business Partners L.P. 1 CYRUS MADON: Thank you, Bruce, for that. For all of you here, welcome to our second Investor Day for Brookfield Business Partners. Presenting with me today is Craig Laurie, our Chief Financial Officer. We also have a number of our Senior Management Team members here with us, and at the end of the presentation we d be happy to take any questions you have. Really, our objective today is to give you an overview of Brookfield Business Partners, update you on our activities over the last year we have been quite active and then we re going to speak about our plans to grow this business going forward. Brookfield Business Partners, or BBU, is a Business Services and Industrials company. We launched BBU in June of last year with book equity of about $2 billion. Our market cap today is $3.8 billion. It has grown $800 million through capital appreciation and $1 billion through capital raise. Our objective is to generate long-term capital appreciation for our Unitholders and we trade on both the New York and Toronto stock exchanges, and have an annual distribution of $0.25 per unit. BBU owns and controls operations with significant scale and a global footprint. In total, we have more than $14 billion in assets and our business is diversified across industries and regions. Within our business, we have 65 investment professionals dedicated to investing capital and managing operations for BBU, and that investment team is located around the world. Our objective is to own high-quality businesses with barriers to entry, leading market positions with low cost structures. We target investment returns of 15% to 20%, and given our ability to invest across industries, multiple regions and by form of investment, our investable universe is very large. Our strategy is generally to be value investors, and when we acquire a business, we re either seeking to buy a great business that we can build and scale for many years, which we refer to as platform companies, or we re looking for businesses which we can buy for exceptional value and bring our operational skills to bear and we ll take you through examples of both of these. These businesses are likely to be monetized in a shorter timeframe of five to seven years, and if we do our jobs right, should provide exceptional returns for BBU. Our business has many attributes which give us a strong competitive advantage. First, despite the fact that our Company is just over a year old, we ve been running this business for 30 years in the form of Brookfield s Private Equity business and we have a very strong track record generating returns of more than 20%. Our global scale in the broader Brookfield business gives us access to opportunities in real assets that few other organizations would have access to. Our financial structure, coupled with

3 Brookfield Business Partners L.P. 2 institutional partner capital and Bruce talked about this allows us to participate in large scale transactions that a company of BBU s size would not normally have access to. Our team includes operating professionals and this enables us to pursue companies in need of a new strategy or better execution of a strategy. We have deep distress investing capability, and because we have permanent capital, management teams view us favourably as potential owners and sponsors of their business. We operate our business across four broad segments Business Services, Industrials, Construction and Energy and within these segments we have operations in different industries and regions, and this diversification, it really mitigates any industry-specific or regional volatility and gives us insight into a broad range of business activities around the world. That brings us to our first question we d like to ask you: where do you think BBU should be investing over the next couple of years? The alternatives are North America, South America, Europe, Australia, India and China. It looks like India is the winner by a well, it s moving around a little, hold on. The race is still on. India is the winner by a wide margin, and our view is we are seeing a number of great value opportunities in India today. We re also seeing them in Brazil, although as Bruce mentioned, not to the, I d say, distressed extent they have been. I think we would generally be in agreement with everything here. North America is a little bit pricey today, so we re a little more cautious there, but I think we would generally be in agreement with what your answers are, so thank you for that. I m now going to speak about our activities over the last year. We ve had a very productive year, including making significant progress toward expanding the scale and global footprint of our operations, and our business today is more diversified and has very high-quality fundamentals. Specifically, we deployed or committed $3 billion of capital over the last year to acquire five high-quality businesses, including BBU s first acquisitions in the U.K. and Brazil. We enhanced the capability of our emerging businesses which we expect to be strong cash flow contributors, and I will take you through that specifically. We created new and expanded existing operating platforms, particularly in Business Services and Industrials. We recycled capital, selling businesses and securities to maximize returns, and we raised capital to strengthen our balance sheet. In summary, we ve made great progress in

4 Brookfield Business Partners L.P. 3 repositioning our overall business in a relatively short period of time. Our recent acquisitions have some common attributes that make them great additions to BBU. They have very strong cash flows; they have high barriers to entry; they provide us with opportunities to create value by leveraging not only our operational expertise but the broader Brookfield platform, and they have significant growth potential. I m going to touch on each of these briefly, starting with BRK Ambiental. We acquired a 70% controlling interest in the largest private water treatment business in Brazil in April this year. We rebranded it to BRK Ambiental, or BRK, and we, together with our institutional partners, invested about $1 billions in this. BBU s share is about $380 million. BRK operates water and sewage treatment systems through concessions, providing services to 15 million people in Brazil. The business has long-term take-or-pay contracts or service agreements, so cash flows are fully contracted and inflation-linked which provides downside protection. The BRK investment was a rare opportunity for us to acquire high-quality assets with long-term contracts, strong cash flows, high barriers to entry and significant downside protection, and we were able to execute on this fairly complicated transaction on a value basis, given the challenges that had been happening in Brazil, including, as most of you know, a recessionary economy, a very weak currency, scandals within the government, and we had a very liquidity-constrained seller. We re now implementing our business plan at BRK which is focused on a few areas. First, we plan to enhance the operating performance at existing concessions, and we get paid on a volumetric basis so the more water we deliver or sewage we take away, we get paid for. So, enhancing the current operations actually increases our revenue. Second, we re going to provide sponsorship to the business to re-establish the company as a preferred partner to municipalities. Third, we re implementing management systems across a currently decentralized platform, and we re doing this to ensure timely and accurate information flows, efficient and lower cost operations, and it also will provide the business with very strong compliance and quality controls. We plan to surface value in the longer term from mature projects and reinvest this capital into high-returning new concessions. So, this is a very highly scalable growth platform as a result of this urgent social need in

5 Brookfield Business Partners L.P. 4 Brazil for water and sewage treatment and government planned improvements. We expect this investment to provide us with increasing cash flows for many, many years. We closed the acquisition of Greenergy Fuels in May of this year. Greenergy is a leading provider of gasoline, diesel and biofuels in the U.K., with significant import and storage infrastructure. Greenergy owns 65% of U.K. biodiesel capacity and is the only vertically integrated supplier with blending infrastructure to meet renewable fuel standards. In addition, the company has an extensive distribution network which delivers more than 18 billion litres of road fuels annually. Greenergy has long-term relationships with high quality customers, including oil majors, supermarkets, biodiesel companies and independents in the U.K. We like this business because it has strong barriers to entry as a result of long-term lease or ownership of import and storage infrastructure in its key demand regions. In addition, the business serves markets outside local refinery supply envelopes, which limits any substitution risk. The business generates consistent margins from multiple sources which are resilient across market cycles, and we re able to do this because we can eliminate commodity risk through the structure of customer contracts. So, this is really a fee-earning distribution business. We re focused on growing and diversifying the business by extending customer contracts in the U.K., developing growth strategies for outside of the U.K., particularly in the markets where Brookfield can be of assistance, and this is business is highly complementary to the next business we acquired, which is our acquisition in July of Loblaw gas station operations for about $400 million. For those of you not from Canada, Loblaw is Canada s largest grocery retailer that had built one of the largest gas station networks in the country, 213 stations. The significant scale of this business allowed us to enter into an agreement with Imperial Oil to source premium fuel at extremely competitive pricing. In addition, we entered into an agreement with Imperial to bring the Mobil fuel brand to Canada and rebrand all of our stations to the Mobil brand, and this marks the introduction of Mobil to Canada. This acquisition presented an opportunity to acquire a business with significant scale, strong customer loyalty and opportunities for further growth. In terms of scale, as I mentioned, Loblaw is Canada s largest retailer and gas station network, and the stations themselves have very high volumes. The network averages 8 million litres per site, which is significantly higher than the national average of 3.5 million litres. Loblaw s industry-leading PC Plus

6 Brookfield Business Partners L.P. 5 loyalty program is the largest loyalty program in Canada and is available at all of our sites. Today, these operations generate high free cash flow in a stable demand and supply environment with steady margins and profitability, and we expect to be able to grow this business over the years in a few different ways by increasing market share, by rebranding existing stations and through the addition of value-added services. Our strategic partnership with Loblaw allows us to expand our gas station network to the remainder of their stores, and they have more than a thousand stores across the country. We also plan to execute on acquisitions when it makes sense. I m now going to move into our investment in Teekay Offshore. We actually closed this investment this week. Teekay Offshore is a leading provider of critical transportation and production services to the offshore oil industry and provides services under medium- to long-term fixed rate contracts. So this is not an E&P producer; it s a service provider. The business has a global fleet in regions with very long-life reserves, including the North Sea, Brazil and Canadian markets; has a very strong operational track record servicing some of the largest oil companies in the world. Teekay experienced liquidity constraints as a result of an overleveraged balance sheet and it was put under stress as their construction projects experienced cost overruns. We were able to provide a full capital solution and we ll provide management support to enhance capital allocation and contract execution going forward. To be clear, this is a very well-managed business at the operating level. We like this business because it has a leading position in offshore production services. Teekay controls 40% of the global fleet in the shuttle tanker market. It s among the largest players in the FPSO market with a focus on midsized projects. FPSO, by the way, stands for Floating Production, Storage and Offloading. It generates stable cash flows underpinned by very diverse medium- to long-term fixed rate contracts with very high quality in fact, primarily investment-grade counterparties. So, as a feebased business focused on critical transportation and production services, it has limited direct commodity exposure and its customers have very competitive operating costs which should support continuing production, even in a lower oil price environment. When we did our diligence on this company, that was an area we spent a lot of time and energy thinking through. It has a number of growth projects in the late stages of completion which will contribute to near-term

7 Brookfield Business Partners L.P. 6 cash flow growth, and this is a public company today, as I said. We bought 60% and I believe they have disclosed that these growth projects should add $200 million to their annual cash flow. That brings me to the latest investment we announced. In August, in partnership with Great Canadian Gaming Corporation, we were selected as the successful proponent by the Ontario Lottery and Gaming Corporation, or OLG, to operate and manage three gaming facilities in the Greater Toronto Area, or GTA. The GTA concession that we were awarded represents the largest casino concession ever awarded in Canada. It includes the Woodbine location near to Pearson International Airport, which is a very, very large casino. The GTA concession generates over $1 billion of gross gaming revenue today. We have the exclusive right to operate and improve the existing sites for a minimum period of 22 years, and under some circumstances, we can extend it for another 10 years. We also have the option to develop a fourth casino in the GTA, should we choose to. We plan to reposition the casinos through development, expansion and modernization, which will include integrated property expansions that will increase the gaming offerings to service the GTA market, and we expect to close this investment early in the New Year. We like this investment because it has stable cash flows and an attractive returns profile. We benefit from a highly regulated concession with very strong barriers to entry and a long-term contract which provides us exclusive rights to operate within a large protected zone, which is very unusual for a casino. In addition, with the expansion and modernization of the facilities, we expect to gain market share and revenue in the underserviced GTA market which today has no resort style casinos and very minimal table game offerings. Over the long term, this business should generate growing cash flows for our Unitholders. That brings me to another question. What we d like to know from you is: which new segments do you think we should be investing in? For those of you with the ipads, if you could just enter your suggestion, that would be great. Okay. It looks like well, it s still moving around. It looks like you re changing your mind. So, it looks like healthcare and data centres are two of the top picks technology. I think we would agree with that. Healthcare is an enormous sector. There have to be many areas within it where we can make money. Data centres is an enormous and growing area. Technology is as well. We are already in energy.

8 Brookfield Business Partners L.P. 7 Retail? Possibly but it s not really our expertise, I would say, but possibly. But that s interesting. Thank you. Thanks for doing our homework for us. Last year we spoke to you about something we called our emerging businesses and I thought we should give you an update on where we re at. We re very excited about our acquisitions that we spoke to, and I ll talk a little bit later about how we intend to continue growing the business. First, I want to give you an update on these businesses though. We define an emerging business as operating below what we believe to be a trend line level of operating potential. The biggest ones are listed here and we expect earnings from these to improve from a combination of operational enhancements, improved market prices for their products, and improved product volumes. Our Company stands to benefit most from market normalization and operating improvements from the three listed here, which are GrafTech, our graphite electrode manufacturer; North American Palladium, our palladium mining operation; and Ember, our natural gas operation in Western Canada. At each of GrafTech and North American Palladium, or NAP, we ve recently improved underlying operating performance, and these businesses have become much more competitive as a result. When we acquired GrafTech two years ago, the company had experienced a decline in earnings due to a combination of underperformance and a downturn in the global steel industry, and resulting oversupply in the overall graphite electrode market. We became very involved in the business with a plan to refocus GrafTech on its core electrode business by divesting of non-core segments, focusing production and improving productivity at its low-cost plants. We also improved electrode performance. We completely re-engineered the company s commercial strategy and that really means how you price the product and what sort of contract terms you have with your customers. We also reduced corporate overhead, which we were able to do because we got rid of all the what I would refer to as clutter in the business. In total, we ve generated $100 million of sustainable operating improvements at GrafTech and today it is the largest and most efficient producer in the world in its industry. At North American Palladium, we ve implemented a number of operating initiatives. We expanded the long-term tailings and water management facility; we transitioned to a new underground mining method to improve production reliability and throughput; we very substantially proved up reserves; and we ve

9 Brookfield Business Partners L.P. 8 returned the mine to full-time milling. This has resulted in a 32% increase in payable palladium production. As well, we ve reduced all-in sustaining costs by 15%, and we re forecasting an additional 18% per ounce reduction in sustaining costs through the life of the mine. Like GrafTech, this business is far more competitive now than when we acquired it. We re starting to benefit from price increases in our end markets. At North American Palladium, supply and demand fundamentals remain very strong. There s a fundamental supply shortage, expected to continue for many years, as auto manufacturers focus on improving emissions. The primary use of palladium is catalytic converters. This has driven palladium prices to over $900 an ounce from $700 an ounce last year. This $200 increase in price should result in annual EBITDA increasing by $40 million for our Company at current production levels, and that will increase as production increases as well. In addition, as I mentioned, we plan further operating enhancements at North American Palladium. Natural gas pricing improved this year by 10% over last year, and coupled with an active hedging program, provides greater certainty of cash flows and retains upside optionality at Ember. Each $0.10 improvement in natural gas price increases Ember s annual EBITDA by $5 million or $2 million of BBU s share. The most exciting market improvement is happening at GrafTech where graphite electrode prices are well beyond what our most aggressive assumptions were when we bought this business. Today there is a global shortage of graphite electrodes and steel producers will shut down if they don t have graphite electrodes. It is an absolutely critical part of the production process for electric arc furnace steel producers, yet it only comprises 2% of total production costs. I want to put the price improvement in perspective. We always envision trend line pricing to be somewhere in the $4,000, $4,500 level. For the first nine months of this year, pricing was $2,500 a tonne, so significantly less. We expect our realized price for Q1 of 2018 to be $7,500. Now, that s a combination of older contracts that were priced for that period, and new contracts we re entering into today at much higher prices than $7,500. On an annual basis, each $500 per tonne increase should increase EBITDA at GrafTech by $75 million or $27 million at BBU s share. So, you can do some math; it s kind of fun when you think through it. Obviously, we expect to generate EBITDA next year at GrafTech well beyond our trend line assumption of $300 million. GrafTech and NAP are both I would say we ve been successful in their operational enhancements,

10 Brookfield Business Partners L.P. 9 turnarounds, the markets are pretty strong, and at some point both of these companies will be attractive targets for strategics and I hope our investment banker friends here are taking notes at this point. When we put all of this together, our emerging businesses, which generated only $37 million of EBITDA for the 12 months to the end of June, should start generating meaningful results in the near term. At our view of trend line pricing not above trend line but trend line pricing these businesses should generate about $170 million of EBITDA at BBU s share and that s relative to a book value of about $570 million. With that, I m going to hand it over to Craig and then I ll come back toward the end to talk about our growth plans. CRAIG LAURIE: Thank you, Cyrus. Good morning, everyone. I m here today to provide an overview of our operations and financials, as well as an update on our liquidity and an approach to valuation. As Cyrus described, we are a Business Services and Industrials company with four segments Construction, Business Services, Energy and Industrial Operations with over $14 billion of assets at June 30. BBU has had a very solid start to Company FFO for the trailing 12 months ended June 30, 2017 increased by over 20%. Total assets increased by over $6 billion with the acquisitions that Cyrus described, and our balance sheet remains strong with a conservative level of debt. Our first segment, Business Services, represents approximately $4 billion of assets and $400 million of book equity. It s split between four, I ll call them, sub segments. The first one is real estate services with real estate brokerage, which is made up of 66,000 real estate agents across the Berkshire Hathaway HomeServices brand in the United States and Royal LePage in Canada, as well as our global relocation business. Secondly, we have facilities management with over 300 million square feet of real estate under management in Canada, the United States and Australia. Third, we have financial advisory services, providing investment banking services focused on real estate and infrastructure. The fourth and final segment is fuel distribution and marketing, made up of Greenergy and BG Fuels. Our Services businesses benefit from a recurring cash flow stream which is

11 Brookfield Business Partners L.P. 10 supported by long-term customers, long-term contracts and a high renewal rate. An example of this is our facilities management business where we estimate over a 90% renewal rate. In many instances, clients are looking to reduce the number of suppliers that they deal with and to deal with suppliers that have a global reach. We have benefitted from this trend and we believe we ll continue to benefit in the future. Our Industrial portfolio has over $6 billion of assets and $500 million of book equity. The largest businesses in this segment are BRK Ambiental, GrafTech and North American Palladium. Cyrus has described these businesses as well as the achievements that we ve had in them. Construction Services totals $2.5 billion of assets and approximately $1 billion of book equity. We operate under the Multiplex banner and benefit from a 55-year track record. We have over 6,500 employees in this business with operations in Australia, the Middle East, Europe, Canada and India. We have deep experience in office, apartments, hotels, shopping malls and social infrastructure. Projects are generally delivered through contracts where we take responsibility for design, procurement and construction, and are based on a subcontractor model. While the construction results can be lumpy, and this year has had its challenges, we continue to be positive on our outlook for this business. We have a near-record backlog of $7.4 billion and continue to be awarded landmark projects. Our Energy segment totals $1.4 billion of assets and approximately $300 million of book equity at June 30, comprising oil and gas production and exploration, as well as energy services. Ember, located in Western Canada, is the largest coal bed methane natural gas producer in Canada with low cost, low decline reserves. Quadrant is our Australian operation, is one of the largest suppliers of natural gas in Western Australia. We have put in place financial hedges for the oil production and have fully contracted the natural gas output going forward, leaving little commodity risk in this business. CWC is our contracted drill and well service business in Western Canada. We have four key financial objectives: first, maintain a disciplined financial risk management and a strong balance sheet with ample liquidity; second, strategically refinance existing debt and manage leverage; third, fund growth with cash flow from operations; and fourth, opportunistically monetize mature assets and operations. As part of our disciplined financial risk management, we maintain a strong and flexible balance sheet,

12 Brookfield Business Partners L.P. 11 with ample liquidity and a conservative level of debt. Our current consolidated net debt-to-capitalization ratio is 29%. At the Corporate level, our facilities are undrawn. At this time, we do not intend to draw our corporate debt on the balance sheet for long periods of time, rather, we see it as a bridge for acquisitions or working capital, with longer term debt placed at the operating company level. We recently upsized our revolver by $100 million and completed an equity offering for proceeds of $600 million, returning our liquidity at the Corporate level, after taking into account the recently announced acquisitions, to $1 billion. Our other sources of liquidity include cash flow from operations, strategically refinancing existing debt and incurring additional debt at the operations, and opportunistically monetizing mature assets and operations. We actively monitor the value of our portfolio companies and, when appropriate, will exit to free up capital from these investments to be invested in new or existing businesses. As an example, in January, we sold MAAX Bath and Spa to a strategic buyer. We had acquired MAAX during the housing crisis and we repositioned the company to become a North American industry leader. We did this by, first, appointing a new management team; second, redefining its strategy; third, reduced cost; and fourth, focused on new product development. The sale resulted in a $90 million gain for BBU unitholders before tax, and we recycled the proceeds into our new acquisitions. With the improvements at our emerging businesses that Cyrus described, paired with the contribution from our acquisitions, we believe there will be significant growth in our future Company EBITDA going forward. We reported at June 30 $170 million of trailing 12-months Company EBITDA, and as Cyrus described, there is upside potential in our earnings from emerging businesses GrafTech, NAP and Ember which, when realized, could add over $130 million of EBITDA. If we then layer on our pro forma EBITDA on achieving in targeted investment returns on our acquisitions, our future normalized Company EBITDA could increase to between $475 million and $525 million. With these acquisitions and business improvements in our operations, we have increased the estimated value range of a BBU unit under our approach to valuation to between $29.00 to $ By segment, the updates from last year are as follows. The Business Services segment increased with the acquisition of Greenergy, BG Fuels and the OLG concessions. The Industrials value increased with the operational turnaround and cost containment measures at GrafTech, the acquisition of BRK Ambiental, as well as the price improvement at GrafTech and NAP. We ve held the Construction value

13 Brookfield Business Partners L.P. 12 constant, while the Energy value has increased with the acquisition of Teekay and modest price improvements. Corporate cash includes our cash at the Corporate level at June 30, the proceeds from our recent unit issuance less the cash to fund the acquisitions of Teekay and OLG. Our unit price has increased as the value of the Company has grown, resulting in strong unit performance with a 30% CAGR since the spinoff in June of As demonstrated today, we now have a business with meaningful scale. While we need to fund capex and growth in our existing operations, we will generate meaningful cash flow going forward, which we can reinvest to grow the business and which should bode well for the future value of our units. We do have a polling question. What performance metric do people see as most relevant to you: FFO, EBITDA, AFFO or something else? I think this is good. We added EBITDA this year. We have the components for AFFO in that we do disclose the maintenance capital that we ve invested each quarter. We haven t actually put out AFFO but it is a good reminder for us to do it going forward. With that, I ll pass it back to Cyrus. CYRUS MADON: Thanks, Craig. As you ve heard today, our business has grown a lot in its first year as a public company. We plan to continue growing. So, where are we looking to grow today? First, acquisitions that strengthen and expand our existing segments; and, second, growth of platform businesses organically and through tuck-in acquisitions. We continue to see opportunities across our Services, Industrials and Energy segments today, and while we re active in all of our regions and we talked about this earlier Brazil and India are presenting some pretty interesting value opportunities for us while we re finding North America and Europe to be a little more competitive. That s not to say we won t be investing there, we re just being a little more cautious there today. We re considering new sectors all the time, like the ones that you suggested earlier, where we believe

14 Brookfield Business Partners L.P. 13 we can create a competitive skill set over time. Of course, some of our platform companies may become large enough in their own right that they may form a new segment for us for our business going forward. We re often asked by investors how we differentiate between longer-term businesses and those that will turn in the normal course, so I thought I d highlight the issues we consider when we re looking at opportunities, and they are listed here on this slide. Does the business have predictable free cash flows with stable pricing and volumes? Does the business have a strong competitive position with a sound value proposition, good market share and strong margins? What pricing power does the business have? If we increase prices, can we pass it on to our customers and retain the customers? Are there barriers to entry to maintain a competitive position, including expense to replicate the business, operating efficiencies from scale or brand value? Can the business grow cash flow with minimal additional capex, and if capex is needed, are the returns adequate? Businesses that have most of these characteristics have the potential to become platform companies within BBU. BGIS is a great example of a platform company that we ve owned and grown for 25 years. This is our Facilities Management business which manages facilities for institutional and government clients at more than 30,000 locations, representing more than 300 million square feet of real estate. We like this business because of the very high customer retention rates. The business becomes an important service to the client in fact, an essential service to them and because it achieves growth with little capital requirement, it s an industry leader that can support global operations. On growth, revenues in the business have more than doubled since This was accomplished by growing with existing customers, new customers, and providing new services to our client base, all supported by the growing trend to outsource these services. And acquisitions: Many years ago, as a means to grow this business, we partnered with Johnson Controls. At the time our operations were limited to Canada and Australia. When Johnson Controls made the decision to sell its broader facilities management business, we decided to buy their joint venture interest in these two countries. This really allowed us to start growing the business in the U.S. and in Asia where we re making progress today, becoming increasingly global in our capabilities. We ve since made three bolt-on acquisitions as well. We acquired SNC Lavalin s facilities management business in Canada. We acquired a business in the U.S. called McKinstry and this added

15 Brookfield Business Partners L.P. 14 to our capabilities in data centres; that s their specialty. Our clients today include Microsoft, ebay, PayPal, Disney and a number of other companies. We re now exporting this knowledge and know-how to the rest of our global business and providing our clients with a service in what we call critical environments. We recently announced the acquisition of a business called S-A-S Petroleum Technologies, which is a maintenance specialist in fuelling facilities and gas stations. This is a great platform company. As you ve heard today, we re on a fairly strong growth trajectory by continuing to build our existing business and from new acquisition activity. Our pipeline of new opportunities is strong and we have financial capacity to maintain our investment pace. We expect that BBU will be a different business within three to five years with more and larger platform businesses that have embedded growth opportunities. We ll also be more diversified with a couple of new segments and by region. We continue to benefit from Brookfield s broader business, global reach and sourcing capability. All in all, we expect to have a much larger and stronger business within three to five years. To conclude, the case for investing in BBU is that our existing businesses provide a combination of long-term growth and embedded value creation opportunities. We have a strong pipeline of future opportunities. We have an experienced team with an active management approach and global capabilities, and the broader Brookfield platform provides us with a strong competitive advantage. Thank you for attending our presentation today, and with that, I m happy to open it up for questions. NICK STOGDILL: Hi. Nick Stogdill from Credit Suisse. My question is on capital allocation. About a year ago when you spun out from BAM, about a third of your portfolio, or around that number, was in more of the opportunistic turnaround type businesses; today, that s moving towards 50%. How comfortable are you in allocating more capital to turnaround type businesses? Do you have any caps in place or soft caps that you think about when making new investments? CYRUS MADON: Yes. Look, when we look at the portfolio today, I d say the things that, what we used to call turnaround,

16 Brookfield Business Partners L.P. 15 it s a much smaller proportion. Things like BRK Ambiental, we were able to buy that from really a distressed seller, but it s not a turnaround business. It s a great business today, it just happens to have lots of growth opportunity. Teekay, as well, I really wouldn t characterize as a turnaround. It just had a broken balance sheet, but it s fundamentally a sound business. I suspect going forward we will always do that type of activity. It'll be part of our business, but a bigger part of our business is going to be buying companies that, as I said, we may own and scale for many, many years. NICK STOGDILL: So you see no constraints on the types of acquisitions you may pursue? CYRUS MADON: Yes. We really don t limit ourselves as to what we may or may not buy. We try to be open-minded and the only way we can really be contrarian and buy for deep value is to focus on a particular area when that particular area happens to present opportunities for us. NICK STOGDILL: Thank you. CYRUS MADON: I m going to take a question here. One of the questions here is why BRK was done by BBU and not BIP, which is a good question. First, I will tell you we have a large, I would say a big process we go through for any new investment across Brookfield to make sure it goes in the right bucket. In this case, BRK is a business that generates no cash flow. It generates lots of operating cash flow and it s committed to investing that into the ground to improve the concessions they have for several years. So we don t expect to pull a dividend out of BRK for some time, and for that reason we saw it more as a development play, at least for the first five years, maybe a little bit longer, than buying a mature infrastructure asset that has ongoing cash flows that can be distributed. Another question in the audience? COLIN DUCHARME: Thank you. Hi. Colin Ducharme with Sterling Capital. Just curious what interplay, if any, your segment has with the public securities business in Brookfield. I m just thinking specifically of a few deals you ve done Teekay, Johnson, GrafTech just don t know from a sourcing perspective or any other interplay

17 Brookfield Business Partners L.P. 16 there. Curious on your thoughts, thanks. CYRUS MADON: Yes. They are completely separate. They re walled off. They have no knowledge of anything that s going on in our private equity platform or BBU or Infrastructure or Real Estate or any of our major platforms. Any other questions from the audience? CHERILYN RADBOURNE: Hi. It s Cherilyn Radbourne from TD Securities. My question was just the private equity space is relatively mature and fairly competitive, so I m just curious what you do to ensure that you ve got a continuous flow of what I ll call proprietary deal opportunities. CYRUS MADON: It s a good question and I will first tell you, if you look at our history, the vast majority of our transactions have been proprietary. It s rare that I wouldn t say rare, but the minority of our investments would be an auction situation, and we will only participate there where we think we can bring some angle to a transaction or a competitive advantage and add value to a business because otherwise it s just a cost of capital shoot-out and usually those things may not work out. But we have a very broad first of all, we have a broad network and, as I said, being part of Brookfield, we have an incredible knowledge base around the world of what s going on in real assets. Internally, we have lots of meetings and business development sessions to think through new ideas that just evolve from that knowledge base. Then we have people on the ground in many, many, many regions, as Bruce talked about; we re in 30 different countries, so we just have on-the-ground knowledge which is a huge advantage, enables you to get into deal flow. Then finally, as you know, we try to be more value oriented and a little more contrarian and that s where we find our best opportunities, when other people aren t interested in them. Bruce talked about BRK Ambiental. I m quite certain they approached a number of other parties and many people at the time were just not interested in Brazil, so we were it at the end of the day. Any other questions? Thank you.