Equity Research
U.S. Infrastructure Sector
Initiated Research Coverage With A Market Weight Rating
Investment Outlook For A Burgeoning U.S. Asset Class
• We Have Initiated Coverage Of The U.S. Infrastructure Sector With A
Market Weight Rating. Infrastructure ownership is highly fragmented, spanning
local, state, and federal government, as well as private enterprise. However, there
are only two publicly traded companies in the United States specifically focused on
the ownership and operation of infrastructure. Our current coverage group includes
Brookfield Infrastructure Partners (BIP, $17.50 Market Perform) and Macquarie
Infrastructure Co. (MIC, $29.25, Market Perform).
• A Heterogeneous Sector, With Some Common Threads. Infrastructure assets
comprise a wide swath of investment choices, which makes direct comparison
between investments challenging, but we believe there are a few common qualities
that bind these investments: (1) stable cash flow with inelastic demand; (2) growth
indexed to inflation; (3) high barriers to entry; and (4) capital-intensive, longduration
assets that tend to appreciate in value over time. These characteristics
make infrastructure assets stable, lower-risk investments, despite commonly being
compared with private equity or other ‘alternative assets’, which have significantly
higher risk and return expectations.
• A Burgeoning Asset Class With A Few Global Players Poised To Benefit.
Infrastructure investing is drawing increased attention from investors and fund
sponsors, while governments are increasingly privatizing infrastructure assets.
Despite strong investor interest and broadening investment choices, we believe
there are only a handful of global firms that have the resources and capabilities
necessary to successfully own and operate infrastructure. We believe these
capabilities include (1) sizable capital resources; (2) strong underwriting expertise;
and (3) experience managing infrastructure assets. BIP's and MIC's external
managers, Brookfield (BAM, $28.10, Outperform) and Macquarie (MQG.ASX,
A$51.89, Not Rated), respectively, meet these criteria, and we think BIP and MIC
will benefit from their managers' experience and deep resources. Additional
sponsors that appear well positioned include Babcock & Brown (BNB.ASX,
A$14.33, Not Rated), RREEF (a division of Deutsche Bank, DB, $113.05, Not
Rated), and Goldman Sachs (GS, $178.00, Market Perform), among others.
• Lower Volatility…In Theory. One primary reason to invest in infrastructure is its
relatively low volatility and low correlation to other asset classes. Our experience
with other sectors (notably, commercial real estate) that offer low volatility for
private investments suggests this stability does not necessarily translate to public
equities. Volatility and correlation data to other equity classes for international
infrastructure equities have been low thus far; however, it is a limited data set, and
we believe variability in equity prices may increase as investor interest grows.
• We Believe BIP And MIC Are Well Positioned To Deliver Solid Long-Term
Returns To Shareholders. However, a continued tight credit environment is likely
to weigh on asset values (NAV), keeping share price growth muted. The 2009E
cash flow yield for the U.S. Infrastructure group is 9.5%, which compares
favorably with the that of the real estate investment trust (REIT) group and the
master limited partnership (MLP) group, both at 8.2%.

TABLE OF CONTENTS
Summary Of Key Investment Points On The U.S. Infrastructure Sector ............................................................................................. 5
Investment Summary .......................................................................................................................................................................... 5
Investment Concerns........................................................................................................................................................................... 7
Valuation Methods.............................................................................................................................................................................. 9
Company Comparisons ..................................................................................................................................................................... 10
Industry Overview............................................................................................................................................................................. 11
Company Reports
Brookfield Infrastructure Partners ............................................................................................................................................. 29
Macquarie Infrastructure Co., LLC............................................................................................................................................ 45
Appendix........................................................................................................................................................................................... 67