Good afternoon, and welcome to Brookfield's 2023 Listed Affiliates Investor Day. My name is Alan Fleming. I head Investor Relations for Brookfield Business Partners, and on behalf of the entire senior management at Brookfield, we're really pleased to have you here today. We have a full agenda planned for you this afternoon. We'll get started with a panel moderated by Brookfield's CEO, Bruce Flatt. Bruce will be joined by Cyrus Madon, CEO of Brookfield Business Partners, and Jared Parker, Co-Head of North America for Oaktree's Opportunity Strategy. They'll have a discussion on the current value investing environment. After that, we'll have updates from Brookfield Business Partners, followed by Brookfield Infrastructure Partners. We'll then move into our second panel, focused on opportunities emerging from digitalization and decarbonization, and how our businesses are positioned to benefit.
We'll finish the afternoon with an update from Brookfield Renewable Partners, and then we invite all of our shareholders and investors here with us today for a reception with senior management. A couple housekeeping items to note. We have two short breaks planned during the course of the afternoon, one after BBU's presentation and the second after BIP's presentation before our second panel. We'll also leave time for questions at the end of each presentation. For those in the room, we just ask that you raise your hand and wait for the mic that's floating around. For those online, please submit your questions at the bottom, at the text box at the bottom of your screen.
Before getting started, we'd like to remind you that in responding to questions and in talking about new initiatives and our financial and operating performance for the Brookfield companies presenting today, we may make forward-looking statements, including forward-looking statements within the meaning of Canadian and U.S. securities law. These statements reflect predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risks, and future events may differ materially from such statements. For further information on these risks and their potential impacts on our companies, please see the Risk Factors section of the annual report for each of our companies, which are available on their respective websites.
With that, I'll turn it over.
Okay, welcome, everyone. Thank you, thank you for being here. I'm gonna moderate this panel. I think what that means is that somebody thinks I'm moving into the chairman's role soon, as opposed to normally when you're a CEO, you get to do a speech, and I get to do a moderation, so this is very interesting. Might may be a message there. We're thrilled, we're thrilled to be here. Cyrus on the far side and Jared beside me. Look, I think I maybe just frame the panel by saying that the macro world is always very always very volatile. It seems more volatile lately.
But I think what I hope you'll hear today from these two individuals is that there's always opportunities and actually even more when you're in these type of environments. Our overall view on rates and the world out there is that rates generally have peaked around the world. They may stay a little higher for longer. But what's gonna happen is that capital is gonna come back into the markets because there's just certainty which is in the markets now. When you have extreme uncertainty, inflation is gonna be 12%, interest rates are gonna go to 10%, whatever that is. When you have extreme uncertainty, you really just don't know where to price, and therefore no transactions happen.
With that, Cyrus, so that initial comment, I just say: What, how has that affected-- I guess, just generally, how has that affected the private equity business, and deals and what people are doing out there, us and just broadly, the general industry?
Yeah. So I, I think there's two different points here. One is the, I'll say industry, fundraising has industry-wide for private equity has become much tougher because many firms were relying on selling their assets into a higher multiple environment, and they did it for a long time. In fact, I think since the credit crisis, really, rates have been coming down and, multiples have been increasing, and there's been lots of liquidity to sell into. So in, in fact, probably most firms earn most of their profit by selling at higher multiples.
That has changed very rapidly, and it's put really a deep freeze on transactions in a sense, and that has created a problem for institutional investors, many institutional investors, not all of them, certainly many of the North American ones, where they are now overallocated, that's the term they use, to private equity. They have more than the target they wanted in private equity, exacerbated by the fact that public market valuations dropped. So they aren't re-upping, they aren't making new funds commitments to most GPs out there. So you know, there's definitely a slowdown in fundraising environment for most firms, but clearly, there's been a bifurcation. There's a bifurcation going on of sponsors, those who have, continue to have access to capital, relationships, et cetera, and those that don't.
So the equity markets have come up a lot-- in the last, like six months.
Yeah.
Is that a story that was last year's story, and we're now into the next chapter?
I think things are definitely getting better and definitely stabilizing, and we're starting to see deal activity, but it's not back to the point where limited partners are ready to write large checks to PE firms yet across the board. So I think there are going to end up being fewer private equity firms when this is all done with.
What about deals?
So on deals, deals are happening for those that have access to capital. And if you have access to capital with limited partners and investors and the financing market, and that's the critical thing that investors need access to in order to get transactions done, you can get things done. So it was very slow and starting to pick up, but even all the lenders in the lending community is being far more selective than they have been the last 10 years.
Have you in the companies we have in the portfolio, forget about new deals? What about financing those? Because 12 months ago, the markets were pretty, pretty-
Closed.
Pretty dire.
Yeah. Yeah. It's actually a similar story to the PE firms. There are haves and there are have-nots. Great companies have access to capital. Strong sponsors who have proven ability to deal with issues and be responsible borrowers continue to have access to capital. And I'm sorry, Jaspreet, I'm gonna steal a bit of your thunder here, but in the last three-four months, we refinanced $11 billion of borrowings at our portfolio companies. $11 billion. I think we may have been the most active issuer in North America at virtually the same cost. Virtually the same cost. Our cost barely went up.
But how-- But base rates are up by 400 basis points. How is that possible?
Well, base rates are up a lot. 10-year rates are not up that much. Like, the 20-year—if you go back 20 years, the average 10-year Treasury is about 3%, and today it's 4%-4.5%, like-
The spread has come, is--
Spread is c ome in, and if you own a great company, the spread keeps getting tighter because the company generates more and more EBITDA every year, and you're actually paying your debt down.
Which actually, Jared, Jared co-runs the big opportunities fund at Oaktree. I would use that to segue into--
Sure.
These businesses out there that are good are getting better, but there must be a lot of-- I think there was an email this morning out of Oaktree that said, finding good companies with bad balance sheets. And I guess that really is what you're trying to do, is find the ones that Cyrus doesn't own.
That's right. Not, not everyone's as fortunate as Cyrus, I don't think. Although there are you know, to your point, and, and that's been our mantra since Bruce and Howard started the fund, the firm, you know, +30 years ago, has been looking for good, you know, high-quality businesses that, for one reason or another, have a balance sheet that doesn't match the moment for that business. That and, and I think that's.-- There's always that opportunity. That opportunity set is much bigger today than it has been for probably the last-- since the GFC, maybe the last 15 years.
But because the companies are better, or, or they were ill-financed, or they just got unlucky, or what, what—like, what's the prototype you're looking for?
Let me give you the archetypal issuer that fits this billing. We're seeing this across all industries. It's a bit unique, in fact, because most times when we've seen a dislocation in credit, there's been a single industry at the epicenter that's feeling the adversity most acutely, right?
Yeah.
It's been-
Oil and gas or airlines or something.
During the pandemic, travel and leisure and energy, right? For sure, those were the industries that were most adversely harmed. In the financial crisis, it was the banks and the financial institutions. In the tech bubble, it was the tech and telecom sector. Right now, it's industry agnostic, and what's happened is, you know, Cyrus referenced 20-year average rates of 3%. Well, a lot of transactions took place in 2020 and 2021, meaning new debt was issued, not at the long-term averages, but at the nadir, when base rates were at 0% and Treasuries were at, you know, between 0 and 1%-1%.
Those businesses, which may be very good businesses, took on capital that made sense in that environment, with low base rates, low spreads, and now we're coming up on the sort of five-year anniversary of the first wave of that. That debt's all coming due, and it's coming due into an environment with more normalized interest rates and more normalized spreads.
In the fund, are you buying bonds, or you're doing rescue finances? Like, like, who is, who is getting harmed, or who are you helping?
Who are we helping? Yeah.
in the process of that?
So our platform has the benefit, much like yours, of very broad mandate and broad flexibility. So we are helping companies that have near-term maturities that need to be contended with, that can't get priced in the broadly syndicated market. So unlike the sort of, the issuer that Cyrus is describing, a number of issuers, particularly if you're a B- or B- or CC C, you don't have access to broadly syndicated capital, period, full stop today. There hasn't been a new CCC deal launched in over a year, and the rate at which the CCC index is trading would suggest your cost of borrowing is gonna go up twofold from the on the run coupon that you're paying for that debt right now. So we're-
If who is issued in that window?
In that window, which a lot of it was. I think something like 80%, you would know this better than me, something like 80% of sponsor-to-sponsor transactions took place in that, 2020, 2021 window. So there's quite a bit of that out there right now. And so that issuer, whether it's sponsor or public, has to start thinking about its 25 maturities now, you know, 12-18 months ahead of time. And some of them will wait, and they'll hope that either interest rates will fall or their, earnings will accelerate, and they'll grow into their balance sheet, or both.
Now, some of them are coming to us and saying: "Hey, we don't wanna wait. We and we value the certainty of pushing out this maturity wall right now, and can you help us? And that's what we're-- I mean, that's perfect.
Those would go in your opportunities fund versus, and maybe just for the benefit of people here, we also have, which may not be specifically what you're doing day to day, but a private credit business which has been growing fast. How do those work together? Are they side by side or different?
They're, they're side by side, so we've got multiple strategies. Oaktree is really a credit-oriented asset manager, and we've got lots of different products. Where I sit in the opportunity strategy is our broadest and most flexible product. We have a sister product, which we call Oaktree Lending Partners, which focuses on helping sponsors make acquisitions, and specifically helping large scale, what we would consider to be blue chip sponsors, access capital to invest in new companies. That market is really competing with what used to be a market that was owned by the banks, and the banks have been retreating. The size of the direct lending market is now equivalent to the size of the broadly syndicated loan market, about $1.5 trillion each. Oaktree has actually really been hesitant to enter that market until now.
And right now, we see that market as having very significant advantages, for managers like ourselves, because, unlike was the case in 2000 or 2021, you're able to invest into that market. We're able to invest into that market with not only high-quality sponsors, but much lower loan-to-values. You know, call it, if that archetypal issuer in 2021 was getting 40%-60% LTV on the deals they were doing, it's probably 25%-40% today. Much tighter documents with real covenants, maintenance covenants, real collateral pledges, and lower EBITDA multiples, and the same or even wider spreads, plus a much higher base rate.
Are the opportunities global, everywhere, U.S., somewhere, Europe? Like, what-- where is the--
Sure.
On the liquid side.
Yeah, on the liquid side, by far, the biggest market is the United States, by far. Over 50%, I think, of corporate debt outstanding is issued in the United States. The market is global. We are fortunate, as is Brookfield, to have to be part of a global firm that has visibility into what's happening, and the global forces are relevant in whichever market you're issuing in, right? China's economy is gonna have an impact on the U.S. economy and so forth. So it's great to have that visibility, but I would tell you that at least the way we think about risk at Oaktree, we are really only going to stretch outside of home base if we're really provoked to do so.
Right now, with base rates at 5.5%, spreads at sort of 400 for B, where you're doing, you know, 9%-10% for secured debt at very good businesses, sometimes with very good sponsors, sometimes public companies with equity behind you, it's really hard to justify reaching abroad. You know, we can sort of get it right here.
Cy, what about private equity? Still continuing global or, or is it a similar story?
It's more of a similar story. You know, if you think back to the credit crisis, we, Brookfield, broadly made a lot of investments, many billions of dollars, at the bottom of the market, and we did the vast majority of it in North America, the United States. Most liquid, biggest capital market in the world, you know, home to some of the greatest companies in the world. We don't-- If you don't have to go afar, why wouldn't you just do it in your own backyard?
Well, and we all deploy US dollar funds, meaning i f you go elsewhere, you have to take currency risk.
Absolutely.
There's just another factor if you do it.
For sure.
Uh, but-
Today it's similar story. Like, if I go back two years, Jared was talking about sponsor transactions that were done. And the rough number is if we did a screen of all the LBOs that were done and how many of them had debt yielding 15% or more, I'm gonna guess you, we would have seen 20-ish, 20, two years ago. Today, there's 200. 200. And now they're not all great businesses, for sure. Many of them should never have been bought, but some of them are really good businesses, probably being mismanaged a little bit, over-leveraged, and those present amazing opportunities.
And he's looking for good businesses with bad balance sheets. You're trying to make sure your businesses stay good, and the balance sheets are fine. But just on-- If you took a broad section of the private equity businesses that we have. How are they doing?
Look, all in all, they're doing very well. Like, our same story, EBITDA is actually pretty good. Maybe marginally down, like ever so marginally. But by and large, they're doing well. Look, we're not immune to what's going on in the world. We have some companies that were more impacted by COVID, some that had some, you know, I'm gonna say, commodity-type exposure, resin prices, that sort of things, where we got hurt a little bit. But we can deal with that because we have access to capital. We've been in this game for a long time, so we always keep capital in reserve to solve a problem.
People often ask me, "Well, okay, if I hear Jared's story, it means there's just guys—there's lots of companies out there that are in trouble, and they're all gonna have to get refinanced." But that—it isn't for us, and, like, that's because we're our businesses we buy are different, they're cash flow businesses? Or because we put less leverage on them? Or, like, why are we so, why, why is that the case with us?
It's because, I've made so many mistakes that I've learned from over the years.
Okay, Cyrus's record is 28% IRR for over 20 years. So whatever mistakes he made are not so bad.
So, no, but it's. Look, it's because, yeah, we have access to capital, and we keep capital in reserve, right? Bad stuff's gonna happen all the time. Something nasty is gonna happen. I don't know what the next problem is gonna be, but there will be a problem.
Jared, I think, and maybe you could comment on this, but I think what happened was people got excited during that period of time, and they bought businesses on multiples that were high and didn't have cash flows or expected them to come. And is that what's out there or?
I think in some sectors.
Or they just went crazy and put too high leverage on it at too low interest rates.
I think it's both. I think, you know, in some sectors, especially at that period in time, there was a, you know, there was a drive to find to put risk on, right? You couldn't get risk in-- You couldn't get return for investing in credit. I mean, 80% of the high yield credits outstanding at that time were gonna be less than 6%. And so you know, the thirst for a return was real, and so there was a rotation in capital into sectors like technology, and other more, you know, some de novo areas around healthcare.
Growth businesses.
That were very growth oriented, free cash flow, maybe some pre-revenue.
Pre-- free cash flow, that means losses.
Yes. I guess the distress guy on stage is using the euphemism. But that's right. And so there was a lot of-- And I think something like 40% or so of the transactions that took place in that period were in two sectors, in tech and healthcare. So you're gonna see a lot of activity around those sectors.
So now I found out why, Cyrus doesn't have any problems, 'cause--
That was the answer.
We don't have much tech, we don't have much healthcare.
That was the answer.
Wow! And Cyrus, on-- What is part of it also that you've built up, we've built up a large operational team to run the businesses and work them out? Or is that, is it that important?
It's super important. In fact, that is our key. Look, we have two differentiators at Brookfield. One, we have hands-on operating expertise across Brookfield. We have enormous access to capital. We have a big global platform. Without that hands-on capability to improve businesses, we would not have the franchise we have today. And in fact, most of the value we have created over 25 years has come from operational improvement. That is the exact opposite of the broader industry.
Now, you did buy a software business two years ago. So it might have fit the category of what Jared just stated. Why is it different?
Well, we are looking at mature software companies that are, you know, mission-critical to their customers large scale.
What-- You bought it at, it had cash flow?
We bought a business that, you know, we're generating a 10% free cash yield, day one. We sold off a division, you know, enhanced the business. Our, I think, you know, rough numbers, our EBITDA went from something like $650 million to $850 million or $900 million . In a year and a half, we've done that on a runway business.
Through, through, uh--
All operate-
Cutting costs? Cutting costs and operati-ng-
Cutting costs and selling products that are relevant to their customers and getting rid of products that are not relevant to the customers.
And it's earning today, free capital yield of?
Of strong double-digit yield now. I don't, I don't know the exact numbers. Probably gonna get close to 15%.
It was financed how much when you bought it?
$3.5 billion equity, $5 billion.
60%.
Yeah. Yeah. So but now, you know, if EBITDA is approaching $900 million-ish, well, now it's less than 4x . So that's what we wanna do in, in software.
Jared, and maybe just many people in the room were around in 2008 and 2020. Many people weren't in some of the prior meltdowns. But just if you take 2008 and 2020 and compare it to now, what would you-- Like, how would you--
Just dimension it?
Yeah, yeah. Just for people, 'cause some people, many people here probably lived through both.
Sure.
It, what, right now, is it similar or different? Then, what do you predict over the next 18 months?
So sticking with what is easier to talk about objectively, in what, when the global financial crisis set in in 2008, as I said earlier, it was really initially narrowly focused on a set of actors within sort of the, the financial institutions. Obviously, there was contagion across the whole market, but it was. The epicenter was very clear. The amount of liquid distress opportunity set that resulted or came as a result of the financial crisis was very profound, and it was relatively relative to 2020, it was longer lasting. It wasn't long lasting because there was an intervention from central banks, and there were some government rescues that took place.
But there was a multi-quarter window where folks like ourselves were able to, if you had the stomach, to step into the breach and buy distressed liquid credits in high quantities, high volumes, at very low dollar prices. And we, as a, just to speak about Oaktree, at, in that period, in the 12 months from, take July of 2028, 2008, 12 months forward into, into June of 2009, we invested more than we had ever invested in our firm's history to that point, over $10 billion.
In that period, you were putting, that sounds like $1 billion, almost $1 billion a month?
Something like that.
Wow!
At the peak, probably higher. So that is sort of the belly of that was probably in the fourth quarter of 2008. I think we put $5 billion to work in that quarter. In 2020, the correction and then reversal was much sharper. So there was really only less than a month, maybe it was 3 weeks, where there was real dislocation in liquid public credits. And so you had to be ready, and you had to be big in terms of not just capital, but also people to have buy targets out on enough different issuers that you could get access to the very limited amount of--
And have enough information on them, right?
And again, the stomach, I would say. So we were very active participants in both. We actually, in spite of what I just said, invested more money in the 12-month period around the pandemic, about $14 billion as a firm. And the reason is, in that instance, we were focusing not only on the public distress, but also on private capital solutions. So we were not just sort of taking advantage of distress in the liquid secondary market. We were proactively helping companies.
And, just for the benefit of everyone, like, you financed LATAM Airlines, I think i f I recall.
We did.
With a big rescue financing, which clearly, you said you have to have stomach. Clearly, financing an airline in April 2020 when there wasn't a plane flying was-- You had to have a lot of stomach.
You, you did, although when we tell the story now, it seems sort of obvious.
I realize that.
Right?
It never feels like it at the time.
You know, the number one market share, flying, around Latin America, you know, could you close your eyes and envision a world where you were never going to see LATAM Airlines board a plane again? You know, we, I think we were fortunate enough to be able to, to see a future where this was a good company that had a temporal issue.
Okay, so I got that on the past, but what about like-- What does that mean for right now? How does that compare to what people are interested to hear is not fast? What does that infer? What do you infer from that information and take the environment we're sitting in right now, what does it mean for the next 18 months?
A few things. You know, and I work for someone in Howard Marks that is, fortunately very reticent to make economic forecasts, which gives us the license to admit that we actually have no idea what, you know, the next 18 months or further, let alone are gonna bring. But what seems to be the case, is that we are in a higher-for-longer market. As recently as yesterday's, you know, Fed announcement, seems like the yield curve is starting to flatten. People are less convinced that there is gonna be a rapid decline in interest rates.
When you say higher for longer, what you mean is higher in this range for longer, not higher.
That's right. That's what I meant.
This range of interest rates for a longer period of time.
Yes, thank you.
Okay. Got it.
And so as a result of that, a few things we think are likely to be the case. One, as we talked about earlier, companies that don't have the access to capital or haven't grown at, you know, in, into double-digit free cash flows, as Cyrus' company was describing, are gonna have a hard time refinancing their debt. You know, it doesn't really matter whether we have a hard landing or a soft landing, whether we're in, you know, an accelerating economy or not, there is gonna be a wave of issues.
They have too much debt at these interest rates, therefore, they're gonna have a problem.
Period.
But it sounds like it's not. Like in 2008, it went like this, and in 2020, it went like this. It sounds like this is a march to $28 billion put to work. It's not a-
That's what we're sort of bracing for. But, you know what tends to happen, and I would have.
You're bracing for just a pace of deployment.
Yes, exactly. Lots of rescue loans, lots of private capital solutions, the occasional, you know, default, and bankruptcy, where maybe there's a dip or a rescue loan or something that we can do to help a company restructure. But it is certainly possible, and I think, you know, I hesitate to say probable, but what ordinarily has happened is there was a catalyst, maybe one that we haven't predicted or, that isn't obvious, that it swings the pendulum away to the other side. And if you go back 12 months and looked at where public markets were pricing risk, 12 months ago, I think most people would have said, "We're in for a hard landing." You know, credit spreads were touching 600 basis points over base rates.
The equity markets were down. I think the equity markets finished last year down 18% or so. S&P, I think, was down 18%. High yield was down 11%. Right now, one year later, I'm not sure all that much has actually changed. The Fed did exactly what they said they were gonna do. Economy is not rapidly accelerating. We may not be in a recession, but we're not rapidly accelerating. But the sentiment in the market is for sure, soft landing. Goldman has, you know, reduced their —recession predictor. So, what's happened, credit spreads, spreads are now 400, so they've come in 200 basis points.
Sai, do you have a view?
I think he said it much better than I can ever say.
But, so, but you don't think there's, other than something, there could be accidents out there, it's just going to be—there's just gonna be opportunities coming, lots of along.
Lots of opportunities coming. And I think for our private equity business, the most important thing is we're in a reasonably stable rate environment as it relates to long-term rates, and we finance most of our businesses based on long-term rates.
What gets you most excited other than everything, right now?
What, what Jared said, technology and healthcare is very relevant because that's where all the capital flowed into. That's where the biggest debt problems are, and that's where we're spending a lot of time today.
Which is why 18 months ago, you started building businesses in both of those, but deployed very little money.
Correct.
Is it buying secondaries or it's just, it's all the above?
All of the above, but the bottom line is there are gonna be great businesses that can't be refinanced, and they need help.
Jared?
I think for us, it's just the numbers. You know, we have a 100-year history of 9%-10% returns on stocks, and right now, that's what you can achieve buying secured debt that's performing, let alone finding the opportunistic opportunities in credit.
Although you earn 20% returns in your fund, not 9% or 10%. You're saying 9% or 10% in performing credit. Can you buy performing credit earning 20?
You can wake up and invest in performing credit, even factoring in, you know, a point or two of losses, and essentially match the 100-year return on the S&P right now. And hopefully, with some underwriting skill and what we've been able to do historically in our strategy, that's, you know, the starting point, and so we should far exceed that.
So, before we end, I'd sum up by saying, A, thanks to both of you for being here. We think the world is. There's a lot of opportunity that's out there. And it's gonna be very interesting for both of these businesses, but merely because we have access, access to capital and a franchise that can, that can capitalize on it. And I'd say that's probably what sums up our views in general. So, thank you for listening. We're gonna take-- We need one minute to adjust these chairs, and then I think Cyrus is coming back up to start the discussion on Brookfield Business Partners.
Well, welcome to our Investor Day for BBU. Presenting with me today, Anuj Ranjan, our President, Jaspreet Dehl, our Chief Financial Officer, and Stuart Levings, the CEO of Sagen, our mortgage insurance business. I'm just curious, are any of you new to BBU that are here? Couple of people. [crosstalk] Okay. All right. Well, for those of you that are new, BBU is Brookfield's industrial and service business, and it allows investors to participate in Brookfield's private equity activities. So we had a very active year since we spoke to you last. We closed on $1.4 billion of acquisitions. We secured $1.9 billion in proceeds, primarily through the sale of companies. We refinanced $11 billion of borrowings, as you heard us talk about earlier, on really great terms.
Jaspreet is going to get into the detail there, and we continued to generate very strong operating results. Now, as you can see on here, that the size of our business grew pretty meaningfully. We reached $2.5 billion of EBITDA over the last year, and our earnings from operations reached $1.2 billion. Now, growing in size alone is not our overall objective. It's to increase cash flow and value on a per-share basis. And our earnings from operations remain strong. Now, it dipped a little bit, primarily because of increased interest rates, but we're confident, we have conviction over the long term, we will continue increasing our EFO per share. A common question that we've been getting is: how are we coping in this investment and operating environment?
And, I'm gonna repeat a little bit of what we just talked about, if you don't mind. But, as you, as we all know, rates are up quite a bit, very rapidly. Labor markets remain very, very tight. That has had some impact on our businesses. Inflation remains high, although it's come off quite a bit. It's still high from a historical basis. So what does that mean for our investment approach? Well, because BBU is a partner to Brookfield's private equity activities, it's helpful to look at Brookfield's private equity history. Over 25 years, you'll see that some of the best investments we made were during these periods of volatility and uncertainty. Simply because in tough environments, capital dries up and investors lose confidence.
Competition for assets and businesses is typically reduced, and the last three years has presented phenomenal opportunities to BBU for this reason. Over that same 25 years, Brookfield has generated strong returns for investors in its private equity strategy and within BBU. That's in the past, and what does that mean for the future? Well, we think the setup for continued value creation is great, and here's why. First, over the last five years, BBU invested $7 billion at its share, paying an overall acquisition multiple of less than 10x EBITDA. During the same period, the average market multiple was north of 14x, so we clearly invested for value. Second, BBU bought super high-quality businesses. They provide products and services that are critical to their customers. This enables us to maintain revenue in all sorts of environments.
We also bought market leaders, which means we have pricing power in an inflationary environment, which has been really important recently. Our businesses have durable competitive advantages, which support strong margins. These businesses also have high returns on capital, which means that capital reinvestment generates strong returns. All of this means our large-scale, high-quality businesses are generating strong and resilient cash flows. Finally, over that same five years, our overall blended EBITDA margin has consistently improved. Quite simply, we own great businesses, and we're making them better. The quality of our underlying operations is the best in our history. Now, six of our businesses, which we refer to as the Super Six, generate the majority of BBU's EBITDA and free cash flow. Each of these businesses are truly exceptional in their own right. They're market leaders, providing mission-critical products and services with strong margins and excellent growth potential.
I wanted to touch on two of these in particular, starting with Clarios. Clarios is the global leader in the manufacture and distribution of low-voltage battery systems for the automotive industry. One in three cars in the world are powered by our batteries. Clarios is 5x larger than its nearest competitor. Its software, its system integration, and battery technology are unmatched by any of its peers. 75% of its revenue is generated from replacement batteries, providing it with super stable demand. Every vehicle, including every electric vehicle, I'm gonna repeat that, every electric vehicle, needs a Clarios-type low-voltage battery, and today, Clarios is working with virtually every automaker on their next-generation electric and autonomous vehicle platforms. In fact, since we acquired Clarios, its low-voltage systems have been chosen for 140 electric vehicle platforms. Clarios is doing extraordinarily well financially.
It's generating about $500 million in free cash flow every year, even after making significant investments into advanced battery production. It will soon exceed $2 billion of EBITDA, and we have line of sight to $1 billion of annual free cash flow, and BBU owns 28% of this incredible business. The second business I want to talk to you about is Scientific Games, the newest member to the Super Six. Scientific Games is also a global market leader. It provides technology and systems for governments to run their lottery systems, and it includes Powerball, Mega Millions, Lotto 6/49, and scratch lottery cards. The lottery industry has been incredibly resilient across multiple decades. In fact, over the last three decades, U.S. lottery sales have only dipped once. In 2009, they dipped less than 1%.
There are very few industries that are so stable and have year-on-year growth. Because of this backdrop, Scientific Games generates stable cash flow, which grows over time. But the real excitement for this business is the growth that we expect from something called iLottery, which is lottery on your phone or your tablet or your computer. iLottery is still in its infancy, but over time, we expect that most U.S. states will adopt this as a big driver of incremental growth to their lotteries. The business is already the primary technology provider to three of the top iLotteries in the world. So I hope you'll agree that these are two exceptional businesses. The main point here being that BBU owns several of exceptional quality. So before I conclude, I want to touch on prospects for monetizations and capital recycling. That's another question we get a lot.
Since the inception of BBU, we've sold 16 companies. We generated net proceeds of $6 billion and very strong returns for BBU. But given what we own today, the best is yet to come. And while the last couple of years have been tough for the capital markets, we're definitely seeing signs of improvement, which should support additional monetizations. Debt markets have stabilized. In fact, I'd say they've improved meaningfully for strong companies. Equity markets are stabilizing, and M&A activity in the private, private markets is definitely starting to pick up. To give you a little bit of context, about a third of our cash flow today comes from businesses that are early in our value creation plans. A third are midway through our plans, and about a third are reaching a state of maturity. And this means we should always have businesses that are ready for sale.
Markets permitting, we'll have a very active capital recycling program to fund our growth. If I can leave you with one important thought, it is this: please don't confuse value and value creation with monetizations. BBU is a very valuable business, no matter when we decide to sell an operation.
With that, I'm going to hand it over to Anuj.
Thank you, Cyrus. There we go. We are value investors, and those of you who know us well know that we're no stranger to complexity. In fact, we often seek out complexity because it creates an opportunity to acquire for value. We often like to buy businesses that are out of favor, misunderstood, sometimes not totally resonating with the public markets. And through Brookfield's broader platform across sectors and in many geographies around the world in which we operate, we have an ability to distinguish ourselves as a partner of choice. This is a great example of this is Network International, an acquisition that we recently announced in June. This is the leading payment processing and merchant acquiring business in the Middle East.
It forms the financial backbone of the 15 economies that it operates in, and it services more than 150,000 merchants, manages 18 million credit and debit cards, processing almost $50 billion of annual payments. It's an incredible business, very high quality, that provides essential technology and services that allow both governments and merchants to securely process online and offline transactions. It's got huge tailwinds. Network has been growing 20% year-on-year for many years, and that's driven by the fact that cash is continuously moving to card, and there is a continuous shift to online payments. We were able to acquire this business for some of the reasons that I mentioned earlier. It was out of favor. While it's largely Middle Eastern business, it was listed on the London Stock Exchange.
With the markets correcting in London over the last couple of years, in addition to the fact that it did not really resonate as a Middle Eastern business with the shareholder set in that market, it was trading at a, what we felt, was quite a deep value. We were able to become a partner of choice. Brookfield, as a whole, has been in the Middle East operating since 1997. We've invested over $8 billion across real estate infrastructure and private equity, and we have multiple offices in the region, deep relationships with the banks, who are the important counterparts and customers for a payment processing business.
And because we already own the number two player in the market, which we acquired in 2022, called Magnati, we were able to bring an operational value creation plan, unlike anybody else would have been able to with this business. We're actually very excited about putting Magnati and Network together. We're going to create the leader in the market with a 70% market share of payments in these regions, a very fast-growing region where, as I said, growth has been over 20% year-on-year. We were able to acquire the business, though, for 11x EBITDA, considering how fast it grows and considering the fact that we can leverage the technology in both businesses to reduce CapEx and have a better tech stack.
We think that this is quite an attractive business that we were able to buy, and we're very excited about its potential. This type of value creation, of adding, increasing margins and bringing operations, bringing operational benefits to the businesses we own, is becoming more and more important in the world and the environment that we're in. It'll come as no surprise to any of you that the acquisition multiples in the private equity sector have increased dramatically over the last 10 years. In fact, it's gone up almost 4x since 4x EBITDA since 2010. And if you look at the past period, since 2010, so the last 13 years, the private equity industry has benefited from this multiple expansion. In fact, about 50% of the whole private equity industry's returns have come from multiple expansion.
The vast majority of it has been multiple expansion or revenue growth, and only very little has been on operational improvements. For our business, on the other hand, the majority of what we have been able to do in our businesses, the majority of the value that we've created are things that we control. Things like operational improvement, where we've been able to increase margins and increase the cash flow of the underlying businesses, and by buying businesses for value, as I've outlined earlier. Now, don't get me wrong, we do love multiple expansion. We've been a beneficiary of multiple expansion. I'd like to win in the casino as well, but we like to invest based on things that we know that we can achieve in the businesses that we own.
We roll up our sleeves and get involved in the operations to enhance their cash flows, and we've done this by creating a repeatable process that we can apply to every business we acquire, across regions and across sectors. The best way to outline this is with examples. If you take Westinghouse, for example, we were able to refocus the business on more profitable products. We were able to work with the management team to put in place a better organizational design, and we were able to invest in technology, which ultimately grew EBITDA by $350 million. Another example is BrandSafway. And while BrandSafway was impacted by the pandemic, we were still able to use that opportunity to invest in the organizational structure and design.
Largely, actually, we focused on procurement and optimizing the branch network and getting more out of our branches. We've already seen some significant cost synergies as a result. With this, we've been able to make 20 acquisitions over the last five years, and we've actually generated $1 billion of EBITDA improvements across all of these businesses, $300 million at BBU's share. That is-- Another couple of examples I'd like to talk about where we are doing the same as DexKo. DexKo is a leading manufacturer of components for highly engineered components and parts for the trailer industry. It's a market leader with about 50% market share in its core product offerings, and it's vertically integrated, providing a holistic solution for its customers.
The fragmented nature of its customer base allows the company to have significant pricing power, even in this inflationary market, and as a result of all of this, that it's got quite strong margins and a very resilient cash flow profile. Through some of the same items that I've already described, focusing on things like procurement, on vertically integrating and an acquisition of TexTrail, which allowed us to realize significant synergies in the business, we've been able to increase margins by about 200 basis points, and that's just the beginning of our value creation plan. Another example is CDK. This is the software company that Cyrus was referring to earlier, a mature software business that provides mission-critical technology and services to the automotive industry.
It's an industry leader, and its product is mission-critical in the sense that its customers rely on it every day for their daily workflow, and their employees do as well. As a result of this, the great relationship it shares with the customers, it's got a very high customer retention rate and annual recurring revenue and very strong cash flow generation. We are well ahead of plan. I must say that I think a year ago, at this very forum, we stood and told you that we would increase margins by 10%. I'm glad to say that we've actually delivered that, actually slightly better, increasing EBITDA by over $250 million in the business by reducing costs, improving the organizational structure, and focusing the businesses on products that are more relevant to their customers.
The upside is quite significant for BBU going forward. This is probably the most important slide I'll have up here today, and what I-- The point I would like you to take away from this is that even if we do nothing, if we don't acquire any more businesses, the fact that our value creation plan is still, in some cases, in early to a mid-stage, we are continuously improving margins, and BBU's EBITDA will increase by almost 20% without any more investment or growth. Being able to improve EBITDA over the medium term continuously, purely through operational improvements, and because we bought these businesses for value, is quite unique. If I could leave you with three things, it would be that we're value investors. Over 25 years, we have continuously bought businesses at single-digit multiples.
We roll up our sleeves, we get into the business, and we improve the margins, and we improve their cash flows. As a result of this, the potential for BBU is tremendous. Next up is my colleague, Stuart Levings, who's going to-- the CEO of Sagen. As many of you know, and as Stuart will tell you, Sagen is the leading private mortgage insurer in Canada. We're excited to have him here today to talk about, against the backdrop that you heard earlier of higher interest rates, understanding the housing market and the mortgage insurance market, and frankly, why this is one of BBU's best businesses, and why we're still so excited. Thank you.
Thanks, Stuart?
Thank you, Anuj, and good afternoon, everybody. Sagen is an essential service provider in the housing finance sector, focused on helping first-time home buyers achieve responsible homeownership. We work with all the major lenders in Canada, providing default risk transfer and capital relief in exchange for a single, upfront, and importantly, nonrefundable premium. Mortgage insurance is also a mandatory product for all home purchases with a down payment less than 20%. Now, this is good for us because it eliminates any potential adverse selection. As Anuj noted, Sagen has been in business providing mortgage insurance since 1995, and is the largest private sector mortgage insurance today. We've built deep relationships with our customers, leveraging our data and our analytical capabilities to provide value beyond the mortgage insurance transaction. And we've seen great market share growth under Brookfield's ownership.
The Canadian mortgage insurance market is one of the best in the world. We have three disciplined providers and a conservative lending environment based on industry underwriting practices and strict regulations from OSFI, our federal supervisor. Legislation provides for lender recourse, which basically means that borrowers are liable for their debt, even if they turn their home back to the lender. So Canadians don't typically walk away if their home prices fall below their mortgage amount. We receive our premiums upfront, as I noted, and we invest it for the duration of the policy. The U.S. market, on the other hand, is quite different. It's heavily competed, with numerous providers in a state-regulated environment. There is limited recourse, which meant during the global financial crisis, we saw a tremendous number of homeowners walk away from their debt, so-called Jingle Mail, as some of you recall.
In the U.S. model, it's often a monthly paid premium as well. And what that means is that once that borrower's LTV or loan-to-value drops below 80%, they stop paying. And what that does is it highly concentrates the risk with the remaining portfolio, because those are the borrowers who can't seem to get their mortgage paid down as much. We insure high-quality mortgages with strong borrowers, and essentially act as a second set of eyes on high-ratio mortgages. Our insured borrowers are typically first-time home buyers, purchasing entry-level, owner-occupied homes. And that is important because we have no exposure to investors and rental properties. We insure mortgages all over Canada, with the majority of them in major urban areas, and we benefit from a diverse Canadian economy, with rarely more than one or two provinces in a simultaneous economic downturn.
Our solid business model has delivered durable earnings and cash flows through a variety of economic cycles, including very stable performance during the global financial crisis. The business experienced record results in 2021 and 2022 due to tailwinds in the Canadian housing market that far exceeded our own expectations. Performance is now normalizing again in line with our historical norms. Since the acquisition by BBU in 2019, we've been able to make significant improvements in our returns, which have increased approximately 800 basis points from around 12% to a sustainable 20% today. Our efforts focused on growing market share to benefit from scale, as well as improving our expense ratio through productivity, eliminating some public company costs, and redesigning our IT platform. We also added an appropriate amount of cost-efficient leverage and optimized our investment portfolio to enhance returns.
Sagen is a very well-capitalized company with a strong conservative balance sheet. As I noted, we added cost-efficient leverage while maintaining our strong investment-grade credit ratings, which are very important to our customers. We took a proactive approach to refinancing our debt so as to avoid a stacked maturities profile. The business has been able to generate significant cash flows. In just three years of ownership, we've returned over 60% of invested capital to shareholders in the form of cash distributions. Our insurance portfolio is essentially the strongest it's ever been, due in large part to our strong risk management framework, our conservative underwriting stance, as well as the environment in which we operate, including very strong house price appreciation over the last decade.
We've continuously improved our underwriting approach, adding high-quality borrowers with an average credit score of around 754 today and above-average family incomes. The above-average family income is largely because we have a lot of dual income borrowers, dual income families, and that's essentially the only way that many first-time home buyers can afford a home in major urban areas today-- The above-average income with borrowers purchasing below average or starter entry homes will results in very strong debt service ratios. Our insurance risk is backed by strong underlying collateral, with significant embedded equity, driven by principal paydown and of course, a decade of strong house price appreciation. We view mortgages with a loan-to-value below 80% as essentially low risk, or in some cases, even off risk, and we have 74% of our portfolio in that category.
Embedded equity is a very important component of our business performance because it acts as a buffer against potential economic headwinds. We operate with a proactive risk management framework. We actively engage with lenders on loss mitigation strategies. Our focus there is on avoiding unnecessary foreclosures, foreclosures that would be driven by a temporary financial difficulty, especially where the borrower is still employed and able to make some level of payment. We leverage predictive analytics and our own database and stress testing to inform our risk appetite, which we then adjust in terms of underwriting criteria in response to emerging economic risks. As I noted before, we're well capitalized under OSFI's capital test, which essentially requires us to hold significant amounts of capital to withstand a very severe tail event.
The global pandemic saw an unprecedented level of home sales as consumers had extra disposable income and a desire for more space. As we all know, this demand was further fueled by record low interest rates, resulting in extremely high levels of new underwriting volume for us in 2020 and 2021. Demand cooled somewhat after that as rates began to rise in 2022, and very quickly, industry stakeholders started to shift their attention to, so what happens when all these mortgages renew in five years' time at significantly higher interest rates? Well, in our view, Sagen is very well positioned to manage the impact of higher interest rates on mortgage renewals. First of all, approximately 80% of our portfolio is comprised of fixed-rate mortgages, which, as the name says, means that their payments don't change as interest rates change.
That's because first-time home buyers generally prefer payment certainty. Secondly, and probably the most impactful in our industry over the last five years, is the mortgage rate stress test. This stress test requires that borrowers qualify at a mortgage rate at least 200 basis points higher than their contract rate. That means that in our portfolio, all our borrowers have been qualified at a rate of at least 4.9%, as it was, currently much higher when you add the 200 basis points onto today's mortgage rates. This rate buffer will be extremely important in helping to absorb any potential payment shock at renewal. When we forecast out the expected renewal rate around 2025, 2026, the essential rate that they're gonna be paying is around 4.9%, 5%, which is exactly in line with that qualifying rate.
And we've seen the benefit of the mortgage stress test already in our current renewals. We've seen many fixed-rate mortgages renew this year at rates that are substantially higher than what they had as a contract rate, and yet delinquencies have barely risen. We've also seen how adjustable-rate mortgages behave, who have seen significant payment changes, and they, too, are managing just fine at this point. In our view, less than 1% of our portfolio is actually at significant risk of payment shock based on high debt service ratios. And in the event that payment shock would, in fact, drive a default, we would allow and do allow our lenders to extend the amortization as an escape valve to reduce that payment amount. Now, lenders are doing that themselves already on their own portfolios as well.
The reason why it really works well for Sagen and for the high ratio industry as a whole, is that our buyers are typically first-time home buyers, as I noted, which means they are a younger profile with a lot more potential for income growth over the next five years. That basically means that between income growth and equity build in their property, there is a very, very low risk of default at the next renewal. We think that the extending of amortization is a very effective default management tool in the Canadian industry, and provided employment remains strong, which we believe is the outlook, we think that this strategy will prevent any major war of defaults as mortgages renew in 2025 and 2026. Now, we also expect to continue generating resilient performance based on both the current and long-term fundamentals of our industry.
Recent market fundamentals are stabilizing. Home prices have begun to recover as sales activity responds to a more stable interest rate environment and ongoing strength in the labor markets. Home prices and employment levels, as you can imagine, are essential business drivers for our performance, impacting both the frequency and severity of any insurance claims. The long-term fundamentals are also very positive. Strong population growth, driven primarily by immigration, continues to drive housing demand. We know that Canadian immigrants tend to be very well-educated and often buy a home within the first few years of arriving in Canada. However, a chronic undersupply of new construction has led to an ongoing imbalance between demand and supply. Now that in itself makes it difficult for new home buyers to get into a home, but it also provides tremendous support for Canadian home prices, even in an economic downturn.
Now, as this rate tightening cycle does take hold and the economy slows, we do expect to see a modest increase in unemployment over the next 12-18 months. That will cause our loss ratio to rise from its current record low levels, but still well within our long-run expectation of around 15%-25%. So let me wrap up with this. Sagen has demonstrated its ability to generate strong returns and cash flows through a variety of economic cycles, due in large part to the strength of our business model, our disciplined risk appetite, and the very supportive environment in which we operate. We feel confident in the business's ability to sustain our improved return on equity at 20% and approximately CAD 350 million of annual earnings and distributions based on our outlook for the Canadian economy. This translates into approximately $150 million of earnings and distributions at Brookfield Business Partners Share.
With that, I'd like to thank you for your attention, and I'm going to turn it over to Jaspreet Dehl, CFO at BBU.
Thanks, Stuart, and good afternoon, everyone. There are three main topics that I wanted to cover with you today. The first is around how we think about financing our operations. Cyrus and Anuj talked about the strong performance and quality of our businesses, as well as the value creation plans that we have in place at these operations. What's crucial is having resilient capital structures through any kind of economic cycle that allows us the time and space to execute on these operational plans. I'm going to spend some time today discussing the refinancings that we've been able to do in the current environment. I'll then discuss the strength and positioning of our balance sheet, and finally, the value proposition for BBU. Many of you have seen this slide before, but I thought it was worth sharing, as I wanted to reiterate to you that our approach to financing remains unchanged.
When we think about financing our business, all of our debt sits within our operating companies, with no recourse back up to BBU and no cross-collateralization across businesses. We want to make sure that the debt that we put in place within our operating companies is serviceable in any economic cycle, and we want to make sure over the long term, it's sustainable and manageable for the company. And finally, our focus continues to be on ensuring that we have no permanent debt at the corporate level. Now, when we talk about financing our operating companies, we have access to a diversified sources of financing. These include the term loan and bond markets in the U.S. as well as in Europe, bank financing through our global banking relationships, and the private credit market, where that's appropriate.
Being part of the broader Brookfield ecosystem provides us with a tremendous advantage when we look to access the capital markets. We have a deep strength within Brookfield and expertise to help us ensure that we get best execution on the refinancings that we take to market, and we do it at the appropriate time and take advantage of windows. As Cyrus mentioned, overall, markets seem to be stabilizing, and that's true for the credit markets as well. We've seen banks sell down the majority of the unsyndicated leverage loan financing that was on their balance sheet. We've also seen corporate bond issuances pick up. On the other side, we've seen limited new M&A-related issuances, and what this seems to have created is pent-up demand from credit investors to put capital to work. But capital isn't available to everyone today.
What we're seeing is a clear bifurcation in where people want to put their capital, and it's gravitating towards high-quality issuers that have shown that they can withstand the high interest rate environment and also run their businesses in a challenging operating environment. We can see here that in the high yield bond market, prior to the Fed's rate hiking cycle, the differential between a B-rated bond and a CCC rated bond was about 250 basis points. That differential, in two years, has doubled to over 500 basis points. This bifurcation in credit quality has actually been good for us, as it favors the types of businesses that we own, and the debt of our businesses has traded quite well in the market.
In fact, if you look at the debt of some of our Super Six businesses, like Clarios, CDK, Scientific Games, they're trading at or near par today. This puts us in a unique position where we have access to capital at a reasonable cost, and we've been able to amend and extend our maturities, and in some cases, get increased flexibility on terms. So what have we been doing? We've been taking advantage of the opportunities to refinance existing borrowings, as well as amend and extend any maturities. Cyrus mentioned this earlier, but we've refinanced $11 billion of non-recourse borrowings during the year, this year. This includes Clarios, where we've saw a lot of demand from investors, and we were able to upsize our offering, and we were able to do these refinancings at reasonable cost, optimizing pricing across the board.
I thought I'd dwell a little bit deeper into a couple of the refinancings that we've done, just to give you a sense of what we've been doing. Anuj talked about CDK Global and the incredible performance of this business. We were able to refinance out about $750 million of private capital out of the capital structure at CDK and replace it with first lien notes. And in doing so, we were able to reduce the overall cost of that borrowing, that tranche of borrowing, by 320 basis points. At our work access services operation, BrandSafway, where we did see the business being impacted through the COVID shutdowns, we've seen a very good recovery over the last few quarters. We refinanced the debt at BrandSafway and saw borrowing costs increase about 90 basis points.
We also put some capital in to delever the balance sheet at BrandSafway. We were comfortable investing this incremental equity because we feel confident that it should return. It should provide good returns to us. So if you step back and you look at all of the refinancings that we've done, we've been able to effectively manage all of our maturities. We were able to extend the weighted average maturity on the refinancings by about three years. In a lot of cases, we were able to get improved flexibility in the terms within our debt documents. And if you looked at the cost of all of the debt that we refinanced the day before we refinanced it versus the day after, the cost is very similar.
Just to put a finer point to it, the overall cost on a weighted average basis was 25 basis points higher. So where do we go from here? As we look forward, we think we're very well positioned. Our balance sheet remains strong. The weighted average debt maturity for our borrowings is 5.8 years, and most importantly, we don't have any significant maturities over the next 12 months. The majority of our refinancing needs are behind us, and what this means is that it gives us significant flexibility to opportunistically manage long-term maturities over the next few years. I feel like Jared set me up well for the next slide, where he talked about how there may be a wall of maturities coming in over the next couple of years.
If you look at our borrowings and all of the debt that's maturing within the next three years, 80% of that debt is in six operations, and we've listed the operations here. The biggest piece of the debt is at Clarios. Cyrus talked about the high quality of this business. It's generating a lot of free cash flow. We've been delevering the business, and we don't anticipate any issues refinancing this debt. The other, La Trobe, Air Liquide, and Tel, these are businesses that will refinance the debt. It's just part of normal course operations. At Altera, we restructured the balance sheet last year, and we made sure that the capital structure in that business is sustainable in any environment, and we don't foresee any issues just rolling over normal course debt.
We have a little bit of debt at Schoeller, about EUR 250 million, which we're managing through right now, and in due course, we'll refinance. And then finally, Westinghouse, which we expect will close the transaction in the coming months, and not need to refinance that debt. And as we close the Westinghouse transaction, we'll generate $1.5 billion of proceeds that we'll use to pay down the borrowings on our working capital facility that we made to bridge acquisition and monetization activity. And that will give us significant flexibility in our balance sheet for growth as we're looking forward. So if we look forward and talk about earnings from operations and cash flows, the disposition of Westinghouse and the higher rate environment has impacted our earnings, excluding gains. And when--
But when you couple that with the value creation margin improvements that we've already realized and everything we have planned within the business, we expect EFO will grow about 20%. And just to be clear, this doesn't factor in any potential normalization of interest or the benefit of any future debt paydowns. And if we roll this up to free cash flow, that results in an increase in free cash flow generation in the portfolio of businesses that we own today from approximately $500 million-$700 million, or a 40% increase. So before I wrap up, I thought I'd spend a few minutes just framing what this all means from a value perspective for BBU. At today's market price, BBU is a tremendous value opportunity based on any metric. Take any one of our Super Six businesses. I took Clarios here for illustrative purposes.
That one business alone has about $10 of equity value. What this means is that at $16 today, you can get the rest of BBU, so if you take out Clarios, you're left with the Fabulous Five, plus all of the other portfolio companies, for basically $6 per unit. You do need to factor in the working capital lines that we've got drawn today, but any way you cut it, this is an amazing entry point for BBU. And then what's the reason to stay invested? Because the longer-term value proposition is very compelling. We've grown BBU into a high-quality business today that's generating a 19% EBITDA margin, and that EBITDA margin was 18% last year. That's in line with the highest quality services and industrial companies. But our trading performance hasn't correlated with the underlying quality of our earnings.
And to put this in context, we're generating about a 15% free cash flow yield today and trading at an 8x EV to EBITDA multiple. Compare that to high quality, diversified services and industrial companies. They're trading at a mid-teens EV to EBITDA multiple and about a 5% free cash flow yield. So the point is that that this is the opportunity over time, and we do think that the quality of earnings and cash flow generation is being underappreciated today. There's significant upside in the value of our units, even at a very reasonable multiple of the earnings that we generate today.
Thank you, and I'll pass it back over to Cyrus for Q&A.
Thanks, Jaspreet. I think we have time for a few questions. Just ask you to raise your arm, and someone will bring you a microphone.
Thanks, Cyrus. Gary Ho from Desjardins here. So you talked about monetization, and you said there's best is yet to come. Maybe can you talk about the channels that you hope to monetize your assets? Is it through IPO? Are some of your Super Six too big for strategics, or is it selling to other private funds? And a follow-up.
Yeah, so I, I think it's all of the above. The really large, you know, Clarios-type business probably is best done as an IPO, probably. That said, it may be that one or two sponsors or strategics might want to buy half the business and own it with us for the long term. That's another alternative. Some of the smaller businesses certainly may be sold to sponsors or to strategics. That's usually our preferred exit because we get all our cash back at once.
Thanks. And then the second question, the, the number I was looking for in your presentation was the intrinsic NAV, which you've, you've taken out this, this year. Just wondering, kind of where that stands. If you can't provide that, maybe the Super Six NAV, like, where, where that stands?
Well, look, we realize that providing you NAV wasn't actually helping us or you, but what we thought might be better is to provide a comparator to other companies that Jaspreet did. But I will say this: We don't think our NAV has gone down, if that's what you're asking. Okay. Anything else?
Hi, Steve Cole, Starvine Capital. So given this stark discount to intrinsic value that you point out and that the trading volume is low, so it makes it hard to take advantage of a normal course issuer bid or to take in a lot of shares opportunistically, what are some other levers you think can be utilized to capitalize on this, this stark discount, which would be very accretive?
So I will start by saying that we care a lot about our share price, primarily because it, it impacts all of you in this room, and we realize it impacts you very directly. So I will start by saying that. It matters a lot to us that we get this trading better to make all of, all of you successful. But that said, we take a balanced approach to capital allocation. You know, we, as you know, we've been very acquisitive the last couple of years. We are still buying back shares. We'll continue to do the same.
Our view is that as rates stabilize and at the point in time where the Fed says rates may come down, it's gonna change the demand/supply shape for our shares, and that we're gonna have lots of marginal buyers at that point. We're looking for, you know, looking for a risk on investment and that we should start trading markedly better at that time.
Okay, well, with that, we will call it to an end. Thank you very much for your time.
Okay. Well, good afternoon, everyone, and welcome to Brookfield Infrastructure's portion of today's Investor Day. My name is Sam Pollock. I'm the CEO of Brookfield Infrastructure. And unlike Cyrus, I'm not gonna ask for a show of hands, 'cause I see lots of familiar faces out there. But thank you for coming again this year. As you know, typically, this is a time when, you know, we reflect on our accomplishments and chart the path forward. And my role today is gonna be to summarize, you know, some of our achievements and the strategic priorities that have defined our success for the year. And I'm also gonna describe the current environment and how it's shaping our business strategy.
Then my colleagues are gonna come up and further expand on these items, and in particular, try and show you some case studies to kind of reflect them. 2003, as many of you know, has been another solid year for us. Not only did our assets generate the sustainable results that we've come to expect, but we also were extremely successful in executing our investment in capital recycling plans. I'm gonna begin with our results. As we said in many investor days in the past, our business is well positioned to prosper in almost any business environment.
In spite of higher interest rates and weaker economic conditions, our infrastructure assets are on track to deliver strong financial results that benefit from higher revenues due to the compounding effect of inflation, as well as higher volumes across pretty much all our businesses, and this reflects their essential nature. Now, we're thrilled to report 10% FFO growth year to date. But with even stronger results expected in the second half of the year, our annualized run rate FFO should be approximately 13% higher compared to last year. Another testament to our success is the achievement of delivering our 14th consecutive year of distribution increases, during which we've achieved an 8% compounded annual growth rate.
Now, our key financial deliverables for shareholders, which really goes to the sustainability of our business model, is about generating an annual distribution increase of 5%-9% annually, but maintaining, at the same time, a conservative payout ratio of 60%-70%, as well as a strong balance sheet. We are on track to deliver all of these objectives. Now, as we do every year, we like to reconfirm our commitment to maintaining a robust balance sheet. And during the year, you know, we received further validation of the strength of our balance sheet with a second credit rating of BBB+. We also have $2.3 billion of liquidity, which is more than enough liquidity to capitalize on new opportunities that we see in the market.
Now, one of the keys to our success is our unique ability to recycle assets as well as use our shares as currency for transactions. Because of these strengths, we've been able to fully fund our $2.6 billion of growth initiatives in 2023 through asset sales and the issuance of BIP's C units. Now, speaking about asset sales, the last 18 months or so have not been the easiest market for us to sell assets. However, we continue to achieve strong valuations, and we've been able to generate sizable return of capital to fund future growth. Now, you might ask, "How is that the case? Well, really, our success is attributable to a number of factors. First, just the general attractiveness of infrastructure assets as a whole.
You know, our disciplined approach to asset management, which has yielded a lot of value add across our businesses, and then the ability to be selective across regions and sectors to bring to market those assets that have unique intrinsic value. Now, transactions that have exemplified our success are-- There's a couple here on the, on the slide here. You know, first off, we've achieved an outstanding IRR of about 18% on the sale of NGPL. This is our natural gas pipeline in the U.S., and we achieved a remarkable 31% IRR on the sale of an investment in a New Zealand data distribution business called One New Zealand. So now let's turn to growth. Brookfield Infrastructure's growth is being driven by the DD Ds. This is a phrase that we coined last year at this event.
It refers to the transformative trends around digitalization, deglobalization, and decarbonization. These transformative trends are reshaping the infrastructure industry, and we are at the forefront of capitalizing on these opportunities. Now, we described these trends in a lot of detail last year, and for many of you, you've probably heard us describe them again at BAM's Investor Day a week ago. So I'm only going to make a few comments. Now, just starting with digitalization, this is probably where we are seeing the most activity. I shouldn't say probably. It is where we are seeing the most activity these days-- and our focus is on data centers, telecom towers, and fiber networks that are all critical to the digitalization of our economies. In relation to de-globalization, it is our global presence that allows us to navigate the evolving landscape of de-globalization.
You know, we are seeing tremendous opportunities to support the trillions of dollars that are going to facilitate changes in the global supply chains, as well as critical infrastructure, energy and semiconductor facilities. And then with decarbonization, our commitment to sustainability is at the core of our strategy. Now, while the majority of Brookfield's opportunities related to decarbonization is gonna be met by our renewables group, and you're gonna hear a lot about that later, every one of our businesses is making investments that are aligned with the transition to a low-carbon economy. So I'm pleased to report that in 2023, we have already exceeded our annual deployment target for new investments by investing $2 billion into Triton International and two large-scale data center platforms in North America and Europe.
These investments not only diversify our portfolio, but they also position us for sustained growth in key infrastructure sectors. Now, Triton has received all regulatory and shareholder approvals, and we expect the transaction to close on September 28th. Now, while we acquired the business for its attractive cash yield, we do have a, a very good, value-added business plan for the business, and we think it's gonna allow us to generate returns in that 50%-20% range. We are also excited about the opportunities in the data center businesses. Data4 closed on October 1st, and Compass is expected to close next week. Combining these businesses with our existing platform is gonna allow us to fully capitalize on the strong digital trends. So I'm gonna change gears a little bit now.
As I mentioned at the beginning of our remarks, I'm gonna provide some context around, you know, what we're gonna do for the rest of the presentation here. Now, we thought it would be useful to describe how the current market environment is shaping our business strategy. The main economic and business factors that are affecting the infrastructure sector include the following: You know, we've got, you know, interest rates that are the highest they've been in almost a decade. Elevated inflation in virtually every market that we operate in. Lower economic growth, and in fact, probably the prospect of recession in a number of markets. And scarcity of capital, as we've seen many institutions, you know, pull back on their capital deployment.
Now, I know most of that sounds negative, but on the positive side, we are in an infrastructure super cycle, and that's all impacted by the DD Ds that I talked about. There is tremendous enthusiasm around the potential impacts from artificial intelligence. We're gonna touch on three elements of our business strategy that are impacted by these factors. Those are operations, capital allocation, and corporate finance. From an operational perspective, elevated inflation, lower economic growth, and enthusiasm for artificial intelligence, you know, are all factors that are impacting our approach to asset management. It is the sustained potential for lower economic growth that is probably the biggest threat to our long-term operating margins. Consequently, this is a time where we have renewed our efforts to streamline operations and focus on margins.
Anita's gonna come up in a second, minute, right after me, and describe some of the asset management initiatives that we have underway to protect and enhance margins, and those include utilizing advances in AI to grow revenues and reduce costs. From an investment posture and capital allocation perspective, higher interest rates, scarcity of capital, and, you know, the large infrastructure CapEx super cycle in front of us, and the backlog related to that are all, you know, providing the backdrop for value investing. In particular, businesses with huge pipelines of growth, which normally trade at a premium, are effectively today on sale, as many investors don't have the capital or confidence to build out these platforms. As a result, we've been able to invest boldly and buy two large-scale, exceptional data center platforms in 2023.
These investments were underwritten not only at excellent risk-adjusted returns, but also at absolute returns well above what we would normally target for these types of businesses. Now, Udhay is gonna come up after Anita to tell you why we're excited about these investments. And then lastly, we want to talk to you about how we're navigating this buyer's market to successfully achieve our capital-raising initiatives. While being both a buyer and a seller each year may sound like a wash from a value perspective. We believe that we are able to sell for good value at the same time as we buy for good value. And that's because of our diversified asset base, which really enhances our ability to be very selective and strategic on what we sell and how we sell it.
So in 2024, we're targeting to generate an additional $2 billion of asset sale proceeds. Dave is going to come up after Udhay, and he's going to describe our differentiated full cycle investment strategy. So I'm going to stop there, and I'm going to now ask Anita to come up and tell you about our operations approach.
Good afternoon, everyone. My name is Anita Dusevic Oliva , and I'm an Operating Partner in the Brookfield Infrastructure Group. I am very pleased to be here today to talk to you about our approach to optimizing organizational effectiveness. I'll first share the exciting impact we expect AI to have on our operations, as well as a case study of AI work already successfully underway. I'll then dive into our key organizational optimization techniques that we use in our businesses to create value. At Brookfield Infrastructure, we own and truly operate critical infrastructure globally. We are not noses in, fingers out. We are hands-on owner-operators, as you've heard already. It's a theme today. With our strong understanding of the day-to-day work in our businesses, we believe that AI will significantly enhance and accelerate our approach to creating value for our shareholders.
We see AI having an impact on our business through both revenue generation and margin enhancement. From a revenue generation perspective, using AI, we are able to process and analyze large datasets to identify growth and cross-selling opportunities across the Brookfield ecosystem. We also see real-time and proprietary data enabling advanced analytics, which will help us predict the right areas of focus, as well as enhance customer retention, particularly in our B2C businesses. From a margin enhancement perspective, we are looking at how teams work and leveraging AI to transform how they'll work in the future. This includes automating a number of back-office processes to decentralize and eliminate shared services. Let me bring you into an example. HomeServe is a B2C business that has a large front-facing workforce that's needed to service customers and generate new business.
Part of this workforce is call center-based, and several years ago, prior to our acquisition of HomeServe, the team identified an opportunity to use AI and automation to augment the workforce. This work has progressed well under our ownership and it's innovative in its approach to call management. HomeServe piloted this in North America, where the business receives 3.6 million calls annually. The immediate opportunity was centered around the 1.6 million repair calls, and over a two-year period, we've seen tremendous success, with the percentage of calls automated from essentially none to 15% today. Now, this is not the type of automation that we've all experienced, where we dial one, two, three for our selection before we eventually dial zero a number of times to attempt to talk to a human.
HomeServe's approach uses machine learning to respond in an intelligent and tailored manner to our customers, which has resulted in much more efficient routine calls. Where calls are less routine or there's revenue generation opportunities, sales agents are recruited to engage with our customers with the benefit of a detailed customer profile that's prepared by our HomeServe digital assistant. In summary, our best sales agents are spending time on higher-value calls. What is the result of all of this? A very positive impact on our business, as you can see here. First, we've seen a reduction in average call time from roughly 11-12 minutes to 9 minutes, which is saving our customers time. Second, as mentioned already, the automation of repair calls has focused our strategic workforce on revenue generation.
We've seen the number of calls that result in a sale, upgrade, or the retention of a customer looking to cancel increased by approximately 25%. We've done all of this with improved levels of customer satisfaction, a great result from the HomeServe team. There's more to come. The larger opportunity is to integrate AI across our entire residential infrastructure platform, which services 10.5 million customers across three continents. The two largest businesses within the platform are Enercare and HomeServe. At Enercare, our objective is to double the number of products, and at HomeServe, we plan to add an extra policy. We believe that AI, through advanced analytics, can match customers to products most beneficial to them and accelerate our growth ambitions. Ultimately, we believe there is further upside tied to the number of products we can offer.
Once we're present in a customer's home, there are at least 10 different products we can provide, as you can see here. We are early days in terms of our penetration into the home, and we believe there is a significant runway for growth here. We also remain keenly focused on people and processes in managing our portfolio companies. Good old operating discipline is critically important and remains a core principle for us in creating shareholder value. After two decades of successfully building infrastructure businesses, we have arranged our approach to improving organizational effectiveness across four pillars. We don't like organizations to have more managerial layers than will add value, and we are allergic to bureaucracy, both within Brookfield and in our operating companies. Our organizations are laser-focused on their strategic priorities and the work that's tied to achieving those priorities.
We also insist on having clear P&L owners in our businesses. Matrix management is a non-starter for us in our operating companies. We require senior leaders to be accountable for both top-line growth and costs in our businesses. And finally, we know that this all starts with having the right CEOs in place, setting the right tone at the top. So let's dive into some case studies now. In early 2022, following Inter Pipeline's acquisition by Brookfield Infrastructure, we completed an organizational redesign. This involves shifting support functions into business units and the elimination of two managerial layers in many parts of the organization. In just over three months, we created a nimbler company with less bureaucracy and more streamlined processes. The result of this was approximately $60 million in annualized cost savings. We also ensure our portfolio companies are aligned on strategy.
The best wing-to-wing example of this is our North American district energy business, Enwave. We owned Enwave for eight years before exiting in 2021. During our ownership, we transformed what was previously a passive utility into a growth-focused and commercially-minded green energy solutions provider. Early on, we hired a strong management team, pairing experienced executives with Brookfield's grown talent to drive growth. The business acquired a number of high-quality district energy businesses in a fragmented market and integrated them into one cohesive and operationally efficient business. Through our ownership, the business realized a compound annual EBITDA growth rate of over 20%. On exit, we realized significant platform value with an IRR of over 30% and a multiple of capital of over 6x. As mentioned earlier, P&L accountability is essential for us.
We had success at TDF, our French telecom business, shifting from a shared services to a P&L accountable model. We separated three core businesses into three P&Ls, with independent leaders for each. After this change, service function costs were more transparent, and the businesses were paying these costs directly. Of course, this resulted in a mindset shift. Profitability became more transparent and focused, capital was allocated separately, distinct financing approaches were adopted, and the business unit teams were compensated for achieving targets set on this basis. Not only does this control costs to enhance margins at TDF, but it provides optionality for us at exit. We have the ability to monetize the business as a whole or in individual bite-sized pieces to provide us transaction flexibility and attract the broadest number of potential buyers.
Finally, what do we want to see from our CEOs to make all of this work together? Our CEOs do not delegate accountability. They are directly accountable for strategy, health and safety, people and culture, and overall business results. They may delegate execution of plans, but they remain accountable. Our CEOs also create an aligned culture in their businesses. They walk the shop floor. They get out into our operations and are accessible and open to employees. We also expect a level of boldness in our CEOs in setting stretch goals to support their teams in driving the best possible results from their organizations. What does all of this mean for Brookfield Infrastructure? We've been doing very well with our organizational optimization efforts to date, typically resulting in 1%-3% return enhancements.
AI is expected to provide meaningful tailwinds, and although the magnitude today is yet to be defined, we are very excited about the future and the opportunity to create significant upside to our expected returns.
With that, I'll now turn it over to Udhay to touch on our data center platform.
Thank you, Anisa. Thank you, Anita. My name is Udhay Mathialagan . I lead our global data center platform. I'm here to talk to you about the remarkable growth in demand for data infrastructure, and more specifically, about the way we are developing our data center platform to take advantage of this growth. So let's kick off with a video first, and that'll set up the discussion.
Digitalization is the use of data to make everybody's lives better. It's a shift of manual processes and greater insight gathered by big data to actually generate better outcomes for everybody.
The explosive growth in data is creating a need for all digital infrastructure to be upgraded. Brookfield is participating in the three key pillars that make up digital infrastructure: data centers, wireless towers, and fiber networks. We have a large number of data centers. We're in 17 countries across 5 continents. We are well-positioned in the wireless infrastructure space through ownership of 209,000 towers, and we've got more than 35,000 kilometers of fiber around the world.
We're in a once-in-a-generation investment cycle for data centers at the moment. We estimate that we will need over $1 trillion over the next 10 years to invest in data centers to ensure that there is sufficient infrastructure for the growth in data consumption. In terms of megawatt capacity, over the next three years, we estimate that an additional 6 GW of capacity will be required to meet data demand.
Brookfield has big ambitions in the data center sector, which is supported by very strong tailwinds. There are four major trends that are pushing the development of the data centers across the globe. The first one being the mass production of data. The second one is the exchange of the data. The third trend is the cloudification of the IT, where everything is putting into the public cloud. And I would say the last trend we're seeing, and we are actively working with our customers, is the generative AI.
Brookfield is one of the very few players that can provide turnkey solutions to hyperscalers around renewable power, land, and management of critical infrastructure. Brookfield's data center platform puts us in a unique place to meet their global requirements through a single relationship, backed by Brookfield's capital, construction expertise, and operating expertise.
I'm super excited about the scale we've created. It's about being able to execute our commercial contracts with customers and suppliers in a very effective manner. It's making sure we've got large land banks that we're meaningfully developing on a timely basis, and then making sure our capital allocation is managed in a smart way, and providing and producing the right returns for our investors and the right services for our customers. Interesting transition back to me. But, look, literally, the walk back from the office to the hotel yesterday, I overheard and picked up two conversations on AI. AI is everywhere, and machine learning and AI growth has just exploded.
There's lots of theories, lots of views on how AI will manifest itself, how it'll be deployed, but the one thing, the one plain truth, is the only way AI can be delivered is through physical data infrastructure on the ground, and what that means is data centers, and lots of them. So there's a lot to like about data centers as an asset category. One, it's, it's the lifeblood of digital services and the very backbone of the digital economy. So, and plus, it's typically, you know, used by very large tech companies that have got very strong balance sheets, and they're prepared to commit to long contracts. So excellent features in terms of the asset class. But in addition to being a great asset class, data centers also lend themselves to be very good platform investments.
Two years ago, at the investor day, we talked about the characteristics we'd like to see in a platform investment. Good growth, great ability to scale, the opportunity to attract and keep good partners. The data center platform as an asset category checks or ticks all the boxes here. Needless to say, businesses like this that are attractive, you know, there's been a big rush into this sector by a number of players over the last few years. Some of the players have just chosen to make single, large bet plays. The Brookfield approach has been quite differentiated and very disciplined.
Our journey into data centers started in 2019 with Ascenty, and we've been focused, in the early years, more on organic growth in South America and Asia Pacific, and we continued to evaluate a number of M&A opportunities in the data center sector. But we stayed very disciplined. We did not transact when we saw that the price at which these deals were done did not meet the value that we placed on these businesses, and that patience has paid off. Earlier this year, as markets got into more challenging times with interest rates rising, I think we were able to spot and execute two bold transactions that Sam talked about, one in North America and one in Europe, which plugged the gaps in our portfolio.
By being patient, we've also made sure we haven't overpaid, which means we're, by executing the plan, we've underwritten the business where we will be able to achieve returns in excess, excess of our targets. The other interesting thing is, we also have uncontracted land banks within these portfolios, and the ability to create new self-funding structures, which should enhance the returns even further. We have very clear visibility in terms of the growth we can achieve in the platform without any further inorganic acquisition. Our current base of roughly 0.5 GW, we have clear plans to grow to 1,700 MW over the next three years. That's on a 100% basis. For BIP, on a proportionate basis, the FFO, the next 12-month FFO, has a CAGR of 65% during that period.
What's interesting about this growth is, there's two very interesting factors. One, it's large in scale, but we've also materially de-risked this growth. Land that's been well-sited, owned, that has permits and has power, is very, very scarce and highly attractive to hyperscale customers. This means that customers are willing to commit long-term contracts, which in turn helps us to have visibility, very clear visibility, in terms of our build program over many years. So operating at this scale means we can commit to suppliers, we can commit to builders, and secure the inputs for the build at attractive prices, but also, importantly, secure critical elements that may be difficult in a time where there's this kind of a gold rush to build these assets. The other interesting aspect is we're finding that a lot of our builds now are in large campuses, and we're able to, as you can see in this picture, take almost a modular approach.
So we're just rinse and repeat, replicating buildings, which has a lot of benefits in terms of, you know, cost savings, learnings, but also keeping the teams together that have constructed these, these facilities. So that's, that's another very sort of positive way in which we're de-risking the business. And in terms of, you know, bringing all this together, what excites me very much as, as a leader of this platform is the phenomenal growth opportunities in front of us. Without any further acquisition, we see a clear pathway to have a fivefold increase in physical capacity from 500 MW to more than 200 MW to 2,500 MW over that sort of period. And in financial terms, what this means is, you know, because we've not overpaid for the businesses, if we execute well, we're already going to achieve returns in excess of our targets.
But what's really exciting, and as Sam would probably say, the real joy comes in being able to sell our operationally mature assets and recycle the capital, a kind of self-funded structure that will help us achieve a 20%+ return. You know, and this is, this is truly exciting. And in asking the question and concluding, what does this mean for us? This basically means the $1.5 billion that BIP has invested in the, in, in the data infrastructure platform at the moment, by just executing what's in front of us, there's embedded value of $5 billion in it. So this is a very motivating target and task for myself and my team, and so we're super excited about it.
On that exciting note, I'm going to turn it over to David to talk a little bit more about and expand on capital recycling.
All right. Thank you, Udhay, and good afternoon, everyone. As introduced, my name is David Krant, and I'm the CFO of Brookfield Infrastructure Partners. So to wrap up our presentation, I'm gonna spend the next few minutes talking about how we can tailor our full cycle investment strategy for the current environment. Now, a few years ago, as Udhay said, we talked about platform value and where we were building it organically in our business. It was organic because the market did not allow us to be buying these assets for value or earning the returns that we would want to be generating. As Sam introduced, this environment is very different today. We're buying platforms at attractive values that are gonna give us exceptional growth in the years ahead. So our strategy of asset rotation has been consistent for the last decade.
We've sold 27 businesses, generated over $8 billion of proceeds for our business through these asset sales that have gone to fund new growth initiatives. Now, the fact that we buy and sell assets each year, as Sam said, may seem like a wash, but over the next few minutes, I'm gonna highlight why we think we're still building significant value by doing this strategy well. In terms of the conditions that we're operating in today, I think, as Sam said, the lower growth outlook, combined with the capital scarcity, has combined and contributed to create a buyer's market. Now, when you're deploying capital in that buyer's market, that's fantastic, and that's what we've done this year, as you've heard. But when you're selling businesses in this market, it requires you to be nimble, flexible, and thoughtful when executing this strategy to create meaningful value.
And although our strategy is consistent from year to year, the way we execute it will be very different. Let's look at our new investments. We've tried to simplify a new investment into two broad categories. The first are brownfield infrastructure investments. These are large, mature, operating assets that generate stable going-in FFO yields. For these, think of our short-line rail business, G&W, that we acquired three years ago, or more recently, Inter Pipeline. Now, these businesses generate sizable FFO yields on day one and provide immediate accretion to our results. On the other hand, you have a platform investment. These values tend to have lower in-place operating asset bases or are being built out from scratch. As a result, they tend to have lower going-in yields and can produce significant growth in our business. Now, let's put some numbers around this concept.
Now, starting with brownfield infrastructure investments, we're typically earning a high single digit or low double-digit FFO yield and modest growth, generally from inflation indexation. On the platform side, you're gonna see low going-in yields of low single digit, but tremendous growth potential, as I've highlighted. But both will result in an IRR or internal rate of return when we underwrite these businesses between 12% or +15% . What's important to note is that we have been and always will be discounted cash flow investors. What that means is that we're not EBITDA-based multiple investors. And the difference here is that EBITDA multiples can be very meaningful for a brownfield investment that has little growth prospects, but tells you nothing about a platform or its ability to execute and grow in the future.
As you've heard, our investment activity this year exemplifies both of these concepts very well, and we're often asked which ones we prefer. And I think you'll hear, and not surprisingly, is we love them both if we're getting the right entry point, and that's really plays to the value investing theme you'll hear throughout the day today. Now, take Triton. It has a high going-in cash yield, 90% EBITDA margin, seven-year average contract life, investment-grade balance sheet, things we loved about the business. On the other hand, as Udhay just mentioned, we had two data center platforms that we acquired. Low going-in yields, so no accretion on day one, but significantly higher growth rates in the future. On a five-year basis, we're seeing 30%+ CAGRs on FFO. Now, how does this mix compare to what we've done historically?
If we look back over the last 15 years, I'd say most of our investments have been in the form of brownfield infrastructure. However, during the last two-year cycle, we have deployed a meaningful amount of our balance sheet and our invested capital into these growth platforms. Looking back over the last two years, we've deployed $5 billion of equity, of which $2.5 billion or half, half of all of our new investment activity has been into these high-quality, high-growth platforms. This includes Intellihub and Uniti, two Australian businesses that we acquired last year. It includes the follow-on acquisition in our residential decarbonization business in HomeServe, and then Compass and Data4. We thought, how does that compare, as I said, to previously?
Well, if we look back 10 years ago in our within our business, we had one platform investment, one single business that we expected to compound organic growth at above 10%. You've heard about it today. It was our district energy platform, by no surprise. Fast-forward five years later to 2018, now we have four platform investments. We still had our district energy business, but we built three more organically within our business. That was fiber within TDF in France. It was a smart meter business within our U.K. regulated utility, and it was Quantum, a Brazilian electricity greenfield development that we built from scratch. What's different about that time to today is it didn't have much of our balance sheet or invested capital associated to it, maybe 5%-10% at most.
Now, today, with the recent acquisitions, we have nine thematic platforms that we're focused on building and creating value. If we look at them on a country basis, we actually have 13 different investments that we expect to compound average growth rates of over 20% annually. Again, what's different is we now have a significant amount invested. We have 25% of our invested capital invested in these 13 platforms. We're often asked, why are they overlooked? How can they be undervalued in our business today? Our multiple, when you look at the market, is trading at levels well below where they were five and 10 years ago. Well, it's because those businesses contribute a very small component of our earnings today. On an EBITDA basis, they're only making up 5% of our business, but we expect them to grow meaningfully.
Before we show the growth, I think it's important to understand that growth is often synonymous with risk. In this environment, we've been able to acquire these very high-quality growth engines, but without taking undue risk. And why is that? Well, 100% of the revenues in these investments have inflation indexation and the ability to price escalate with local levels. We've acquired $1.5 billion of capital backlog through these businesses at our share, which is going to be deployed over the next five years. As you've heard from Udhay, again, the data center example is perfect. In that business, we have power, land, and commercial contracts that support roughly 80% of that backlog. That's, that's the exact same as in Uniti and Intellihub as well in Australia.
So we think we can deliver on this, much lower risk growth than what we would have had, had to have paid to acquire these platform investments during previous cycles where capital was more abundant. And that low execution risk should lead to meaningful growth. On an EBITDA net-to-BIP basis, you'll see that we expect these platforms to grow significantly. Our residential decarbonization platform, HomeServe, and Uniti, our fiber-to-the-home business, are expected to grow 2x-3x in the next five years. And then, more impressively, our metering business, Intellihub, and our two data center platforms are combined to increase 5x over the next five years on an EBITDA basis. So what does that mean?
Again, these two combinations of inflation indexation, growing backlogs, and de-risked, and de-risked growth plans really mean that we have strong organic growth tailwinds building in our business faster than ever before and at higher rates because of the types of investments we've been buying. And as you heard from Anita, these platforms give us superior and the ability to generate premium exit values when we go to monetize these in the right cycle. So transition a little bit to the right cycle. What do I mean by that? Well, as Sam said, our ability to continue to create meaningful proceeds from our asset rotation strategy is because of our diversified asset base, and that's key. Diversification comes in many forms. It comes in size, it comes in region, and it comes in asset class.
We have businesses ranging from $500 million of equity all the way to $5 billion. We have 14 different continents. We have nine different asset classes, so we really can customize our approach to what the market is, is demanding or seeking. And the most important part of what we've learned from the last 27 businesses we've sold, or $8 billion of proceeds we, we have raised, is that understanding where the market is will really allow you to generate those outsized proceeds. So what I mean by that is, is we first focus on the size. What is the appetite, and what is the capital abundancy or scarcity in the market today? And then we focus on where is capital wanting to be deployed? Where are those growth sectors and, and regions?
So focusing on size, we have several tools in our toolkit that we can use to create the best outcome during an asset sale process, and we've demonstrated them actually all throughout the last 18 months. The first thing we can do is we can look at specific assets within a broader business and carve those out and sell them off one by one. Those are great when a strategic is investing or looking to buy or build out their footprint. That's exactly what we did in our gas storage assets. The second thing we can do is we can sell a vertical.
Anita gave a great example of TDF, where we've set it up that way, but we've actually done that already in New Zealand, where we sold the towers last year, and we sold the rest of the integrated business this year, again, to maximize exits and drive that superior return. And lastly, we can take a larger business and break it apart or sell a non-controlling or passive stake to a financial investor. And that's exactly what we did with our 12.5% stake sale in NGPL this year. So again, by customizing and tailoring our approach to the current environment, we think we can continue to maximize those proceeds. The last element that you'll see here that we also try to use sometimes is optimizing the capital structure during our ownership period.
Again, we fundamentally focus on investment-grade balance sheets during our ownership period, but when capital is scarce, we can also look to optimize that capital structure prior to our exit. Taking capital out prior to our sale has the same effect as reducing that equity requirement and, again, appealing to the broadest amount of investors and therefore ideally driving the best deal execution. It's with this diversified portfolio and tailored approach that we think we can continue to demonstrate and target raising $2 billion of proceeds next year from our capital recycling plan. We're targeting four sectors that we invest in across many different countries, and we expect that the average cost of capital on those realizations should be between 9% and 11%.
Now, assuming we're in the same environment we are in today, our ability to redeploy that at above our target returns should provide meaningful accretion on a per unit basis to our business. And well, just how meaningful? Well, we've been able to grow FFO per unit on an 11% CAGR since 2012. We expect to continue that trend and even deliver above that with a 12% average CAGR over the next three-year outlook as we build out these platforms and deliver upon the growth that Udhay had just mentioned, as well as other places in our business, that we're excited about.
So with that, I'd like to now pass it back to Sam for closing remarks.
Okay. Thank you. Thank you, Dave. That was excellent. And, I'm just gonna make a couple of closing remarks before going to questions. The first thing, I just want to say that, you know, we remain steadfast in our commitment to generating shareholder value. And as I mentioned at the beginning of my or during my remarks a bit earlier, our strategic focus is on those key deliverables. There's the three of them to remember. The first one is providing shareholders with a consistent, steady dividend within that 5%-9% range, doing it by staying within our payout ratio of 60%-70% and having a strong balance sheet. So that's. We are always gonna continue to do that.
And the last thing I wanted to mention was, you know, now that interest rates are, are peaking and with the growth that we're generating from the platform investments that we just talked about, along with our attractive dividend yield, now is a great entry point for any shareholders who, you know, want to own a stock that has growth plus income or growth utility. So I'll stop there, and now I'd be happy to take any questions. I see one back there.
Hi, thanks for those comments. Robert Catellier , CIBC Capital Markets. Today, you've put out another number here for asset sales being $2 billion, which is also roughly what you're gonna accomplish in 2023. But that's again higher than the long-term numbers you put out a couple of years ago. I think we're closer to $1 billion-$1.5 billion. So what's motivating the higher level of asset monetizations?
Hi, Rob. It's really just growth in the business. Over the last number of years, you know, we've continued to deploy more capital. As we've deployed more capital, the growth in our legacy businesses has just increased. Basically, now that's, you know, roughly the amount that we expect to generate on an annual basis. It's really just growth in the business. I'm sure, you know, 5, 10 years from now, the number will be $3 billion.
Thank you. Just another quick one here. When you look at how you're describing the environment, the macroeconomic environment, higher rates, but maybe a flatter yield curve, I was happy to see you haven't changed your financial guardrails. Still managing the balance sheet the same way. Same thing on the payout ratio. Can you envision a circumstance in which you might alter some of those financial strategies? In other words, maybe changing the payout ratio up or down, or maybe changing the average maturity of your debt profile to take advantage of the shorter end of the curve. Is there a circumstance in which you can see that?
So the short answer is no. I think we set those guardrails up, those you know business goals and objectives going back 15 years ago, and they served us well throughout the cycle. Now, there's always points where, you know, we might be a bit below. There's times we've had payout ratios, you know, down in the high 50s, and there's a few times it's been in the low 70s. And that just goes with the ebb and flows of business, but it's not by design. Our goal is to always be within those levels and most importantly, to have a solid balance sheet. Now, you can never predict what's gonna come around the corner. We've seen that the last couple of years.
And so having that strong balance sheet has allowed us to invest boldly when others don't have capital, and we'll continue that for sure.
Hi, Rob Hope, Scotiabank. The 12%+ FFO growth that you're targeting over the next couple of years is above the levels over the last decade, as well as the 10% target that you typically speak to. When you take a look at, you know, what is a relatively robust growth outlook, what is driving kind of the increased confidence in the higher level? Is that the growth from the platforms, is that, you know, we'll call it, you know, good accretion from IPL or Triton, or is it the AI margin enhancements?
Hey, Robert. So really, the reason, you know, we have that confidence is because of what David talked about, the fact that we have a large amount of capital invested in those new platform investments that today aren't really giving us a lot of cash flow. But over the next number of years, we expect them to be huge providers of income. And so, as a result, because the businesses has shifted a bit from being heavily brownfield-oriented to a little bit more greenfield-oriented, that's where we get that higher growth.
Maybe just a quick one here. I appreciate the comments on AI, specifically from a Brookfield Infrastructure perspective. But when you take a look at the broader Brookfield organization, how does the learnings in the other parts of the organization come to bear at Brookfield Infrastructure? Is this a consolidated effort from the top, or how does this work?
So I should get Connor up here to talk about the Brookfield ecosystem. That was a big discussion last week, and we do a lot of collaborating, obviously, between the various companies, not only on, you know, learnings and operational techniques, but also business development. And we're gonna talk a little and right after this about how the power group and our data business are working together in a couple of ways. But you know, I think each one of our businesses are doing what I describe as experimentation. In the case of Brookfield Infrastructure, we've picked a couple of businesses where we see the highest value and the most potential for AI, and so that's where we're trying to get our learnings.
And once we fine-tune and figure out what really works, then we'll apply it across our business. We'll share them with the other groups, and they're gonna share with us. So, yes, that's the big advantage of being part of Brookfield, is that whole collaboration.
Hi, thank you. It's Cherilyn Radbourne with TD Cowen. Just wanted to ask, with respect to the investment landscape, obviously, we've done some good deals year to date, but normally when you have sort of a shift in macro conditions like this, you get a bit of a bid-ask spread, you know, that kind of develops and slows down transaction velocity. So I wonder if you could give some perspective on where you think that gap sits today. And then, as you look back at sort of the fundraising cycle for infrastructure over time, is there any reason to think that there's a particular concentration of fund expiries that might also create opportunities for you?
Okay, so there's a couple of questions there. So on the first one, we were trying to describe that a bit today. You're right that often when you know, there's a change in you know, economic conditions, in the case interest rates going up, sellers often pull back and try and wait for a better environment, and so you get this bid-ask spread and valuations. But what happened this time around, and this is what really was unique and really valuable for us, was many organizations had these businesses that had huge capital needs in front of them. And so they couldn't just ride it out. They had to find capital to go into them, or they had to find someone who had the capital.
And so that's why this was, like, a really unique time where we could buy these, you know, platform companies. And that's what we're excited about. Normally, we have to pay a premium and/or you can't extract them from people. This time, we basically paid no goodwill for companies with incredible growth potential. So that's, that's the first thing. Your second question was on, remind me again.
Fund expiry.
The fund expiries. Yes, sorry. And yes, I think every year there's always assets that come up from different managers. I would say in our case, we typically buy from strategics or from the public markets. It's not often that we buy assets from other managers. It does happen sometimes, so I don't want to say never. So it's not a tremendous focus for us. And I do think you know, you do have the existence of continuity vehicles which some of you may or may not be aware of that, but that's basically where managers will retain the asset and bring in capital to take out those who wanna exit. So you're seeing that a bit more.
So I don't think it's gonna be as huge a thing going forward, but there's always situations where, sometimes in the case of private equity companies, they have much shorter timeframe and, you know, they're happy to sell to infrastructure investors. So that's, those are usually maybe the best opportunities. I don't know, do I have any more time left or-- Nope? Okay, I'm being yanked. So I have one bit of bad news, and that is I was told that, we're no longer taking a break. We're just going to change the, the furniture up here. And so if people can stick around, if you need to, to sneak out to go to washroom, I guess that's allowed, but, we'd ask that most of you stay here. Thank you.
Well, good afternoon, everyone. My name is Natalie Hadad , and I am a Managing Partner in our infrastructure group. And today with me, we have Udhay again, and Dan Cheng, who is a managing director and is responsible for our investment activities in the Brookfield Renewable and Transition Group in Asia-Pacific. So thank you for joining us. So last year, in this very stage, we unveiled the three Ds: digitalization, decarbonization, and deglobalization. Each one of these macroeconomic themes is driving significant capital deployment opportunities for us. And today, we would like to focus on digitalization and decarbonization. Specifically, how we are positioned to benefit from very strong tailwinds across these segments created by the adoption of AI, specifically generative AI and language learning models. In fact, I was reading a very interesting stat.
When ChatGPT was first released back in November, it took two months for it to reach 100 million subscribers. That is exponentially less than what it took Facebook and Instagram to reach that level. It took them years. So on that note, Udhay, perhaps we can start discussing what is the impact of generative AI and language learning models on our infrastructure platform?
Look, we can talk a lot about AI, so maybe I'll just start with a couple of points. One is, the amount of processing power required to deal with these large language models is enormous, and it's sort of just exploded. What this means in practical terms is, in the past, with data centers, we're producing a particular level of, you know, energy and which really translates to heat and cooling in a data center environment. There's a fivefold increase with these new NVIDIA chips that a lot of AI operators are using. So there's a lot more capacity that's needed, that we're seeing that come through in terms of the order book and the reservations that have been used. But also, in terms of the type of data centers need to be built, they need to be built at very large scale.
So, you know, only a few players, I think, will be able to do that. We can chat a little bit more, but the first point I wanna make is lots, lots more power, lot, lot larger in size. Maybe a second point, which will probably be a segue to talk a little more about energy management. It's like, I think in the past, data centers were sited relatively close to urban centers, sometimes close and probably edges of cities. Now, with the split of, you know, the training module, which is a bit different to services delivered in the end, you know, It's possible to split the location, so you can use remote locations for large data processing, and then you can use smaller locations. But anyway, look, I think that that shifts the whole energy need.
So maybe, you know, we can pass to, you know, Dan. You can elaborate a bit more what all that means for renewable power and-
Yeah, for sure. And, I'm glad Natalie started with Udhay because it provides a really nice basis for some perspective on the renewable power and transition side. And, you know, Udhay talked about the exponential increase in data center demand, and as a corollary to that, what we have seen on the renewable power side is a corresponding and also a very large step change in the very critical commodity that powers them, and, that's electricity. And it's not any electricity, it's zero carbon electricity, owing to their decarbonization benefits, their competitive economics, and also elements of attributes of energy security because there's no input feedstock. I'm looking at Udhay here for a bit of validation because, you know, he's the CEO of a very large data center business himself.
It's hard to imagine, I think, just the amount of growth and demand.
Can you give us a sense of that growth in demand?
Yeah, absolutely. And, I think nothing serves better than a few examples. And I think there's a lot, but the one mind-blowing statistic, and we all like statistics, that captured my attention is, you know, any language learning model today in AI, and you know, this is a very standard one, we're not assuming any increases in complexity or growth advances in itself, it takes more computations to run that model than there are grains of sand on Earth. That's pretty amazing and crazy in itself. And so I think, you know, with digitalization, and it being accelerated because of AI, there's a multiplicative impact on power demand because we're also seeing power intensity going up with ever-increasing computational math and algorithms that's gonna be running.
Now, this also means that the increase in demand for data centers is significant. So, Udhay, what are you seeing on the ground and when dealing with hyperscalers? What would you say are the challenges that you're having to encounter and face?
I think typically we, you know, going back to the basics, you know, finding the right site, making sure it's permitted. But what's changed, I think, in the last little while is just power and availability of power is moved front and center, and it's, you know, I think it's-- Because, as I mentioned earlier, the size has grown, so it's all about power. And if you're able to have powered sites, I think it's a huge advantage. In fact, I was gonna flip it back a little bit to you, Natalie, if I could ask a question in reverse. You know, you know, you obviously, transmission business is in a few places, so I think one of the things we're, we are constantly dealing with in the industry is, can you, how can you get the power to the sites we need? So what, what are you seeing?
Well, you, you're not allowed to do that 'cause I'm moderating the panel, so you can't, you can't ask me questions-
I know.
Like I ask you questions. No, all kidding aside, anecdotally, through our transmission businesses, we're hearing firsthand the constraints in the grid and the increasing demand for interconnection and upgrades and the bottlenecking projects. Like, it is a priority for data center operators and developers to have that visibility into interconnection. And in fact, it seems like there's more importance or more emphasis, I would say, on securing power supply than other traditional parameters, such as, you know, specific market or water and land. Now, Dan, that's in your wheelhouse, that need for power supply. So what, what, what are you seeing?
Yeah, I think it comes down to, you know, capabilities and the track record to execute. And, you know, not every single demand for power is the same. When we kind of look at the people that are behind this driving force of data center demand for power, it's a large tech company. You know, the Microsoft, Meta, Amazon, Google, all of which are already the largest procurers of green power today, and so they're a very, very sophisticated counterparty. They know exactly what they want, and they're quite demanding as well. Maybe just to bring that to light, you know, they don't just want a conversation around price and volume.
They want the power to be delivered by a certain date, to a specific location on the particular load profile, usually 24/7, and that's a challenge in itself, because renewables are still largely intermittent today. And increasingly, they're looking for an element of additionality because it's working into part of their own decarbonization objectives. And I think how Brookfield Renewable has positioned itself to try to just capture that increasing growth in demand.
So 24/7?
Yeah.
That is-- There's little to no margin for error or interruption.
Yeah.
So would you say that there is a premium ascribed for, you know, ability to execute and, you know, being a reputable operator? Maybe you can touch a bit on that.
Yeah, and I'm glad you asked that question, because we're seeing data centers and power really driving the driving force behind some of the elements or segments of these large tech corpus businesses that have high growth trajectories. Very critical and extremely valuable. And so they're putting a lot of attention on people that can execute with the capabilities. And just an example, you know, and this speaks to, hopefully, Brookfield's diversified set of toolkit is, we signed a contract to deliver 24/7 power to a counterparty in the Pacific Northwest. And it was quite a creative solution because it really leaned into our multi-technology portfolio, where we used the solar to produce green electricity during the day, 'cause that's when the sun shines. And then on the shoulders, we're using wind, because that's when the wind blows.
And that gave a pretty, you know, even supply profile to match the load. And then we used our hydros to firm it up. And on the edges, you know, to really perfect it, we're leaning on our power marketing or trading capabilities to trade either small excess or shortages of power. So I think we have to be really creative. It's a very complex problem to solve, but those with the capabilities and those have done it before is gonna be very well positioned to benefit.
Maybe switching gears a bit to the Brookfield ecosystem, which you briefly touched on that. So we have the perfect trifecta, with investments in across clean energy, data centers, and real estate. Maybe you can provide some examples on how the ecosystem comes in action.
Yeah, for sure. Udhay, do you want to--
You go first.
Yeah, for sure. Yeah, sounds good. And we heard the ecosystem word come, you know, across a few times during the presentation and then just now with Sam in the Q&A. I think the first, you know, point that we just want to quickly mention is certainly not a out of coincidence and stylistic that we use the buzzword. You know, it's really with $850 billion+ of assets under management under Brookfield today, the various interplays and interconnectivity that we see across all of our assets and businesses, gave us the insight and the knowledge and for us to be able to form a more informed, objective view of the world.
and, you know, when it comes to Udhay's business around data centers, that needs renewable power, there's a very synergistic opportunity for us to work together to explore opportunities to grow. And I saw in the video earlier, you know, the rooftop solar, it brings to life on data center roofs. Those, the modules on the top of the data center rooftops. You know, that's what we try to do, and we bring a holistic solution to the customers. I don't know, Udhay, anything--
Yeah, I'll pick it up. I think it's probably a couple of examples, you know, specifically how, you know, in practice, how we've-- I've seen the ecosystem work. So in Seoul, which is a very large city, quite difficult to find the right piece of land, the real estate team from Brookfield and our data team worked hand in hand over a two-year period. You know what I mean? Solving very complex real estate problems and then transitioning into a development opportunity, which means we now have a very high-quality project on the ground in Seoul.
You know, and in the U.S., there's quite a lot of collaboration between our renewable power group and our data center businesses, particularly looking at greenfield sites, where we're trying to figure out, particularly when AI has triggered lots of interesting, you know, these yet to play out, but really interesting opportunities, saying, "You can locate the site away from the city. Maybe they can be close to our hydropower generation, so we can get a good, clean, green, but also, you know, lots of capacity available." So these are, you know, happening all the time.
And you mentioned location of site. So let's focus on that for a second. How has generative AI and large language models impacted where the data centers are getting built? And, you know, how is that affecting our ability to take advantage of this wedge of incremental growth?
Let me jump in first on that. I think the reality is it's still early days, so I think we are, at the end of the day, providers of really strong underlying infrastructure. So we, we need to just be close enough to the market to make sure we're delivering solutions. So a couple of things we've noticed, which is really, really interesting. You know, we hear about the big programs of AI from the hyperscalers, but there's a lot of new players coming into this space, trying to provide almost AI on, on rent, on a rental basis. And so, so there's quite a lot of innovation taking place. What that means is not all the demand is coming up in large chunks of 50 MW or 100 MW.
So what, the only retail colocation business we own, Evoque, we're finding some interesting examples where we are able to reuse almost odd lots of capacity we have to support these sort of new players. So where it manifests itself, those are in big cities, so it could be in large, you know, it could be large sites in remote locations, big cities, in small sizes, big sizes. So I think lots and lots of, you know, opportunity coming up there. The other thing to note is particularly large land, which, you know, models and stuff, they're not connected live all the time, so the concept of how power is delivered to those could change. We're seeing a small example, but we'll come up with this commercial innovation that's possible.
We're saying, "Hey, today you don't need to go to school. If the power fails, the model just stops learning for a day, and then it can start again." Like, this was not something that, you know, was possible two years ago, so this is innovation or almost selling the spare energy that's available to somebody who will be turned off if something falls back. So I think there's some interesting combinations that are popping up. Yeah.
Dan, how about you? What are you seeing in terms of, you know, different trends or, or patterns in, in locations?
Yeah, it always gets me excited when Udhay, he talks about all these different geographies we can deploy his business and data centers. And I think, you know, when we think about AI today and generative AI, really the branch we're speaking about today is, machine learning, and it's done through, you know, ongoing iterative processing of a lot of data. And, you know, Udhay can correct me if I'm kind of stepping out of line here, but, that branch of AI has, much less, user interface than some of a lot of the data centers that are in operations today that do, which need to be located near, population centers, to, to Udhay's earlier point. That is a game changer for us because it opens up a new frontier of opportunities. And now we have two really robust growth pathways.
The first one being, you know, the data centers near these population centers that will continue to grow at a very rapid pace, and where there's gonna be scarcity of land, scarcity of interconnection to this point. It's why we acquired Urban Grid last year, you know, for its proprietary capability to secure interconnection, and they've got a lot of pipeline projects that are ahead of the curve. But this new incremental opportunity that's not in our business is these remote locations that have a lot of land and ideal resources for solar and wind, but at one point in the past, was simply too far away from load centers for them to be technically and economically feasible, can now be developed and co-located with, you know, machine learning data centers.
And, you know, this goes back to the ecosystem point a little bit and your transmission capability and, you know, Udhay's business on data centers and our renewables is we're seeing the market where a lot of players are thinking, for example, building up a data center hub that's dedicated to machine learning in Wyoming, which is quite remote, because there's a lot of land. But because of the amount of stress that the additional load just plays on the grid, the one caveat is they have to source their own power supply, and I think across the three of us, we can deliver that holistic solution.
I mean, remote, that sounds like interconnection, which sounds like an opportunity for transmission. And, you know, when you think about what we've done, you know, we're currently managing over 20,000 miles of electricity transmission lines, a quarter of which we built from scratch. So we do have that capability and are excited about the prospect of continuing to leverage that. Now one thing that we haven't really touched on is our approach to managing construction risk. So maybe, Udhay, I'll turn it over to you, and how are you addressing these challenges on the data center buildup?
Yeah, excellent question. I think that's top of mind. You know, back to the speech a bit earlier, I talked about a modular approach, but just taking one step back, I think scale solves a lot of these challenges. By having a large volume to build over time, we're just able to get more attention from suppliers, get more attention from the builders, so we're engaging early. And in some of our companies, this is a core skill. They've actually perfected it over time, just getting the right modular structure, the right set of partners, but watching it very carefully, right? So I think it's that sort of combination, and from a customer's perspective, right, this is--
This also means I talked about power as being important, but this is kind of almost equally important, being able to deliver projects on time, because, you know, they are fitting all this into a network of capacity for themselves. So I think it's really those things.
Once you reach the operations phase, there's predictable contracted cash flow, so at that point, what are the types of, call it, operational considerations that you focus on?
Well, look, I mean, data centers are, you know, high-spec products, so they need to keep working all the time, so you can't take your eyes off, you know, making sure you're delivering your service-level guarantees, which usually is around making sure power is available all the time, and temperature and other things, the environment is being managed, and security, of course. That's getting very important. So I think, you know, we pay a lot of attention to the operational aspects. And of course, from a commercial perspective, just watching, you know, your-- the lease terms and making sure when leases come up for renewal, you're well ahead of that.
But, you know, to some extent, our business is shifting more and more into wholesale and hyperscale customers, so, you know, weighted average leases are getting longer and longer, but we still watch it carefully to make sure we're managing churn, particularly in our retail sort of businesses. Yeah.
Great. So maybe to wrap things up, in addition to the opportunities that we're seeing in this data center segment, what broader opportunities are we seeing across our businesses?
I think if I zoomed out a little bit, you know, back on the broader topic of digitalization beyond just AI, you know, there's so much more workloads that are coming into everybody's life in terms of, you know, whether it's you're working from home or you're traveling. So I think, you know, to the point that Sam touched on earlier, we have these three pillars we've been focused on very much around data centers, but also wireless towers, which are absolutely essential to connect with people on the move or any wireless device. And increasingly, you can't sit at home and not have fiber coming into the home if you want to participate in all these new digital services. So, you know, we're very, very excited about all those businesses.
You know, I'll give you an example, like, our tower businesses in Europe, we've got two businesses, and both those are experiencing some amazing opportunities beyond where, you know, we bought into the business. And what's driving that? It's, you know, partners like Deutsche Telekom deciding to accelerate their rollout of 5G, or regulators, in some cases, actually pushing for, you know, greater coverage. So that's very exciting. And we've got fiber businesses, you know, in France, in the U.K., in Australia, that David touched on earlier. So these are all great opportunities for us. But thematically, I think, again, we're all we're doing is making sure we've got amazing businesses that can benefit from greater digitalization. And, you know, so I think it's a very exciting future.
I mean, outside the data infrastructure space, we're seeing opportunities across utilities and transportation in our residential decarbonization platform. We see the opportunity of leveraging data analytics and automation. There's the prospect of autonomous vehicles, which will create tailwinds for transportation investments. Now, Dan, what are you seeing more broadly?
Yeah, I mean, think, one, just on the common ground, digitalization and then AI is, because of advances in data analytics and computation, that's going to help drive improvements in software as well. And one of the trends we're seeing, this already exists in the world, it's at a nascent stage today, is the concept of virtual power plants or VPPs. And what that effectively does is they aggregate, you know, distributed generation resources, and then they aggregate demand, and they try to optimize the two, so that they alleviate stress on the grid. What that allows us to do is then reduce the amount of storage we need to build. That's a very strong tailwind for more renewables, which is great for our business.
I think aside from growth, you know, this entire trend around digitalization and AI is also just gonna help our existing assets as well. You know, we own a portfolio of hydros in Tennessee, in the U.S., called Smoky. And I know that probably doesn't ring a bell for many in the room, but maybe one way to contextualize that is, I'm not sure if a lot of people have watched the movie Fugitive, when the guy jumps off the dam. We own that hydro. That's not the reason why we bought the investment. But just try to, you know, set the stage. You know, that hydro plant used to just sell power through +80 mile transmission line up north into PJM, because that was the more attractive power market.
With data center building out and Tennessee being one of those critical locations, we're seeing more constructive power market signals in the TVA or in Tennessee as well. That provides revenue optionality for that portfolio, derisks it, and is good value for us.
Great. Okay. So, we've reached the end of what we had prepared for today. Thank you so much for your time, and, with that, we're going on a break. No break. Sorry. We are moving on with Brookfield Renewable Partners.
Good afternoon. My name is Connor Teskey. I'm the CEO of Brookfield Renewable Partners. We know we're up last today, so we'll try and keep this punchy, keep it exciting, and end on a high note. Today, we'll start with an overview of our business and really focus on how our disciplined approach to execution and growth works across all economic environments. That will segue into Lluís Noguera , CEO of X-Elio and Brookfield Renewable's Global Head of Development, who will speak to how our approach to development can be leveraged across the increasing number of development businesses we have around the world. Next, Jeh Vevaina will speak about how our differentiated approach to growth through M&A allows us to secure attractive value entry points, and then Wyatt will finish with our financial position and an outlook for the business.
Over the last 12 months, let's say, since we last presented here at Investor Day, there's two narratives about renewables. One is very, very positive. The tailwinds that have supported the rapid growth of the industry for more than a decade are stronger today than they've ever been before. However, equally, there are these dynamics of higher interest rates, higher CapEx, and a more uncertain economic environment, that are raising questions around whether renewable power market participants can continue to grow as profitably as they have in the past. And we thought we would start our presentation by putting any concerns about Brookfield Renewable to bed. In the last 12 months, we've delivered record financial results, we've delivered record amounts of new generation from development, and we've had our single largest year for equity deployment into growth M&A.
We've done all of that while actually strengthening our balance sheet that already had the highest credit rating in the sector. Given the highly visible near-term outlook we have for the business today, we can say with confidence that next year we would expect to exceed a number of these thresholds yet again. Financial results. We have continued to maintain our momentum of delivering double-digit FFO per unit growth, a trajectory we've been on for more than a decade. Given the significant investments in development, the dollars we have in the ground, sorry, new projects that are gonna come online, and the significant amount of recent M&A that is now run rating through our numbers, we see a highly visible step change to a higher run rate level of earnings going forward.
Let's talk about those development capabilities. In the last 12 months, we have delivered approximately 3.5 GW of new clean energy capacity to global electricity grids. The financial benefit of that incremental generation to our business is about $50 million of annualized FFO. Now, maybe just to put that number in perspective, when we presented that number last year, our level of development was generating about $40 million of incremental FFO every year. If we take that same statistic and just roll forward from the end of Q2 to the end of the year, Q4 2023, we expect that number to be close to $70 million due to the continuously increasing amount of development activity we're doing around the world.
We are able to continue to deliver these successful, high-returning development investments due to conscious decisions we made years ago to be in the best and most attractive segments of the market. Today, over 50% of our development pipeline is in the United States and benefiting from IRA, and over 90% of our development pipeline is in the most mature, de-risked technologies, notably solar, onshore wind, and distributed generation. This allows us to continue to deliver our projects on time and on budgets, and target premium development returns well in excess of our 12%-15% corporate return target. We expect to be able to continue to scale up our development activities due to the significant investments in our pipeline in recent periods.
It's not only the entirety of our pipeline, but the fact that we have high visibility of dollars we put in the ground, that we will bring on almost 20 GW over the next three years, and that by the end of next year, the end of 2024, we believe our run rate deployment into development will be 7 GW of annual new generation online each year. It's not just organic growth. As mentioned, we're also coming to the end of a 12-month period that has been our highest period ever of equity deployment into growth via M&A. While the volume of activity is exciting to us, what's perhaps more important is the very attractive value entry points we've been able to secure over that period.
We've been disciplined, we've leveraged our size and our global reach to focus on opportunities with limited competition, where we could differentiate ourselves using something other than cost of capital. Those two major growth levers have allowed us to continue a very attractive financial trajectory. Over the last 10 years, we've raised our dividend every year, maintaining an annualized dividend growth rate well within our 5%-9% return target, something we remain committed to today. Those dividend increases have been well-funded by our increasing cash flows from operations due to that double-digit FFO growth that we think only accelerates going forward. Once again, we've done all of this without ever compromising the bedrock of our business, which is our balance sheet.
Today, we maintain a strong investment-grade credit rating, and our focus on long-term, fixed-rate, non-recourse asset level debt has ensured that we have minimal exposure to the current rise in interest rates. When you leverage that against the fact that we have no near-term maturities and almost $5 billion of available liquidity, we continue to remain well-positioned to capitalize on any new or exciting market opportunities that come our way. All of this has continued to solidify Brookfield Renewable as a global clean energy super major, one that is differentiated by the fact that we are a major player in every major power market around the world, and we have market-leading capabilities across all major renewable power and decarbonization technologies. This allows us to continue to be the partner of choice for both governments and corporates looking to reach their decarbonization objectives.
Maybe just switching gears for a second. In previous years, we've often dedicated a portion of this presentation to explain the strong macro tailwinds that support our industry. These tailwinds have been very consistent for a number of years now. One, accelerating decarbonization objectives. Two, renewable power's position as the lowest cost form of bulk electricity production. Three, the highly visible increase in electricity demand coming from large industries, notably industrials and transportation, that are increasingly electrifying and looking to get off fossil fuels. And four, the role that renewables can play in providing energy security, an objective that is increasingly paramount in many regions around the world. Rather than go into each of these individually, we'd simply say that all four of these drivers have only continued to accelerate over the last 12 months.
But there are many things that you read about in the headlines, and it's important to understand how these impact our business, so we thought we would run through a few of them. As you've just heard from the panel, there are many headlines about the growth of artificial intelligence. This is incredibly beneficial for our business. Artificial intelligence requires more data centers, data centers require more power, and the largest procurers of green power around the world are already the big tech companies that are now seeing a step change in demand for our product. There's been a lot of talk about inflation over the last 12 months, and we all recognize out-of-control inflation is not good for anyone, but central governments are doing their job and taking the hard positions to bring inflation back under control.
It's important to recognize within our business, over 70% of our contracts are indexed to inflation. So this period of high inflation has seen an increase in our revenues, and when you layer that on top of a high-margin business with a fixed cost structure, those increases in revenues drop straight to our bottom line. Higher power prices has been something that's been constantly in the news in recent periods. This obviously is a massive benefit for our business. Although we are mostly contracted today, about 10% of our business remains merchant, particularly within our North American hydros, and we are now seeing the opportunity to contract those assets at much more constructive power prices than we would have seen three or five years ago. And lastly, we've heard that access to capital has become more scarce and capital has become more expensive.
Well, for many years, Brookfield Renewable's access to capital has been a key differentiator, and this has been particularly pronounced, allowing us to do deals and continue to grow in this market, where others can't source the funding to continue to expand. So said another way, in the current environment, our competitive advantages have only been enhanced, and we believe the conditions for putting capital to work today remain excellent. We thought we would finish by focusing on a few ways that our business is well-positioned. For years now, we have been explaining how our access to capital is a key differentiator for our business. In particular, how we can use our strong balance sheet and align it with institutional capital to do some of the largest and most attractive deals in the space.
In the past 12 months, this has become particularly pronounced, as we have used not only Brookfield Renewable's alignment with Brookfield's private funds, but also our ability to bring co-investors into our transactions, allowing us to target some of the largest and most attractive marquee assets that have been available in the market. It should come as no surprise to anyone that some of our largest transactions have also been some of our highest returning, and that is why our access to capital is an enduring competitive advantage. When you put that strong access to capital alongside our global reach, with a boots-on-the-ground presence in over 20 markets around the world, and our over 120 dedicated investment professionals, we can move quickly and with conviction and scale when we see large and attractive opportunities.
Jeh Vevaina will give examples of how we've done that in the past 12 months to capture some unique assets that perhaps others would not have been able to execute on. One theme that we're increasingly seeing in our business today is the demand for decarbonization, and the trend line on transition is being much more driven by a corporate pull than it is a government push. In fact, the demand for green power and other decarbonization products is stronger today and far outweighs the supply of new projects that are available. But in order to capture that demand, you can't just have capabilities. You also need the capital to build out the projects, and most importantly, you need the assets. You need the projects.
You need to have been investing in them ahead of time, such that they are ready to build, to step up and meet that new corporate demand when a counterparty is looking for new green power generation. What we have been doing across our business for a number of years now is investing in best-in-class development capabilities, buying leading businesses in core markets around the world. This has created a very virtuous cycle. Because we have global and scale capabilities to service the largest clients, we are increasingly capturing more of that demand, driving more of our growth, allowing us to invest in more pipeline, and increasingly positioning us as the partner of choice. That is a very difficult value proposition to replicate. Lastly, almost every year, we think it is incredibly important to remind investors of our operations-oriented approach to creating value.
We leverage our thousands of in-house operating professionals to help in due diligence and ensure that we are making the most informed investment decisions. And then once we own an asset, we use those operating professionals to drive our business plans, enhancing and de-risking the cash flows of our underlying portfolio companies. But what we thought we would do today is go a layer deeper and focus on some of the key principles that we use whenever we are investing in growth. And we'll highlight a few of these. Whenever we are looking to deploy capital, either into a new organic development project or into an M&A opportunity, we underwrite conservatively, and we target high returns.
What this allows is, when there are unforeseen headwinds in the market, we have cushion to a satisfactory outcome, but more importantly, there are probably a number of offsetting positives that weren't included in our underwriting that can counterbalance any unforeseen negatives and ensure that we continue to hit our underwriting returns. The second principle we wanted to highlight is something that we call removing the basis risk. Whenever Brookfield Renewable invests significant capital into an investment opportunity, we want to be sure that we can de-risk that investment right away. The best example of this is, if we're going to invest in the significant CapEx of a new renewable project, we're only going to cut that check if at the same time we can lock in the power contract, the EPC, and the long-term financing.
By locking in those four components at once, the returns on that invested capital are largely secured, and we are no longer exposed to changes in power prices, interest rates, or CapEx. And it is because of that that we can continue to deliver our development activities on time and on budget across a variety of economic cycles. When you put these approaches and these principles of our growth alongside our global presence and our deep local market expertise, we have a very repeatable business model for deploying capital at attractive returns. As such, when we sit here today, we have confidence that our recent investments, the returns are excellent and outperforming our underwriting, and we expect to be able to continue to deliver or exceed our return targets going forward. As we have done in previous years, we are yet again increasing our targets into growth, now targeting $7 billion-$8 billion of equity capital into growth over the next five years.
With that, I'll hand it over to Lluís Noguera , CEO of X-Elio and Brookfield's Global Head of Development.
Good afternoon. Today I'm gonna talk about our differentiated development business model, and also some of the lessons learned of my experience at X-Elio, together with, since the ownership of Brookfield. So first slide, two key messages here. I think the first one is 134 GW of pipeline. As a reference, that's 2x the peak demand of Germany, the largest economy in Europe. The size of our pipeline is 2x the peak demand of Germany. Second message, really, it's about diversification, as has been mentioned many, many times. When you look at the splits of our pipeline, we are in all the key markets, the markets that already are committed to energy transition, the markets that have the regulation, that have the fundamentals, that have the economics, that make sense for this transition to happen.
But we're also diversified in terms of technology. When you look at our pipeline, obviously, solar is a big part of it. It's today the lowest LCOE technology in the market, but we're also in all the other technologies, especially in wind, and most of our wind position is on onshore wind, where the risk-return today is the most attractive. But that is just also present in new technologies and storage. We're gonna talk today about storage. Storage is taking a more and more relevance into our pipeline. So this page basically talks about two things. One, we set targets, which we have consistently exceeded. When we look at our targets that we set for 2020, we exceeded them. When we look at 2021, again, we exceeded them. When we look at 2022, again, we exceeded them. And this is just not by coincidence.
This is really the result of harvesting the effort that we've done for many, many years in investing in renewables in a methodic way, diversifying the risk that the development has, and being able to over and over exceed our expectations. How do we do that? Basically, we do that through our global presence, but with local expertise. Our business model is very, very difficult to replicate. We have the scale to really be a market leader, but we execute on a local basis. A very simple example, developing a renewable project in Texas is very different than developing a renewable project in Gujarat, in India. We have a team that is an expert of developing renewables in Texas, and a team that is developing renewable projects on a local basis in the main regions of India.
That is unique, and that is what makes a difference for Brookfield. But let's look at the numbers. Today, we have 31 GW operating, but we have very good visibility of 18 GW of near-term pipeline, out of which 7 are already or will be in construction before the end of the year. That talks about visibility, and that visibility comes, again, because we didn't start yesterday. We've been doing this for many, many years, and today what we are seeing is the results of our continued commitment to development of renewable projects around the world. With that, allow me to introduce a video that will talk a bit about X-Elio .
X-Elio is one of the most solid renewables developers in the industry. We've been doing development of renewable projects for more than 17 years. We transformed the company from what was a small engineering shop into one of the largest global, diversified, multi-technology, renewable developers in the world. We are present in all the continents around the world, from North America to Australia, from Japan to Chile, doing solar projects, but now also entering new technologies like energy storage. It was three things that we really liked about X-Elio when we originally looked at it. The first one was the fact that X-Elio was a sizable, fully integrated development platform. Second, X-Elio was present in all the key solar markets globally. And then third, it also allowed us to participate in the growth we saw in the solar sector as one of the lowest cost renewable technologies out there.
So if you put all of these three things together with a strong management team and the strong capabilities the business had around contracting and procurement, that gave us a ton of comfort on the ability of X-Elio to deliver on its growth plans. We set up a 50/50 co-control joint venture with KKR. Going forward, we will own and control 100% of X-Elio , and that will provide us even further flexibility around the business in the future.
Brookfield has supported growing the pipeline significantly from the 5 GW that we had originally to more than 14 GW. From an asset rotation perspective, we have been selling over 1.5 GW of operating assets in different jurisdictions. And from a funding perspective, we have increased the revolving credit facility on over $350 million to allow X-Elio to be self-sustainable from a capital perspective.
X-Elio is focused on developing green projects that are gonna enable all the rest of the energy transition. When I think about green energy, I want to look at a partner like Brookfield, that has been doing this for many years. I want to look at somebody that I know that is there for the long run, not just jumping into energy transition because it's in fashion, but somebody that has been doing this for more than 15 years, that has the delivery capabilities that Brookfield has proven over and over again.
When it comes to growth, X-Elio has been doing a really good job over the last few years of building a really strong position in all the markets where they are present. What that means today is that X-Elio owns a very large and advanced development pipeline that provides significant growth visibility for the business in the coming years. The largest growth opportunity for X-Elio is organically by executing or delivering on that development pipeline.
We want to produce the most demanded commodity of the next 30 years in a way that is sustainable, that is responsible, that takes into account all the challenges that we've learned over the years, and that's unique. Okay, so in that last picture, there was a tracker that was not facing the sun, so we need to work on that. Sorry. 17 years we've been doing that, and we were born engineering. We are engineers. So for 17 years, we started doing 5 MW projects, and today, by the end of this year, we're gonna be building 1,500. 1,500 MW of solar around the world, from the U.S. to Australia, from Japan to Chile.
I wouldn't say we've seen it all, but in 17 years we've learned a lot, and we've learned many challenges, and we have the team that knows what to do, when to do it, and so on and so forth. Again, like I said, we are in many markets, the markets that really today make the most sense in terms of competitiveness of solar. Either markets that where solar is very cheap because they have the resources, or markets where solar has the economic incentive to actually be very competitive and very attractive for us. And we do that with a centralized team, centralized engineering, centralized procurement, centralized finance, but local development teams.
In all the countries we operate, we have offices with at least 10 people, mostly engineers, that know development and have been doing development, that all day are thinking about getting the right projects and, and getting them to the finish line and to start construction. So when we look at the numbers, actually, the numbers there, what they show is quality. We've been able to sell 1.5 GW, making more than 2x on average. That is possible because of our business model. We develop from the land identification all the way to the notice to proceed. We do everything. We do the design of the project, we do all the permitting, we do all the local relationships, and so on and so forth. That means that when we develop a project, we think that we are gonna build it.
So we develop to build, we don't develop to sell. That's a completely different mindset, because you don't get into trouble because you know your colleagues are gonna be building that project, are gonna be selling the energy, are gonna be looking for the financing for this project. That ensures that all the throughout all the process, quality is important because we are not developing for third parties, we are developing for our own, we are developing to build. In addition, well, that asset rotation, together with the $350 million of corporate facility-- But again, I mean, if you're looking. The development is still a very--
There are many developers, but when you're a bank and you look at who do you want to lend, you want to lend to a company that has been doing that for 17 years and it's owned by Brookfield. It's from a risk-return perspective, it's a no-brainer. So when you look at X-Elio today, we have 15 GW of pipeline on top of all the projects that we have already developed and sold, and 15 GW is really the number. It's a number that is very solid. Again, visibility, visibility, visibility. Nothing is in our pipeline unless we have already secured land or interconnection or both. We are gonna be needing many, many green electrons for the foreseeable future, but this pipeline is real, this pipeline is here today, and this pipeline is diversified.
Again, we have more than 150 projects. Connor mentioned earlier, no binary risk. No binary risk. When you have 150 projects, you diversify the risk of development in a way that is what makes sense from a risk-return perspective. So what next? Continue growing, continue doing what we've done for 17 years. We are developers. We have a business model that has proven to be very profitable. We have the quality, we have the assets and the commodity that the world needs to actually get us there. We can do that in a self-funding model, and in addition, we are increasingly investing into storage. Storage is the next stage of the energy transition. We need a lot of green electrons, but we need electrons 24 hours.
It was also mentioned earlier, and storage is the technology that is gonna allow us to, to produce that. So, X-Elio , I like to see it as a small Brookfield. A small Brookfield, again, if we think about 7 GW per year, that's very difficult to replicate. Brookfield is doing that at a very large scale with the best developers in every region, best developer in India, best developer in the U.S., best developer in Australia, and so on and so forth. We are putting together a network of developers, together with the scale and the capabilities that Brookfield has, that is second to none. And we are applying, on top of that, the lessons that from X-Elio or from other platforms, we can move those, those lessons from one platform to another. If we see in a market that there's a problem, and we see dynamics similar in another market, we can move those lessons from one market to the other.
With that, I leave it to Jeh to talk about some of the investments.
Okay. Hi, everyone. My name is Jeh Vevaina. I'm the Chief Investment Officer in Brookfield's Renewable Power and Transition Group. In this section of the presentation today, I'll be speaking to our differentiated growth capabilities using examples that we've actually executed on. I wanted to first touch on a few points that Connor spoke to earlier to help to put our growth strategy and the advantages we have into context. Globally, there continues to be increasing decarbonization objectives from both governments and corporates. Government support continues to be strong, with the Inflation Reduction Act significantly benefiting our businesses. Increasing demand for energy due to global growth, acceleration of artificial intelligence, and energy security is driving renewable energy prices significantly higher.
An additional key trend that is resulting in strong growth, and which Connor mentioned, which is very beneficial to our business, is the shift from a government push to a corporate pull. Corporates are increasingly setting net zero targets, making public commitments, and investing in businesses to achieve these goals. As of June this year, 47% of the world's 2,000 largest companies by revenue have stated net zero targets, and one of the most significant ways to reduce carbon emissions is by switching to renewable energy. We believe we are also best suited to manage through some of the challenges in our sector. This market dynamic that requires management of rising interest rates, access to capital, and supply chain constraints, favors experienced developers such as us.
Off-takers are keen to work with strong, reliable partners that have a global presence, expertise in complex development, and have deep operating capabilities. The examples I will speak to on the following slides demonstrate how we are differentiated and how we have navigated some of these challenges. The key criteria for our investment decision-making is the same as it has always been: Does the investment meet our target return on a risk-adjusted basis? We are confident that we can continue putting scale capital to work at our targeted risk-adjusted returns. With our unique capabilities, we are not restricted in the way we grow our business. We've had success investing in greenfield projects and acquiring very mature operating businesses, as well as everything in between. We also have flexibility to back high-quality management teams or integrate assets into our operations.
The optionality to invest across the lifecycle of a project allows us to review all deals in the market. The key message we would like you to take away from this slide is that things that make us different provide us with opportunities that others simply do not have, and that is an advantage. The first point I want to make on this slide is our access to capital. The way our business is structured means we are able to bring in co-investors to participate in large-scale deals. Not only does this give us opportunities with fewer bidders, but it can also lead to strong partnerships. Bigger businesses attract better management teams and have more optionality to create value. Both Ascenty and X-Elio were large deals that translated into 20%+ returning investments.
Our track record and past experience allows us to find similar deals and earn outsized returns. On this slide, we have a few large deals that we executed on. Our track record has shown that we can constantly replicate our playbook and consistently create value with large-scale transactions. Our existing investments provide us with proprietary data and information that allows us to underwrite new acquisitions rapidly and accurately. We have a strong understanding of what is happening at a fundamental business level on the ground, and that allows us to act with conviction. For example, you may see us make several investments that look similar. This is because if we identify value levers, we can use that playbook to create value on more than one deal.
For example, our 2018 investment in Luminace, the largest distributed generation business in the U.S., has been extremely successful, and we were able to drive margins higher than anyone expected. It is with this confidence and knowledge that it, it allowed us to invest in Standard Solar, that focuses on a slightly different segment of the distributed generation market, and that investment is performing extremely well. In addition, we're highlighting our India platform. We entered the India market in 2017, and have been growing steadily since. Earlier this year, we signed our first major deals, committing significant capital with our investments in CleanMax and Avaada, materially increasing our capital in the region. We were patient, we learned the market, we developed strong partnerships, and then took action when the time and opportunity to enter was right.
The key message here being that the investments we have made over the last decade provide us with irreplaceable data and knowledge that inform our investment decisions today. We can invest across the operating and development spectrum. In the examples here, we have three different investments in three very different stages of the life cycle. With Scout, we are advancing projects through development and into production. With Duke, which we expect to close imminently, we're taking a large, established operating business, integrating it into our platform, and generating additional value through our capabilities. And with TerraForm, we have generated value through operating enhancements and commercial capabilities, extending contracts, and executing tuck-in acquisitions. Double-clicking on our capabilities and the ways we generate value, our recently announced acquisition of Duke is a great example of how we were able to invest for value with significant upside potential.
We were able to acquire Duke Energy's renewable business at an approximately 9x EBITDA multiple. Our credibility as a counterparty and capacity to underwrite and execute a scale investment quickly was integral to reaching an agreement with Duke, who was motivated to sell these assets and refocus the business on their utility operations. In addition, our ability to carve out a large business spread across multiple markets across the U.S. was key helping us to invest at an attractive valuation. We expect to execute on multiple levers for value creation from this business, from operating and commercial synergies, optimizing the capital structure, and growth from repowerings and development. In addition, we believe the situation is absolutely repeatable, and the market will present us with strong opportunities similar to this in the future. A strong management and disciplined underwriting has been evident with our portfolio through the recent volatility.
We continue to grow our FFO per unit at a double-digit pace and execute on our growth strategy. A great example of our ability to manage through headwinds is with our U.S. distributed generation business. A recent analysis of some of the projects approved in late 2021 and early 2022 were developed through the recent period of interest rate hikes and increases in CapEx are expected to perform better than they were in underwriting. Strong cost management and the fact that we secured panels from suppliers well in advance resulted in no cost overruns. We were able to secure good PPA pricing above our conservative underwriting and realize upside from the IRA and also from financing structures. The key here being that we always underwrite to the downside, protect ourselves from adverse externalities, and position ourselves to realize returns at our targets or better.
I want to leave you with a final message, which is our track record has positioned us to continue delivering this high-quality growth. Thank you. I'll now pass the mic to Wyatt Hartley, our CFO.
Good afternoon, everyone. For those of you who don't know me, my name is Wyatt Hartley, and I'm the Chief Financial Officer of the Renewable Group here at Brookfield. Today, I have two very simple but critical messages about our business. First, our balance sheet is strong, and we are well-positioned to fund the growth of our business going forward. Second, our outlook to grow cash flow per unit is as strong as ever. Starting with the strength of our balance sheet, which Connor covered, underpinning all of this, we have a strong BB B positive investment-grade balance sheet, which is one of the highest ratings in the sector.
In addition, over 90% of our borrowings are project-level, non-recourse, long-duration debt with very little exposure to floating rates, which translates well on a maturity basis with an average remaining term to maturity of over 12 years, and as importantly, no material near-term maturities. And finally, our liquidity is as strong as ever, with $4.5 billion available, providing significant financial flexibility to take advantages of periods of capital scarcity. And we also maintain access to flexible and diverse sources of funding to fund the growth of our business. When we finance our business, our focus to, is to prudently source our lowest-cost capital. So this means we maximize corporate debt, preferred equity, or unutilized debt capacity at our existing assets while maintaining our investment-grade rating throughout our structure.
But it also means that capital recycling will continue to be an important part of our funding strategy, where demand for operating, de-risked, renewable businesses remains strong, even in the current environment. As an example, over the last 12 months, we have completed a variety of sales across our business, crystallizing proceeds that on average, represent almost 3x our invested capital and generating meaningful capital to fund the growth of our business. Moving next to the quality of our cash flows. Said simply, we believe we generate the highest quality cash flows in the sector. This comes from our largely perpetual and dispatchable asset base, our highly contracted profile with an average remaining contract duration of 13 years, and as Connor said, with 70% of our contracts linked to inflation, meaning our cash flows benefit in an inflationary environment.
As we have grown our business, we have also significantly de-risked our cash flows by increasing the diversity of our portfolio. Our current business is diversified across multiple markets and technologies, such that no single market represents more than 10% of our business. As a result, we are well positioned to continue to deliver on our decade-long track record of annual FFO per unit growth of greater than 10%. Even compared to our update last year, the tailwinds across each of our growth levers continue to strengthen. Meaning, as I stand here today, our outlook to achieve FFO per unit growth in excess of 10% over the next five years is increasingly secure. As a reminder, this comes from four basic building blocks.
The first is inflation, which, as I said earlier, that almost 70% of our contracts are indexed to inflation, and given we generate at high margins, and we use almost exclusively fixed rate debt, our cash flows benefit from an inflationary environment. And as we look out this year, in an environment where inflation levels have remained above what most would have expected last year, we are positioned to benefit from additional FFO. And from a margin enhancement perspective, the expected benefit from increased demand for base load or dispatchable carbon-free generation continues to strengthen. As we walked you through last year, we have approximately 5,500 GWh of hydro generation that is rolling off short-term contract that will benefit from recontracted at much higher pricing.
As a result of an increasingly constructive all-in price environment, which includes the grid stabilizing features or the renewable energy credits that we sell from our dispatchable hydro assets, we are seeing additional potential upside to the annual FFO that we highlighted last year. We continue to ramp up our development activities. As both Connor and Lluís highlighted, we take a de-risked approach to development that generates attractive risk-adjusted returns, while delivering projects on time and on budget. As a result of an increase in these activities to an annual run rate of 7,000 MW commissioned per year, the benefit to our annual FFO is meaningful. Finally, as Connor and Jeh touched on, we are deploying capital into M&A at record levels into highly accretive transactions, meaning we have already secured growth that will contribute meaningfully to cash flow growth next year.
So bringing this all together, with the additional tailwinds in our business, we are highly confident that all roads lead to growth at our most historic rate, delivering strong total returns to our investors. Won't let me. Oh, there we go.
So with that, I'll pass it back to Connor for our key takeaways and Q&A.
Great. So maybe, just before we turn to Q&A, three conclusions to leave everyone with. We believe the growth opportunities for our business are as strong as they've ever been, and the current market environment really plays to our strengths. Secondly, we have a highly visible path to continuing our momentum of double-digit FFO growth well into the medium term in an already secured manner, and we also expect our recent elevated levels of growth to continue. And we do all of this without ever compromising on our 5%-9% dividend annual increase target, and our approach to delivering strong, attractive, risk-adjusted, 12%-15% returns on our deployed capital.
With that, we would like to open it up to questions.
Hi, it's Ben Pham, BMO Capital Markets. First question, the $7 billion-$8 billion targeted equity deployment number you put out, what percentage do you think has been de-risked or more visible to you vis-a-vis the development activities that you have planned out?
Yeah, it's a great question. Of that $7 billion-$8 billion , it's probably safe to say about a third of it sits internally within our pipeline opportunities that are proprietary to us to deploy capital in, and the remainder is incremental M&A.
Thanks. And maybe the second one is the conversation on AI technology companies, and the theme we've seen in the last few years is they outsource companies like yourself to build renewables. As you think about the next five years, do you think that there is a risk to you in the industry that they would just build those products themselves, that they become a fierce competitor to Brookfield Renewable?
It's an interesting question. Candidly, we think the answer is no. As Lluís mentioned, and as Dan mentioned, in the panel discussion, development is a highly complex local process. It takes a lot of people. It takes a lot of experience. What we have to be able to deliver our large-scale power on a global basis is very difficult to replicate. And personally, I don't think it's the key objective of the large tech companies. They're focused on growing AI, cloud, those types of products that they are best in class in.
Anthony Crowdell, Mizuho. It seems right now that it's a buyer's market for renewable projects, particularly in the United States, and especially if you look at offshore wind right now. I guess my question is twofold. One, do you see that buyer's market changing for these projects? And two, your view, does someone step in and acquire these offshore assets, whether it's merchant or regulated? Thank you.
Certainly. So, maybe just to make a comment regarding offshore. We love offshore. We think offshore is a great technology. It can be produced at scale. The fact that it's, you know, out in the ocean, addresses some concerns that often people have about building solar on land. So we are big believers in offshore, and the only reason we don't have greater exposure to offshore today is because of our discipline to adhering to that principle of we don't take on basis risk. Many of the opportunities to invest in offshore historically, you had to commit huge sums of capital upfront many years before you knew the cost of building the project or the revenue that project would attract.
Increasingly, around the world, projects are closer to development, they're closer to construction, and it's going to create opportunities for us to invest without taking on that basis risk that we've historically been averse to. The second comment, just about the type of market it is. We often get the question, "Is it a buyer's market or is it a seller's market?" It can be both at the same time. There is no doubt today there are more attractive opportunities to buy large-scale platforms that are complicated and have significant opportunity for value enhancement. That is the bread and butter of what we do when we make large-scale M&A acquisitions.
But what we wouldn't want to leave you with the impression is that there isn't a very, very robust market as well for de-risked, high quality, mature, contracted operating assets, and that really feeds into our asset recycling model, where we can be investing at very attractive returns into new investments, while at the same time, in the same market, selling de-risked, mature assets to lower cost of capital buyers at the same time. So maybe we will cut it there, recognizing we are last, and I actually think we outperformed and saved a little bit of time. Just lastly, on behalf of everyone at Brookfield, we'd like to thank you all for coming today. We appreciate your interest and support of our listed issuers and our affiliate entities.
Because the weather is good, we have moved drinks from inside to outside on the patio, and we look forward to seeing you there. Thank you.