Brookfield Infrastructure Partners L.P. and Brookfield Infrastructure Corporation, 2021 CanLII 134126

Ontario Commission des 22nd Floor 22e étage

Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest

Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8

October 26, 2021

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (THE JURISDICTION)

AND

IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF BROOKFIELD INFRASTRUCTURE PARTNERS L.P. AND BROOKFIELD INFRASTRUCTURE CORPORATION

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Brookfield Infrastructure Partners L.P. (BIP) and Brookfield Infrastructure Corporation (BIPC, together with BIP, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting Brookfield Infrastructure Corporation Exchange Limited Partnership (the Issuer) and, in respect of (c), the insiders of the Issuer, from the following requirements:

(a) the requirements of National Instrument 51-102 — Continuous Disclosure Obligations (NI 51-102) (the Continuous Disclosure Requirements);

(b) the requirements of National Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109) (the Certification Requirements);

(c) the insider reporting requirement (as defined in National Instrument 14-101 — Definitions (NI 14-101)) (the Insider Reporting Requirements);

(d) the requirements of National Instrument 52-110 — Audit Committees (NI 52-110) (the Audit Committee Requirements); and

(e) the requirements of National Instrument 58-101 — Disclosure of Corporate Governance Practices (NI 58-101) (the Corporate Governance Requirements),

in each case to accommodate the issuance by the Issuer of class B exchangeable limited partnership units (the Exchangeable Units) (collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) BIP and BIPC have each provided notice that section 4.7(1) of Multilateral Instrument 11-102 — Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Yukon and Nunavut.

Interpretation

Terms defined in NI 14-101 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by BIP and BIPC:

BIP

1. BIP is a Bermuda exempted limited partnership that was established on May 21, 2007.

2. The limited partnership units of BIP (the BIP Units) are listed on the New York Stock Exchange (NYSE) and the Toronto Stock Exchange (the TSX) under the symbols “BIP” and “BIP.UN”, respectively. BIP’s authorized capital also includes Class A preferred limited partnership units, issuable in series, and general partnership units.

3. Holders of BIP Units do not have voting rights except in limited circumstances.

4. BIP is a reporting issuer in all of the provinces and territories of Canada (collectively, the Jurisdictions) and is an SEC foreign issuer within the meaning of section 1.1 of National Instrument 71-102 — Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102) and satisfies its continuous disclosure obligations by complying with U.S. federal securities laws as is permitted under NI 71-102.

5. BIP’s sole asset is its managing general partnership interest and preferred limited partnership interest in Brookfield Infrastructure L.P. (the Holding LP), a Bermuda exempted limited partnership that was established on August 17, 2007.

6. Brookfield Infrastructure Partners Limited, a Bermuda company, holds the general partner interest in BIP and is wholly-owned by Brookfield Asset Management Inc. (Brookfield).

7. BIP, the Holding LP and certain of their subsidiaries have retained Brookfield and its related entities to provide management, administrative and advisory services under a master services agreement.

8. BIP is not in default of any requirement of the Legislation or equivalent legislation in any of the Jurisdictions.

BIPC

9. BIPC was incorporated under the Business Corporations Act (British Columbia) on August 30, 2019 as an indirect subsidiary of BIP. The registered office of BIPC is located at 1500 Royal Centre, 1055 West Georgia Street, P.O. Box 11117, Vancouver, British Columbia, V6E 4N7. The head office of BIPC is located at 250 Vesey Street, 15th Floor, New York NY 10281.

10. The class A exchangeable subordinate voting shares of BIPC (BIPC Exchangeable Shares) are listed on the NYSE and the TSX under the symbol “BIPC”.

11. BIPC’s principal investments consist of indirect interests in utilities businesses in Europe and South America.

12. BIPC is a reporting issuer in all of the Jurisdictions.

13. The authorized share capital of BIPC consists of an unlimited number of: (i) BIPC Exchangeable Shares; (ii) class B multiple voting shares (the BIPC Class B Shares); (iii) class C non-voting shares (the BIPC Class C Shares); (iv) class A senior preferred shares (issuable in series); and (v) class B junior preferred shares (issuable in series).

14. The holders of the BIPC Class B Shares are entitled to cast three times the number of votes attached to all of the BIPC Exchangeable Shares, for a total of 75% of the votes.

15. The BIPC Exchangeable Shares were provided with nominal voting rights in order to assist with index inclusion.

16. BIP, through Brookfield Infrastructure Holdings (Canada) Inc. (CanHoldco), currently indirectly owns all the BIPC Class B Shares and is therefore entitled to cast 75% of the votes.

17. The voting rights attached to the BIPC Exchangeable Shares do not allow holders of BIPC Exchangeable Shares to affect the control of BIPC regardless of how many BIPC Exchangeable Shares are outstanding.

18. BIP, through CanHoldco, currently indirectly owns all the BIPC Class C Shares, which represent the residual right to participate in the assets of BIPC upon liquidation or winding-up of BIPC.

19. The rights, privileges, restrictions and conditions attached to each BIPC Exchangeable Share (the BIPC Exchangeable Share Provisions) have been structured such that, by virtue of its rights, entitlements and otherwise, each BIPC Exchangeable Share is as nearly as practicable, functionally and economically, equivalent to a BIP Unit. In particular:

(a) each BIPC Exchangeable Share is exchangeable at the option of a holder for one BIP Unit (subject to adjustment to reflect certain capital events) or its cash equivalent (the form of payment to be determined at the election of BIPC);

(b) the BIPC Exchangeable Shares are redeemable by BIPC for BIP Units (or its cash equivalent, at BIPC’s election) on a one-for-one basis (subject to adjustment to reflect certain capital events);

(c) upon a liquidation, dissolution or winding up of BIPC, holders of BIPC Exchangeable Shares will be entitled to receive BIP Units (or its cash equivalent, at BIPC’s election) on a one-for-one basis (subject to adjustment to reflect certain capital events) and not any remaining property or assets of BIPC following such payment;

(d) upon a liquidation, dissolution or winding up of BIP, including where substantially concurrent with a liquidation of BIPC described in paragraph (c) above, all of the BIPC Exchangeable Shares will be automatically redeemed for BIP Units (or its cash equivalent, at BIPC’s election) on a one-for-one basis (subject to adjustment to reflect certain capital events); and

(e) subject to applicable law and in accordance with the rights, privileges, restrictions and conditions attached to each BIPC Exchangeable Share, each BIPC Exchangeable Share entitles the holder to dividends from BIPC payable at the same time as, and equivalent to, each distribution on a BIP Unit. If a distribution is declared on the BIP Units and an equivalent dividend is not declared and paid concurrently on the BIPC Exchangeable Shares, then the undeclared or unpaid amount of such dividend accrues and accumulates and is to be paid upon the first to occur of any of the circumstances contemplated by paragraphs (a) to (d) above, if not yet paid.

20. BIPC is not in default of any requirement of the Legislation or equivalent legislation in any of the Jurisdictions.

21. To date, BIPC has paid dividends on the BIPC Exchangeable Shares at the same time as, and in an amount equivalent to, each distribution on a BIP Unit.

22. As a condition to the relief provided by the OSC to BIP and BIPC, In the Matter of Brookfield Infrastructure Partners L.P. and Brookfield Infrastructure Corporation (2020) 43 OSCB 2731, BIP is required to, directly or indirectly, hold all of the voting securities of BIPC (other than the BIPC Exchangeable Shares) and to make no material changes to the BIPC Exchangeable Share Provisions.

The Issuer and the Acquisition

23. The Issuer was formed under the laws of the Province of Alberta on April 21, 2021 as an indirect subsidiary of BIP. The registered and head office of the Issuer is located at Suite 1210 - 225 6th Ave SW, Calgary, Alberta T2P 1N2.

24. The Issuer was formed in connection with the bid by Bison Acquisition Corp. (the Purchaser) to acquire any or all of the common shares (the IPL Common Shares) of Inter Pipeline Ltd. (IPL) not already owned by BIP or its institutional partners (the Bid).

25. The Bid was made pursuant to a takeover bid circular dated February 22, 2021, as amended and extended.

26. The consideration offered to holders of IPL Common Shares in connection with the Bid consisted of: (i) cash; (ii) BIPC Exchangeable Shares; or (iii) Exchangeable Units (only in the case of eligible Canadian holders of IPL Common Shares), at the election of each holder of IPL Common Shares.

27. The Bid expired on September 3, 2021.

28. 286,254,231 IPL Common Shares were tendered and taken-up under the Bid.

29. An aggregate of approximately 17.9 million BIPC Exchangeable Shares and 4 million Exchangeable Units were issued to former holders of IPL Common Shares in connection with the Bid.

30. The Purchaser and IPL entered into an arrangement agreement dated September 3, 2021, as amended, pursuant to which the Purchaser and the Issuer proposed to acquire all of the issued and outstanding IPL Common Shares not otherwise owned by BIP or its institutional partners by way of a plan of arrangement under section 193 of the Business Corporations Act (Alberta) (the Arrangement). Pursuant to the Arrangement, holders of IPL Common Shares will be entitled to elect to receive the same consideration as set forth in the Bid for each IPL Common Share.

31. A special meeting of the holders of IPL Common Shares will be held on October 28, 2021 and it is expected that the Arrangement will be completed as soon as practicable thereafter, subject to satisfaction or waiver of all conditions precedent, including receipt of the final order of the Alberta Court of Queen’s Bench.

32. BIPC is a mutual fund corporation for Canadian tax purposes and is therefore restricted from holding “taxable Canadian property”, including the IPL Common Shares, exceeding a certain percentage of its total assets.

33. The BIPC Exchangeable Shares issued as consideration in connection with the acquisition of IPL are delivered to holders of IPL Common Shares by the Purchaser and not by BIPC.

34. A rollover for tax purposes involving the BIPC Exchangeable Shares could only be obtained by transferring the IPL Common Shares to BIPC directly in exchange for the BIPC Exchangeable Shares as consideration.

35. The Exchangeable Units were created in order to offer an exchangeable security that can be delivered to eligible Canadian holders of IPL Common Shares seeking a rollover for tax purposes, which was not available to those who elected to receive BIPC Exchangeable Shares.

36. The Exchangeable Units are not and will not be listed on a stock exchange nor are they transferrable.

37. The authorized capital of the Issuer consists of: (a) class A limited partnership units (the LP Units); (b) Exchangeable Units; and (c) general partner units (the GP Units).

38. BIP indirectly owns all the LP Units and the GP Units, and therefore indirectly controls 100% of the voting securities of the Issuer.

39. The Issuer distributed the Exchangeable Units to the public under the Bid in reliance upon section 2.16 of National Instrument 45-106 — Prospectus Exemptions (NI 45-106). The distribution of Exchangeable Units under the Arrangement will be made in reliance upon section 2.11 of NI 45-106.

40. The Issuer became a reporting issuer in certain of the Jurisdictions in connection with the issuance of Exchangeable Units to the public under the Bid and will become a reporting issuer in the remaining Jurisdictions in which IPL is a reporting issuer upon completion of the Arrangement, and the Issuer, accordingly, will be subject to the continuous disclosure and insider reporting requirements of the Legislation applicable to reporting issuers. Accordingly, the Exemption Sought relates to exemptions from the continuous disclosure and insider reporting requirements of the Legislation that will apply to the Issuer.

The Exchangeable Units and the Relationship between BIP, BIPC and the Issuer

41. The Exchangeable Units are intended to provide eligible Canadian holders of IPL Common Shares a rollover for tax purposes that is not otherwise available in connection with the receipt of the BIPC Exchangeable Shares. The rights, privileges, restrictions and conditions attached to each Exchangeable Unit (the Exchangeable Unit Provisions) have been structured such that, by virtue of its rights, entitlements and otherwise, each Exchangeable Unit provides the holder with economic rights which are, as nearly as possible except for tax implications, equivalent to a BIPC Exchangeable Share. In particular:

(a) each Exchangeable Unit will be exchangeable at the option of a holder for one BIPC Exchangeable Share (subject to adjustment to reflect certain capital events) (an Exchange);

(b) upon a liquidation, dissolution or winding up of the Issuer, holders of Exchangeable Units shall be entitled to receive from the assets of the Issuer a liquidation payment that will be satisfied by issuance of BIPC Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events) (a Liquidation);

(c) commencing on the tenth anniversary of the take-up of the IPL Common Shares under the Bid (or earlier upon the occurrence of certain events), BIP has the right to purchase (directly or indirectly) all of the then outstanding Exchangeable Units for BIPC Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events) (a Final Exchange);

(d) upon a liquidation, dissolution or winding up of the Issuer, BIP has an overriding right to purchase (directly or indirectly) all but not less than all of the then outstanding Exchangeable Units for BIPC Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events);

(e) upon a liquidation, dissolution or winding up of BIPC, all of the Exchangeable Units will be automatically purchased by BIP (directly or indirectly) for BIPC Exchangeable Shares on a one-for-one basis (subject to adjustment to reflect certain capital events) (a BIPC Liquidation); and

(f) subject to applicable law and in accordance with the Exchangeable Unit Provisions, each Exchangeable Unit will entitle the holder to distributions from BIPC payable at the same time as, and equivalent to, each dividend on a BIPC Exchangeable Share. The Exchangeable Unit Provisions also provide that if a dividend is declared on the BIPC Exchangeable Shares and an equivalent distribution is not declared and paid concurrently on the Exchangeable Units, then the undeclared or unpaid amount of such dividend accrues and accumulates and is to be paid upon the first to occur of any of the circumstances contemplated by paragraphs (a) to (e) above, if not yet paid.

42. BIP, BIPC and the Issuer, among others, entered into a support and exchange agreement, pursuant to which BIP and BIPC covenanted that, so long as Exchangeable Units not owned by BIP are outstanding, (i) BIP will take all actions reasonably necessary to enable the Issuer to pay the amount payable upon an Exchange, Final Exchange, Liquidation or BIPC Liquidation, and (ii) BIP shall ensure that the Issuer has sufficient money or other assets available to enable the due declaration and due and punctual payment of a distribution on the Exchangeable Units equivalent to the distribution on the BIPC Shares.

43. The Exchangeable Units do not have voting rights in respect of BIPC.

44. BIP controls, directly or indirectly, the Issuer and BIPC. As a result, BIP consolidates BIPC and the Issuer, in its financial statements.

45. The Exchangeable Units will be disclosed as a non-controlling interest in the financial statements of BIP.

46. The LP Units of the Issuer are owned by CanHoldco and the GP Unit is held by Brookfield Infrastructure Corporation Exchange GP Inc., an indirect subsidiary of BIP.

47. BIPC is the “parent issuer” (as defined in Part 13.3 of NI 51-102) in respect of the Exchangeable Units issued by the Issuer and the BIPC Exchangeable Shares are therefore the “underlying security” (as defined in Part 13.3 of NI 51-102).

48. The Issuer is an “exchangeable security issuer” (as defined in Part 13.3 of NI 51-102) in respect of the Exchangeable Units.

49. The Exchangeable Units would be a “designated exchangeable security” (as defined in Part 13.3 of NI 51-102) but for the fact that they do not have voting rights in respect of BIPC.

50. The Issuer satisfies the requirements of section 13.3(2) of NI 51-102 in all respects, other than the fact that (i) BIP, rather than BIPC (the parent issuer), is the beneficial owner of all the issued and outstanding voting securities of the exchangeable security issuer as required by section 13.3(2)(a) of NI 51-102, and (ii) the Exchangeable Units do not have voting rights in respect of BIPC.

51. The Exemption Sought is required in order for the provisions of sections 13.3(2) and 13.3(3) of NI 51-102 to apply to BIPC and the Issuer, and the relationship between BIPC and the Issuer.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1. in respect of the Continuous Disclosure Requirements, the Issuer and the Filers continue to satisfy the conditions set out in section 13.3(2) of NI 51-102, except as modified as follows:

(a) any reference to designated exchangeable security in section 13.3 of NI 51-102 shall be deemed to include the Exchangeable Units notwithstanding that the Exchangeable Units do not provide their holders with voting rights which are, as nearly as possible except for tax implications, equivalent to BIPC Exchangeable Shares, and

(b) the Filers do not have to comply with the condition in section 13.3(2)(a) if:

(i) all of the voting securities of the Issuer are owned, directly or indirectly, by BIP; and

(ii) there are no material changes to the Exchangeable Unit Provisions and the BIPC Exchangeable Share Provisions, as described above,

2. in respect of the Certification Requirements, the Audit Committee Requirements and the Corporate Governance Requirements, the Filers and the Issuer continue to satisfy the conditions for relief from the Continuous Disclosure Requirements set forth above,

3. in respect of the Insider Reporting Requirements, an insider of the Issuer (an Issuer Insider) can only rely on the Exemption Sought so long as:

(a) the Issuer Insider complies with the conditions in sections 13.3(3)(a) and (c) of NI 51-102, and

(b) the Filers and the Issuer continue to satisfy the conditions for relief from the Continuous Disclosure Requirements set forth above.

As to the Exemption Sought (other than from the Insider Reporting Requirements in the Securities Act (Ontario)).

“Michael Balter” Michael Balter, Manager, Corporate Finance

Ontario Securities Commission

As to the Exemption Sought from the Insider Reporting Requirements in the Securities Act (Ontario).

“Frances Kordyback” “Cathy Singer”

Commissioner Commissioner Ontario Securities Commission Ontario Securities Commission

OSC File #: 2021/0439