The WACC of Brookfield Infrastructure Partners LP (BIP) is 7.0%.
Range | Selected | |
Cost of equity | 6.9% - 9.2% | 8.05% |
Tax rate | 22.0% - 26.1% | 24.05% |
Cost of debt | 5.5% - 12.4% | 8.95% |
WACC | 4.8% - 9.2% | 7.0% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.65 | 0.78 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 6.9% | 9.2% |
Tax rate | 22.0% | 26.1% |
Debt/Equity ratio | 3.64 | 3.64 |
Cost of debt | 5.5% | 12.4% |
After-tax WACC | 4.8% | 9.2% |
Selected WACC | 7.0% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
BIP | Brookfield Infrastructure Partners LP | 3.64 | 0.5 | 0.13 |
AEE | Ameren Corp | 0.73 | 0.31 | 0.2 |
CMS | CMS Energy Corp | 0.74 | 0.04 | 0.03 |
CNP | CenterPoint Energy Inc | 0.88 | 0.27 | 0.16 |
DTE | DTE Energy Co | 0.84 | 0.15 | 0.09 |
ED | Consolidated Edison Inc | 0.77 | -0.17 | -0.11 |
MDU | MDU Resources Group Inc | 0.68 | 0.85 | 0.56 |
PEG | Public Service Enterprise Group Inc | 0.54 | 0.35 | 0.25 |
SRE | Sempra Energy | 0.73 | 0.72 | 0.46 |
WEC | WEC Energy Group Inc | 0.62 | 0.18 | 0.12 |
Low | High | |
Unlevered beta | 0.13 | 0.18 |
Relevered beta | 0.48 | 0.67 |
Adjusted relevered beta | 0.65 | 0.78 |
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for BIP:
cost_of_equity (8.05%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.65) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.