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Why Spark Infrastructure shares are surging higher today

The Spark Infrastructure Group (ASX: SKI) share price is moving higher today as the market reacts positively to the release of the company’s full-year FY19 results.

While the S&P/ASX 200 Index (INDEXASX: XJO) is down by 1.1% at the time of writing, Spark shares have risen 4.37% higher.

What did Spark Infrastructure announce?

Spark Infrastructure delivered look-through adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $859.1 million, up 3.7% on FY18. The company commented that this growth was driven by cost efficiencies and growth in both the regulated and unregulated sectors in which the utility provider operates.

The company delivered look-through net operating cash flow of $379.3 million, which was up 15.7% on FY18. Meanwhile, Spark also recorded $368 million net growth in regulated and contracted asset base (RCAB) which came to $6,466 million for the 12-month period. This result was an increase of 6%, however, Spark noted that it is based on the company’s investment in capital expenditure of $686 million.

Spark Infrastructure also noted an increase in corporate debt facilities to $400 million. This will support organic growth in TransGrid, renewable assets, as well as other core business opportunities.

The company declared a final distribution of 7.5 cents per security (cps), taking full-year FY19 distributions to 15.0 cents cps. This represents a payout ratio of 67% of look-through net operating cash flow.

With this, Spark Infrastructure provided FY20 distribution guidance of at least 13.5 cps, subject to business conditions.

Commenting on the results, Spark Infrastructure Chair, Dr Doug McTaggart, said:

“We have delivered a full year distribution of 15.0 cents per security to our Securityholders in line with our previous guidance. Strategically, Spark Infrastructure is well positioned to continue to deliver long-term value through capital growth and distributions.”

New solar farm

During the period, Spark Infrastructure completed the construction of its Bomen Solar Farm, which now in commissioning phase.

The project is reported to be remaining within budget and on time for commercial operations sometime during the second quarter of 2020.

Strategy and outlook

The company reported a multi-billion-dollar potential pipeline of Integrated System Plan priority projects for TransGrid.

The company further commented that TransGrid has the potential to invest in several significant growth projects. This includes the upgrade to the Queensland to New South Wales Interconnector (QNI), which is expected to be completed by 2021-2022.

Commenting on strategy, CEO and managing director Rick Francis said:

“We will continue to deliver our three-part strategy to seek efficiency gains, maximise outperformance, and invest across regulated and contracted opportunities and be a leading owner of essential services infrastructure.”

Chair Dr Doug McTaggart also spoke about outlook, adding:

“We are well placed to respond to the exciting pipeline of opportunities in front of us and our investment businesses. This represents a shift in focus as we transition to deliver a combination of increasing capital growth and distributions to our Securityholders over the near term.”

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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