Energy infrastructure business Spark Infrastructure Group (ASX: SKI) has announced its FY20 result today, it also told investors about its 5-year plan for the distribution.
Spark Infrastructure FY20 result
Spark reported that its look-through earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 2.4% to $862.4 million. Cash distributions from investment businesses declined by 3.7% to $301 million.
It said that its standalone net operating cash flow fell by 24.9% to $192.5 million. However, the underlying standalone net operating cash flow only declined by 10.8% to $252.8 million. The decrease reflected the first full year of tax payments and retention of operational cash flow by TransGrid to fund the increase in the regulatory asset base.
The net capital expenditure increased by 10% to $573.7 million on an aggregated proportional basis. This number excludes the Bomen Solar Farm.
Spark said that its regulated and contracted asset base (RCAB) improved by 3.7% to $6.7 billion.
The energy infrastructure business said that during the year there were minimal COVID-19 impacts to its investment businesses with no deterioration to customer supply and no significant impacts on operations, maintenance or safety.
Bomen Solar Farm
The first renewables project, the Bomen Solar Farm, was delivered on time and significantly under budget according to Spark Infrastructure. Commercial operations commenced in late June 2020.
Management said that after this success, it has developed a pipeline of high quality opportunities in renewables including storage. It will pursue any opportunities in a prudent and disciplined manner.
Distribution and 5-year plan
The FY20 total distribution was 13.5 cents per share. The final distribution for the financial year is 6.5 cents per share.
Spark Infrastructure announced that its FY21 distribution guidance is being rebased to 12.5 cents per share, franked to approximately 25%.
It's targeting growth in distributions at or around CPI over the next 5-year regulatory period (2025) maintaining franking at approximately 25%.
Outlook
Spark Infrastructure said that the new 5-year regulatory decisions for both SA Power Networks and Victoria Power Networks will be in force from 2021. It said that new regulatory decisions put downward pressure on revenues for these businesses largely due to sustained low interest rates affecting regulatory returns and the low inflationary environment. In response, Spark expects both businesses to closely review all operating and capital expenditure plans, with a view to minimising any non-essential or discretionary expenditure.
It's expecting RCAB growth over the next five years approaching 4% per annum. While growth in the SA Power Networks and Victoria Power Networks will be funded from operational cashflows and debt as they have been previously. Any equity commitments to support TransGrid major projects or Spark Infrastructure value build growth can be met by continued operation of the distribution reinvestment plan. In other words, the distribution re-investment plan will be used to manage equity for growth ensuring sufficient cash exists at the corporate level to fund distributions for securityholders.
