Shortly before market open this morning Spark Infrastructure (ASX: SKI) announced its FY20 results. Dividend per share (DPS) for FY19 was 15 cps and was guided to be at least 13.5 cps for FY20, coming roughly in line with consensus expectations of 15 cps for FY19 and FY20.
Spark Infrastructure (ASX: SKI) announced its FY20 results this morning. The share price rallied 2.7% on the back of the result, despite the market falling 1.8% today. (Credit: Spark Infrastructure).
In respect to Distribution Assets, Victoria Power Networks (VPN) had regulated revenue increase by 3.9% and regulated asset base increasing 3.8%. SA Power Networks had regulated revenue grow 3.4% and Transgrid’s revenue increased 2.8%.
SKI’s SA Power Networks and VPN are currently under regulatory review, which is expected to lower the WACC from around 6% to 5%, impacting the regulated revenue available to SKI. A final decision is expected in April 2020 for SA Power Networks and 1 Jul 2020 for VPN.
Given the opportunities currently in the pipeline from a shift in Australia’s energy transmission and sourcing, SKI expects 3.6% CAGR growth in regulated asset base from $6.5b in FY19 to $7.7b in FY24.
SKI has guided to FY20’s DPS as 7 cps for 1H20 and at least 6.5 cps in 2H20 subject to business conditions. SKI is also expected to submit a tax appeal to a Full Federal Court in May regarding VPN with a decision expected in late 2020, which would impact distribution going forward.
It appears that the company is being conservative with its outlook given the uncertainty around SA Power Networks and VPN’s regulated revenue decisions and negotiations with regulators. However, if the decision in April for SA Power Network or the Court decision on VPN in late 2020 is favourable towards SKI, investors could see potential upside in distributions.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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