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Spark to boost capital return

AAP logoAAP 22/08/2016 Lilly Vitorovich

Electricity network owner Spark Infrastructure will return more capital to investors, underpinned by acquisition of a 15 per cent stake in NSW's TransGrid, and has ruled out a bid for AusGrid after foreign bidders were ruled out by the federal government.

Spark has forecast a 20.8 per cent jump in distribution to 14.5 cents a security for 2016, from 12 cents a year earlier.

The jump - which is well above the group's average of 4.65 per cent distribution growth over the past four years - is due to a one-off cash injection of $59 million from Spark's 49 per cent stake in Victoria Power Networks.

VPN has revamped its operations by streamlining procurement processes, simplifying its maintenance processes and improving its supply chain, leading to savings of $163 million annually.

Simliar changes are afoot at TransGrid, which was acquired by a consortium for $10.3 billion from the NSW government late last year, a Spark spokesman said.

TransGrid is the owner and operator of the NSW high voltage electricity network, connecting generators, distributors and major end users across the state. Its network connects more than three million homes and businesses across NSW and the ACT to the electricity grid.

Spark's rate of distribution growth is expected to slow down, with the group forecasting a rise of 5.2 per cent to 15.25 cents in 2017, and 4.9 per cent to 16 cents in 2018.

Chairman Doug McTaggart said the growth reflected the company's "diligent and methodical execution" of its strategy.

"It is supported by an investment portfolio that contains a strong combination of proven excellence and future potential and which is delivering in line with expectations.

"Our outlook for the business continues to be very positive", said Dr McTaggart said on Monday.

Spark has confirmed it will not bid for NSW electricity network AusGrid, as the NSW government prepares to kick off a second sale process after Federal Treasurer Scott Morrison rejected bids from two Chinese companies on national security concerns.

Spark's underlying profit, before loan note interest and tax, fell 9.4 per cent fall to $127.2 million for the six months to June 30, hurt by a smaller profit from its 49 per cent stake in SA Power Networks and holding in VPN.

First-half net profit jumped 31.6 per cent to $51.6 million, thanks to gains from the divestment of its interest in DUET Group, which has energy utility assets in Australia and the US.

Spark shares closed four cents higher at $2.51 in a slightly lower Australian market.

SPARK 1H RESULTS

*Net profit up 31.6pct to $51.6m

*Total income up 1.3pct to $138.7m

*Interim distribution up 20.8pct to 7.25c a security

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