SPARK INFRASTRUCTURE 2010 HALF YEAR RESULTS - AUGUST 2010

Transcription

1 SPARK INFRASTRUCTURE 2010 HALF YEAR RESULTS - AUGUST 2010

2 PRESENTATION AGENDA HY RESULTS 2010 FINANCIAL AND PERFORMANCE HIGHLIGHTS STRATEGIC REVIEW SPARK INFRASTRUCTURE PERFORMANCE ASSET COMPANY PERFORMANCE GROWTH AND REGULATORY ENVIRONMENT CLOSING COMMENTS IMPORTANT: Please read the disclaimer and securities warnings located at the end of this presentation. 2

3 FINANCIAL HIGHLIGHTS SPARK INFRASTRUCTURE $m HY 2008 HY 2009 HY 2010 $m HY 2008 HY 2009 HY % 70 $150.2 $137.3 $108.9 Underlying income HY 2008 HY 2009 HY $m 120 $71.7 $117.2 $128.0 Underlying profit before income tax and loan notes interest HY 2008 HY 2009 HY % 61.3% 60.4% $100.5 $96.4 $ Net gearing - look through 0 Spark - Stand Alone Operating Cashflows Includes Cashflows from Operating and Investing Activities. The 2010 year was affected by cash retained to fund growth capital expenditure in the Asset Companies and by timing of distributions across the calendar year.

4 FINANCIAL HIGHLIGHTS AGGREGATED ASSET COMPANIES (100%) $m HY 2008 HY 2009 HY 2010 $m HY 2008 HY 2009 HY 2010 $m HY 2008 HY 2009 HY $889.6 $880.4 $796.7 Total Revenue ($m) $644.5 $616.8 $569.6 Regulated revenue ($m) $154.9 $162.5 $106.3 Semi-regulated revenue ($m) $m $m $m HY 2008 HY 2009 HY 2010 HY 2008 HY 2009 HY 2010 HY 2008 HY 2009 HY $120.7 $108.7 $82.6 Unregulated revenue ($m) $538.1 $627.8 EBITDA ($m) $ $254.6 $186.2 $181.0 Net capital expenditure ($m) 4 Note: The 2008 comparatives have been adjusted to reflect all metering revenue for CHEDHA as Regulated Revenue

5 PERFORMANCE HIGHLIGHTS RELIABLE PERFORMANCE FROM CONSISTENT STRATEGY Invest only in regulated assets with stable cashflows Resilient income through economic downturn Regulated returns underpinned by built-in protections within regulated structure ETSA Utilities final regulatory decision provides for strong organic growth CHEDHA revised regulatory proposals submitted with final decision due in October Prioritise ongoing investment in existing asset portfolio Strong source of organic growth at zero premium (1.0 x RAB) Regulated Asset Base has grown at around 4% each year since IPO Smart Meter capex of $630m to 2013 providing accelerated returns with Beta of 1.0 Ensure prudent approach to gearing and hedging of debt Strong credit ratings of A- at asset level (S&P) and Baa1 at fund level (Moody s) Ready access to capital markets and bank debt at asset and fund levels evidenced Gearing in line with regulatory model Maintain prudent distribution policy alongside strong and growing look-through cashflows Cash distribution of 6.72 cents per security declared for the six months ended 30 June 2010 and payable on 15 September 2010 Maintain attractive investment metrics with prudent and sustainable distributions Strong and growing look-through operating cashflows Continue to fund distributions from operational cashflows received from the Asset Companies 5

6 STRATEGIC REVIEW 66

7 STRATEGIC REVIEW In February 2010 Spark Infrastructure announced a Strategic Review to explore and evaluate a wide range of options including capital structure, ownership structure and future funding needs The Asset Companies have indicated they wish to retain a greater proportion of cash from operations to fund the expected increase in growth capital expenditure While increased capital expenditure enhances long term value it potentially impacts on short term cash distributions from the Asset Companies to Spark Infrastructure The available options under the Strategic Review include: changes in corporate structure changes in capital structure capital raisings; and proposals that involve asset sales or a change of control of Spark Infrastructure Detailed consideration of each of these options is still ongoing and well progressed 7

8 STRATEGIC REVIEW The Board, which operates with a majority of Independent Directors, has put in place governance protocols and established a committee of Independent Directors to: manage any conflicts of interest that may arise within the Strategic Review process regulate the flow of information as appropriate among the Board, the Independent Directors, the Asset Companies, the asset partners (CKI and HKE) and Spark Infrastructure s Manager Deutsche Bank was appointed to act as financial adviser in relation to this Strategic Review. Investec Bank (Australia) Limited appointed to provide advice to the Independent Directors and will work closely with Deutsche Bank It is expected that the Strategic Review outcome will be determined by 30 November Spark Infrastructure will keep the market appropriately informed of any developments 8

9 DISTRIBUTIONS TO SECURITYHOLDERS HY 2010 cash distribution of 6.72 cents per security consisting entirely of interest on Loan Notes for the period The outcome of the Strategic Review may impact the composition of the total return to Securityholders in relation to the balance between distribution yield and capital growth in future periods Therefore guidance on future distributions cannot be provided at this time, noting that: Historical distributions are not indicative of future distributions The Asset Companies have indicated a desire to retain a greater proportion of cash from operations to contribute to the funding of growth capital expenditure The Directors expect to be able to provide future distribution guidance by 30 November

10 SPARK INFRASTRUCTURE PERFORMANCE 10 10

11 FINANCIAL PERFORMANCE Underlying Results Half Year ended 30 June 2010 HY 2010 ($m) HY 2009 ($m) Variance % Total income Management fee (10.8) Finance costs - senior debt General and administrative expenses (75.0) Profit before loan note interest, performance fee and tax Loan note interest (Distributions to Securityholders) (2.4) Performance fee Income tax expense Profit attributable to Stapled Securityholders underlying Profit attributable to Stapled Securityholders reported (19.8) Operating cashflow including investing activities (54.4) Cashflows impacted by capex funding and budgeted phasing of distributions across

12 OPERATING CASHFLOW MODEL Spark Infrastructure s 49% share of asset companies total $m Look-through Operating Cashflow $62.6m Prior Year cash surplus utilised -$4.4m Senior debt interest (net) $11.4m Other costs $7.7m $82.5m $325.5m $64.3m $32.0m Distributions $69.4m 50 $84.1m 0 EBITDA Less Customer Contribs + Gifted less: Net interest paid less: Maintenance Capex less: Average Net Working Cap. Operating C/Flow Distributions paid from operating cashflow 1. Maintenance capex allowance is calculated as regulatory depreciation net of CPI uplift in RAB 2. Net Regulatory Depreciation reported number impacted by some CPI volatility. Normalising for a long term CPI assumption of 2.5% would equate to $55m Net Regulatory Depreciation for HY

13 UNDISTRIBUTED OPERATING CASHFLOW Available for distribution or reinvestment in future periods Spark operating cashflow (OCF) Balance available from 2009 HY 2010 OCF HY 2010 Distribution Balance at 30 June 2010 $58.5 million $44.0 million ($69.4 million) $33.1 million Operating cashflow of $21.1 million retained at Asset Company level during HY 2010 growing long term value of the Asset Companies Half Year 2010 providing attractive distribution yield and capital growth 13

14 CAPITAL EXPENDITURE MAINTENANCE CAPEX COMPARISONS $ million Maintenance capex spend Regulatory depreciation Less inflation uplift on RAB Net regulatory depreciation Net capex funded by cashflow from operations HY 10 HY 09 HY 10 HY 09 HY 10 HY 09 HY 10 HY 09 HY 10 HY (40.0) (31.3) (7.7) (28.3) (13.3) (49.1) Totals (61.0) (108.7) Spark 49% share (29.9) (53.3) The table above compares the following HY 2010 figures: Maintenance capex actual spend during the period Net regulatory depreciation - (depreciation net of inflation uplift on the RAB) provided for in allowed revenue. The reported number is impacted by some CPI volatility. Normalising for a long term CPI assumption of 2.5% would equate to $55m Net Regulatory Depreciation for HY 2010 (HY2009: $53.8) Net capex funded by cashflow from operations total capex (maintenance and growth) net of debt draw downs during the period 14

15 CAPITAL MANAGEMENT FOCUS ON FUNDING GROWTH Spark Infrastructure s distribution policy set in 2009 designed to conserve capital to fund organic growth of assets Sufficient capital to fund organic growth requirements in the asset businesses for 2010 Interest cover ratios are strong 5.9x at Spark Infrastructure level; 3.0x on look through basis Gearing consistent with regulatory framework 60.4% on net look through basis Credit ratings maintained - Spark Infrastructure at Baa1 by Moody s; Asset Companies at A- by Standard & Poor s Good relationships with debt providers and credit rating agencies Conservative interest rate hedging policy in line with regulatory periods - 100% hedged at Spark Infrastructure level % hedged on gross look through basis, with Asset Company hedges matched to regulatory periods 15

16 DEBT POSITION PROVEN ACCESS AND CAPACITY Spark Infrastructure entered into underwritten commitments for the refinancing of all existing bank debt facilities totaling $450 million - jointly underwritten by NAB and Westpac First tranche - new debt facility of $250 million: refinanced $225 million debt maturity which was due in December year revolving facility of $165 million 4 year term loan of $85 million syndication is well progressed Second tranche new debt facility of up to $200 million: intended to refinance debt maturity that falls due in June year revolving facility of $135 million 4-year term loan of $65 million contingent on outcomes of Strategic Review At 30 June 2010 Spark s net debt position was $337 million plus $100 million of undrawn facilities available. No refinancing of existing facilities at Spark level until August 2013 Strong support from debt markets at Spark Fund level 16

17 $Am (100% share) DEBT POSITION MATURITIES WELL SPREAD Capital Markets Debt Maturity Profile Credit Rating Next Maturity 500 Asset Level Spark Fund level Baa1 negative (Moody s) Aug ETSA Utilities A- negative Apr Jun 11 Feb 13 Sep 14 Nov 14 Jul 15 Nov 15 Sep 16 Oct 16 Nov 16 Jul 17 Apr 18 Sep 19 Oct 19 Aug 21 Jan 22 CitiPower and Powercor (S&P) A- negative (S&P) Jun Bank Debt and Working Capital (All) Debt Maturities Spark Infrastructure undrawn working capital facilities expire October 10 and November 11, $50m each Aug 10 Oct-10 Dec 10 Jun 11 Jul 11 Nov 11 Jul 12 Feb 13 Apr 13 Maturity Undrawn Drawn bank (Asset Companies) Drawn bank (Spark) Undrawn bank facilities at Spark and Asset Company levels in place total $390 million Cash balances total $295 million Spark $88 million, Asset Companies $207 million No re-financings at Asset Company level until June 2011 No re-financings at Spark Infrastructure level until August

18 DEBT POSITION CONSERVATIVE AND CAREFULLY MANAGED Hedging undertaken with counterparties with credit ratings of A and above ETSA Utilities $m Net Debt 2,281.7 Spark Share of net debt 1,118.0 Percentage Hedged (net) 98.4% CitiPower and Powercor (CHEDHA) $m Net Debt 2,917.0 Spark Share of net debt 1,429.4 Percentage Hedged (net) 79.1% Spark Infrastructure $m Net debt at Spark Infrastructure level Net debt at asset level (Spark Share) 2,547.4 Total net debt 2,884.7 Total equity and loan notes (book) 1,890.7 Gearing net 60.4% Hedged at Spark level 100.0% Spark look through proportion of hedge (net) 89.5% Net gearing of 60.4% in line with the regulatory model 18

19 ASSET COMPANY PERFORMANCE 19

20 AGGREGATED FINANCIAL PERFORMANCE (100% results) ETSA, CitiPower and Powercor Half Year ended 30 June 2010 $m 2009 $m Variance % Regulated Revenue Semi-regulated Revenue customer contributions Semi-regulated Revenue other Unregulated revenue (24.0) Total Revenue Total operating costs EBITDA Capital expenditure (net) Regulated revenue (Prescribed) ETSA Utilities regulated revenue increased by 5.7% due to price increases in accordance with the regulatory formula and favourable impact of weather on residential sales, partially offset by lower consumption. CHEDHA prescribed revenue increased due to increased metering revenue associated with the roll-out of Advance Metering, although electricity distribution revenue fell due to lower rates and consumption Unregulated revenue (Non-prescribed) ETSA non-prescribed revenue fell by 6.8%. Customer contributions increased while other non-prescribed revenue fell due to a reduction in construction and maintenance activity. CHEDHA non-prescribed revenue decreased by 7.3%. Customer contributions fell due to lower construction activity, while other non-prescribed revenue decreased in part due to a reduction in shared services fees charged to related companies Net Capital Expenditure The Asset Companies continue to invest in the expansion of their networks, enhancing asset performance and reliability, and for replacement of existing assets. Capital expenditure is added to the Regulated Asset Base of the Asset Companies which results in increased revenue in future periods Operating costs Operating costs were lower for ETSA Utilities in line with lower unregulated business activity. CitiPower and Powercor recorded lower operating costs due in part to lower materials usage, higher than planned capital expenditure, and capitalisation of the AMI project management fee 20 Note: Comparatives have been adjusted to reflect all metering revenue for CHEDHA as Regulated Revenue

21 ETSA UTILITIES REGULATED REVENUE PRIMED FOR GROWTH Financial HY 2010 ($m) HY 2009 ($m) Variance Regulated revenue Customer contributions Semi-regulated other Unregulated revenue Total revenue Cash operating costs EBITDA Net capital expenditure Operational HY 2010 HY 2009 Variance Volume sold GWh 5,660,000 5,655, % EBITDA increased by 9.7% to $331.8m due largely to an increase in regulated revenue. This was due to price increases in accordance with the regulatory formula and favourable impact of weather on residential sales Customer contributions increased by 9.3%, while unregulated revenue fell by 27.5% due to a reduction in construction and maintenance activity Cash operating costs fell by 21.3% due largely to a reduction in construction and maintenance costs Customer numbers 817, , Employee numbers 1,841 1,

22 CITIPOWER AND POWERCOR CONSISTENTLY STRONG PERFORMANCE Financial HY 2010 ($m) HY 2009 ($m) Variance Regulated revenue Customer contributions Semi-regulated other Unregulated revenue Total revenue Cash operating costs EBITDA Net capital expenditure Operational HY 2010 HY 2009 Variance Volume sold GWh 8,443,000 8,315, Customer numbers 1,013, , Employee numbers 1,956 1, % EBITDA increased by 2.2% due largely to an increase regulated revenue, including higher metering revenues resulting from increased activity from the continued rollout of Advanced Metering Infrastructure (AMI) Customer contributions decreased by 4.3% due to lower construction activity, while unregulated revenue decreased by 19.3% in part due to a reduction in shared services fees charged to related companies Cash operating costs decreased by 1.7% due to higher levels of capitalisation of internal costs to capital projects Employee numbers increased due mainly to the hiring of fixed term project staff to support the roll out of Advanced Metering Infrastructure and the appointment of thirty apprentices Includes all Advanced Metering Infrastructure (AMI) revenue. Previous corresponding periods adjusted to reflect metering related revenues.

23 REGULATED REVENUE STRONG AND RELIABLE GROWTH HY 2010 Sales volume growth (HY 2009) Weather¹ Underlying¹ Total 1 0.2% (-0.3%) -0.5% (-0.3%) -0.3% (-0.6%) -0.1% (1.1%) 0.1% (0.5%) 0.0% (1.6%) -1.6% (1.7%) 4.1% (-1.7%) 2.5% (0.0%) HY 2010 Customer growth Customers Percentage increase 817, % 307, % 705, % Net Capital Expenditure Increase (%) Growth Capex AMI Growth Capex other Maintenance Capex $83.5m 23.5% n/a $44.1m $39.4m $171.1m 44.3% $49.1m $86.1m $35.9m Net capex is added to the RAB and generates a return from day one 1 Asset company estimates represent changes relative to FY 2009 figures 23

24 NON-PRESCRIBED REVENUE DIVERSIFIED SOURCES (100% results) Semi-regulated - Customer contributions Semi-regulated - Other Unregulated $34.7m (14.2%) $245.1m $127.8m (52.1%) $82.6m (33.7%) $24.9m (30.1%) $82.6m $30.0 (36.3%) Transmission & distribution Resources Telecommunications Material sales Asset rentals Other unregulated NB. Transmission revenue is pass through and does not contribute to profit. It is therefore excluded from this calculation Non-prescribed revenue was $245.1m, down 7.0% (HY 2009: $263.6m). Comprises: Semi-regulated revenue was $162.5m, up 4.9% (HY 2009: $154.9m) Activities include metering (ETSA Utilities), public lighting and revenue from customer contributions (ETSA Utilities and CHEDHA) Unregulated revenue was $82.6m, down 24.0% (HY 2009: $108.7m) This was down due to a reduction in construction an maintenance activity in both businesses Long-term contracts with electricity transmission companies, ElectraNet (SA) & SP AusNet (Vic) Unregulated business revenues are diversified 24

25 GROWTH AND REGULATORY ENVIRONMENT 25

26 REGULATORY ENVIRONMENT FRAMEWORK AND TIMELINES The Australian Energy Regulator (AER) continues to apply the same building block arrangements for revenue allocation and similar service and efficiency incentive mechanisms WACC Parameters Equity beta 0.8 Benchmark credit rating BBB+ Imputation credits value 0.65 Risk free rate proxy 10 year Commonwealth bonds Market Risk Premium 6.5% Regulatory Reset Milestones ETSA Utilities CHEDHA Business submits Regulatory Proposal 1 July November 2009 Issue of Draft Decision 27 November May 2010 Business submits revised Regulatory Proposal 14 January July 2010 AER issues its Final Decision 6 May October 2010 New distribution prices come into effect 1 July January 2011 Appeals heard by Competition Tribunal 13 September to N/A November

27 REGULATORY FRAMEWORK BUILT-IN PROTECTIONS Regulated Asset Base (RAB) Weighted Average Cost of Capital (WACC) 1 Depreciation 2 Operating expenditure Tax Regulated revenue (target) Well established, transparent regulatory process with resets every 5 years; CPI X 3 formula 1. Based on 10 yr Commonwealth Treasury Note. Includes both an equity premium and a debt premium (BBB+/Baa1) Forecast volume Regulated tariff 2. Depreciation based on regulated economic life of assets 3. X factor is currently +1.1 in Victoria ( ), and in South Australia ( ) - a negative X factor results in an increase in prices above CPI Regulated tariff Actual volume Actual Revenue RAB and Revenues are adjusted for inflation (inflation protected) 27

28 GROWTH DRIVERS ASSET COMPANIES PRIMED FOR GROWTH The Asset Companies in which Spark holds a 49% interest are entering a unique and exciting period of growth based on substantially increasing regulated capital expenditure. This means: Strong growth in their Regulated Asset Bases (RAB) and correspondingly increasing revenues Greater relative returns than growth by acquisition as investment in existing regulated assets occurs at 1.0 times RAB (no acquisition premium) Regulated Return on Equity of around 11% (11.09% ETSA final; 10.85% CHEDA draft) Long term capital growth through net equity investment in RAB Net capital expenditure earns a return from day one and is growing the Regulated Asset Base and therefore growing future returns - Extensive asset replacement programs confirmed by Australian Energy Regulator for ETSA Utilities and proposed for CitiPower and Powercor - Roll-out of Advanced Metering Infrastructure in Victoria provides additional RAB growth and future revenue for CitiPower and Powercor - Steady increases in peak demand for electricity expected in South Australia and Victoria in line with population and economic growth Businesses can benefit from efficiency out-performance The regulated business provides a secure platform for growth 28

29 GROWTH DRIVERS ETSA UTILITIES Final decision from Australian Energy Regulator provides for strong growth in revenue and the Regulated Asset Base - substantial increases in capital expenditure and operating expenditure allowances to cater for strong asset renewal and expansion programs AER decision has set WACC at 9.76% and Return on Equity now 11.09% ETSA Utilities selected by NBNCo to construct one of five first release sites at Willunga potential for further participation in the future Regulatory period Beta Risk Free Rate 5.89% 5.8% Debt risk premium (DRP) 2.98% 1.65% Market risk premium (MRP) 6.5% 6.0% Nominal vanilla WACC 9.76% 8.95% Nominal post tax return on equity 11.09% 11.2% Gamma (Imputation) Net capex over 5 years ($June 2010) $1,643m $886m 1 Opex over 5 years ($June 2010) $1,066m $760m 1 Revenue (Nominal) $3,637m $2,518m 2 1. Allowances 2. Actual Key project spend areas - capacity - asset replacement substation circuit breakers, substation transformers, planned poles expenditure - safety substation fencing and security - security of supply network control, CBD reinforcement - customer connections 29

30 GROWTH DRIVERS CITIPOWER AND POWERCOR Draft decision from Australian Energy Regulator was disappointing and inconsistent with recent precedent with respect to opex and capex Return on equity of 10.85% is only slightly down in previous period (11.2%) AER draft decision represents worst case scenario and is subject to consideration of revised proposals from Asset Companies which were submitted on 21 July 2010 Regulatory period Beta Risk Free Rate 5.65% 5.27% Debt risk premium (DRP) 3.25% 1.43% Market risk premium (MRP) 6.5% 6.0% Nominal vanilla WACC 9.68% 8.61% Nominal post tax return on equity 10.85% 11.27% Gamma (Imputation) Net capex over 5 years ($June 2010) $1,576m $1,412m 1 Opex over 5 years ($June 2010) $807m $831m 1 Revenue (Nominal) $3,413m $3,090m 2 Key points in revised submissions The revised proposals include challenges to the AER s position in relation to: - capital and operating expenditure allowances - treatment of efficiency carry-over amounts - energy volume forecasts - pass throughs, and - alternative control services 1. Allowances 2. Actual 30

31 CLOSING COMMENTS 31 32

32 CLOSING COMMENTS Robust regulatory framework provides a range of built-in protections. Regulatory reset process will conclude this year providing certainty over a new five year regulatory period Strong expected rise in capital expenditure offers long term growth in Asset Company revenues and look-through cashflows High quality businesses with strong management teams generating stable look-through cashflows Strong support from debt markets evidenced. Spark Infrastructure level refinance underwritten. Asset Companies remain well placed to meet future financing requirements. HY 2010 distributions of 6.72cps has been declared and is payable on 15 September 2010 The Strategic Review is well progressed and its outcome is expected to be determined by 30 November the Directors expect to be able to provide future distribution guidance by this date 32

33 Regulatory Update Presentation by RICHARD GROSS GM Regulation, CitiPower and Powercor August

34 Regulatory Timetable AER Draft Decision June 4 Business Revised Proposals July 21 Stakeholder Submissions August 19 Final Decision October 31 34

35 AER Draft Decision Different approach Inconsistent with previous decisions SA, Qld and NSW Found Victorian businesses were most efficient yet Did not accept proposals Significantly reduced capex requests Legal approach and reasoning Ignored AMI consumption impacts Disallowed some costs such as recovery of transmission connection costs Shifted the materiality thresholds for pass-through events 35

36 Revenue ($M, 2010) 3,000 2,500 2,000 1,500 1, Current Period ( ) Draft Decision ( ) Revised Proposal ( ) PAL CP 36

37 Net Capital ($M, 2010) 1,800 1,600 1,400 1,200 1, Current Period ( ) Draft Decision ( ) Revised Proposal ( ) PAL CP 37

38 Operating Cost ($M, 2010) 1, Current Period ( ) Draft Decision ( ) Revised Proposal ( ) PAL CP 38

39 Energy CAGR (%) 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Current Period ( ) Draft Decision ( ) Revised Proposal ( ) PAL CP 39

40 First Year Price Increase/Decrease (%) 25% 20% 15% 10% 5% 0% (5%) (10%) (15%) (20%) Current Period ( ) Draft Decision ( ) Revised Proposal ( ) PAL CP 40

41 WACC Regulatory Period ESC Framework Draft Decision Revised Proposal Equity Beta Risk Free Rate 5.27% 5.65% 5.65% Debt Risk Premium 1.43% 3.25% 4.28% Market Risk Premium 6.00% 6.50% 6.50% Nominal Vanilla WACC 8.61% 9.68% 10.29% Nominal post tax Return on Equity 11.27% 10.85% 10.85% Gamma (Imputation)

42 Victorian Bushfires Royal Commission Final report released July 31 VBRC made seven electricity distribution related recommendations Progressive replacement of all SWER and 22kw distribution feeders A suite of interim measures aimed at reducing fire starts A strengthening of ESV mandate for the prevention and mitigation of electricity caused bushfires VBRC concluded: costs of implementing its recommendations be explicitly included in distributors revenue allowances Mechanism be established to include costs in revenue allowances Vic Government (interim response, August 2) in principal gave support to all but one VBRC recommendation directly applicable to distribution 42

43 Next Steps Engage with AER Seek to ensure the AER understands arguments and evidence for our proposed: capex Opex WACC Energy forecasts Risk allocation Sharing Mechanisms Highlight inconsistency and variations in approach of the AER Ensure AER is fully aware of the distribution related VBRC recommendations 43

44 Thank you 44

45 FURTHER INFORMATION FOR FURTHER INFORMATION PLEASE CONTACT: Mario Falchoni General Manager, Investor Relations and Corporate Affairs Spark Infrastructure P: F: mario.falchoni@sparkinfrastructure.com 45

46 DISCLAIMER AND SECURITIES WARNING No offer or invitation. This presentation is not an offer or invitation for subscription or purchase of or a recommendation to purchase securities or financial product. No financial product advice. This presentation contains general information only and does not take into account the investment objectives, financial situation and particular needs of individual investors. It is not financial product advice. Investors should obtain their own independent advice from a qualified financial advisor having regard to their objectives, financial situation and needs. Entities within the Spark Infrastructure group are not licensed to provide financial product advice. Summary information. The information in this presentation does not purport to be complete. It should be read in conjunction with Spark Infrastructure s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), which are available at U.S. ownership restrictions. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or to any U.S. person. The Stapled Securities have not been registered under the U.S. Securities Act or the securities laws of any state of the United States. In addition, none of the Spark Infrastructure entities have been registered under the U.S. Investment Company Act of 1940, as amended, in reliance on the exemption provided by Section 3(c)(7) thereof. Accordingly, the Stapled Securities cannot be held at any time by, or for the account or benefit of, any U.S. person who is not both a QIB and a QP. Any U.S. person who is not both a QIB and a QP (or any investor who holds Stapled Securities for the account or benefit of any US person who is not both a QIB and a QP) is an "Excluded US Person" (A "U.S. person", a QIB or "Qualified Institutional Buyer" and a QP or "Qualified Purchaser" have the meanings given under US law). Spark Infrastructure may require an investor to complete a statutory declaration as to whether they (or any person on whose account or benefit it holds Stapled Securities) are an Excluded US Person. Spark Infrastructure may treat any investor who does not comply with such a request as an Excluded US Person. Spark Infrastructure has the right to: (i) refuse to register a transfer of Stapled Securities to any Excluded U.S. Person; or (ii) require any Excluded US Person to dispose of their Stapled Securities; or (iii) if the Excluded US Person does not do so within 30 business days, require the Stapled Securities be sold by a nominee appointed by Spark. To monitor compliance with these foreign ownership restrictions, the ASX s settlement facility operator (ASTC) has classified the Stapled Securities as Foreign Ownership Restricted financial products and put in place certain additional monitoring procedures. Foreign jurisdictions. No action has been taken to register or qualify the Stapled Securities in any jurisdiction outside Australia. It is the responsibility of any investor to ensure compliance with the laws of any country (outside Australia) relevant to their securityholding in Spark Infrastructure. No liability. No representation or warranty, express or implied, is made in relation to the fairness, accuracy or completeness of the information, opinions and conclusions expressed in the course of this presentation. To the maximum extent permitted by law, each of Spark Infrastructure, all of its related bodies corporate and their representatives, officers, employees, agents and advisors do not accept any responsibility or liability (including without limitation any liability arising from negligence on the part of any person) for any direct, indirect or consequential loss or damage suffered by any person, as a result of or in connection with this presentation or any action taken by you on the basis of the information, opinions or conclusions expressed in the course of this presentation. You must make your own independent assessment of the information and in respect of any action taken on the basis of the information and seek your own independent professional advice where appropriate. Forward looking statements. No representation or warranty is given as to the accuracy, completeness, likelihood of achievement or reasonableness of any forecasts, projections, prospects, returns, forward-looking statements or statements in relation to future matters contained in the information provided in this presentation. Such forecasts, projections, prospects, returns and statements are by their nature subject to significant unknown risks, uncertainties and contingencies, many of which are outside the control of Spark Infrastructure, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. 46

47 KEY METRICS Security metrics Market Price (20 August 2010) $1.165 Market capitalisation $1.2 billion Distributions HY cps Financials Net gearing % Asset level credit rating A- (S&P) Fund level credit rating Baa1 (Moody s) Regulated Asset Base 31 December 2009 Management fees Base Fees Performance fee 1 Performance fee deficit at 30 June % of EV < $2.4b 1.0% of EV > $2.4b 20% return > ASX200 Ind.Acc. Index $138.9 million ETSA Utilities $2.75 billion CitiPower $1.22 billion Powercor Australia $2.12 billion Regulated asset base total $6.09 billion Regulated Asset Base 30 June 2010 (Estimate) ETSA Utilities $2.85 billion CitiPower $1.26 billion Powercor Australia $2.17 billion Regulated asset base total $6.28 billion 1 Any deficit in performance fee is carried forward and taken into account in determining whether the return exceeds the benchmark return in future period. 2 Based on Spark Infrastructure s net debt of $337.3 million plus Spark share of asset company net senior debt ($2,547.4m)/debt + equity Appendix 471

48 OPERATING CASHFLOW MODEL DISTRIBUTIONS SUPPORTED BY OPERATIONS Note: Maintenance capex allowance is calculated as regulatory depreciation net of inflation uplift on the RAB Appendix 2

49 DISTRIBUTIONS FROM ASSET COMPANIES Spark Infrastructure s main source of income is derived from interest and distributions on subordinated loans and Preferred Partnership Capital (PPC) from the Spark subsidiaries which hold a 49% interest in ETSA Utilities and CHEDHA Distribution policy of the Asset Companies is to distribute all available surplus cash to the shareholders in whatever form deemed appropriate The Asset Companies have indicated a desire to retain a greater proportion of cash from operations to fund the expected rise in future growth capital expenditure this matter is under discussion between the shareholders CHEDHA SUBORDINATED LOANS Investment is largely by way of subordinated loan Interest set at 10.85% Classed as subordinated debt Ability to defer interest exists 1 and attracts interest at the current rate Other distributions can be made in the form of repayment of subordinated loan principal or dividends Cumulative early loan repayments total $147m ETSA PREFERRED PARTNERSHIP CAPITAL Spark s distributions from its investment is largely by way of PPC The specified rate of PPC distributions is 11.19% Unpaid distributions are cumulative and attract interest at the current rate Distributions are shared by all the partners in their respective proportionate share In limited circumstances Appendix 3

50 DISTRIBUTIONS FROM ASSET COMPANIES Worked example with actual cashflows to 30 June 2010 Tax deferred Distributions Nil Spark Infrastructure Trust Interest and principal $27.7m Interest $69.4m Securityholders Spark Infrastructure Company (Victoria)* CitiPower CHEDHA Interest from loan notes $69.4m CHEDHA subsidiary Dividends Spark Infrastructure Holdings 1 Powercor Australia $35.3m Return of capital and dividends Nil Dividends Nil Preferred Partnership Distribution $34.3m Dividends Nil Spark Infrastructure Holdings 2 Dividends Nil Spark Infrastructure Company (South Aust.) ETSA Utilities Dividends $1.0m SA 1 SA 2 SA 3 Distributions to Security Holders HY distribution of 6.72 cps declared, representing interest on loan notes payable by the Trust on 15 September 2010 Distributions in excess of this level can be tax deferred (currently there are none): - Repayment of loan principal - tax is deferred until investment is sold - Concessional CGT arrangements may apply Surplus operating cash from Asset Companies Residual operating cashflow (OCF) after allowance for capex is available for distribution to Spark Cash primarily flows to Spark Infrastructure from: - ETSA through preferred partnership distributions and dividends - CHEDHA through interest on subordinated shareholder loan and loan repayments - Spark had $58.5m of undistributed OCF on hand at the beginning of the 2010 year, available for distribution Appendix 504 * Inflows to Spark Victoria of $63.0m, less net interest of $11.3m and management fees and other fund costs of $7.7m = Spark investing and operating cashflows of $44.0m

51 UNDERLYING ADJUSTMENTS Underlying Adjustments Underlying Result $m MTM interest swaps 1 $m Spark tax expense 2 $m Reported Result $m Total income incl. associates & interest (1.8) Profit before income tax, loan note interest & performance fee (1.8) Profit attributable to Stapled Securityholders 55.6 (1.8) (0.2) 53.6 Operating cashflow including investing activities (1) Unfavourable movement in mark-to-market of ineffective interest rate swaps under AASB139 (2) Income tax expense on items recognised directly in equity (Refer to Spark Infrastructure Holdings No.2 financial statements) Underlying adjustments are non-cash related Appendix 5

52 NON-PRESCRIBED REVENUE DIVERSIFIED SOURCES Unregulated Revenue Variations from period to period are normal due to timing and delivery of specific contracts/projects Diversified sources of business including electricity transmission, defence, government and resources sectors Long term contracts with transmission companies Highly regarded skills in unregulated business ETSA Utilities CHEDHA CaMS T&D CaMS Government CaMS Resources Telecommunications Asset rentals Material sales Other * Includes SLA revenue, Wellington Electricity management fees, property rental, joint use of poles, duct rental and Docklands lease PNS T&D PNS Government PNS Resources Telecommunications Asset rentals Material sales Other * Appendix 6