Last week FNArena profiled Spark Infrastructure (SKI) as one of only two companies to receive Buy ratings from all the brokers in the FNArena database that cover the stock. Interest in the company appears to be growing, as this week Intersuisse has initiated coverage, rating the stock as Accumulate.
South Australia Power Network (49% owned by Spark Infrastructure) has asked for no material change in total revenue across 2020-25, even though it is targeting higher expenditure than the regulator assumes.
The draft decision on the South Australian Power Networks has confirmed Morgans' view that distribution revenue will fall. A lower capital expenditure budget also means a slowdown in regulated asset base growth.
Morgans is not convinced the investment in the Bomen solar farm is attractive. It adds additional risk and the broker finds it difficult to envisage how economic returns will be generated without strong wholesale prices.
Morgans continues to doubt the sustainability of the distribution, guided at $0.16 per security in 2018, over the medium term. In the short term, the yield of around 7% remains attractive for income-oriented investors.