Spark Infrastructure Group (ASX: SKI) today, on 17th April 2019, announced that it has acquired a 100% interest in the 120MWDC/100MWAC Bomen Solar Farm (“Bomen”) from Renew Estate. This acquisition will strongly align with the company’s investment strategy to enhance its existing risk and return profile, producing attractive and accretive returns.
The Solar Farm is located in a strong grid location, which is 10 kilometres north-east of Wagga Wagga in NSW close to TransGrid’s Wagga North substation, where it will connect into TransGrid’s transmission network. The construction is scheduled to commence in Q2 2019, with a total cost of completion expected to be approximately $188 million. The commercial operations are expected to commence in Q2 2020.
Company’s Chief Executive Officer and Managing Director, Rick Francis stated that they are excited about this development, which will help them deliver the Value Build strategy. It is evidence of the company’s commitment to invest in Australia’s renewable energy future through 100% ownership of contracted renewable generation and adds to the commitment to renewables through existing electricity transmission and distribution businesses. Bomen Solar Farm has highly contracted cash flows and attractive risk-adjusted returns, which will exceed current regulatory returns. Whilst modest, it is a logical and prudent first step in diversifying their exposure to the regulated assets and accessing growth in adjacent essential service infrastructure in line with the group’s investment strategy.
Bomen has long-term power purchase agreements (PPAs) in place with high-quality counterparties providing stable and predictable cash flows for up to 10 years. On the commencement of the commercial operations, the plant will sell power and Large-Scale Renewable Generation Certificates (LGCs) under PPAs with Westpac for 10 years and with Flow Power for a range of contract tenures of five, seven and 10 years. This provides a strong and stable revenue stream, which is ~95% contracted for the first five years and ~82% contracted for the first 10 years. When operating, Bomen is expected to generate an average annual revenue of approximately $13.5 million for the first five years.
Beon Energy Solutions (Beon), owned by Victoria Power Networks (in which Spark Infrastructure has an ownership interest of 49%), has been appointed as engineering, procurement and construction (EPC) contractor. Bomen will connect into TransGrid’s high-voltage transmission network, providing access to the National Electricity Market, with Build, Own, Operate and Maintain (BOOM) services for the grid connection provided by TransGrid (in which Spark Infrastructure has an ownership interest of 15%) for a 30-year term.
The acquisition and construction costs are expected to be initially funded from cash and existing debt facilities, with a view to maintaining a prudent capital structure post-construction, with target bank debt funding for Bomen of 65% to 70%. The equity funding is expected to be met through reactivating the Distribution Reinvestment Plan (DRP) during the construction phase of the project. There is no change to FY2019 distribution guidance of at least 15.0 cents per security, as a result of the acquisition or the 12-month construction phase of Bomen, subject to business conditions.
On stock information, at the time of writing (on April 17, 2019, AEST: 01:30 PM), the stock of Spark Infrastructure was trading at $2.190, down 1.794% with a market capitalisation of ~$3.75 billion. Its annual dividend yield has been noted at 7.17%. Today, it touched day’s high at $2.24 and day’s low at $2.19, with a daily volume of 2,201,088. Its 52 weeks high was at $2.53 and 52 weeks low at $2.125, with an average volume of 5,545,283. Its absolute return for five years, one year, six months, and three months are 32.29, -1.76%, 2.29%, and -5.51%, respectively.
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