Spark Infrastructure : AGM Chair's address and AGM presentation

Tuesday, 23 May 2017

The Manager

Company Announcements Australian Stock Exchange Limited 20 Bridge Street

SYDNEY NSW 2000

Dear Sir / Madam

I enclose the Chair's address and AGM presentation to be delivered today at the 2017 AGM of Spark Infrastructure.

Yours faithfully,

as Responsible Entity of Spark Infrastructure Trust (ARSN 116 670 725) Level 25, 259 George Street Sydney NSW 2000 Australia

T +61 2 9086 3600 F +61 2 9086 3666

www.sparkinfrastructure.com

Tuesday, 23 May 2017

Ladies and Gentlemen,

I am pleased to report that Spark Infrastructure enjoyed another strong year in 2016. Spark Infrastructure's Total Shareholder Return in 2016 was 31%, significantly outperforming the return delivered by the broader ASX 200 Index over the same period. This performance has also continued in 2017 with our share price increasing from $2.38 on 31 December 2016, to $2.65 at yesterday's market close.

I am delighted to say that Spark Infrastructure has been the standout performer among its regulated peers in the ASX 200 Utilities Index over the past year. Since the beginning of last year, Spark Infrastructure has significantly outperformed all of its ASX listed sector peers and both of the ASX indices of which it is a member. Our consistent long-term performance is demonstrated by the fact that, over the past 5 years, Spark Infrastructure has delivered a total shareholder return of 169% compared with the market's 75%.

We believe this performance is founded on two things: first, the underlying quality of the investment portfolio, which consists entirely of regulated electricity distribution and transmission businesses, each possessing significant unregulated business opportunities; and second, the overlay of active investment management provided by Spark Infrastructure in partnership with its investment partners in each asset.

Your Directors declared a final distribution for 2016 of 7.25 cents per security (cps), in line with our prior guidance of a total distribution of 14.5 cps for 2016, an increase of 20.8% on 2015. The final distribution was paid to Securityholders on 15 March 2017.

We are also pleased to reaffirm the forward distribution guidance of 15.25cps for 2017, which is 5.2% above 2016, and then growing by 4.9% to 16cps in 2018. This forward guidance is based on the distributions that we expect to receive from our investment portfolio and is subject to business conditions.

The screen shows our distributions since 2011 matched against the corresponding operating cashflows at the Spark Infrastructure level for each year, Standalone operating cashflow as we call it. As you can see, our distributions to Securityholders have been consistently covered by cash distributions from the investment portfolio to Spark Infrastructure.

Rick Francis, our Managing Director, will provide more detail on the recent performance of the investment portfolio as well as some insights into strategy, discussion of the macro-business environment and will touch on some of the issues affecting our industry.

Spark Infrastructure and its portfolio of businesses operate in a competitive environment. Technology is developing quickly and this results in continuous innovation and change at the operational level.

Customers are more informed and engaged to make decisions about how much energy they consume and from where they source their energy. Regulators are increasingly focussed on ensuring that consumers receive value for money. Renewable energy generation is growing based on both public demand and the drive by investors to ensure long-term business sustainability.

What must be recognised is that the nature of the electricity distribution network is fast changing from a linear process - generation to transmission to distribution to retail - to a decentralised and distributed network where generation can come from a multiplicity of sources differentiated over both time and geography. This significant change supports the value of transmission and distribution networks, as electricity is moving constantly in a non-linear fashion, where businesses and households can be consumers at one point in time and suppliers at another point in time.

Ultimately, these changes are positive for our economy and for our society. For efficient and forward- looking businesses, this represents more opportunity than threat. This has certainly been our experience across our businesses. However, the pace of change does mean that, more than ever before, businesses like ours must be agile, innovative and customer centric in order to succeed.

I am personally delighted and encouraged by the fact that this is precisely what I see at Spark Infrastructure and what I know to be the case across the investment portfolio. Our business culture is focussed on the safe, efficient and reliable delivery of services; embracing of new technology and is quick to innovate; and seeks to work collaboratively with regulators to achieve the best possible outcome for consumers over the long-term.

In addition to the changing business environment, the question of security of electricity supply across the National Electricity Market (known as the "NEM") has loomed large in recent months. This has been occupying both industry and governments alike given the recent outages, particularly in South Australia.

Late last year, the Federal Government launched the "Independent Review into the Future Security of the National Electricity Market", chaired by the Chief Scientist Dr Alan Finkel and otherwise known as the "Finkel Review". Its key objective is to solve what has become known as the "Finkel trilemma" - to re- imagine an electricity market that can deliver energy reliably, affordably and at the same time assist the transition to a low carbon economy.

The Finkel Review is expected to report to the Council of Australian Governments next month. Spark Infrastructure has participated in the Review. Our submission is in the public domain if you are interested in reading it. Our starting premise is that future reliance on renewable energy generation is both desirable and inevitable. However, the electricity system and the regulation that supports it has not been designed for this scenario. This places the NEM in a state of transition that poses some difficult but not insurmountable challenges.

Networks have a key role to play in facilitating the transition to a low emissions economy, by providing expanded interconnection and access, and greater reliability and stability to the grid. Moreover, we believe we are best placed to provide these services most affordably.

The potential for increased grid interconnectivity as part of the potential solution represents a significant opportunity for TransGrid, in particular. Greater interconnectivity of the NEM has the ability to improve

reliability and security of supply to customers and thereby facilitate the growth of renewable generation in a cost effective manner.

Further, expanding into niche areas associated with 'behind the meter' customer solutions, distributed battery storage and consulting services to the energy industry are opportunities that Spark Infrastructure is determined to explore through its electricity distribution businesses, to enhance Securityholder value.

Our investment portfolio continues to demonstrate strong cashflow generating capacity, delivering growth of 47.4% in standalone operating cashflows in 2016. This includes the first full year of distributions from TransGrid and a significant step-up in distributions from Victoria Power Networks (VPN).

This is a tremendous performance and attests to the hard work of the people in the investment portfolio businesses - VPN, comprising the CitiPower and Powercor networks, SA Power Networks (SAPN) and TransGrid, in combination with the active investment management approach we undertake.

In 2016, VPN delivered cash distributions to Spark Infrastructure of $145 million, an increase of 76% on the prior year. VPN's management of its operating costs through its World CLASS program has set the leading benchmark for our sector. This year it will deliver $167 million of savings in operating costs relative to its 2013 baseline, when the program was initiated. The VPN experience demonstrates how a transformation program can increase network performance and improve safety outcomes and reliability at the same time.

Naturally, VPN is not alone in its efforts. SAPN is undertaking similar cost management initiatives and we expect it will achieve comparable results. For example, SAPN is currently making increased use of drones for inspection of infrastructure and the use of virtual planning assessments of new projects. The smart use of technology holds the key to further reducing costs in already efficient businesses like SAPN and VPN.

VPN and SAPN are ranked in the top quartile of efficiency amongst their peers by the Australian Energy Regulator (AER) and are industry leaders in terms of safety, reliability and customer service. In a similar vein, we are also working with TransGrid to move its business to the 'efficient frontier' of performance.

Around 18 months have passed since we acquired a 15% stake in TransGrid and the diversification benefits this acquisition is bringing to Spark Infrastructure are now being demonstrated.

The business continues to deliver against the acquisition business plan. TransGrid remains focussed on cultural transformation, efficiency improvements and growing non-regulated business revenues.

The infrastructure connections opportunities in TransGrid are particularly exciting. What we have found is that the pipeline of opportunity is larger than we had originally envisaged and in addition, TransGrid is converting them into contracts at a higher rate than we expected. In the first 12 months under private ownership, TransGrid signed seven new contracts with wind and solar farm proponents to connect their generation facilities to the grid. This presents the business with an additional source of value accretive growth.

Due to the capital investment required, it is likely that TransGrid will need to retain a larger proportion of its operational cashflows to fund this growth. The construction phase for these projects varies between 12 and 24 months with the revenue from the most recently signed contracts expected to start flowing later this year.

This is a great problem to have, and although you should expect to see a lower level of cashflows at the Spark Infrastructure level in 2017 and 2018, it will not impact our current distribution guidance to end 2018.