Spark Infrastructure : HY 2017 securityholder newsletter

Friday, 15 September 2017

The Manager

Company Announcements Australian Stock Exchange Limited 20 Bridge Street

SYDNEY NSW 2000

Dear Sir / Madam

I enclose the Spark Infrastructure newsletter that will be sent to Securityholders today along with their distribution statements.

Yours faithfully,

Spark Infrastructure RE Limited ABN 36 114 940 984

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

SPARK INFRASTRUCTURE

Suite 5, Level 29, 225 George Street

Sydney NSW 2000

t: +61 2 9086 3600

f: +61 2 9086 3666

e:info@sparkinfrastructure.com

w: www.sparkinfrastructure.com

Spark Infrastructure RE Limited (ACN 114 940 984; AFSL 290 436)

is the responsible entity for Spark Infrastructure Trust (ARSN 116 870 725)

DR DOUG McTAGGART

Dear Securityholder,

We were pleased to announce another solid result for the six months to

30 June 2017, based on the continued strong performance of the businesses in our investment portfolio - Victoria Power Networks, SA Power Networks and TransGrid. Each of them

has maintained a sharp focus on sustainable cost management and continued business growth.

The Victorian and South Australian businesses are ranked in the top quartile of efficiency amongst their peers by the Australian Energy Regulator and are industry leaders in terms of safety, reliability and customer service. We are actively managing our interest in TransGrid to move the business to the efficient

frontier of performance, much like our investments in Victoria Power Networks and SA Power Networks.

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.

The nature of much new renewable generation is creating excellent opportunities in the infrastructure connections space for all of our businesses. The changes underscore the importance of transmission interconnection between states to the efficient operation of the National Electricity Market (NEM). They also

highlight the importance of maintaining the most optimal and efficient

service model.

ALL OF THIS MEANS GREATER INVESTMENT OPPORTUNITIES FOR OUR NETWORKS IN BOTH THE REGULATED AND UNREGULATED PARTS OF THEIR BUSINESSES.

The many changes occurring in the energy landscape are underscoring the importance of ancillary services and creating niche areas of customer demand which network businesses are ideally placed to provide in the most cost-effective manner.

Spark Infrastructure contributed in the recent Independent Review into the Future Security of the National Electricity Market Preliminary Report, also known as the Finkel Review.

Our submission recognised that new technology is driving extensive changes in how network service providers engage with customers. This applies to every part of the electricity supply chain and is empowering consumers with greater choice, creating demand for new products and services, and thereby creating new business opportunities, both for incumbents and new entrants to the market.

An important recommendation of the Finkel Report is that the

Australian Energy Market Operator (AEMO) develops a comprehensive and integrated grid plan to facilitate the development and connection of

renewable energy zones. This underpins the importance of TransGrid's north/ south and east/west transmission

spine in facilitating the expansion of renewable energy, and recognises TransGrid's role in maintaining system security and reliability, as we transition away from ageing coal fired generation.

Earlier this year, the NSW State Government completed its privatisation program of electricity distribution and transmission businesses. As I confirmed at the Annual General Meeting in May 2017, Spark Infrastructure was a bidder for the final asset to be sold, Endeavour Energy, as part of the same consortium which acquired TransGrid in December 2015. Together we undertook a highly disciplined valuation producing a detailed business transformation plan, which included material cost reductions and performance improvements.

On this occasion, we were not successful. In fact, our bid fell well short of the acquisition price announced by the NSW State Government. Had

we been successful, we are confident the acquisition would have enhanced Securityholder value and helped to deliver growth in Spark Infrastructure's distributions over the long term.

As always, it was important to us that there be a prudent capital structure in place; that there be no dilution to cashflows to Spark Infrastructure

in the near term; and that there be demonstrable long-term accretion. Moreover, Spark Infrastructure did not intend to use any corporate debt for the purposes of the acquisition.

The consortium had negotiated for Spark Infrastructure to provide technical and specialist advice and support to Endeavour Energy, for which Spark Infrastructure would have received additional fees for service.

This is tangible recognition of the value Spark Infrastructure can bring through its expertise and experience, and validates our position as an active investment manager.

While we were soundly out-bid for this asset, we have no regrets. As always, we applied our financial discipline to

a rigorous due diligence process and bid at a level where the investment was expected to deliver long-term asset growth and sustainable growth in distributions for Spark Infrastructure Securityholders.

2 | SPARK INFRASTRUCTURE

In line with previous distribution guidance, the Board has declared an interim cash distribution for HY2017 of 7.625 cents per security (cps). The interim distribution is payable on 15 September 2017, and consists of 3.50 cps interest on Loan Notes for the period and 4.125 cps capital distribution. The interim

distribution will be made by the Spark Infrastructure Trust.

The Directors have also reaffirmed distribution guidance for 2017

and 2018, subject to business conditions, of 15.25 cps and 16.0 cps, representing annual growth of 5.2% and 4.9% respectively. This continues Spark Infrastructure's long track record of delivering reliable growth in distributions.

I am delighted to be leading Spark Infrastructure at such a dynamic, challenging and exciting period in the Australian energy sector. I look forward to keeping you updated on our progress in the future.

Yours faithfully,

DR DOUG McTAGGART

Chairman

Spark Infrastructure

RICK FRANCIS

Dear Securityholder,

In August 2017, Spark Infrastructure released its results for the six months ended 30 June 2017. Profits and Standalone Operating Cashflows were both up on the adjusted1 Prior Period results.

Profit before Loan Note Interest and Tax for the half year increased by 14.3% to $138.7 million compared to the Prior Period. The increase mainly reflects

a greater equity accounted share of profits from SA Power Networks, although all three investment businesses have performed strongly during the period with a strong focus on delivering an efficient cost base to be shared with consumers.

Our businesses continue to maintain a sharp focus on cost management. To survive and thrive in this changing market we must continue to operate efficiently and proactively deliver to customers' demands. Victoria Power Networks and SA Power Networks have historically done well in this regard, and we are ensuring that TransGrid seeks to emulate their class- leading performance.

Spark Infrastructure's active management philosophy, coupled with the current core focus areas, ensures that we maintain a portfolio of quality assets with a good combination of proven excellence and future potential. We will continue to actively manage these businesses in 2017 and beyond, in conjunction with our investment partners, to ensure they are well positioned to participate and grow

in the changing times ahead.

We continue to be focussed on delivering efficiency gains across the portfolio

and on ensuring the businesses are properly supported to take advantage of the regulated and unregulated business opportunities arising from the changing energy landscape.

Victoria Power Networks' "World CLASS" program, which was established to create a more commercial and lean organisation, is now complete. It delivered sustainable total expenditure savings of $151 million per annum between 2014 and 2016, off its 2013 baseline. While the "World CLASS" program has formally been completed, the business has continued to focus on strategy, programs and change, with

a further $27 million per annum of incremental benefits being identified or delivered during HY2017.

SA Power Networks formally launched its "Powering Ahead" efficiency program earlier this month. The business was already implementing comparable initiatives to Victoria Power Networks with the new program targeting benefits of at least $40 million per annum.

1. Prior Period (HY2016) results have been adjusted to exclude Spark Infrastructure's net interest in derivative contracts associated with DUET Group which was disposed of during HY2016

2. Includes interest income from Associates, Spark Infrastructure's share of equity accounted profits and other income

3. Includes $36.2 million of distributions from Victoria Power Networks received by way of repayments of shareholder loans and classified as investing activities for statutory reporting purposes

2017 NEWSLETTER | 3