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ASX ANNOUNCEMENT 26 September 2014 APA Group (ASX: APA) (also for release to APT Pipelines Limited (ASX: AQH)) ANNUAL REVIEW AND SUSTAINABILITY REPORT, ANNUAL REPORT AND NEWSLETTER The following documents are attached for release to the market: • Annual Review and Sustainability Report 2014 • Annual Report 2014 • In the Pipeline newsletter Mark Knapman Company Secretary Australian Pipeline Limited For further information please contact: Investor enquiries: Media enquiries: Chris Kotsaris David Symons Telephone: (02) 9693 0049 Telephone: (02) 8306 4244 Mob: 0402 060 508 Mob: 0410 559 184 Email: [email protected] Email: [email protected] About APA Group (APA) APA is Australia’s largest natural gas infrastructure business, owning and/or operating $12 billion of energy assets. Its gas transmission pipelines span every state and territory on mainland Australia, delivering approximately half of the nation’s gas usage. APA has direct management and operational control over its assets and the majority of its investments. APA also holds minority interests in energy infrastructure enterprises including Envestra, SEA Gas Pipeline, Energy Infrastructure Investments and GDI. APT Pipelines Limited is a fully owned subsidiary of Australian Pipeline Trust and is the borrowing entity of APA Group. For more information visit APA’s website, www.apa.com.au APA Group Annual Review and Sustainability Report 2014 TRANSFORMING AUSTRALIA’S GAS INDUSTRY APA is transforming the future of Australia’s gas industry through innovative thinking and sound decision making Gas industry dynamics are complex, and at APA, APA remains focused on its core business of we’re focused on providing seamless energy transporting and storing gas, and on investment solutions that meet our customers’ needs. We’re opportunities that utilise our industry-leading also developing further enhancements to our skills in these areas. We have remained disciplined integrated portfolio of gas infrastructure that will in our approach to growing APA. Our drive and add significant value for all stakeholders. enthusiasm to respond to Australia’s energy challenges, as well as the smarts of our people, APA’s innovation is allowing participants in are changing the way we do things. In turn Australia’s energy market to think differently about this creates opportunities for customers, their businesses because of new opportunities growth for our business and value generation and energy frontiers presented by APA. Miners are for our investors. converting their operations to gas-fired power, gas explorers are pursuing new sources of gas, and shippers are able to access multiple supply and delivery points with one transport contract, while pipeline capacity trading supports flexibility and Innovating today – transforming tomorrow transparency in the gas market. that’s what we’re doing at APA. Front Cover: Bronte Rathjen (left) Regional Manager for South West Queensland Pipeline (SWQP) Transmission Operations and Ben Tibenszky (right) Project Engineer for the SWQP Eastern Haul project on site at APA’s Wallumbilla Queensland operations, overseeing the compression expansion and bi-directional capital works. In the background are the three new Solar Mars 90 compressors that will increase capacity at the Wallumbilla gas hub. This page: Kilometres of steel pipe for looping stored at a laydown yard in regional Victoria for Stage 1 of the Victorian Northern Interconnect expansion project. OUR VISION Maintain our ranking as Australia’s number one energy CONTENTS infrastructure business. Highlights 2 OUR STRATEGY Chairman’s report 4 Managing Director's report 6 1 Enhancing APA’s portfolio of gas infrastructure assets in Australia’s growing energy market Operations review – Transmission 8 2 Capturing revenue and operational synergies from – Networks 12 APA’s significant asset base Our people 14 3 Facilitating the development of gas related Sustainability report 16 projects that enhance APA’s infrastructure portfolio Leadership 20 4 Pursuing opportunities that leverage APA’s knowledge and skills base Five year financial summary 22 5 Strengthening our financial capability Investor information 23 About APA 24 Information contained in this document is current as at 20 August 2014 unless otherwise stated. Annual Review and Sustainability Report 2014 3 2014 HIGHLIGHTS BUSINESS PERFORMANCE (NORMALISED1) EBITDA ($M) OPERATING CASH FLOW ($M) TOTAL ASSETS ($M) 2014 747.3 2014 439.7 2014 7,972.5 2013 661.92 2013 432.6 2013 7,699 2012 535.5 2012 335.6 2012 5,496 2011 489.6 2011 290.0 2011 5,428 2010 460.0 2010 267.8 2010 4,982 EBITDA increased by 12.9% with a full year’s Operating cash flow increased by 1.6%, Total assets increased by 3.6% with contribution of the acquired pipelines, additional which was less than the increase for the addition of expansion projects. earnings from the Mondarra Gas Storage Facility, EBITDA mainly due to timing differences. increased performance of Energy Investments and increased customer contributions in Asset Management. REVENUE EXCLUDING PASS-THROUGH3 ($M) OPERATING CASH FLOW PER SECURITY (CENTS) DISTRIBUTIONS PER SECURITY (CENTS) 2014 992.5 2014 52.6 2014 36.3 2013 919.5 2013 56.0 2013 35.5 2012 758.0 2012 52.5 2012 35.0 2011 720.3 2011 52.6 2011 34.4 2010 659.5 2010 51.9 2010 32.8 Revenue excluding pass through3 increased Operating cash flow per security Distributions per security increased by by 7.9% with a full year’s contribution of the decreased by 6.1% due to the increase 2.1% to 36.25 cents, in line with guidance acquired pipelines, additional earnings from in weighted average securities on issue. and paid in full out of operating cash flow. the Mondarra Gas Storage Facility, increased performance of Energy Investments and increased customer contributions in Asset Management. FINANCIAL ACHIEVEMENTS 2014 2013 2014 2013 Normalised1 Normalised 1,2 Change % Statutory Statutory2 Change % $ million $ million Normalised $ million $ million Statutory FINANCIAL RESULTS Revenue 1,396.0 1,272.3 9.7 1,396.0 1,272.3 9.7 Revenue excluding pass-through3 992.5 919.5 7.9 992.5 919.5 7.9 EBITDA 747.3 661.9 12.9 747.3 763.6 (2.1) Profit after tax and minorities 199.6 175.1 14.0 343.7 295.1 16.5 Operating cash flow 439.7 432.6 1.6 431.5 374.4 15.3 FINANCIAL POSITION Total assets 7,972.5 7,698.9 3.6 Debt 4,789.4 4,412.0 8.6 Securityholders’ equity 2,496.5 2,513.9 (0.7) FINANCIAL RATIOS Operating cash flow per security (cents) 52.6 56.0 (6.1) 51.6 48.5 6.4 Earnings per security (cents) 23.9 22.7 5.3 41.1 38.2 7.6 Distribution per security (cents) 36.3 35.5 2.3 Distribution payout ratio (%) 68.9 68.2 1.0 70.2 78.9 (11.0) Gearing (net debt to net debt plus equity) (%) 64.2 62.8 Interest cover ratio (times) 2.3 2.3 1 Normalised financial results exclude significant items. 2 The comparative numbers for 2013 have been restated for the eect of applying AASB 119 ‘Employee Benefits’. 3 Pass-through revenue is revenue on which no margin is earned. 23 APA GROUP / Annual Review and Sustainability Report 2014 CAPITAL EXPANSION ACHIEVEMENTS PILBARA PIPELINE NORTHERN LINK DIAMANTINA WALLUMBILLA SYSTEM FEASIBILITY STUDY POWER STATION COMPRESSION New lateral and APA committed up to APA/AGL joint development Expanding compression delivery station for $2 million to undertake a 242 MW gas-fired generation capacity and associated new gas transportation 2 year feasibility study to (in commissioning services. agreement. link its Northern Territory phase) plus 60 MW pipeline infrastructure back-up generation SOUTH WEST with its east coast grid. (commercially operating). QUEENSLAND PIPELINE MORE: PAGE 11 MORE: PAGE 11 MORE: PAGE 4 Increased eastern haul capacity and bi-directional flow capability. APA Group assets APA Group investments MORE: PAGE 10 Assets operated (not owned by APA Group) Other natural gas pipelines Power station Gas processing plant Gas storage Wind farm MOOMBA COMPRESSION Expand compression capacity. MORE: PAGE 10 MOOMBA MONDARRA GAS EASTERN VICTORIAN SYDNEY PIPELINE STORAGE FACILITY GOLDFIELDS TRANSMISSION Southern lateral expansion PIPELINE SYSTEM for new gas transportation Capacity expansion agreements increasing the completed and New 292 km Capacity expansion of the gas flow from Victoria into commercial operations transmission pipeline Northern Interconnect New South Wales. commenced. Majority of to supply 2 gold mine supported by 3 new gas capacity contracted with operations. Gas will transportation agreements MORE: PAGE 8 Synergy plus several short be transported along and a new compressor at term agreements with three APA pipelines. Winchelsea. other customers. MORE: PAGE 11 MORE: PAGE 11 OTHER INITIATIVES Introduced Capacity Trading and In-Pipe Trade services on Constructed new gas network infrastructure to deliver gas to five two APA pipelines – South West Queensland Pipeline and new major housing developments in South Australia, Queensland Roma Brisbane Pipeline. The services are accessed via a public and Victoria which will deliver over 130,000 new connections over website and provide market flexibility and transparency to the the next 30 years. Together with Envestra, APA secured funding gas market. Plans are in place to extend these services to all under the Victorian Governments Energy for the Regions Program APA pipelines nationally. to connect natural gas to two regional Victorian townships. Developed a Gas Loan Service facility at APA’s Mondarra Replaced over 551 kilometres of network mains in Queensland, Gas Storage Facility to provide loans of up to 100 TJ South Australia and Victoria allowing networks to operate at higher to help manage emergency and/or security of supply issues. pressure and increase gas transmission capacity. Annual Review and Sustainability Report 2014 3 I am pleased to report that APA has CHAIRMAN’S delivered another strong result for the 2014 financial year, successfully delivering REPORT on a number of growth initiatives while improving the services we are able to provide customers.