APA GROUP ANNUAL REVIEW AND SUSTAINABILITY REPORT 2015
CONNECTING MARKETS CREATING OPPORTUNITIES
APA Group | Annual Review and Sustainability Report 2015 A Front cover: APA’s most recent and largest acquisition - the Wallumbilla CONNECTING Gladstone Pipeline (“WGP”). This is APA’s delivery station for the Queensland Curtis LNG facility MARKETS located on Curtis Island near Gladstone where the WGP emerges from the underground 556 kilometres from its starting point in the Surat Basin, Queensland.
This page: Pipes strung and welded during construction of APA’s new Eastern Goldfields Pipeline in Western Australia. The 293 kilometre pipeline connects to APA’s Murrin Murrin Lateral which connects to our Goldfields Gas Pipeline. APA’s three pipelines will be used to supply gas to AngloGold Ashanti’s gold mining operations displacing liquid fuel power supply.
MOVING ENERGY
CREATING OPPORTUNITIES
2016 15 YEARS OF GROWTH
2016-BEYOND We only look forward at APA as to what opportunities for growth lay ahead, never resting on MORE GROWTH our laurels of what we’ve achieved. However, we also believe it’s healthy to acknowledge our IN THE PIPELINE significant growth and success since listing 15 years ago. That’s why our celebratory timeline starts at financial year 2015 – like you, we’re keen to see what’s next in 2016 and beyond, but we’re proud of the list of achievements you’ll see flowing through the pages of APA’s 2015 Annual Review. Continuing to grow our 02 Highlights ownership interests in 04 Chairman’s report transmission pipelines 06 Managing Director’s through further Growing other report 1 expanding the east energy infrastructure and west coast grids midstream assets 08 Operations report 2 16 Sustainability report 24 Leadership 26 Five year financial summary 27 Investor information Leveraging 28 Map — our footprint OUR APA’s asset and FY2015 activities management, STRATEGY development Information contained in this document 3 and operational is current as at 26 August 2015. capabilities
Maintaining financial flexibility 5 OUR VISION MAINTAIN OUR Delivering responsive, valuable RANKING AS solutions to our AUSTRALIA’S customers 4 NUMBER ONE ENERGY INFRASTRUCTURE BUSINESS
As a leader in energy delivery, APA is transforming Australia’s dynamic energy sector. Energy is essential to our everyday lives and Australians are fortunate to take for granted 24/7 connection to it. For 15 years, APA has been making sure connections are in place, when and where they are needed now and for the future. By connecting gas resources to markets, we create opportunities for our customers to more effectively manage their energy portfolios. Our focus is on serving our customers and solving their challenges which generates sustainable growth opportunities for APA. We add value to our customers’ businesses which adds value to their customers’ operations. By providing flexible services and solutions, we are able to consistently deliver returns and value to our investors and offer our 1,600 employees a dynamic environment in which to use and further develop their talents. APA is well positioned to connect, create and grow our stakeholders’ interests as we move energy around Australia.
2015 2014
30 JUNE 2015 JUN 2015 DEC 2014 MARKET CAP Wallumbilla Gladstone Pipeline Diamantina and Leichhardt Power $9.2B acquisition, underpinned by Stations officially opened, underpinned SECURITY PRICE 20 year take-or-pay gas transportation by long term electricity supply $8.24 agreements. APA’s largest contracts until 2030. acquisition to-date.
APA Group | Annual Review and Sustainability Report 2015 1 2015 HIGHLIGHTS 0.64 LTIFR 1 INCLUDING EMPLOYEES AND CONTRACTORS -20% year-on-year
$US4.6B (AUD$6B) AUSTRALIA’S LARGEST PIPELINE ACQUISITION 38.0¢ FY2015 TOTAL DISTRIBUTION PER SECURITY
56.5¢ OPERATING CASH FLOW PER SECURITY +13.5% YEAR-ON-YEAR $821.3M NORMALISED EBITDA CONTINUING BUSINESS +18% year-on-year and in-line with FY2015 guidance
28,535 NEW NETWORK GAS CONNECTIONS
$9.2B MARKET CAPITALISATION as at 30 June 2015 +59.5% $396.3M as at 30 June 2015 TOTAL CAPITAL EXPENDITURE INCLUDING STAY-IN BUSINESS
Photo: Peter Wheelwright, APA’s Construction Manager working on the Victoria-New South Wales Interconnect expansion project. 1. Lost Time Injury Frequency Rate (“LTIFR”) 2013 2012
28 JUNE 2013 2013-2011 DEC 2012 DEC 2012 MARKET CAP Maximising the value of APA’s Completed acquisition of Hastings Commenced $4.8B portfolio through consolidation Diversified Utilities Fund. Creation of APA’s expansion of APA’s SECURITY PRICE and expansion – we’re more than East Coast Grid through the addition of compression capacity $5.73 the sum of our parts. the South West Queensland Pipeline. at the Wallumbilla Emergence of the West Coast Grid with Gas Hub. acquisition of Pilbara Pipeline System.
2 2015 54.8
2014 50.8
2013 56.0
2012 52.5
2011 52.6
BUSINESS PERFORMANCE (NORMALISED 1)
EBITDA ($M) OPERATING CASH FLOW ($M) 3 TOTAL ASSETS ($M)
2015 822.3 2015 545.0 2015 14,652.9
2014 747.3 2014 439.7 2014 7,972.5
2013 661.9 2 2013 432.6 2013 7,698.9
2012 535.5 2012 335.6 2012 5,496.1
2011 489.6 2011 290.0 2011 5,427.6
REVENUE EXCLUDING OPERATING CASH FLOW DISTRIBUTIONS PER PASS-THROUGH ($M) 4 PER SECURITY (CENTS) 5 SECURITY (CENTS)
2015 1,119.2 2015 54.8 2015 38.0
2014 992.5 2014 50.8 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
FINANCIAL RESULTS 2015 2014 Change 2015 2014 Change Normalised 1 Normalised 1 Normalised 1 Statutory Statutory Statutory $ million $ million % $ million $ million %
Revenue 1,553.6 1,396.0 11.3 1,553.6 1,396.0 11.3 Revenue excluding pass-through 4 1,119.2 992.5 12.8 1,119.2 992.5 12.8 EBITDA 822.3 747.3 10.0 1,269.5 747.3 69.9 Profit after tax and non-controlling interests 203.9 199.6 2.1 559.9 343.7 62.9 Operating cash flow 3 545.0 439.7 23.9 562.2 431.5 30.3
FINANCIAL POSITION Total assets 14,652.9 7,972.5 83.8 14,652.9 7,972.5 83.8 Total drawn debt 6 8,642.8 4,789.4 80.5 8,642.8 4,789.4 80.5 Total equity 4,382.7 2,496.5 75.6 4,382.7 2,496.5 75.6
FINANCIAL RATIOS Operating cash flow per security (cents) 5 54.8 50.8 7.9 56.5 49.8 13.5 Earnings per security (cents) 5 20.5 23.1 (11.3) 56.3 39.7 41.8 Distribution per security (cents) 38.0 36.3 4.8 38.0 36.3 4.8 Distribution payout ratio (%) 7 68.8 68.9 66.7 70.2 Gearing (net debt plus equity) (%) 63.4 64.2 Interest cover ratio (times) 2.6 2.3
Notes: Numbers in the table may not add up due to rounding. 1. Normalised financial results exclude significant items. 2. The balances for June 2013 have been restated for the effect of applying AASB 119: ‘Employee Benefits’. 3. Operating cash flow = net cash from operations after interest and tax payments. 4. Pass-through revenue is revenue on which no margin is earned. Pass-through revenue arises in the asset management operations in respect of costs incurred in, and passed on to Australian Gas Networks Limited (“AGN”, formerly Envestra Limited) and GDI in respect of, the operation of the AGN and GDI assets respectively. 5. Between 23 December 2014 and 28 January 2015, APA issued a total of 278,556,562 new ordinary securities, resulting in total securities on issue as at 30 June 2015 of 1,114,307,369. The issue was offered at $6.60 per security, a discount to APA’s closing market price of $7.67 per security on 9 December 2014, the last trading day before the record date of the entitlement offer of 15 December 2014. The weighted average number of securities for the current and prior period (FY2014) has been adjusted in accordance with the accounting principles of AASB 133: ‘Earnings per Share’, for the discounted rights issue. 6. APA’s liability to repay debt at relevant due dates of the drawn facilities. This amount represents current and non-current borrowings as per balance sheet and is adjusted for deferred borrowing costs, the effect of unwinding of discount, unrealised foreign exchange differences reported in equity and deducting other financial liabilities that are reported as part of borrowings in the balance sheet. 7. Distribution payout ratio = total distribution payments as a percentage of normalised operating cash flow.
2011
DEC 2011 JUL 2011 JUN 2011 MAY 2011 Capacity expansion of the Emu Downs wind farm acquisition Acquisition of the Amadeus Gas Fivefold capacity Goldfields Gas Pipeline. in the Perth area energy precinct, Pipeline in the Northern Territory. expansion of Mondarra underpinned by 20 year electricity gas storage facility supply contracts. in the Perth area energy precinct.
APA Group | Annual Review and Sustainability Report 2015 3 CHAIRMAN’S REPORT
As we look back over the 15 years since APA listed on the Australian Securities Exchange, it is timely to reflect on how much has been achieved. We began this journey with an asset base of less than $1 billion and a simple goal – “to be recognised as the leading transporter of natural gas in Australia”.
From these modest beginnings, Earnings before interest, tax, depreciation APA’s capacity to complete an consistent strategy execution has seen and amortisation (“EBITDA”) from acquisition of this scale is testament to APA emerge as a leader in energy continuing business and before the skills of our people, our relationships delivery that is playing an active part significant items increased by 18 per in the equity and debt markets, and in transforming Australia’s dynamic cent to $821.3 million. The increase in our conservative approach to balance energy sector. normalised EBITDA from continuing sheet management. From conception, business was underpinned by organic and through preliminary discussions, Today, we operate around $19 billion growth of $109.1 million, more than structuring, due diligence, and of owned or managed assets and our offsetting the decrease in contribution financing to the ultimate closing of the team of 1,600 experienced professionals from the divested investment in acquisition, the quality of execution is working harder than ever to unlock AGN, and below-average customer on this transaction was a credit to all still more value from this diverse and contributions received by APA’s Asset those involved. growing portfolio. By connecting Management operations. gas resources to markets, we create We are particularly grateful to APA opportunities for our customers WALLUMBILLA GLADSTONE PIPELINE Securityholders for the confidence they to more effectively manage their A highlight of the year was the showed in the acquisition, and in our energy portfolios. US$4.6 billion acquisition of the strategy, through their support for the Wallumbilla Gladstone Pipeline that APA $1.8 billion accelerated renounceable Our focus is on serving our customers announced in December 2014. This was entitlement offer undertaken to partially and solving their challenges in a manner our largest ever acquisition and a true fund the acquisition. that generates sustainable growth milestone for APA that further cements opportunities for APA. It is pleasing MORE GROWTH our position as Australia’s largest gas to report that, consistent with this infrastructure business. Continued investment in our existing philosophy, APA has delivered another assets is core to APA’s strategy to strong result for the 2015 financial year. The acquisition significantly enhanced position the business for ongoing our asset portfolio, connecting APA’s East growth. Over the course of the financial The Board declared total distributions Coast Grid to Gladstone. Expansion of the year ending 2015, APA spent close to for the year of 38.0 cents per security, grid provides our customers with the ability $400 million on capital expenditure including a final distribution of 20.5 to transport gas seamlessly from multiple including stay-in business capital cents, an increase of 4.8 per cent production facilities to users across four expenditure, and expansions in New over the total distribution paid for the states and the ACT, as well as the export South Wales, Victoria, Queensland and previous year. Distributions continue LNG market developing in Gladstone. Western Australia. Among a number to be fully funded out of operating of previously announced projects, the cash flow as we seek to deliver The 556 kilometre (including laterals) following were concluded: sustainable growth in distributions while Wallumbilla Gladstone Pipeline is a maintaining investment in the growth of key component of the Queensland — In May 2015, we completed the latest the business. Execution of this strategy Curtis LNG Project (“QCLNG”) linking expansion of the Victoria – New has seen APA deliver a compound total gas fields in the Surat Basin to the South Wales Interconnect (“VNI”) securityholder return of 19.2 per cent project’s LNG plant on Curtis Island. to increase the firm peak winter gas per annum since listing in June 2000. The acquisition is underpinned by fully flows from Victoria into New South contracted revenues with BG Group Wales by 145 per cent to nearly Net profit after tax including significant entities and a China National Offshore 120 terajoules per day, at a total cost items increased by 62.9 per cent to Oil Corporation owned entity on a 20 of approximately $160 million. New $559.9 million, including a $356.0 million year take-or-pay basis with primary gas transportation agreements with after tax profit from the sale of APA’s tariff components escalated annually at three customers were entered into as shareholding in Australian Gas Networks U.S. Consumer Price Index. a result of the project’s completion. Limited (“AGN”, formerly Envestra A fourth agreement with an existing Limited) and the recovery of fees paid Gas began flowing through the customer was announced in July by Hastings Diversified Utilities Fund Wallumbilla Gladstone Pipeline in 2015, which will support further to Hastings Funds Management during December 2014, with the QCLNG plant expansion of the VNI; the period. Net profit after tax excluding commencing commercial operations in — In January 2015, the South significant items and profits attributable May 2015 following the shipping of 16 West Queensland Pipeline to minorities, increased by 2.1 per cent LNG cargoes as part of commissioning expansion project was completed to $203.9 million. and performance testing. and commissioned.
2010
APR 2011 30 JUNE 2010 2010-2009 2010-2008 Capacity expansion of the MARKET CAP APA obtained investment grade Enhanced APA’s asset Roma Brisbane Pipeline. $1.9B credit ratings from Standard & footprint by means SECURITY PRICE Poor’s (June 2009) and Moody’s of capacity expansion, $3.45 (April 2010). pipeline development and acquisitions.
4 1,304% 19.2% per annum compound APA’s total securityholder total securityholder return since listing return since listing
TOTAL SECURITYHOLDER RETURN SINCE LISTING 1 Total returns indexed to 100 from date of APA listing, 13 June 2000 to 30 June 2015
1,600
APA total securityholder return 1,200 S&P/ASX 200 Utilities Accumulation Index S&P/ASX 200 Accumulation Index 800
400
0
JUN 00 JUN 01 JUN 02 JUN 03 JUN 04 JUN 04 JUN 06 JUN 07 JUN 08 JUN 09 JUN 10 JUN 11 JUN 12 JUN 13 JUN 14 JUN 15
The $325 million growth project, This financing program saw US$3.7 billion OUTLOOK underpinned by a number of long debt raised in international debt capital Your Board is confident that APA remains term gas transportation agreements, markets, across three currencies well placed to continue delivering has seen a significant increase in and five maturity tranches ranging sustainable and profitable growth. Our the pipeline’s capacity, the addition from 7 to 20 years. demonstrated ability to generate organic of bi-directional capability and growth from existing assets augurs well At 30 June 2015, APA had around the augmentation of compression for the financial year ahead, which will also $1.6 billion in cash and committed facilities at Wallumbilla and Moomba. benefit from the first full year of ownership undrawn facilities available to meet the of the Wallumbilla Gladstone Pipeline. — In September 2014, the Goldfields continued capital growth needs of the Gas Pipeline expansion project business. We finished the year with a Our confidence in the outlook for APA was completed. Long term gas debt portfolio containing a broad spread is reflected in our guidance for the 2016 transportation agreements with of maturities extending out to 2035, with financial year, with statutory EBITDA for major mining groups underpinned an average maturity of drawn debt of the full year to 30 June 2016 to be in a this expansion. 8.5 years. Our gearing of 63.4 per cent range of $1,275 million to $1,310 million. CAPITAL MANAGEMENT at 30 June 2015 was down slightly from The distribution per security for the 2016 64.2 per cent at 30 June 2014. APA’s success relies upon a strong financial year is expected to be at least equal to that paid in the 2015 financial year, balance sheet and, in a year of I recently announced the appointment that is, at least 38.0 cents per security. substantial investment and growth of two new members to your Board. through acquisition, we maintained our Michael Fraser and Debbie Goodin will On behalf of the Board, I thank our solid investment grade credit ratings further enhance the Board’s expertise Managing Director Mick McCormack, of BBB/Baa2 from Standard & Poor’s in the energy industry and financial his leadership team and APA’s people and Moody’s respectively, through a management. As foreshadowed at the for their contributions this year. prudent and conservative approach 2014 Annual Meeting, Robert Wright, to capital management. who was appointed to the Board when I also thank you, APA’s Securityholders, APA was floated in 2000, is retiring for your continued support. APA’s strategies for financing growth from the APA Board with effect from continued to attract strong support close of the 2015 Annual Meeting of from capital markets, with debt sourced Securityholders in October. I thank across a range of maturities and Robert for his significant contribution markets to partially fund the Wallumbilla over the last 15 years. Gladstone Pipeline acquisition. Len Bleasel AM Chairman
1. Total securityholder return is the capital appreciation of the company’s security price, adjusted for capital management (such as security splits and consolidations) and assuming the reinvestment of distributions at the declared distribution rate per security. Figures quoted are sourced from IRESS.
2008
2010-2008 MAR 2010 DEC 2008 AUG 2008 Enhanced APA’s asset Acquired the Berwyndale Established Energy Infrastructure Acquired the Central Ranges Pipeline. footprint by means to Wallumbilla Pipeline. Investments (EII) for APA of capacity expansion, annuity style assets. Completed pipeline development construction of the Bonaparte and acquisitions. Gas Pipeline.
APA Group | Annual Review and Sustainability Report 2015 5 MANAGING DIRECTOR’S REPORT
At the mid-point of our second decade as a listed entity, it is the skills and expertise of APA’s people across asset management, development and operational activities that have seen us emerge as a leader in energy delivery in Australia.
Today, APA owns and/or operates for our customers and realise additional This year the Northern Territory over 14,700 kilometres of natural gas operational efficiencies. I have no doubt Government announced its own process pipelines as well as gas storage facilities, that this concentration of expertise from for this pipeline and shortlisted four gas-fired generation plants and a wind many different parts of APA will, in itself, bidders, one of which is APA. farm. Half of Australia’s natural gas lead to the development of previously We are working towards making a final production passes through our network, unthought-of services and a step-change submission in September this year. which is by far the largest in the country. in the timeliness and dynamism with The proposed pipeline link would create We have a well-earned reputation which we meet our customers’ needs. the opportunity for gas sourced from for delivering our Securityholders In 2016 we will complete full transitioning onshore and offshore fields in the sustainable growth and returns, while of all APA pipelines to the IOC. Northern Territory to be economically continuing to invest in assets that are supplied to east coast markets as well a strategically vital part of our nation’s The establishment of the IOC is a as provide additional gas security for energy infrastructure. natural step following the creation in 2012 of the East Coast Grid, which the Northern Territory. Any commitment The 2015 financial year saw exceptional now allows our customers to choose by APA will be underpinned by levels of activity in the completion of from, and move gas between, around appropriate long-term revenue existing projects, the commissioning of 30 receipt points and approximately agreements, and we look forward new projects, and our most substantial 100 delivery points on the east coast. to the favourable conclusion of this acquisition to date – the Wallumbilla It is APA’s ongoing commitment to exciting prospect. Gladstone Pipeline. Our investment innovation that enabled us to develop These are just three of the projects activity is focused on connecting APA’s the commercial and operational that saw APA invest $343.1 million in physical assets to link more Australian framework to provide this flexibility growth capital expenditure, including gas resources to more gas markets. It is to our customers including related expansions and enhancements to its a process that is driven by engagement offerings such as multi-asset services, gas infrastructure in New South Wales, with our customers, listening to bi-directional transportation and gas Victoria, Queensland and Western their needs and developing new and storage and parking facilities. Australia over the course of the year. innovative ways to make the most of our infrastructure. We broke ground in March 2015 on the construction of the new 293 kilometre TRANSPARENT COSTS FUTURE GROWTH Eastern Goldfields Pipeline (“EGP”). This year we are introducing a change in our reporting by separating While it’s healthy to acknowledge our This project is underwritten by two gas corporate costs from operating significant growth and success over the transportation agreements executed business segments. In doing so, last 15 years, and reflect on what we between AngloGold Ashanti Australia it is our intention to provide our have achieved in the past year, at APA Limited (“AngloGold”) and APA in Securityholders with a greater insight we are always looking forward to the July 2014 for the transportation of to the underlying performance of the opportunities for growth that lie ahead. natural gas to AngloGold’s Sunrise operating businesses and the costs That is why, in addition to the projects Dam Operations and the Tropicana incurred by APA in the management we completed in the past year, we have Operations located in the eastern of these businesses. also been planting the seeds for our Goldfields region of Western Australia. future growth. The EGP will connect APA’s existing Corporate costs have declined as infrastructure, the Goldfields Gas a proportion of revenue (excluding In April 2015 we opened the APA Pipeline and the Murrin Murrin Lateral pass‑through revenue; 2015: 6.7 per Integrated Operations Centre (“IOC”) in to the respective mine site locations cent and 2014: 7.7 per cent) and Brisbane. This new centre of excellence transporting natural gas over a EBITDA (continuing businesses before will enable us to centrally manage our total distance of 1,500 kilometres. corporate costs; 2015: 8.2 per cent portfolio of interconnected assets, Commissioning of this project is and 2014: 9.4 per cent). Indeed, these responding more nimbly to operational scheduled to take place prior to ratios have trended down over the last and market imperatives. By integrating January 2016. five years, demonstrating the efficient commercial, technical and operational scalability of APA. resources in the one location in a As we discussed in last year’s Annual real‑time environment, we will provide Review, in early 2014 APA announced a single operational point of contact a feasibility study into a possible link of our Northern Territory pipeline infrastructure with our East Coast Grid.
2007
2007-2006 OCT 2007 APA acquired Origin Energy Network APA completed construction Start of ongoing acquisition and APA fully internalised asset (Jun/Jul 2007) assets including and commissioning of development of complementary management and interests in SEA Gas Pipeline and Daandine (Jan 2007) and X41 assets for the APA portfolio. operational services. the Envestra gas distribution (Nov 2007) Power Stations. network along with the long term operations and management contract for Envestra assets.
6 $9.2B US$4.6B market capitalisation (AUD$6B) Australia’s as at 30 June 2015, largest pipeline +59.5% year-on-year acquisition
PUBLIC POLICY CONTINUING COMMITMENT TO SAFETY We will continue to invest in the The 2015 financial year saw In this report last year, I announced growth of our national infrastructure unprecedented levels of public and APA’s three-year Health, Safety and where customer demand provides policy discussion of the evolving gas Environment Strategic Improvement an opportunity for commercial market in Australia as LNG exports from Plan following a corporate-wide health long‑term returns. And we will Gladstone commence and domestic and safety cultural survey in early 2013. remain alert to investment and supply arrangements need renewal. I am pleased to provide an update on acquisition opportunities compatible The Federal and State Energy Ministers, the progress that we have made in the with our over‑arching strategy, through the Council of Australian past year towards achieving our aim of prudent management of the balance Governments’ Energy Council, initiated being a Zero Harm workplace. sheet, and our own return on a major review of the east coast investment requirements. 14 of the 17 Plan initiatives we originally gas market and concurrently, the identified have now been implemented. Recently, APA announced the Federal Government has instructed The Plan and ongoing progress of the retirement of two members of my the Australian Competition and initiatives are regularly reviewed and executive team – Peter Wallace, Group Consumer Commission to undertake updated. Given the vast geographical Executive Human Resources and Mark an inquiry into the competitiveness of spread and remoteness of our assets, Knapman, APA’s Company Secretary. the wholesale gas market, including an additional initiative was introduced Both have contributed significantly gas transmission. this year, Safedrive+ which will provide to APA’s growth and I thank them for There appears to be a high degree of the requisite level of control and training their commitment and wish Peter and overlap between these processes and for all APA and contractor drivers and Mark all the best for their well-deserved each consumes a material amount passengers, as well as a minimum retirements. We’re very proud of the of APA’s resources and management standard vehicle specification. talent pool and succession planning attention. These reviews cover much that has been internally developed The principle metric against which we of the same ground considered in the within APA over a number of years. measure the safety of our people is expansive work undertaken by the It was therefore with great pleasure the Lost Time Injury Frequency Rate Productivity Commission, the Harper to also announce at the time that (“LTIFR” including both employees Review into Competition Policy, and the both executive roles were taken up and contractors), which has continued Federal Government in developing its by existing employees and I welcome to decline from 0.80 last year to 0.64 Energy White Paper, all of which were to the executive team Elise Manns this financial year. This represents completed in 2014/15. APA’s new Group Executive Human a significant improvement, but Resources and Nevenka Codevelle, Whilst transparent discussion of the we will continue working towards APA’s new Company Secretary issues facing the industry promotes zero, implementing the remaining and General Counsel. sensible policy determinations, provides initiatives as well as monitoring the certainty and serves to educate the active initiatives. Lastly, at 15 years young, I would like public, it is important that a succession to extend my sincere thanks for your of reviews should not be allowed to OUTLOOK continued support of APA. I look adversely affect business confidence. I am tremendously proud of the forward to leading our business with In the last decade Australia has been dedication, competence and hard work the same enthusiasm and focus that well served by the relatively light level that each of APA’s employees has has brought us this far, to a future of regulation and market interference contributed to our strong 2015 financial that promises to be even more exciting in transmission pipelines. It was this year result. It is these same qualities, than our past. business environment that has enabled combined with our robust balance the development of the East Coast Grid sheet, and a commitment to innovation and the range of services that APA and excellent execution that give me provides the market. Today, as we are confidence in APA’s future. about to enter the next expansive stage Our approach will not change. We of the gas market, it is critical that the will continue to invest in our existing Mick McCormack ability to invest in further enhancements infrastructure to provide tailored Managing Director of Australia’s pipeline system such as services to our customers. and Chief Executive Officer the Northern Territory Link are not crippled by misguided government policy and bureaucratic interference. 2006
APA completed construction APA completed construction and APA acquired the Murraylink DEC 2006 NOV 2006 and commissioning of commissioning of Kogan North (Mar 2006) and Directlink Acquisition of the Acquisition of Allgas Daandine (Jan 2007) and X41 (Mar 2006) and Tipton West (May 2007) electricity Victorian Transmission gas distribution network (Nov 2007) Power Stations. (Mar 2007) gas processing facilities. interconnectors. System (formerly GasNet). in Queensland.
APA Group | Annual Review and Sustainability Report 2015 7 ENERGY INFRASTRUCTURE
~ ~7,500KM 14,700 KM transmission gas interconnected pipelines owned and/or East Coast Grid operated by APA
Energy Infrastructure is at the core of APA, housing our key gas infrastructure assets including gas transmission pipelines, compression facilities and storage facilities. Our national and interconnected portfolio of assets enables APA to provide various infrastructure services to our customers, including transportation, storage, compression or metering.
Over the last 15 years, APA has we have also become skilled operators. take advantage of short term price extended its infrastructure footprint Now we own and/or operate around differentials across the gas market. so gas can be seamlessly transported $19 billion of assets when we include By listening to our customers, APA to the various markets where it is APA’s latest and largest acquisition, can now seamlessly manage their gas required from every major gas supply the Wallumbilla Gladstone Pipeline transportation requirements, providing source in Australia. And we continue (“WGP”, renamed by APA from the park and loan services, storage services to invest in our interconnected gas Queensland Curtis LNG Pipeline and bi-directional services across our infrastructure grids across the country post completion of the acquisition). connected gas grids. We can now offer that connects resources to markets additional services such as capacity and and markets to resources. In doing SOLUTIONS DELIVERY in-pipe trading that enables customers so, we are contributing to the energy APA has been busy working with our to more efficiently and effectively security of Australia’s economy and customers to provide more flexible manage their energy needs. assisting the domestic market to and value-add services across this adapt to the dynamic times that have extensive infrastructure portfolio. APA’s various teams across commercial, developed with the onset of east Pipelines worldwide, including Australia, engineering and operational disciplines coast LNG exports. were originally built to deliver gas from have always worked together to deliver one point to another. But APA has solutions to our customers’ needs. And We now own and/or operate rewritten the guidelines of tradition by now with the opening of the Integrated over 14,700 kilometres of gas developing an interconnected grid and Operations Centre (“IOC”) in April 2015, transmission pipelines as well as a flexible solutions. Our East Coast Grid APA expects that our coordinated substantial portfolio of energy-related has now become a 7,500 kilometre gas solutions approach will be further infrastructure assets. To achieve superhighway, with customers able enhanced, and our service delivery this sustainable growth, we listen to to take advantage of the many service even more responsive to changes in our customers and work with them, offerings along its routes. operations and gas markets. The IOC leveraging APA’s diversified assets currently services APA’s infrastructure and know-how to solve their logistical It is our technical and commercial assets in Queensland, New South Wales, challenges. Our strategy of expansion ‘smarts’ that APA applies to our assets the Northern Territory and the Pilbara and enhancement of our portfolio that transforms their functionality Pipeline System in Western Australia has remained consistent since we and capabilities from simple point to with further assets transitioning to listed in 2000, developing organic point pipelines to an interconnected the IOC during FY2016. By integrating growth opportunities surrounding gas grid. Our customers continually the service teams we aim to maximise our assets and prudent acquisitions. respond to the current dynamic energy commercial opportunities and minimise From 2006, when we acquired markets and associated demand and operational impact. the asset management business, supply movements, as well as seek to
2005 2004
2005-2001 FEB 2005 30 JUNE 2005 AUG 2004 Period of acquisition of minority Acquired the remaining 30% interest in MARKET CAP Goldfields Gas Pipeline interest interests in major APA pipelines the Carpentaria Gas Pipeline. $1.0B increased to 88.2%. consolidating our ownership SECURITY PRICE positions across Australia. $3.45
8 “We are very pleased that APA Group, as one of the most experienced owners and operators of pipeline infrastructure in Australia, has purchased the QCLNG Pipeline. The newly-named Wallumbilla Gladstone Pipeline is a critical piece of infrastructure connecting our upstream CSG wells to our LNG plant on Curtis Island. APA Group has been an important partner as we have started up and commissioned the world’s first integrated, large‑scale CSG‑to‑LNG project – partnering with us on key commercial arrangements; being a pragmatic and highly responsive counterparty; and a first-rate operator of an extensive pipeline network. APA Group has demonstrated that it is deeply invested in supporting the success of the QCLNG Project - this was evident even before we completed the pipeline sale and we look forward to deepening our relationship with APA Group even further over the next 20 years and beyond.”
TONY NUNAN Managing Director QGC
EAST COAST GRID The WGP transports gas to BG’s APA’S EAST COAST GRID Three years ago, APA created the Queensland Curtis LNG export facility East Coast Grid by interconnecting on Curtis Island, just off Gladstone, from the majority of our existing assets the Surat Basin, and is fully contracted in eastern Australia through the in the form of long term take-or‑pay acquisition of the South West gas transportation agreements. After Queensland Pipeline. This has allowed the first twenty years, the shippers our customers on the east coast of have two options to extend the Australia to move gas seamlessly contracts by a further ten years. between different markets and states, So APA has 20 years of guaranteed enabling them to manage their energy revenues and potentially up to forty, portfolios with a high degree of with the extensions clearly designed flexibility. This year, we added some for the shippers to take advantage of the technical life of the pipeline. MOUNT 500 kilometres to the East Coast Grid ISA as well as a gateway to the LNG export We will earn a return on capital spent market at Gladstone through the to ensure the pipeline operates for acquisition of the WGP. that additional 20 years. GLADSTONE The acquisition of the WGP is the This acquisition is consistent with the largest pipeline transaction in Australia. strategy that has created value for our But more impressive than the size investors and underpinned our growth of the transaction is the strategic for years. That is, it leverages our core WALLUMBILLA value it adds to our East Coast Grid, skills in gas infrastructure assets to MOOMBA BRISBANE adding a delivery point at Gladstone, deliver appropriate commercial returns. extending our strong customer base The existing contracts provide that with the addition of two international return, and the potential enhancements customers in BG Group and China that come from our ownership and National Offshore Oil Corporation and integration with our existing platform enhancing APA’s ability to capture give further commercial opportunities. SYDNEY further opportunities for the growing Following commissioning of the LNG export market as it connects pipeline in 2014, QGC Pty Limited, with the other two LNG transmission an Australian subsidiary of BG Group pipelines due to come online in FY2016. will continue to operate the WGP for These connections, together with the next 12 or so months after which other potential connections that we MELBOURNE APA has the option to take over the may develop in the future, provide operatorship (from June 2016). As we’re us with opportunities for additional first and foremost a pipeline operator, enhancements of the Wallumbilla we’re likely to do so when that time Gladstone Pipeline, be they for the arrives and we are comfortable that all foundation shippers or new shippers. the usual issues around commissioning have been settled.
2001 2000
AUG 2004 AUG 2004 FEB 2001 30 JUNE 2000 13 JUNE 2000 Goldfields Gas Pipeline interest Acquired Mondarra Gas Storage Acquired the remaining 15% interest MARKET CAP APA was listed on the increased to 88.2%. Facility, along with the Parmelia in the Roma Brisbane Pipeline. $0.5B Australian Stock Exchange. Gas Pipeline. SECURITY PRICE Foundation contract was $2.10 on the only 100% owned Moomba Sydney Pipeline.
APA Group | Annual Review and Sustainability Report 2015 9 ENERGY INFRASTRUCTURE
Trebling of VNI capacity in MORE CAPACITY additional compression capacity was The network of our pipelines is not also increased. All of these expansion just getting bigger in length and projects were underwritten by long reach, but we are also expanding the term agreements with our customers. capacity of our pipelines – where BENEFIT TO LOCAL COMMUNITIES 3 that capacity is required. During the years year, our Infrastructure Development As APA grows, we’re able to bring team completed an expansion of the an economic boost to the local connection between Victoria and New communities where our expansion South Wales (the Victoria-New South projects are taking place. We Wales Interconnect, “VNI”) that has understand that we are long term increased the asset’s capacity by 145 per members of the communities in which cent to nearly 120 terajoules per day. This our assets and operations exist and involved looping around 60 per cent of therefore where possible, we utilise the the pipeline as well as increasing capacity services and skills of those regional at Culcairn in southern New South Wales. communities. It is very pleasing to get feedback such as was reported in the BOTH DIRECTIONS APA has recently signed a fourth Euroa Gazette 17 December 2014 during Not only are our pipelines expanding in contract that will support 30 terajoules the VNI expansion project works: length and capacity, but we’re changing per day of further capacity expansion. On their flow direction capability as well completion of this project, the capacity Gas pipe workers bring economic which increases the flexibility of services of the VNI will have trebled in three years, boost – Euroa benefiting economically we can offer to customers. Today, the by responding to our customers’ needs from gas pipe construction majority of APA’s key pipelines have to transport more gas from southern gas Shoppers in Euroa will have noticed a bi-directional capabilities allowing resource basins into northern markets sea of flouro yellow work shirts when gas to flow in both directions rather with the benefit of APA’s flexible and they’ve gone to buy their bread or than simply point to point. We achieve seamless services. Also in Victoria, new café lattes. The town is in the grip of this with a combination of additional compression facilities were completed a mini economic boom thanks to the compression capacity as well as at Winchelsea on APA’s South West influx of hundreds of workers who are installation of flow redirection skids. Pipeline which connects to the Victorian stationed at the gas pipe site outside In addition to the extra compression Transmission System. Euroa. Almost 300 people are working capacity installed at Moomba and on a project to construct a gas pipeline Wallumbilla this year, both the South Major capital works were also which will run 119 kilometres from West Queensland Pipeline and the undertaken and completed at both Mangalore to Glenrowan. Moomba in South Australia and Berwyndale Wallumbilla Pipeline Wallumbilla in Queensland with the Euroa Hot Bread owner David Mawson underwent bi-directional transformation. commissioning of three Solar Mars said many local businesses had extended Currently works are underway on compressors at each location to their trading hours to accommodate the both the Roma Brisbane Pipeline and enhance the overall capacity of the workers. “It’s brought a lot of money Moomba Sydney Pipeline to convert to South West Queensland Pipeline in into the town, whether it’s the take-away bi-directional capability which are due the LNG ramp up. In Western Australia shops or the petrol stations because for completion early FY2016. on the Goldfields Gas Pipeline, they’re buying all their fuel locally.”
Ben Tibenszky, APA Project Engineer, with one Preparing to weld the new pipeline looping sections on the VNI of the flow redirection skids installed at Wallumbilla
10 WEST COAST GRID A grid is roughly defined as a network of horizontal and perpendicular lines and the Goldfields Gas Pipeline in Western Australia with all its expansions over the years in response to mining customer requirements has certainly seen it emerge as a key asset of APA’s West Coast Grid. Together with APA’s other assets and investments notably the Pilbara Pipeline System, LINKING NORTH TO EAST Telfer and Nifty Pipelines, the Parmelia Listening to customers and observing Gas Pipeline, Mid-West Pipeline and gas market needs, APA commenced the Mondarra Gas Storage Facility, a feasibility study into a pipeline Western Australia is becoming an connection between our Amadeus interconnected gas market. Gas Pipeline in the Northern Territory The latest adjunct to the Goldfields and the East Coast Grid in early 2014 Gas Pipeline is the 293 kilometre (“NT Link”). The study has been Eastern Goldfields Pipeline, APA’s latest ongoing during this financial year. greenfield project. In mid-2014, we APA has been short listed as one of were able to announce construction of four bidders to the Northern Territory the new pipeline on the back of two Government’s process, the North East gas transportation agreements signed Gas Interconnect (“NEGI”), which was with AngloGold Ashanti, who took a launched in late 2014 with final bids long term view about energy supply due in September 2015. Our feasibility and appreciated the reliability and work has gone into formulating our bid cost stability that gas offered. for this process. 293KM Once completed, APA will deliver gas The genesis of the NT Link concept was from north-west of Western Australia new pipeline under to address the supply dynamics in the to mines in the eastern Goldfields construction in eastern Australia gas market, given the Western Australia region via three of its interconnected development of the LNG projects around pipelines spanning 1,500 kilometres – Gladstone. By connecting the Northern the Goldfields Gas Pipeline, the Murrin Territory with the east coast, those Murrin Lateral and the Eastern Goldfields markets will effectively have additional Pipeline. Construction is expected to gas basins to source their gas from and, involve laying approximately 16,500 conversely, the gas fields will have new 18-metre lengths of carbon steel pipe. markets they can access. This is another The construction is well under way example of APA connecting more with completion prior to January 2016. resources with more markets.
Jo Davis, APA’s Health and Safety Advisor on the Eastern Goldfields Pipeline project
APA Group | Annual Review and Sustainability Report 2015 11 ASSET MANAGEMENT
349KM 541KM new distribution pipelines replaced pipelines
At APA, the diversity and depth of our skills and thinking sets us apart from our peers and therefore our expertise is sought after by asset owners. Under long term agreements, APA provides asset management and operational services to the majority of its energy investments and to a number of third parties.
Our main customers are Australian Gas the total new customer connection The North Harbour development Networks Limited (“AGN”, formerly potential is almost 140,000 homes and located in the corridor between Envestra Limited), Ethane Pipeline businesses in future years. APA works Brisbane and the Sunshine Coast Income Fund, Energy Infrastructure closely with customers, developers and includes a 2,200 residential lot housing Investments and GDI (EII) Pty Ltd government bodies to promote natural estate and a marina with associated (“GDI”). In August 2014, APA sold its gas as the preferred choice of energy, facilities, a neighbourhood shopping 33.05 per cent interest in AGN. APA thereby increasing the utilisation of our centre and lifestyle amenities. There are retained its operation and management customers’ networks. In FY2015, over 400 residential lots for the development agreements with AGN which run to 28,000 new connections were added to of apartments and townhouses 2027. Contracts with other customers existing networks. and a 170 hectare business park to provide operational, management development with a mix of industrial and/or corporate support services Two of the most recent growth project and commercial lots. range from 5 to 20 years. approvals include North Harbour near Caboolture Queensland and McLaren McLaren Vale, located 35 kilometres GROWING OUR CUSTOMERS’ Vale in South Australia. As capital cities south of Adelaide, is an important BUSINESSES become more crowded and expensive centre for the tourism, wine and food It has been a busy year for APA’s to live in, combined with improved production industries, that is very similar 550 Network employees and 950 transport links, high speed internet to Tanunda, also in South Australia, contractors. A number of growth technology and flexible work options, which APA connected to natural gas projects commenced or continued new growth corridors centred around during the year. APA has commenced during FY2015 have required new lifestyle, community and affordable activities to construct the six kilometre connections for homes and businesses housing are being developed, providing high pressure gas supply main to bring throughout eastern Australia. Currently, opportunities for APA to organically reticulated natural gas to McLaren grow its business. Vale, with an estimated 1,500 to 2,000 connections expected in future years.
North Harbour development, Queensland
12 “ On behalf of Australian Gas Networks, I would like to acknowledge APA for its excellent performance during the interruption to gas supplies in Port Pirie and Whyalla in April. The APA teams at Kidman Park and on site showed outstanding commitment and professionalism throughout the incident period and the efforts to keep the two hospitals supplied with compressed natural gas and LNG and to provide hot showers and food to the community are to be commended.”
28,535 BEN WILSON new connections Chief Executive Officer Australian Gas Networks
MAKING IMPORTANT CONNECTIONS RELIABLE SUPPLY Networks. With APA’s experience and During the financial year, APA also Maintaining a safe and reliable supply quick response, some gas was able completed connecting natural gas to for customers is one of our key to be preserved in the network to Adelaide’s new state of the art Royal operational objectives. APA is able to continue an emergency supply to both Adelaide Hospital, due to open in 2016. access and utilise all of its business cities’ hospitals. Furthermore, APA’s One of the design features is natural gas units and capabilities across Australia Asset Management team was able to supply connections from two different from transmission and network services, call on help from other APA teams locations on the gas network to mitigate LNG supply and vaporisation plants, to assist with managing the crisis. the risk of interruption to the supply of storage and compression capacity APA organised LNG supplies from gas which is an essential energy source and compliance and communication its Dandenong storage facility to be for the functioning of the hospital. specialists, which is particularly critical transported across the border by tanker during emergency response events. and injected into the network so that We have also commenced the pre‑work basic needs could be maintained for for providing connection facilities During the year, APA responded to the communities during the week for the Parklands Project, which will a major disruption of gas supply to long disruption. APA transmission be utilised as the Commonwealth the cities of Port Pirie and Whyalla in services also provided support to the Games Village during the Gold Coast South Australia caused by a rupture operator of the Moomba Adelaide 2018 Commonwealth Games. The on the Moomba Adelaide transmission Pipeline, assisting with repairing the redevelopment of the Parklands pipeline. APA operates and maintains ruptured section. As a fully integrated precinct in Southport is one of the the South Australian natural gas business, we are able to add-value largest urban renewal projects ever network, which is connected to this to the individual services we provide undertaken on the Gold Coast. Natural pipeline, on behalf of Australian Gas to customers. gas is being used to supply bulk hot water and cooking to apartments, pool heating and catering. Once the Commonwealth Games are finished, the site will form the key residential, commercial and retail sector of the Gold Coast Health and Knowledge Precinct.
NETWORK ASSETS OWNED AND/ OR OPERATED BY APA
NETWORK STATS Gas Consumers New Connections 28,535 Total Connections 1,317,323
Natural Gas Distribution Networks: New Pipelines 349km Replacement Pipelines 541km Total Pipelines Managed 28,413km Gas Transported 120PJ
Injecting LNG into the network during the Port Pirie and Whyalla gas disruption
APA Group | Annual Review and Sustainability Report 2015 13 ENERGY INVESTMENTS
The Coomandook compressor station on the SEA Gas Pipeline, South Australia
As Australia’s largest energy infrastructure ASSET business, we also have an interest in a number of complementary energy investments across Australia, in addition to the assets we own.
SEA GAS PIPELINE These investments are diverse in both HARNESSING EXPERTISE functionality and geographical spread During the financial year, Diamantina which reduces risks, yet aggregated so and Leichhardt Power Stations that we can apply APA’s considerable (collectively “DPS”) were completed and expertise in managing and operating commenced operations contributing energy assets. to approximately six months of the 2015 financial year. The greenfield In addition to ownership interests, joint venture project was announced ETHANE PIPELINE APA also holds a number of roles in in 2011 and construction commenced INCOME FUND respect of our investment businesses in early 2012. be it operational, management and/or corporate services. All As project partners, APA and investments are equity accounted, AGL Energy harnessed the expertise with the exception of APA’s interest of both companies to deliver a total in Ethane Pipeline Income Fund. energy solution for North West Queensland that will reliably supply the In August 2014, APA divested its energy needs of this mineral rich area EII2 33.05 per cent interest in Australian now and into the future. DPS consists Gas Networks Limited (“AGN”, of the 242 megawatt Diamantina formerly Envestra Limited) receiving combined cycle power station and the $784 million in consideration in 60 megawatt open cycle Leichhardt addition to $21 million we received power station. The site is adjacent to as a final dividend in July 2014. As a APA’s Carpentaria Gas Pipeline and result of the divestment, there was metering station which supplies gas no contribution from AGN to the to the power station precinct. FY2015 results, however APA retains GDI (EII) the operations and management In line with our strategy, APA will agreement on the AGN assets continue to grow our ownership until 2027. interests in energy infrastructure that complements our existing portfolio EBITDA from continuing investments and leverages our operational and increased by 20.9 per cent to $21.8 management capabilities. million (2014: $18.0 million), driven by increased contributions from GDI, EII2 DIAMANTINA POWER STATION and the SEA Gas Pipeline, in particular. JOINT VENTURE
ENERGY INFRASTRUCTURE INVESTMENTS
14 Diamantina Power Station commenced supplying gas-fired power to North west Queensland in FY2015
OWNERSHIP ASSET DETAILS PARTNERS APA SERVICES INTEREST
680 km gas pipeline from Iona and REST MAINTENANCE 50% Port Campbell in Victoria to Adelaide
OPERATIONAL 1,375 km ethane pipeline from MANAGEMENT LISTED ENTITY “EPX” 6.1% Moomba to Port Botany, Sydney CORPORATE SUPPORT
INFRASTRUCTURE 132 MW North Brown Hill wind CAPITAL GROUP CORPORATE 20.2 % farm in South Australia OSAKA GAS SUPPORT COMPANY LTD
OPERATIONAL MARUBENI 3,214 km Allgas gas distribution network MANAGEMENT CORPORATION 20% CORPORATE in Queensland with 96,045 connections DEUTSCHE AWM SUPPORT
Two gas-fired power stations in CORPORATE AGL ENERGY LTD 50% Mount Isa with a combined gas SUPPORT fired power generation of 302 MW
Gas-fired power generation 71 MW OPERATIONAL MARUBENI Gas processing facilities 41 TJ/day MANAGEMENT CORPORATION 19.9% CORPORATE Electricity transmission cables 244 km OSAKA GAS Three gas pipelines totaling 787 km SUPPORT
APA Group | Annual Review and Sustainability Report 2015 15 SUSTAINABILITY REPORT
INVESTORS
We will continue to be a reliable and attractive investment which delivers superior returns for securityholders by:
— Achieving reliable and sustainable earnings growth by focusing on long-term revenue and reduced costs. Each year APA — Maintaining a strong and robust balance sheet. — Identifying and evaluating additional attractive infrastructure style investments in related works hard to energy businesses. maintain our ranking as 2015 PERFORMANCE ACTIONS FOR 2016
Australia’s number — Total securityholder return of — Progress or complete current growth one energy 30 per cent for FY2015. capital projects underway. — Maintained investment grade credit ratings — Continue to evaluate and develop infrastructure (BBB/Baa2). additional revenue streams in related — Established a US$4.1 billion two year energy businesses. business. syndicated bridge facility in preparation — Maintain investment grade credit for purchase of the Wallumbilla Gladstone rating levels. Pipeline. Following debt and equity raising Whilst we own and/or operate as detailed below, the facility was no longer thousands of kilometres of required and therefore cancelled. pipelines and hundreds of — Successful debt and equity raising for the megawatts of power generation Wallumbilla Gladstone Pipeline acquisition via and other energy assets totalling $1.8 billion rights issue and US$3.7 billion in $19 billion, we believe how we the global debt markets. conduct our operations is key — $830 million new syndicated bank debt to being a sustainable business. facility established (July 2015), replacing existing $1.1 billion facility. For our five stakeholder groups — Delivered investors a 4.8 per cent increase – investors, customers, the in distributions. environment, communities — $343.1 million of organic growth and employees – we create capital expenditure. value and responsibly use — Market capitalisation increased by resources available to us, without 59.5 per cent in FY2015. compromising the needs of future generations. KEY SUSTAINABILITY RISKS RISK MANAGEMENT That’s what sustainability means to APA. — Debt and equity - Ensuring continued — APA’s investment decisions are made During the financial year, support from debt and equity markets and its balance sheet is utilised with a for ongoing capital requirements. Inability continuous focus on maintaining long term the ASX Corporate Governance to secure new debt facilities at appropriate investment grade credit ratings. Council introduced a new quantum and price may adversely affect — A diverse portfolio of long-life assets Corporate Governance APA’s operations and/or financial position underpinned by regulated and long term recommendation 7.4, regarding and performance. bilateral agreements, underscores APA’s the expectation by listed ability to service debt and sustain steady companies to report on the way equity distributions. in which they manage material — Maintain diversified funding base and access economic, environmental and to deep and liquid global debt capital and social sustainability risks. banking markets. — Financial results and other salient APA has an established and developments are communicated regularly an effective risk management to investors. framework, whereby risks are measured against both probability of occurrence and severity of consequence. These are then As at 30 June 2015, APA had over 79,000 securityholders holding 1.1 billion captured in a centralised risk securities, with the top 20 investors holding 61.1 per cent of securities. Currently, management application and are approximately 70 per cent of APA’s investors are based in Australian and/or reviewed by APA management on New Zealand. an ongoing basis, with oversight by APA’s Board Audit and APA issued a total of 278,556,562 new securities during December 2014 and Risk Management Committee. January 2015 as a result of a 1 for 3 accelerated renounceable entitlement offer to As part of our Sustainability existing securityholders, raising $1.8 billion to help fund the Wallumbilla Gladstone Report, we have detailed key Pipeline acquisition. The new securities were issued at $6.60 per security in sustainability risks and our risk December 2014 and January 2015, with solid support from APA’s existing management strategies. securityholders. Furthermore in March 2015, APA raised US$3.7 billion in the international debt capital markets, across three currencies and five tenors.
16 SUSTAINABILITY REPORT
Refer to pages CUSTOMERS 8-15 for a full report on APA’s operations report and how we We will deliver value to our customers have supported and responded to our and create responsive solutions to meet customers’ needs. their needs by:
— Providing market-leading flexible solutions to meet our customer’s changing requirements, including responding to critical events on assets we own and/or operate to enable customers to better manage their gas portfolios. — Delivering value to customers by efficiently and reliably utilising the capacity of APA’s infrastructure assets. — Working with customers to provide optimal investment and energy market solutions.
2015 PERFORMANCE ACTIONS FOR 2016
— New agreement negotiated to support further capacity expansion of the Victoria – New South — Continue to offer flexible transportation and Wales Interconnect, the fourth expansion in two years. The new agreement was signed in July storage services and innovative solutions 2015 with the cost of the expansion approximately $85 million, increasing capacity between to meet our customers’ requirements. Victoria and New South Wales by 30 TJ per day. — Maximise use of existing assets and — APA is in the final bidding stage of the Northern Territory Government’s competitive process profitably continue to expand APA’s asset to potentially construct the pipeline linking prospective gas reserves in the Northern Territory portfolio in order to meet customers needs. to east coast demand. During the year, we continued to progress our feasibility study on this — Commence and progress the further potential link which we commenced in early 2014. This work has significantly contributed to expansion of the Victoria – New South our bid in the government process. Wales Interconnect. — Ongoing work on compression and pipeline projects to provide bi-directional gas transportation — Complete construction of the 293 kilometre services on the East Coast Grid. This will enable APA to provide our customers with flexible services. Eastern Goldfields Pipeline (completion — Entered into a number of flexible agreements which incorporate multiple receipt and delivery expected December 2015). points on the East Coast Grid. — Complete construction of the new South — Continued to offer web-based capacity trading services to facilitate trades between sellers Metro gate station off the Parmelia Gas and buyers of capacity. Pipeline, enhancing gas security of supply — Commissioned the Diamantina Power Station Project in Mount Isa which secures the power for metropolitan Perth (completion supply needs of North West Queensland. expected December 2015). — Continued to extend and develop flexible gas storage services utilising the Mondarra Gas — Complete migration of APA’s gas Storage Facility. transmission pipeline assets to the — Signed two long term agreements with AngloGold Ashanti which have underwritten the Integrated Operations Centre (“IOC”), construction of the new 293 kilometre Eastern Goldfields Pipeline (executed June 2015). to holistically manage day to day operations. Construction is well advanced on the new pipeline with commissioning on track for prior to January 2016.
KEY SUSTAINABILITY RISKS RISK MANAGEMENT
Demand for gas – The volume of gas that is — Long-term agreements with strong counterparties underpin assets. transported by APA is dependent on end- — Flexible customer solutions. user demand. The relative price of gas and its — Complementary investments in gas storage and power generation and continued evaluation competitive position with other energy sources of emerging fuels such as investment in wind farms. (such as electricity, coals, fuel oil, renewable sources) may change demand levels for services on APA’s assets.
Supply of gas – Availability of competitively — Long term agreements with strong counterparties underpin assets. priced gas is essential for ongoing use of — Connect more gas resources with more gas markets such as: gas infrastructure assets. > East Coast Grid provides flexibility for customers to manage their gas portfolios. > Expansion of interconnect between Victoria and New South Wales. > Develop the business case for the Northern Territory Link. > Working with new / emerging gas producers to bring new gas supply to market.
Counterparty – If a counterparty is unable to — Creditworthiness test applied to new customers, and ongoing monitoring. meet its commitments to APA, there is risk — Appropriate customer guarantees in place. that future anticipated revenue would be reduced unless and until APA is able to secure an alternative customer.
Operations - APA and our asset management — APA operates assets in accordance with all relevant regulations and standards. customers are exposed to a number of — In-house operating, maintenance and engineering expertise. operational risks such as equipment failures or breakdowns, rupture of pipelines and technological failures.
Economic regulation – APA may be — Regulatory regime is well understood and encapsulated in national law. negatively impacted as a result of a change — The reset dates of APA’s price regulated assets are staggered, with on average one review each year. in regulatory settings. — Composition of asset portfolio is optimised to manage exposure to regulator settings.
APA Group | Annual Review and Sustainability Report 2015 17 SUSTAINABILITY REPORT
ENVIRONMENT
We will continue 2015 PERFORMANCE ACTIONS FOR 2016 to deliver an — Engaged with government to promote — Participate in policy discussions environmentally the role of gas in a carbon‑constrained and promote the role of gas as an economy, directly and through important contribution to reducing responsible, safe and industry associations. Australia’s emissions. essential service by: — Participated for the fifth time in the Carbon — Maintain carbon market expertise and Disclosure Project, a voluntary disclosure knowledge should energy markets shift to investors on carbon emissions, liability, to clean fuels such as wind, solar and gas. — Contributing to policy and responding to reduction activities, strategies and climate change initiatives to promote the use — Evaluate wind and solar generation management. APA’s overall score of 79D of gas as essential to a cleaner energy mix. opportunities now that there is greater ranked highest amongst its direct peers. certainty in the federal Renewable Energy — Including the environment in all investment — Continued to develop the wind and solar Target policy. and procurement decision-making, complying renewable energy projects at Emu Downs with our emissions reporting obligations, — Continue to maintain and operate assets in Wind Farm, subject to customer demand. and conserving and rehabilitating the natural accordance with environmental regulations. state of the land we disturb. — Applied effective environmental practices — Commence implementation of APA’s such as soil erosion control, revegetation — Evaluating complementary clean energy projects. Environmental Strategy and of disturbed land, ecological assessments Improvement Plan. — Meeting or exceeding the Australian Pipelines and environmental audits at operational and Gas Association (“APGA”) Code of and project sites, leading to zero Environmental Practice. regulatory breaches. — Completed a full review and audit of APA’s current Environmental Management System and performance resulting in the development and approval of the APA Environmental Strategy and Improvement Plan, to commence implementation in FY2016.
KEY SUSTAINABILITY RISKS RISK MANAGEMENT
Environmental risks - National, state and — Within the Health, Safety and Environment framework, APA has a strategic plan to ensure territory environmental laws and regulations environmental risks are identified and managed via appropriate controls. affect the operations of APA Group’s assets. — This strategy includes compliance with the necessary environmental regulations which apply to APA businesses and assets. — In-house operating and maintenance expertise.
Mandy McLeod, one of APA’s Environment Officers reviewing a site in Young, New South Wales
18 SUSTAINABILITY REPORT
12 242MW 79D initiatives APA Environmental combined-cycle Carbon Disclosure Strategy and gas‑fired power station Project ranking Improvement commissioned Plan developed
In APA’s view, gas-fired generation and renewable energy, predominately wind-powered generation and increasingly solar generation, are technologies that can meet significant emission reduction targets for Australia.
NATIONAL GREENHOUSE AND CLEAN ENERGY POLICY Its carbon intensity is approximately ENERGY REPORTING Carbon tax legislation was repealed 0.4 tonnes per megawatt hour, which is APA has a relatively small carbon effective from 1 July 2014 at which time less than half the carbon intensity of the footprint in the overall energy chain. APA ceased having a carbon liability. National Electricity Market. Now there APA’s emissions are mainly the result is greater certainty in the RET, subject of the combustion of natural gas in APA continues to support reducing to customer demand, APA will progress compressor stations and from fugitive carbon emissions as a responsible the development of the 130 megawatt emissions within our networks. In risk mitigation response to climate Badgingarra Wind Development Project financial year 2014, APA reported change. APA has long supported the adjacent to APA’s Emu Downs Wind scope 1 emissions of 311,421 tonnes introduction of a price on carbon and Farm, as well as the 20 megawatt Emu under National Greenhouse and certainty on carbon policy. However, Downs Solar Project, a small expansion Energy Reporting and on 31 October the lack of effective domestic and to the wind farm. Both projects are 2015, APA expects to report emissions international carbon policy has failed to contingent on entering into a long-term for this financial year broadly in line provide the required certainty to shift off-take agreement and meeting APA’s with this number. large-scale coal generation to more investment hurdles. carbon efficient gas-fired generation. CARBON DISCLOSURE PROJECT In the longer term, as international and APA’S ENVIRONMENTAL STRATEGY APA participated for the fifth time in the domestic carbon policy and markets AND IMPROVEMENT PLAN Carbon Disclosure Project, a voluntary mature, APA’s assets will play an At APA we aspire to provide a Zero disclosure to investors on carbon important role in meeting Australia’s Harm work environment which emissions, liability, reduction activities, long-term emission reduction targets extends to people that work directly strategies and management. APA’s as energy consumption shifts from and indirectly for APA as well as the score of 79 is ranked in the highest carbon intensive fuels, such as coal, communities and environment where band for disclosure (>70), which states to more carbon efficient fuels, such APA infrastructure operates. In FY2015, that “Senior management understand as natural gas. APA undertook an extensive review the business issues related to climate and audit of our current Environmental APA supports the Renewable Energy change and are building climate related Management Systems as part of Target (“RET”) and was pleased to see risks and opportunities into core the Health, Safety and Environment bipartisan support for the amended business”. APA’s performance score of Strategic improvement Plan with the Large-scale Renewable Energy Target D ranked consistently with the rest of objective to standardise and enhance (“LRET”) to 33,000 GWhs per annum the Utilities sector. APA could improve processes throughout our national by 2020, providing greater certainty its performance score by setting and operations. Our ultimate goal is the to investors in the energy market. APA achieving carbon emission reduction protection of the environment by advocates that any scheme beyond targets. However, because APA’s reducing the impact of our operations the amended LRET should include reduction activities rely on a strong to Zero Harm as we help to meet low‑emission technologies. carbon price, management will wait for Australia’s growing energy needs. further certainty on carbon legislation EXPANDING OUR LOW EMISSION The audit resulted in the development before committing resources to these GENERATION PORTFOLIO of the APA Environmental Strategy activities. APA’s overall score of 79D APA has interests in wind energy and and Improvement Plan consisting of ranked second in the Utilities sector low emission, state-of-the-art gas-fired 12 initiatives which will be rolled out and highest amongst its direct peers. generation. These investments provide over FY2016-FY2017. This environmental solid returns and help lower carbon framework supports APA’s Health, emissions in the Australian economy. Safety and Environment Management In FY2015, APA jointly commissioned System known as Safeguard. The with AGL Energy, the 242 megawatt initiatives include system reviews, Diamantina combined cycle gas power improved training and standard station which is a low emission and procedures, control measures, efficient gas generating asset. environmental monitoring and a structured audit program.
APA Group | Annual Review and Sustainability Report 2015 19 SUSTAINABILITY REPORT
COMMUNITY
We will positively 2015 PERFORMANCE ACTIONS FOR 2016 engage the — Continued APA’s Building Brighter — Maintain support of our community communities Futures community investment program investment program, Building Brighter supporting the Fred Hollows Foundation, Futures, by continuing our three headline within which we Exodus Foundation (for Darwin Literacy partnerships. Employee involvement will operate by: Centre), and Clontarf Foundation. also be continued to further support our — Introduced APA employee involvement partners’ objectives. in Clontarf Foundation and Fred Hollows — Continue financial support for community — Building long-term strategic community Foundation events. events of up to $10,000 per event by relationships to maintain support and matching employee fundraising for goodwill for APA’s activities. — Employees across APA participated in four community fundraising events including employee nominated causes. — Increasing employee connections with local Cancer Council (Australia’s Biggest — Continue to invest in causes that enhance communities through sponsorships, employee Morning Tea and Pink Ribbon Day), Black our relationships with key community volunteering and giving programs targeting Dog Institute and Movember with their stakeholders and strengthen our brand. vulnerable communities. fundraising efforts matched by APA, up to $10,000 per event.
KEY SUSTAINABILITY RISKS RISK MANAGEMENT
Community relations - Maintaining community — Remain in touch with community interests and issues. support and goodwill for APA’s activities. — APA actively engages with its communities through sponsorships. — Construct and operate infrastructure using industry recognised standards or better. — Education and communication around APA’s activities.
Encroachment - Urban encroachment — Landowner and community education and support of “Dial Before You Dig” service. around existing pipeline easements can — Pipeline easement monitoring and surveillance. increase the potential for damage. A change — Liaise with council and planning authorities to effectively manage potential in pipeline location class may also increase encroachment issues. compliance costs.
Students from the Clontarf Foundation Academy meet with APA Sydney employees
20 SUSTAINABILITY REPORT
4 $73K Employee raised by employees, supported community including APA fundraising events matched funding
In FY2015 APA built on its ‘Building Brighter Futures’ community investment program, successfully introducing and implementing employee involvement in two of the program’s headline partners’ events.
Building Brighter Futures supports In addition to direct financial support, Looking ahead, APA will support the initiatives to improve the future APA introduced employee involvement Clontarf Foundation to implement a prospects of vulnerable Australians. in two of our three headline partners’ program to assist Academy students to Established in late 2010, the program events in FY2015. APA employee be work-ready. The Clontarf Employment seeks to strengthen our company representatives participated in these Pathways program will allow selected and employment brand and connect events as part of their personal and APA colleagues the opportunity to the APA business and people to the career development and shared their provide mentoring and guidance to communities in which we live and work. experiences throughout APA with an Clontarf students during Clontarf article in APA’s employee magazine Employment Forums and help develop The program includes: as well as presenting at APA’s annual their exposure to, and experiences in, — Corporate partnerships with three Leadership Conference. The events the corporate environment. selected charities focused on attended were: CALENDAR OF EMPLOYEE EVENTS supporting disadvantaged young — Clontarf Foundation’s Broome Throughout the year, APA continued Indigenous Australians. Leadership Academy: A three-day to support and promote employee — An employee community event event where young Indigenous events across multiple company sites calendar, supporting up to four students are taught about leadership and matched the funds raised by employee-nominated causes, with as part of building their skills for employees, to a capped amount per capped matching of funds raised. future work prospects. event. The events were selected based HEADLINE PARTNERSHIPS — Fred Hollows Foundation’s See on an earlier survey of employees APA continues to support its three Australia: A five-day trek across seeking their nominations of the four charity partners under three-year outback areas to participate in eye most worthy causes. The selected commitments that were renewed or clinics and other health programs for events/causes being: the Indigenous Community. established in March 2014. — Pink Ribbon Day (Cancer Council) — Fred Hollows Foundation’s Barunga — Movember (Movember Foundation) The Clontarf Foundation works to Festival involvement: A three-day improve the education, discipline, life festival hosted by the Barunga — Black Dog Institute (Mental skills, self-esteem and employment Aboriginal community in Western Health research) prospects of young Aboriginal Australia for various remote — Australia’s Biggest Morning Tea men, through a network of football Aboriginal communities in the (Cancer Council) academies established in partnership Top End. The Foundation attended with local schools. APA has been to educate the community about SPONSORSHIP AND DONATIONS working with the Clontarf Foundation eye care and other basic health In addition to its Building Brighter since 2011. information. Futures program, APA continued to provide monetary and in-kind support The Exodus Foundation’s Literacy — Clontarf Foundation’s Jatbula to a number of groups or causes that Program is an accelerated literacy Experience: A six-day hike (in June) achieve one or more of the following: program to support disadvantaged through Nitmiluk National Park children with severely compromised providing the opportunity to engage — Strengthen APA’s reputation in the reading ability. APA has funded three with students from the Katherine local community children per annum to participate in Clontarf Academy who guided the — Enhance APA’s relationships with the Foundation’s Darwin program group on the 62 kilometre trail. key community stakeholders since 2011. Two APA sites also hosted Clontarf — Increase community awareness In Australia, the Fred Hollows Foundation Academy students during and understanding of APA Foundation provides eye treatment the year. Sydney and Perth employees — Provide positive networking and health programs for Indigenous engaged with the students to learn opportunities with community communities in remote Australia. APA more about how the Foundation helps stakeholders has been working with the Fred Hollows young Indigenous men. The two major sponsorships in FY2015 Foundation to deliver its Australian were for Taronga Zoo Foundation and program since 2014. the Australian Brandenburg Orchestra.
APA Group | Annual Review and Sustainability Report 2015 21 SUSTAINABILITY REPORT
EMPLOYEES
We will provide a 2015 PERFORMANCE ACTIONS FOR 2016 stimulating and — LTIFR 1 (employees and contractors) has — Target an LTIFR of less than 1 rewarding working shown continued improvement from 0.8 in (employees and contractors). environment that FY2014 to 0.64 in FY2015 and below our — Continue implementation of the HSE 2015 LTIFR target of <1.0. Strategic Improvement Plan initiatives. strives for Zero Harm — Second year of APA’s three year Health, — Commence a Safedrive+ and safe Safety and Environment (“HSE”) Strategic driving improvement program covering and ensures: Improvement Plan, including refreshing 12 key areas of activity. the Leading Zero Harm behavioural safety — An independent third party audit will — Commitment to a culture of Zero Harm by program and a new contractor safety be conducted during the year of our continually improving safety in the workplace. management program. HSE system. — Fit for purpose learning and development — Successful implementation of the — Roll-out the inclusive leadership program programs to attract, retain and company’s online safety management to leaders across the business. system Safeguard+ improving discipline develop employees. — Continue the expansion and deployment in investigating, reporting and — We encourage and foster diversity of of new technical, leadership and appropriately actioning HSE issues. thought and inclusion. professional development programs. — Continued sponsorship of health focused — Review and deploy career transition activities for employees including the to retirement program. Global Corporate Challenge in which 259 APA employees participated. — Roll-out an employee survey that measures engagement, alignment and agility. — Developed an inclusive leadership program for delivery to all leaders. — Develop new entry programs for graduates and apprentices. — Implemented an online recruitment system and other sourcing initiatives to dramatically improve time and quality of hiring.
KEY SUSTAINABILITY RISKS RISK MANAGEMENT
Safety – Failure to provide a safe workplace. — APA maintains a comprehensive workplace HSE Management system. It is predicated on the principles of hazard and risk identification, control measures and a robust assurance framework. — HSE training, education and awareness is a cornerstone of the HSE management system.
Employee capability, recruitment and — APA maintains a number of initiatives to ensure there is a pool of talent and internal engagement - Failure to develop, attract capability for now and in the future. and retain talented employees. — These include formal succession and talent management, a diversity and inclusion strategy, as well as technical, functional, business and leadership development. — The business has introduced a strong internal recruitment capability to ensure we identify and secure external resources as and when needed.
APA WORKFORCE GENDER PROFILE 2015
29% 71% 26% 74 % 17% 83% 4% 96% Percentage of Non-Executive Percentage of workforce Percentage of leadership Percentage of technical and Directors who are women who are women roles filled by women 2 trades roles filled by women
25% 75% 14% 86% 25% 75% 13% 87% Leadership roles filled by Other Executives/ Senior Other women (CEO and KMP) 2 General Managers Managers Managers
1. Lost Time Injury Frequency Rate (“LTIFR”). 2. Leadership roles are defined in accordance with the Workplace Gender Equality Agency (“WGEA”, Australia and New Zealand Standard Classification of Occupations) occupational categories and comprise all levels of management (i.e. general managers, key management personnel, manager roles) excluding team leader and supervisory roles. Figures above take into account the Board and Executive announcements 26 August 2015. APA’s 2014-15 public report to the WGEA is available at www.apa.com.au
22 SUSTAINABILITY REPORT
OUR PEOPLE Talented and skilled employees are Our annual succession and talent APA values inclusiveness and central to creating value for our review process continues to be a encourages a safe, high performance stakeholders and the more diverse successful means of identifying critical working culture, where the contributions the thinking and skills we apply to our role and capability requirements, as well of our people are harnessed and business, the more innovative we can be as providing a healthy talent pool. developed to achieve successful in creating value and return for them. To DIVERSITY AND INCLUSION outcomes for the business. We are this end, in FY2015 we developed and committed to building sustainable implemented an E-recruitment platform During FY2015 we developed programs organisational capability that enables through APA’s website, complementing aligned to our three year Diversity and continued growth and development this with a profile on the business Inclusion Strategy which was developed of our people and supports APA’s social media platform LinkedIn. As a in FY2014. These initiatives are strategic vision. result, both APA, as well as individual aligned to the strategic focus areas of line managers seeking new employees, improving diversity of thought, diversity Since listing 15 years ago, our workforce have benefited from a much more of gender and diversity of age at APA has grown exponentially from six people streamlined and efficient recruitment and will be rolled out from FY2016 to a team of over 1,600 skilled people process, greater visibility, reduced costs and beyond. The programs cover located across mainland Australia. and more targeted candidates for the a diverse range of topics, including Throughout FY2015, we continued to advertised positions. acknowledging unconscious bias challenge our organisation with regards and establishing inclusive practices; to effective and efficient organisational DEVELOPING POTENTIAL career transition and knowledge design and made structural and work We continue to focus on growing and transfer; women in leadership; and practice changes through people and developing our people, as we recognise new entry programs for graduates systems to enhance our capability. this is critical to our success. During and apprentices. FY2015, we supported the development ATTRACTING TALENT and training requirements of our The skilled job market that APA people through a range of compliance, operates in continues to be highly technical, leadership and professional competitive and we realise more than development programs totalling ever the importance of attracting and 7,613 attendances. retaining the very best people as our business continues to grow.
APA’s Kerryanne Mallitt, General Manager of East Coast Field Services Transmission meets with QGC on-site at the Wallumbilla Gladstone Pipeline APA’s latest acquisition
APA Group | Annual Review and Sustainability Report 2015 23 APA GROUP BOARD
1 2 3 4
5 6 7 8 9
The Board is accountable to Securityholders for the performance of APA. It endorses the strategic direction of the business, approves new projects within that strategy and monitors the management and performance of the business and the executive team. The Board operates in accordance with the APA Group Board Charter.
1 LEN BLEASEL AM 2 MICK McCORMACK 3 STEVE CRANE 4 JOHN FLETCHER
Chairman Chief Executive Officer Steven (Steve) joined John joined the Board and Managing Director the Board in 2011. in 2008 and has over Leonard (Len) was Michael (Mick) has been His background is in 35 years’ experience appointed Chairman in Chief Executive Officer investment banking and in the energy industry, 2007. He has had a long of APA since 1 July 2005 he has over 30 years’ including Chief Financial career in the energy and Managing Director experience in the financial Officer of AGL. He brings industry commencing since 1 July 2006. Mick services industry having a wide commercial his career with AGL in has over 30 years’ previously been Chief and financial practical 1958 working in a variety experience in the gas Executive Officer of ABN knowledge to the Board. of roles, culminating in infrastructure sector in AMRO Australia and BZW John was previously an the position of Managing Australia, and his career Australia. Steve also has AGL appointed Director Director and CEO from has encompassed all considerable experience of Australian Pipeline 1990 until his retirement aspects of the sector, as a non-executive Limited from 2000 to from management in including commercial Director of listed entities. 2005. John is Chairman 2001. Len was awarded development, design, Steve is a member of of the Remuneration an AM in the General construction, operation the Audit and Risk Committee and a Division of the Order of and management of Management Committee member of the Audit Australia for services to most of Australia’s natural and the Remuneration and Risk Management the Australian gas and gas pipelines and gas Committee. Committee. energy industries and distribution systems. the community.
5 MICHAEL FRASER 6 DEBBIE GOODIN 7 RUSSELL HIGGINS AO 8 PATRICIA MCKENZIE 9 ROBERT WRIGHT
Michael has more than Debra (Debbie) has Russell joined the Board Patricia joined the Robert joined the 30 years’ experience in considerable experience in 2004. He has extensive Board in 2011. She has Board in 2000. He has the Australian energy as a non-executive experience both locally considerable expertise over 30 years’ financial industry He has held director. Debbie is and internationally and experience in energy management experience, various executive currently a director of in the energy sector market regulation having held a number of positions at AGL ASX-listed companies and in economic and having been Chief Chief Financial Officer culminating in his role Senex Energy Limited, fiscal policy. He was Executive Officer of positions, including as Managing Director oOh!media Limited and Secretary and Chief Gas Market Company Finance Director of and Chief Executive Victorian government Executive Officer of the Limited and a former David Jones Limited. He Officer until February owned City West Water. Department of Industry, Director of Australian is currently Chairman 2015. Michael is a former Debbie also has extensive Science and Resources Energy Market Operator of APA Ethane Limited, Chairman of the Clean executive experience in from 1997 to 2002 Limited. Patricia also the responsible entity of Energy Council, Elgas operations and corporate and Chairman of the has extensive corporate Ethane Pipeline Income Limited and ActewAGL, development, including Australian Government’s legal experience and Fund. Robert is Chairman and a former Director with engineering and Energy Task Force from is a qualified solicitor. of the Audit and Risk of Queensland Gas professional services 2003 to 2004. Russell is Patricia is a member of Management Committee Company Limited. firms. Debbie is a member Chairman of the Health the Health Safety and and a member of the Michael is a member of the Audit and Risk Safety and Environment Environment Committee Health Safety and of the Remuneration Management Committee Committee and a and the Remuneration Environment Committee. Committee and the and the Health Safety and member of the Audit Committee. Retiring: 22 October 2015 Health Safety and Environment Committee. and Risk Management Environment Committee. Effective: 1 September 2015 Committee. Effective: 1 September 2015
24 SENIOR MANAGEMENT
1 2 3 4 5
6 7 8 9
APA is an internally managed and operated business overseen by an executive leadership team with extensive know-how and industry experience across all areas of operations. Our leadership team holds the business to account to ensure high standards are achieved.
1 ROSS GERSBACH 2 ROB WHEALS 3 JOHN FERGUSON 4 KEVIN LESTER 5 PETER FREDRICSON Chief Executive Strategy Group Executive Group Executive Group Executive Chief Financial Officer and Development Transmission Networks Infrastructure Development Responsible for Responsible for the Responsible for the Responsible for Responsible for all complementary commercial and management and engineering services and financial functions, businesses that enhance operational performance operation of APA’s the delivery of APA’s including accounting APA’s infrastructure of APA’s gas transmission minority owned gas infrastructure expansion and financial reporting, portfolio, including power and gas storage assets. distribution assets, projects, including financial compliance and generation and APA’s and Australian Gas asset management, governance, taxation, Energy Investments Networks assets. project development treasury, balance sheet as well as group and technical regulation management and capital strategy, regulatory of all pipeline and strategy, and insurance and government related assets. and risk. He is also affairs, environmental responsible for investor development and relations and information mergers and acquisitions. technology.
6 PETER WALLACE 7 ELISE MANNS 8 NEVENKA CODEVELLE 9 MARK KNAPMAN Group Executive Group Executive Company Secretary Company Secretary Human Resources Human Resources and General Counsel View full biographies Responsible for Responsible for Responsible for the Responsible for the of our people at managing the human managing the human company secretariat secretariat function, APA.COM.AU resources function, resources function, and general counsel corporate governance, which covers strategy which covers strategy functions, including legal, internal audit and activities relating and activities relating corporate governance and financial services to APA’s employees, to APA’s employees, and compliance, and compliance functions. including providing a including providing a legal advisory and support. Retiring: October 2015 safe work environment safe work environment for all employees. for all employees. Retiring: October 2015
APA Group | Annual Review and Sustainability Report 2015 25 FIVE YEAR SUMMARY
FINANCIAL PERFORMANCE (STATUTORY) 2015 2014 2013 6 2012 2011 Revenue $m 1,553.6 1,396.0 1,272.3 1,060.7 1,102.0 Revenue excluding pass-through 1 $m 1,119.2 992.5 919.5 758.0 720.3 EBITDA $m 1,269.5 747.3 763.6 525.8 492.1 Depreciation and amortisation expense $m (208.2) (156.2) (130.5) (110.4) (100.4) EBIT $m 1,061.3 591.1 633.2 415.4 391.8 Interest expense $m (324.2) (325.1) (290.9) (234.3) (247.1) Tax (expense)/benefit $m (177.2) 77.7 (49.9) (50.4) (35.9) Non-controlling interests $m (1.0) (1.0) 2.8 — (0.3) Profit after tax and non-controlling interests including significant items $m 559.9 343.7 295.1 130.7 108.5 Significant items — after income tax $m 356.0 144.1 120.0 (9.7) (0.4) Profit after tax and minorities, excluding significant items $m 203.9 199.6 175.1 140.3 108.9
FINANCIAL POSITION Total assets $m 14,652.9 7,972.5 7,698.9 5,496.1 5,427.6 Total drawn debt 2 $m 8,642.8 4,789.4 4,412.0 3,223.6 3,239.9 Total equity $m 4,382.7 2,496.5 2,513.9 1,614.0 1,667.8
CASH FLOW AND CAPITAL EXPENDITURE Operating cash flow 3 $m 562.2 431.5 374.4 335.6 290.0 Capital expenditure $m 2,814.6 446.8 397.4 249.1 173.4 Investments and acquisitions $m 17.4 — 330.8 46.4 342.7
KEY FINANCIAL RATIOS Earnings per security 4 cents 56.3 39.7 38.2 20.4 19.7 Operating cash flow per security 4 cents 56.5 49.8 48.5 52.5 52.6 Distribution per security cents 38.0 36.3 35.5 35.0 34.4 Gearing (net debt to net debt plus equity) % 63.4 64.2 62.8 65.0 66.2 Interest cover ratio times 2.6 2.3 2.3 2.5 2.0 Weighted average number of securities 4 m 995.2 866.0 772.3 639.7 551.2
EBITDA BY SEGMENT (EXCLUDING SIGNIFICANT ITEMS) EBITDA (Continuing Business) Energy Infrastructure East Coast Grid: Queensland $m 340.1 234.5 180.7 91.0 82.0 New South Wales $m 120.8 115.6 120.2 122.8 111.8 Victoria $m 130.2 127.6 136.9 138.3 128.8 South Australia $m 1.9 2.4 2.4 2.1 2.1 Western Australia $m 212.6 189.0 149.4 133.9 108.1 Northern Territory $m 18.0 15.2 13.5 10.6 5.6 Asset Management $m 49.5 67.6 51.6 35.6 42.5 Energy Investments $m 21.8 18.0 15.6 9.6 3.2 Divested businesses 5 $m 1.0 50.1 56.2 55.2 64.3
1. Pass-through revenue is revenue on which no margin is earned. Pass-through revenue arises in the asset management operations in respect of costs incurred in, and passed on to Australian Gas Networks Limited (“AGN”, formerly Envestra Limited) and GDI in respect of, the operation of the AGN and GDI assets respectively. 2. APA’s liability to repay debt at relevant due dates of the drawn facilities. This amount represents current and non-current borrowings as per balance sheet and is adjusted for deferred borrowing costs, the effect of unwinding of discount, unrealised foreign exchange differences reported in equity and deducting other financial liabilities that are reported as part of borrowings in the balance sheet. 3. Operating cash flow = net cash from operations after interest and tax payments. 4. Between 23 December 2014 and 28 January 2015, APA issued a total of 278,556,562 new ordinary securities resulting in total securities on issue as at 30 June 2015 of 1,114,307,369. The issue was offered at $6.60 per security, a discount to APA’s closing market price of $7.67 per security on 9 December 2014, the last trading day before the record date of the entitlement offer of 15 December 2014. The weighted average number of securities for the current and prior period (FY2014) has been adjusted in accordance with the accounting principles of AASB 133: ‘Earnings per Share’, for the discounted rights issue. 5. Australian Gas Networks Limited sold in August 2014, Moomba Adelaide Pipeline System sold in FY2013, APA Gas Network Queensland (Allgas) was sold into GDI (EII) Pty Ltd in FY2012, with APA retaining a 20 per cent interest in GDI (EII) Pty Ltd and operates the assets under a long term asset management agreement. 6. The balances for June 2013 have been restated for the effect of applying AASB: 119 ‘Employee Benefits’.
26 INVESTOR INFORMATION ANNUAL ONLINE MEETING INTERACTIVE 10:30AM, THURSDAY REPORTS 22 OCTOBER 2015 ANGEL PLACE, APA.COM.AU SYDNEY NSW
CALENDAR OF EVENTS Final distribution FY2015 record date 30 June 2015 Final distribution FY2015 payment date 16 September 2015 Annual meeting 22 October 2015 Interim result announcement 24 February 2016 1 Interim distribution FY2016 record date 31 December 2015 1 Interim distribution FY2016 payment date 16 March 2016 1
1. Subject to change
ANNUAL MEETING DETAILS APA GROUP RESPONSIBLE ENTITY SECURITYHOLDER DETAILS Date: Thursday, 22 October 2015 AND REGISTERED OFFICE It is important that Securityholders Venue: City Recital Hall, Australian Pipeline Limited notify the APA Group registry Angel Place, Sydney NSW ACN 091 344 704 immediately if there is a change to Time: 10.30am Level 19, 580 George Street, their address or banking arrangements. Registration commences Sydney NSW 2000 Securityholders with enquiries should at 10.00am also contact the APA Group registry. PO Box R41, ASX LISTING Royal Exchange NSW 1225 An APA Group security comprises a Telephone: +61 2 9693 0000 DISTRIBUTION PAYMENTS unit in Australian Pipeline Trust and a Facsimile: +61 2 9693 0093 Distributions will be paid semi‑annually in unit in APT Investment Trust. These Website: apa.com.au March and September. Securityholders units are stapled together to form will receive annual tax statements with a stapled security which is listed on the final distribution in September. APA GROUP REGISTRY the ASX (ASX Code: APA). Australian Payment to Securityholders residing in Link Market Services Limited Pipeline Limited is the Responsible Australia and New Zealand will be made Level 12, 680 George Street, Entity of those trusts. only by direct credit into an Australian Sydney NSW 2000 or New Zealand bank account. Locked Bag A14, Securityholders with enquires should Sydney South NSW 1235 contact the APA Group registry. Telephone: +61 1800 992 312 Facsimile: +61 2 9287 0303 Email: apagroup@ linkmarketservices.com.au Website: linkmarketservices.com.au
ONLINE INTERACTIVE REPORTS ONLINE INFORMATION ELECTRONIC COMMUNICATION APA Group’s 2015 Annual Report, Further information on APA is available Securityholders can elect to receive Annual Review and Sustainability at apa.com.au, including: communication from APA electronically Report are available in an easy to view — Results, market releases and news by registering their email address with interactive format at apa.com.au. — Asset and business information the APA Group registry. Electing to receive annual reports electronically — Corporate responsibility and will reduce the adverse impact we have sustainability reporting on the environment. — Securityholder information such as the current APA security price, distribution and tax information.
DISCLAIMER: APA Group comprises two registered investment schemes, Australian Pipeline Trust (ARSN 091 678 778) and APT Investment Trust (ARSN 115 585 441), the securities of which are stapled together. Australian Pipeline Limited (ACN 091 344 704) is the responsible entity of Australian Pipeline Trust and APT Investment Trust. Please note that Australian Pipeline Limited is not licensed to provide financial product advice in relation to securities in APA Group. This publication does not constitute financial product advice and has been prepared without taking into account your objectives, financial situation or particular needs. Before relying on any statements contained in this publication, including forecasts and projections, you should consider the appropriateness of the information, having regard to your own objectives, financial situations and needs and consult an investment adviser if necessary. Whilst due care and attention have been used in preparing this publication, certain forward looking statements are made in this publication which are not based on historical fact and necessarily involve assumptions as to future events and analysis, which may or may not be correct. These forward looking statements should not be relied upon as an indication or guarantee of future performance.
APA Group | Annual Review and Sustainability Report 2015 27
OUR FOOTPRINT AND KEY 2015 ACTIVITIES
NT LINK
Continued the feasibility study committed to in FY2014. APA is 1 of 4 shortlisted bidders by the Northern ~$19B ~14,700KM Territory Government. of energy infrastructure transmission gas pipelines owned and/or operated owned and/or £ READ MORE P11 across Australia operated by APA
DARWIN
23
GOLDFIELDS GAS PIPELINE EXPANSION 12 Commenced in 2012, the final phase in this project was completed during the MOUNT ISA first half of FY2015 with 23 commencement of operations 13 23 at the new dual unit Turee Creek compressor. Pipeline capacity has increased a total 26 of 28% with the expansion 2 GLADSTONE works undertaken on behalf of mining operations in the Pilbara. 14 5
4 3 23
MOOMBA WALLUMBILLA BRISBANE 17 15 23 1 21 EASTERN GOLDFIELDS 23 EXPANSION 19 6 18 Commenced construction of 16 the new 293 km transmission 20 24 pipeline and associated delivery PERTH 8 and meter stations. Gas will be 25 7 transported 1,500 km along 3 APA interconnected pipelines. Commencement date for services SYDNEY is 1 January 2016. MOOMBA COMPRESSION 23
£ READ MORE P11 3 new compressors installed to 22 provide a major capacity uplift ADELAIDE 9 11 on the South West Queensland 10 Pipeline ahead of the Gladstone LNG project start-ups.
MELBOURNE VICTORIAN NORTHERN INTERCONNECT (VNI) EXPANSION
APA Group assets and investments Enhanced capacity by looping 162 km of the VNI. Under construction Potential pipeline link A fourth multi-service agreement was announced in Assets operated by APA (not owned) July 2015 which will require further expansion of the VNI. Other pipelines £ READ MORE P10
28
NETWORK OPERATIONS 28,535 new gas connections added.
DIAMANTINA AND LEICHHARDT BERWYNDALE WALLUMBILLA 541 kms of network mains replaced. POWER STATIONS PIPELINE
Completed construction of both Completed bi-directional power stations which are now capability. 349 kms fully operational. of gas pipeline added to WALLUMBILLA COMPRESSION distribution networks. £ READ MORE P14 3 new compressors added. £ READ MORE P12 WALLUMBILLA GLADSTONE SOUTH WEST QUEENSLAND PIPELINE PIPELINE ENERGY INFRASTRUCTURE Queensland $6 billion acquisition completed and Completed bi-directional contributing EBITDA. 1. Roma Brisbane Pipeline capability. 2. Carpentaria Gas Pipeline DARWIN Expansion projects support the 3. Berwyndale Wallumbilla Pipeline £ READ MORE P9 bourgeoning LNG market. 4. South West Queensland Pipeline 5. Wallumbilla Gladstone Pipeline 23 £ READ MORE P10 New South Wales 6. Moomba Sydney Pipeline 7. Central West Pipeline 8. Central Ranges Pipeline Victoria 9. Victorian Transmission System 12 10. Dandenong LNG facility South Australia MOUNT 11. SESA Pipeline ISA Northern Territory 23 ROMA BRISBANE PIPELINE 12. Amadeus Gas Pipeline 13 23 Bi-directional capability due Western Australia for completion 1Q FY2016. 13. Pilbara Pipeline System 26 14. Goldfields Gas Pipeline (88.2%) 2 GLADSTONE 15. Eastern Goldfields Pipeline INTEGRATED OPERATIONS (under construction) 16. Kalgoorlie Kambalda Pipeline 14 5 CENTRE (IOC) 17. Mid West Pipeline (50%) 4 3 23 Opened the national 18. Parmelia Gas Pipeline IOC, centralising APA’s 19. Mondarra Gas Storage Facility 20. Emu Downs Wind Farm MOOMBA WALLUMBILLA BRISBANE commercial, technical and 17 15 23 1 operational resources. 21 ENERGY INVESTMENTS 23 21. GDI (EII) Pty Ltd (20%) Allgas 19 MOOMBA SYDNEY PIPELINE Gas distribution network in 6 Queensland 18 Bi-directional capability due 16 22. SEA Gas Pipeline (50%) for completion 1Q FY2016 and 20 23. Energy Infrastructure 24 8 in-pipe storage services will PERTH Investments (19.9%) 25 7 provide flexibility to customers. Gas pipelines, electricity transmission, gas-fired power SYDNEY stations and gas processing plants 24. Ethane Pipeline Income Fund (6.1%) 23 25. EII2 (20.2%) North Brown Hill MOOMBA SYDNEY PIPELINE SOUTHERN LATERAL 22 Wind Farm ADELAIDE 9 26. Diamantina and Leichhardt Power Completed installation of a third compressor 11 10 at Culcairn to increase capacity. Stations (50%) ASSET MANAGEMENT VICTORIAN TRANSMISSION SYSTEM Commercial and/or operational MELBOURNE services to: Various capex projects as prescribed — Australian Gas Networks by access arrangements. (formerly Envestra) Constructed a new compressor station — GDI (EII) – Allgas (20%) at Winchelsea on APA’s South West Pipeline. — Energy Infrastructure Investments (19.9%) — Ethane Pipeline Income Fund (6.1%) — SEA Gas Pipeline (50%) — EII2 (20.2%) — other third parties
APA Group | Annual Review and Sustainability Report 2015 29 APA.COM.AU
30