ANNUAL REPORT 2021 APA GROUP ANNUAL REPORT 2021 CONTENTS 02 Chairman’s Report 04 Managing Director’s Report 06 APA Group Board 07 APA Group Executive Leadership 08 2021 Summary AUSTRALIAN PIPELINE TRUST (ARSN 091 678 778) 10 Directors’ Report 40 Remuneration Report 56 Consolidated Financial Statements APT INVESTMENT TRUST (ARSN 115 585 441) 119 Directors’ Report 123 Consolidated Financial Statements 143 Additional Information 144 Five Year Summary 145 Investor Information We aspire to be world class in everything we do. We are APA: Always Powering Ahead. CHAIRMAN’S REPORT CHAIRMAN’S APA GROUP ANNUAL REPORT 2021 01 MANAGING DIRECTOR’S REPORT DIRECTOR’S MANAGING BOARD & EXECUTIVES & BOARD SUMMARY OUR TRUST PIPELINE AUSTRALIAN VISION To be world class in energy Cover image: Julie Mackenzie has a background in engineering solutions REPORT DIRECTORS’ and works at APA as a Project Manager, in our Western Australian Infrastructure Development Division. Julie has worked at APA for close to ten years and says she is most proud of the gender, age and cultural diversity within her own REPORT REMUNERATION team and across APA. OUR PURPOSE STATEMENTS FINANCIAL To strengthen communities through responsible TRUST INVESTMENT APT energy DIRECTORS’ REPORT DIRECTORS’ FINANCIAL STATEMENTS FINANCIAL This page: Badgingarra Wind OTHER and Solar farms in WA, photo taken by employee S Robinson. 02 APA GROUP ANNUAL REPORT 2021 CHAIRMAN’S REPORT We aspire to be world class in everything we do. Our success over 21-years has been under- pinned by our ability to be nimble in our approach to the ever-changing needs of our customers, Securityholders and stakeholders. And as we look ahead, we will continue to rapidly adapt and respond to changes in markets and technology. Michael Fraser Chairman The challenges of the ongoing global Strategy As the energy transition accelerates, pandemic have continued to both test The continued growth and sustainable APA is well placed to diversify and deploy and prove APA’s resilience in FY21. development of APA is a core area of decades of knowledge and capability to play a leading role in developing the low The solid results we have once again focus for the Board. Consistent with our emissions technologies of tomorrow, at delivered in a challenging environment, refreshed strategy, we are determined to scale, and to support a net zero future. are testament to the hard work and capture opportunities presented by the energy transition, continuing to invest commitment of APA’s leadership team Our success over 21-years has always in gas, electricity and renewable energy and approximately 2,000 people, who been underpinned by our ability to assets while helping to unlock the energy strive every day to deliver responsible be nimble in our approach to the solutions of tomorrow. This is consistent energy solutions for communities ever-changing needs of our customers, with our vision to be world-class in across Australia. Securityholders and stakeholders. energy solutions. And as we look ahead, we will continue FY21 Results We operate in a dynamic environment to rapidly adapt and respond to changes Our performance for the period and and at a time of enormous change as in markets and technology – and we will confidence in APA’s long-term growth coal-fired power generation is retired, be innovative in our approach. outlook, enabled the Board to declare renewables penetration increases, and a final distribution of 27 cents, taking the Our microgrid project in Western the energy grid rebalances with natural FY21 distribution to 51 cents per security. Australian, is a good example. Once gas forecast to continue playing a critical complete, our hybrid energy microgrid role in the energy transition. This represents a two per cent increase at the Gruyere Gold Mine in Western on FY20 and a continuation of long term Indeed, a series of events in the national Australia will reduce the overall carbon growth in distributions to Securityholders. energy market in the second half of intensity of the power supply to the We have a track record of value creation this year, including a coal plant outage mine by about 10 per cent, thanks to and our objective is to deliver strong in Queensland, flooding at Yallourn the introduction of complementary distributions while maintaining an in Victoria impacting coal powered solar generation and battery storage, appropriate level of funding for growth generation and technical issues that alongside the mine’s reliable gas and our investment grade credit rating. impacted production at the Longford power supply. gas plant in Victoria, along with a cold In this context the Board has revised This is a first for APA but demand for snap, underscored the continued its distribution policy to target a payout this kind of innovative energy solution and critical role of natural gas, and ratio of between 60-70 per cent of will grow as technology continues to APA’s gas infrastructure, in rapidly and Free Cash Flow from FY22. mature and develop. We are ensuring flexibly responding to changing energy we have the skills, capabilities and market dynamics. experience to respond. CHAIRMAN’S REPORT CHAIRMAN’S CHAIRMAN’S REPORT CHAIRMAN’S APA GROUP ANNUAL REPORT 2021 03 MANAGING DIRECTOR’S REPORT DIRECTOR’S MANAGING BOARD & EXECUTIVES & BOARD SUMMARY AUSTRALIAN PIPELINE TRUST PIPELINE AUSTRALIAN Assets owned and/or Distribution operated by APA per security up 2.0% 21+BN 51.0 REPORT DIRECTORS’ Net zero Annual Meeting FY22 outlook While the global pathway to net zero The outbreak of the Delta strain of Turning now to APA’s FY22 outlook. REPORT REMUNERATION is uncertain, APA understands the COVID-19 in Sydney and in other parts of Despite the ongoing challenges of the challenges and opportunities that climate Australia looks set to significantly impact pandemic, with our newly refreshed change presents both for our business our original plans to hold this year’s strategy now in place, the Board is and the world, and the importance of Annual Meeting in a hybrid format, which confident in the strong financial and a lower-carbon future. would have allowed Securityholders to operational position of APA. attend virtually or in person. In FY21, we announced our ambition Rob and the APA team are now very STATEMENTS FINANCIAL for net zero operations emissions by Accordingly, in the interests of having much in execution mode, supported 2050 and we continue to invest in new planning certainty and to ensure by a strong balance sheet and the capability to support sustainability and the health and safety or our people, right capabilities to ensure APA climate change risk management. Securityholders and guests, the Board achieves its vision to be world class has resolved that we will again hold a in energy solutions. We published our first Climate Change fully virtual meeting for FY21. Resilience Report, with a comprehensive Reflecting that confidence, total analysis of our current asset portfolio With the vaccination program now distributions for FY22 are expected to TRUST INVESTMENT APT under three divergent climate scenarios gathering pace, we very much look be 53 cps, 3.9% higher than FY21. to 2050, including a 1.5C pathway. forward to returning to a more ‘normal’ On behalf of the Board, thank you to our We also developed a Climate Change format in 2022 and appreciate Securityholders, customers, communities Management Framework and established the understanding and support of and employees for their ongoing support an enterprise-wide Net Zero & Climate Securityholders. of your business and our commitment Transformation Program to evaluate to strengthening communities through REPORT DIRECTORS’ and plan our pathway towards our responsible energy. net zero goal. In the year ahead, we will publish transparent, interim targets that will help guide our way forward towards our net zero ambition. STATEMENTS FINANCIAL Michael Fraser Chairman OTHER 04 APA GROUP ANNUAL REPORT 2021 MANAGING DIRECTOR’S REPORT We are APA: Always Powering Ahead. As we mark our milestone twenty-first birthday, we celebrate the successes that have made APA what it is today and look to the future with confidence in our people, our capability and our strategy to keep APA Always Powering Ahead. Rob Wheals Chief Executive Officer and Managing Director Our strategy The ongoing response to the COVID-19 Net profit after tax, at $3.7 million June 13 this year marked 21-years since pandemic, which has included (FY20: $317.1 million), was impacted our business was formed and listed on lockdowns, border closures and health by significant items including the the Australian Securities Exchange (ASX). restrictions that have been necessary to $249.3 million non-cash Orbost respond to outbreaks of the virus, has impairment charge we disclosed at the We marked this milestone with our of course continued to challenge our half year and costs associated with our refreshed corporate strategy and a people, our business and the nation. debt refinancing activities that occurred refresh of our branding, bringing to in March 2021. The Orbost impairment I am enormously proud of how our life the APA initials (“Always Powering charge reflected the increased capital people have continued to adapt and Ahead”) in a new way that reflects our expenditure and reassessment of the respond to the often rapidly changing people, our purpose and our vision – plant’s future cash flows following environments in which we work, and it demonstrates our collective ambition commissioning work during the year. to be impactful in everything we do. thank them for their commitment and resilience through it all. As we advised Securityholders at our Our refreshed strategy is strongly aligned Investor Day in May, consistent with our We are actively encouraging all APA staff to our purpose and vision and will peers, we will be limiting our earnings to get vaccinated as soon as they can, and better enable APA to capture the vast guidance only to distributions going we continue to offer support and flexibility opportunities ahead to grow our business, forward, in part owing to the challenges to our employees so we can help do our as the energy transition accelerates.