Australian Pipeline Ltd ACN 091 344 704 | Australian Pipeline Trust ARSN 091 678 778 | APT Investment Trust ARSN 115 585 441 Level 25, 580 George Street Sydney NSW 2000 | PO Box R41 Royal Exchange NSW 1225 Phone +61 2 9693 0000 | Fax +61 2 9693 0093 APA Group | apa.com.au 21 September 2018 ASX ANNOUNCEMENT APA Group (ASX: APA) (also for release to APT Pipelines Limited (ASX: AQH)) ANNUAL REPORT AND SUSTAINABILITY REPORT The combined Annual Report and Sustainability Report 2018 is attached for release to the market. Nevenka Codevelle Company Secretary Australian Pipeline Limited For further information please contact: Investor enquiries: Media enquiries: Jennifer Blake Louise Watson Telephone: +61 2 9693 0097 Telephone: +61 2 8011 0591 Mob: +61 455 071 006 Mob: +61 419 185 674 Email: [email protected] Email: [email protected] About APA Group (APA) APA is a leading Australian energy infrastructure business, owning and/or operating in excess of $20 billion of energy infrastructure assets. Its gas transmission pipelines span every state and territory on mainland Australia, delivering approximately half of the nation’s gas usage. APA has direct management and operational control over its assets and the majority of its investments. APA also holds ownership interests in a number of energy infrastructure enterprises including SEA Gas Pipeline, SEA Gas (Mortlake) Partnership, Energy Infrastructure Investments and GDI Allgas Gas Networks. APT Pipelines Limited is a wholly owned subsidiary of Australian Pipeline Trust and is the borrowing entity of APA Group. For more information visit APA’s website, apa.com.au For personal use only energy. connected. For personal use only apa group annual report. 2018 APA GROUP — ANNUAL REPORT 2018 Our Vision Energy affords us the quality of life we have come to expect in Australia. Affordable, reliable and sustainable energy is a basic expectation of Australians, both consumers and businesses. We live in a country with bountiful energy resources, and yet in recent times, we’ve incurred rising energy bills and concerns about having sufficient energy supply to meet demand. As a leading energy infrastructure business, APA is committed to playing its part within the broader energy sector to work towards solving Australia’s energy trilemma. A collaborative and innovative approach combining the commitments and skills of the whole energy supply chain and governments is what is required. For personal use only As we work towards our vision of connecting Australia to its energy future, we will play our part in ensuring that energy is affordable, reliable and sustainable for us all. Construction of the Reedy Creek Wallumbilla Pipeline in Queensland, commissioned in May 2018 APA GROUP — ANNUAL REPORT 2018 — 01 FY2018 IN REVIEW 02 Chairman’s Report 04 Managing Director’s Report 06 APA Leadership 08 Highlights AUSTRALIAN PIPELINE TRUST 10 Directors’ Report Contents 40 Remuneration Report 50 Consolidated Financial Statements APT INVESTMENT TRUST 101 Directors’ Report 106 Consolidated Financial Statements 125 Additional information 126 Five year summary 127 Investor information S01 Sustainability Report Our Strategy MAINTAIN APA’S FINANCIAL STRENGTH GROWTH FOCUS TO ENHANCE OUR PORTFOLIO OF: gas transmission pipelines power generation: gas-fired and renewables mid-stream energy infrastructure assets, including gas storage and gas processing For personal use only CONTINUE TO STRENGTHEN ASSET MANAGEMENT, DEVELOPMENT AND OPERATIONAL CAPABILITIES 02 — APA GROUP — ANNUAL REPORT 2018 chairman’s report. APA’s vision is to connect Australia to its energy future. That future has rapidly evolved particularly in recent years, with influences from both domestic circumstances such as our dynamic energy markets and government policy, and globally with demand for Australia’s energy resources and calls for action on climate change. APA plays a key role in enabling Australian consumers and businesses to have access to affordable, reliable and sustainable energy. During the 2018 financial year, we stepped up our commitment to this role, working with industry and our customers and investing over $700 million in new organic growth projects that will contribute to providing a solution to Australia’s energy trilemma. In my first year as your Chairman, I am delighted to share some highlights about the progress APA has made in delivering on its strategy this past financial year. Since its inception in 2000, APA has gone from strength to strength and our disciplined investment approach has delivered a portfolio of assets that we own and/or operate of over $20 billion. APA’s vision to connect Australia to its energy future is being realised as we progress our strategic growth trajectory and continue to deliver value for our Securityholders. Financial results In FY2018, APA has presented the market with a solid set of financial results. Revenue has increased by 2.8 per cent to $1,941.4 million (1). Off the back of the growth that we continue to deliver, earnings before interest, tax, depreciation and amortisation (EBITDA) have increased by 3.3 per cent to $1,518.5 million and net profit after tax has increased by 11.8 per cent to $264.8 million. The very nature of APA’s business enables predictable results for our Securityholders that are largely unaffected by market conditions. This is achieved through the longevity of our contracts to supply energy and services to our customers. These contracts, in turn, support the ongoing investment in our infrastructure. Over the last few years, the Australian market has been challenged by fluctuating commodity prices. We are conscious that the relative price of these commodities may have an impact on our customer’s demand for infrastructure in the future. By applying a customer centric approach, APA sees itself as an energy industry team player with the ability to offer flexible services that meet our customers’ long-term needs. Our total distributions for FY2018 of 45 cents per security represent a 3.4 per cent increase over distributions for FY2017. Securityholders have also benefited from a total of 6.33 cents per security of franking credits which accompany the distributions. In accordance with our distribution policy, distributions have been fully covered by operating cash flows. A portion of these cash flows have also been retained within the business to support our ongoing growth. For personal use only With growth continuing to drive our strategy, we are working on in excess of $1.4 billion of growth projects that have been agreed with our customers to meet their future energy needs. In FY2018, APA commissioned the Emu Downs Solar Farm, Reedy Creek Wallumbilla Pipeline, the Mt Morgans Gas Pipeline and the Yamarna Gas Pipeline. 1) Total revenue, excluding pass-through (revenue on which no margin is earned). APA GROUP — ANNUAL REPORT 2018 — 03 These assets will all contribute to earnings in FY2019 and In FY2018, we farewelled Mr Leonard Bleasel AM as beyond. Operating cash flow for FY2018 increased by 5.9 Chairman of the APA Board after ten successful years per cent to $1,031.6 million. Operating cash flow per security at the Board’s helm. I was delighted to follow in Len’s held strong and increased by 4.1 per cent to 90.7 cents per footsteps and accept the position as Chairman, after security, despite over 65 million new securities being issued contributing in my role as an APA Non-Executive Director during FY2018 as part of the $500 million equity capital since 2015. APA’s Board also saw Non-Executive Director Mr raise that was undertaken in February. John Fletcher retire and welcomed two new Non-Executive Directors, Ms Shirley In’t Veld and Mr Peter Wasow who Delivering for stakeholders each have a wealth of experience to help navigate the Our success is not only judged by the value created opportunities and challenges facing the energy market. for Securityholders, but from our ability to service our During the year, Non-Executive Director Ms Patricia customers’ long-term energy infrastructure needs. In McKenzie announced her intention to retire at the 2018 FY2018, APA was one of 15 energy supply chain businesses Annual Meeting. Given the CKI proposal, I am delighted to that pledged to develop a consumer charter, putting advise that Patricia has agreed to continue as a Director customers first. We believe that for APA to continue to beyond the Annual Meeting. succeed, we need to be delivering for our customers and Australia’s energy users. Instilling customer confidence in CKI Consortium Proposal the energy industry requires an industry-wide commitment As at the time of writing this Report, there have been no across the supply chain for both gas and electricity. At the further developments to the proposed transaction between heart of The Energy Charter is an assurance to improve APA and the CKI Consortium since the announcement the culture throughout the energy industry by putting the by APA on 13 August 2018 that both parties had entered customer at the centre of each of our business decisions. into a binding Implementation Agreement for the CKI At APA we are committed to The Energy Charter and Consortium to acquire 100 per cent of APA’s securities. developing a culture of customer focus and good conduct Your Board believes the Offer of $11.00 cash per security across the business. is compelling for APA Securityholders and we unanimously recommend it to you. It represents a premium of over 30 Energy policy per cent (2) on the price APA securities were trading at prior Throughout FY2018, national energy policy remained highly to the announcement on 13 June 2018 and an FY2017 topical within Australia. As policy makers seek to tackle Enterprise Value/EBITDA multiple of 15.3 times and FY2018 the energy ‘trilemma’ and solve a decade-long failure to Enterprise Value/EBITDA of 14.8 times (3).