annual report. 2019 Cover image: Raj Kallath, APA’s Project Manager for the Reedy Creek Wallumbilla Pipeline project. Above: APA’s Orbost Gas Processing Plant in Victoria will connect the Sole Gas Field, a new gas supply source into the east coast market in FY2020. APA GROUP — ANNUAL REPORT 2019 contents. FY2019 in Review 02 Chairman’s Report 04 Managing Director’s Report 06 APA Group Board 07 APA Group Senior Management 08 2019 Highlights Australian Pipeline Trust ARSN 091 678 778 10 Directors’ Report 45 Remuneration Report 59 Consolidated Financial Statements APT Investment Trust ARSN 115 585 441 117 Directors’ Report 121 Consolidated Financial Statements 143 Additional Information 144 Five Year Summary 145 Investor Information Growing energy infrastructure responsibly and sustainably to meet the needs of our customers and stakeholders is what we do at APA. That’s why almost two decades on, we are one of Australia’s leading energy infrastructure companies. We play a major role in Australia’s energy market by connecting gas supply sources to markets, and connecting energy we generate from both gas-fired power and renewables technology to our customers. It’s therefore important that we act responsibly by doing what we say we will do, and by doing the right thing by all of our stakeholders, always. We take a long term view so that our infrastructure will serve future generations, providing responsible energy that affords Australians the quality of life we enjoy and expect. APA GROUP — ANNUAL REPORT 2019 — 01 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information chairman’s report. Michael Fraser APA has pursued a consistent strategy for almost Chairman two-decades and that strategy has demonstrated its value to APA’s customers, Securityholders and business generally. APA has grown significantly over this time – $21 billion of assets owned and/or operated by APA; more than 1,800 employees operating and maintaining those assets; and over $1 billion in operating cash flow generated annually. For Securityholders, distributions have been reliable and have increased as the business has grown. Every dollar invested in APA when it listed in June 2000, has grown more than 22 times over those 19 years (1). Leadership A major contributor to that success has been APA’s long standing CEO and Managing Director, Mick McCormack, who retired in July after 14 years of leading the business. Mick’s foresight and his ‘get-the-job’ done attitude has been instrumental in cementing APA as a leading Australian energy infrastructure owner and operator. On behalf of FY2019 saw the continued all APA Securityholders and employees, I would like to delivery of APA’s largest ever acknowledge and thank Mick, and his family, for those 14 organic growth program – years of dedication to leading APA. In May 2019, after an extensive search and selection more than $1.4 billion process, the Board announced Rob Wheals as CEO and of energy infrastructure Managing Director, effective 6 July 2019. Rob has been with APA since 2008. He started as General Manager added to APA’s footprint Commercial, managing the commercial function in APA’s over the last three years. transmission business and joined the Executive team in 2012 as Group Executive Transmission. Rob has a deep Of most significance is the understanding of the Australian energy market and the value of the services and challenges and opportunities facing APA and the industry as we transition to a lower carbon future. He is particularly flexibility this infrastructure passionate about delivering for our customers, and has been instrumental in implementing APA’s Customer will deliver to our customers Promise over the last few months. Personally, it has been a for years to come. great pleasure for me to have been involved in the launch of APA’s Customer Promise to our customers. During the financial year, APA’s Board underwent a number of changes. Russell Higgins AO and Patricia McKenzie retired from the Board and I thank them both for their significant contributions to APA, each over a number of years. We were fortunate to welcome James Fazzino to the $21 billion Board in February 2019. His extensive corporate experience Assets owned and/or operated by APA as a former Chief Executive Officer of one of Australia’s larger manufacturing companies exposed to the gas sector will complement the Board’s existing skills and capabilities. 1) Total Securityholder Return since listing to 30 June 2019 is calculated on the assumption that all distributions are reinvested at the ex-distribution date. 02 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information Financial results Outlook APA’s financial performance for FY2019 was a very solid APA’s guidance for FY2020 is for EBITDA of between one, particularly in light of the fact that the organisation $1,660 million and $1,690 million and net interest costs of was subject to a takeover proposal from a CKI consortium between $505 million and $515 million. Total distributions for six months of the year. The results and continued growth per security for the financial year are expected to be in of APA in light of those circumstances are a credit to APA’s the order of 50.0 cents per security, prior to the benefits people and their ability to stay focused on driving the of any franking credits that may arise as a result of business forward. the ongoing payment of company tax by APA. Total revenue (excluding pass-through revenue) increased Along with your Board, I am very pleased that this 4.6% on FY2018 to $2,031.0 million. Earnings before expected 6.4% increase in distributions results from the interest, tax, depreciation and amortisation increased 3.6% anticipated growth in operating cash flow as our organic to $1,573.8 million. Net profit after tax increased 8.8% to growth program continues to deliver new projects. $288.0 million. Operating cash flow (OCF) was slightly On behalf of the Board, I would like to thank the APA below FY2018 levels at $1,012.1 million, primarily due to an leadership team and APA’s employees for their dedication increase in income tax paid by APA. The Board has declared and hard work during what has been another very active a final distribution of 25.5 cents per security, taking total year for the company. I would also like to thank you, distributions for FY2019 to 47.0 cents per security. As a our Securityholders, for your continued support. We result of the increased income tax APA paid during the strongly believe that APA is well positioned to continue to financial year, a further 3.66 cents per security of franking deliver long-term growth and securityholder value, well credits will attach to the final distribution for the year. into the future. Sustainability Following steps taken in FY2018, we have continued with our environment, social and governance (ESG) initiatives program with an emphasis on aligning our climate risk management with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). APA accepts the Intergovernmental Panel on Climate Change’s (IPCC) assessment of climate change science that the Michael Fraser climate is changing due to human influence. We believe Chairman that climate change is a significant issue facing the energy industry and the Australian community in general. We also believe that natural gas and our diversified energy asset portfolio will overtime play an important role in the shift to a lower carbon, sustainable energy future. During FY2019, we undertook a scenario analysis using three divergent climate-driven scenarios to stress-test the resilience of APA over the 10 years to 2030. This analysis is detailed in APA’s Sustainability Report, but in summary, the Board expects that APA’s portfolio of assets will be economically and physically resilient to climate-related impacts under the scenarios tested over at least the next 10 years. We believe that it is our responsibility to provide consistent information to stakeholders, including our investors, on climate-related risks and opportunities and we will continue to actively monitor, assess and report on our findings. $1,574 million 47.0 cents EBITDA increased 3.6% on FY2018 Distribution per security increased 4.4% on FY2018 APA GROUP — ANNUAL REPORT 2019 — 03 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information managing director’s report. Rob Wheals Chief Executive Officer and Managing Director Safety first, always I have been with APA for over 10 years. For me as an employee during that time and now taking over as CEO, safety and the wellbeing of our people and the communities around our assets, remains APA’s number one priority. Pleasingly, our increased efforts and focus in FY2019 have led to a significant reduction in injuries to our people. The Total Reportable Injury Frequency Rate (TRIFR) has reduced by around a third on FY2018 results to 5.98 per million hours worked.