Apa Group · ASX:APA
Apa — H1 2024 Earnings Presentation
63 slides from Apa's earnings presentation, Feb 22, 2024
Slide 1: APA 1H24 Results Presentation
APA Group Limited ACN 091 344 704 | APA Infrastructure Trust ARSN 091 678 778 | APA 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 22 February 2024 ASX ANNOUNCEMENT
Slide 2: 22 February 2024
22 February 2024
Slide 3: Disclaimer
Disclaimer This presentation has been prepared by APA Group Limited (ACN 091 344 704) as responsible and uncertainties and other factors, many of which are beyond the control of APA Group, and entity of the APA Infrastructure Trust (ARSN 091 678 778) and APA Investment Trust (ARSN may involve signif
Slide 4: Acknowledgement of Country
Acknowledgement of Country At APA, we acknowledge the Traditional Owners and Custodians of the lands on which we live and work throughout Australia. We acknowledge their connections to land, sea and community. We pay our respects to their Elders past and present, and commit to ensuring APA operates
Slide 5: Safety share: Hand safety awareness program
Safety share: Hand safety awareness program to address one of our key physical injury risks Hand, finger and wrist injuries have made up 29% of all recordable injuries over the past four financial years. The main causes of these injuries has been inadequate hazard awareness, inappropriate operationa
Slide 6: Agenda
Agenda 1 1H24 Highlights and FY24 Outlook 2 1H24 Financial Performance 3 Market Dynamics and Strategy 4 Closing Remarks and Q&A APA 1H24 Results Investor Presentation 5 5
Slide 7: 1H24 Highlights and FY24 Outlook
1H24 Highlights and FY24 Outlook Badgingarra Solar Farm 01
Slide 8: Recent acquisitions performing well, driving a solid 1H24 performance
Recent acquisitions performing well, in line with business cases, driving a solid 1H24 performance Solid 1H24 Executing on our Outlook remains result growth strategy positive • Solid operating and financial • Significant growth platform • Reaffirmed FY24 DPS guidance of 56cps* performance across our
Slide 9: In 1H24 we have delivered solid growth in earnings and Free Cash Flow
In 1H24 we have delivered solid growth in earnings and Free Cash Flow Underlying Free Cash Flow (FCF)(2) 1H24 DPS(3) EBITDA(1) +5.8% to $930m +12.8% to $546m 26.5 cps Strong contribution from acquisitions Up 4.0% excluding the impact of the Up 1.9% on 1H23 and inflation tailwinds, with lower 1H23 de
Slide 10: Reaffirmed FY24 DPS guidance and FY24 Underlying EBITDA guidance
Reaffirmed FY24 DPS guidance of 56 cps and providing FY24 Underlying EBITDA guidance of $1,870-1,910m FY24 Underlying EBITDA FY24 DPS guidance* reaffirmed guidance** 56.0 cps $1,870-1,910m Up 1.8% on FY23, reflecting the desire to balance Guidance range incorporates all considerations distribution g
Slide 11: 1H24 performance achieved through focus on our three delivery pillars
Our 1H24 performance was achieved through continued focus on our three delivery pillars Our People Operational Excellence Creating Value Ensuring our people Safe, reliable and efficient Disciplined operations and are motivated, engaged, operations, and maintaining investments to maximise value safe
Slide 12: Our People: Safe, respectful and inclusive workplace
Our People: We are embedding a safe, respectful and inclusive workplace Safety of our people Inclusion & Gender diversity Continued reduction of employee and contractor injuries Continued focus on improving the gender balance across the organisation Total Recordable Injury Frequency Rate (TRIFR)(4)
Slide 13: Case study - Our People: Growing apprenticeship program
Case study - Our People: Growing apprenticeship program Building a diverse workforce from the ground up Apprentice intake 35 30 25 No. of apprentices 20 15 10 5 0 2021 2022 2023 2024 Intake year Female apprentices Male apprentices Apprentice group workshop at Darling Downs Solar Farm APA 1H24 Result
Slide 14: Operational Excellence: Safe and reliable energy supply to customers
Operational Excellence: Safe and reliable energy supply to our customers is central to our strategy APA Assets(7) Operational Metrics(7) Ongoing focus 618 GWh >99.5% New asset integration Renewable energy generated Remote grid customer availability Integration of recent investments: Including North
Slide 15: Case study – Ensuring energy reliability for our customers
Case study – Operational Excellence: Ensuring energy reliability for our customers Storm impact at Gruyere Solar Farm A storm event occurred on 31 December 2023 Safe and reliable power supply for our customers was maintained as our Whilst only 277 of the +25,000 panels were accompanying gas power st
Slide 16: Supporting customers and communities through our sustainability agenda
Operational Excellence: Supporting our customers and communities through our sustainability agenda Climate Transition Plan delivery Reconciliation Action Plan (RAP) launched • Set a methane reduction target of at least 30% by 2030 • Launched our inaugural RAP October 2023 compared with FY21 base yea
Slide 17: Creating Value: Integration and earnings contributions from new assets
Creating Value: Integration and earnings contributions from new assets in line with business cases Basslink Pilbara Energy (Alinta) Completed 1H24 EBITDA contribution Completed 1H24 EBITDA contribution 20 October 2022 in line with business case 1 November 2023 in line with business case Integration
Slide 18: Creating Value: Pilbara Energy score card
Creating Value: Pilbara Energy score card Asset Integration Organic growth Performance Progress opportunities • $21m EBITDA for first 2 months in • All people and HR systems integrated • Port Hedland Solar Farm and BESS 1H24 – in line with expectations project construction on track – • Integration o
Slide 19: Attractive pipeline of growth opportunities of >$1.8bn
Creating Value: Attractive pipeline of near and long-term growth opportunities of >$1.8bn FY24 to FY26 pipeline of organic capex opportunities >$1.8b* Organic growth opportunities (examples) • Port Hedland solar and BESS Contracted (construction underway) >$3.0bn Renewables and Firming • >$3.0bn Pil
Slide 20: Capital allocation framework maximises securityholder value
Creating Value: Capital allocation framework maximises securityholder value Productivity improvements Investment Organic growth Strategic acquisitions Free Cash Flow (FCF) Distribution target Return to 60-70% of FCF securityholders Other returns to securityholders Capital allocation foundations 1. M
Slide 21: 1H24 Financial Performance
1H24 Financial Performance Garrick Rollason CFO Port Hedland Power Station 02
Slide 22: 1H24 delivered 6% growth in Underlying EBITDA
1H24 has delivered 6% growth in Underlying EBITDA and 4% growth in normalised Free Cash Flow 1H24 1H23 1H24 vs 1H23(10) Underlying EBITDA(11) $m 930 879 5.8% Underlying EBITDA margin % 73.2% 74.8% n.m. Free Cash Flow(12) $m 546 484 12.8% Distribution per security cents 26.5 26.0 1.9% Revenue (exclud
Slide 23: Strong contribution from new assets and continued investment
Strong contribution from new assets and continued investment in our business in 1H24 EBITDA Costs Capex Continued investment in existing Growth from new assets and inflation Continued investment in capability assets and foundational capex +$67m Inflation linked tariff escalation +$10m Electricity Tr
Slide 24: Revenue growth driven by inflation linked tariffs and acquisitions
Revenue growth driven by inflation linked tariffs and recent acquisitions $1,271m Key drivers $5m $2m • Inflation linked tariff escalation: • $44m impact in Energy Infrastructure ex Wallumbilla Gladstone Pipeline (WGP) $2m $63m • $23m impact for WGP • Decline in operating revenue reflects lower $33m
Slide 25: Costs have grown as we integrate new acquisitions
Costs have grown as we integrate new acquisitions and continue to invest in capability $341m Key drivers $7m $5m • Recently acquired assets (Pilbara Energy and Basslink), increased asset operating $20m costs at North West Power System and investment in Electricity Transmission business development $
Slide 26: EBITDA growth across all segments
EBITDA growth across all segments EBITDA by segment 1H24 1H23 % Change(18) Key drivers East Coast $m 349 345 1.2% • East Coast - warmer winter (VTS) and lower variable revenue (RBP) West Coast $m 165 152 8.6% • West Coast - contribution from additional Wallumbilla Gladstone Pipeline(19) $m 321 297 8
Slide 27: Non-operating items includes ongoing non-cash items
Non-operating items includes ongoing non-cash items and foundational investment 1H24 1H23 % Change Key drivers Underlying EBITDA(22) $m 930 879 5.8% • Technology transformation costs increased Technology transformation projects(23) $m (46) (22) 109.1% with the investment in key foundational projects
Slide 28: Strong Free Cash Flow growth reflects underlying earnings growth
Strong Free Cash Flow(27) growth reflects underlying earnings growth, partly offset by higher SIB capex ensuring asset excellence Key drivers 12.8% growth in Free Cash Flow • Recently acquired assets (2 months contribution from Pilbara Energy and 6 Up 4.0% excluding the impact of the months contribu
Slide 29: Continued capital investment in 1H24 to drive longer term growth
Continued capital investment in 1H24 to drive longer term growth and ensure reliability of our assets Up $1,489m $2,172m Acquisitions • Pilbara Energy acquisition $683m Down $11m $1,603m Growth $103m $580m $569m Includes: • East Coast Grid expansion • Kurri Kurri Lateral • Northern Goldfields Interc
Slide 30: Balance sheet positioned to support investment in future growth
Balance sheet positioned to support investment in future growth Treasury principles: Completed debt funding and upcoming refinancing activities (A$m) Completed hybrid issuance US144A A$1,544m Completed debt funding GBP MTN A$536m 828 Upcoming refinancing Retain investment grade Diversity of funding
Slide 31: Outlook considerations remain unchanged
Outlook considerations remain unchanged* Underlying EBITDA Costs Capex Continued investment in existing Growth from new assets and inflation Continued investment in capability assets and foundational capex • 8 month contribution of Pilbara Energy • Corporate costs in FY24 expected to • SIB capex (pr
Slide 32: Market Dynamics and Strategy
Market Dynamics and Strategy Adam Watson CEO & MD Mondarra gas pipeline 03
Slide 33: Strategy remains unchanged - partner of choice for energy transition
Strategy remains unchanged - to be the partner of choice in delivering infrastructure solutions for the energy transition $27bn* Remote Grid – Contracted Renewables and Firming $57bn* Electricity Transmission We are supporting Australia’s energy transition through investment in Gas $8bn* Transmissio
Slide 34: APA is adapting to shifting energy market dynamics
APA is adapting to shifting energy market dynamics MARKET DYNAMIC OPPORTUNITY / RISK IMPLICATIONS FOR APA Customers facing pressure to deliver a faster Demand for established operators to partner to deliver on Customer decarbonisation pathway. requirements. Decarbonisation Increasing acknowledgement
Slide 35: Regulatory matters being addressed
Regulatory matters being addressed Basslink Form of Regulation Reviews • The conversion application and revenue proposal are • Changes to National Gas Law came into effect in March 2023 currently under consideration by the Australia Energy • The AER has new regulatory powers to initiate a process to
Slide 36: Most efficient way to decarbonise is to retire coal and build renewables supported by gas
The most efficient and effective way to decarbonise Australia’s energy system is to retire coal and build out renewables supported by gas AEMO’s 2024 Draft Integrated System Plan (ISP) Step Change scenario forecasts ~20 GW of all coal generation will close by 2035 (90% of current capacity); last uni
Slide 37: Demand for peak gas firming capacity forecast to more than double
Demand for peak gas firming capacity is forecast to more than double(30) by 2050 to support the retirement of coal and build out of renewables National Energy Market (NEM) under the 2024 Draft ISP requires more dispatchable capacity, including gas powered 2024 Draft ISP step change scenario requires
Slide 38: Victoria's Gas Power Generation response helps secure the grid
Case study - Victoria’s Gas Power Generation (GPG) response helps secure the grid and deliver reliable energy to Victorians Gas Power Generation Capacity during Victoria’s storm event on 13 February 2024 2.0GW Storm Event • Severe weather impacted the Gas and Hydro respond state’s transmission lines
Slide 39: Gas will continue to play a critical role
Gas will continue to play a critical role beyond supporting the transition to renewables An effective transition requires energy that is… Firming the accelerated build out of renewables and exit of coal 1 Approx. 120 TWh per annum of additional renewables is required to meet 82% renewable electricit
Slide 40: Closing Remarks
Closing Remarks Adam Watson CEO & MD Dugald River Solar Farm 04
Slide 41: Today's key messages
Today's key messages Executing on our Outlook remains Solid 1H24 growth strategy positive result • Solid operating and financial • Significant growth platform established • Reaffirmed FY24 DPS guidance of 56cps* performance across our with the acquisition of Pilbara Energy • FY24 Underlying EBITDA g
Slide 42: Q&A
Q&A
Slide 43: Supplementary Financials
Supplementary Financials Diamantina Power Station 05
Slide 44: Inflation linked revenues
Inflation linked revenues Revenue Drawn debt EBITDA Majority of APA’s fixed revenue is indexed to Fully hedged/fixed with average maturity of 5.7 yrs(32) High EBITDA margins(33) inflation(31) Underlying EBITDA Drawn debt hedged or as % of revenue CPI linked revenue fixed Other revenue Costs as % of
Slide 45: Diversity of funding sources and maturities
Diversity of funding sources and maturities(35) 2,500 ASFA Syndicated Loan EUR MTN (Hybrid) GBP MTN 2,000 EUR MTN US144a 928 JPY MTN 350 Corporate Liquidity Facility 1,500 1H24 syndicated term loan and 550 hybrid capital securities 1,544 1,018 1,000 1,00336 82837 1,30036 1,109 133 500 750 742 774 70
Slide 46: 1H24 Financial results summary
1H24 Financial results summary Financial summary 1H24 1H23 % Change(39) Revenue (excluding pass-through)(40) $m 1,274 1,232 3.4% Segment revenue (excluding pass-through)(41) $m 1,271 1,175 8.2% Underlying EBITDA(42) $m 930 879 5.8% Non-operating items(43) $m (90) 11 n.m. Reported EBITDA(44) $m 840 8
Slide 47: Historical Underlying EBITDA by asset – Energy Infrastructure
Historical Underlying EBITDA by asset – Energy Infrastructure $ million 1H24 1H23 FY23 FY22 FY21(49) FY20(49) FY19(49) East Coast Grid Wallumbilla Gladstone Pipeline 321 297 620 578 550 539 542 South West Queensland Pipeline 145 132 262 245 233 254 250 Moomba Sydney Pipeline 75 73 126 136 152 161 14
Slide 48: Revenue and Underlying EBITDA by geography
Revenue and Underlying EBITDA by geography $ million 1H24 1H23 Change ($) Change (%)(51) Revenue Energy Infrastructure Queensland 686 652 34 5.2% New South Wales 87 92 (5) -5.4% Victoria 124 109 15 13.8% South Australia 1 1 - 0.0% Northern Territory 13 14 (1) -7.1% Western Australia 280 230 50 21.7%
Slide 49: Underlying EBITDA bridge to Free Cash Flow
Underlying EBITDA bridge to Free Cash Flow $ million 1H24 1H23 % Change(52) Underlying EBITDA(53) 930 879 5.8% less Equity Accounted Earnings (13) (12) -8.3% Underlying EBITDA Excluding Associates/JV’s 917 867 5.8% Change in Working Capital/Other (3) (54) 94.4% Cash impact of Non Operating Items/Oth
Slide 50: 1H24 Capital and investment expenditure
1H24 Capital and investment expenditure(57) $ million Description of major projects 1H24 1H23 Growth capex Regulated Western Outer Ring Main (WORM), Winchelsea Compressor Station; Acess 67 97 Arrangement allowed expenditure Non-Regulated East Coast Gas South West Queensland Pipeline and Moomba Sydne
Slide 51: 5-year normalised financials
5-year normalised financials Financial Performance 1H24 1H23 FY23 FY22 FY21 FY20 FY19 Total revenue $m 1,516 1,499 2,913 2,732 2,605 2,591 2,452 Total revenue excluding pass-through(58) $m 1,274 1,232 2,401 2,236 2,145 2,130 2,031 Underlying EBITDA(59) $m 930 879 1,725 1,692 1,629 1,650 1,570 Total
Slide 52: Regulatory Dynamics
Regulatory Dynamics Diamantina Power Station 06
Slide 53: Regulation of Australian gas pipelines
Regulation of Australian gas pipelines In 1H24, 7.2% of Energy Infrastructure revenue (excluding In practice, pipelines previously subject to full APA pipelines by regulation type pass through revenue) was derived from regulated tariffs under regulation are not expected to experience much regulatory
Slide 54: Regulation of Australian gas pipelines (continued)
Regulation of Australian gas pipelines (continued) Current regulatory period 2023 2024 2025 2026 2027 2028 Vic Transmission System(64) Schedule of regulatory reset Goldfields Gas Pipeline dates for APA Amadeus Gas Pipeline Roma Brisbane Pipeline(65) • Apply for a term, generally 5 years Access • Set
Slide 55: Appendix
Appendix Badgingarra Wind Farm
Slide 56: APA's diverse energy infrastructure portfolio
APA’s diverse energy infrastructure portfolio GAS INFRASTRUCTURE POWER GENERATION Renewable energy(66) 342 MW Wind Transmission(66) 311 MW Solar >15,000 km transmission pipelines 39 MW BESS Gas fired(66) 884 MW Storage 12,000 tonnes LNG ELECTRICITY TRANSMISSION 18 PJ gas >800 km high voltage electri
Slide 57: APA's operational footprint across energy infrastructure assets
APA’s operational footprint is across a range of energy infrastructure assets APA 1H24 Results Investor Presentation 56
Slide 58: Diversified business model
Diversified business model Characteristics of APA’s Energy 1% 1H24 Energy Infrastructure 3% 1H24 Energy Infrastructure Infrastructure (EI) revenue: 12% 1% by Revenue Type Revenue by Customer 5% Industry Segment Capacity charge revenue 26% Regulated revenue 7% ~87% Diverse 44% Energy • Risk managemen
Slide 59: Group structure
Group structure GROUP STRUCTURE • APA Group is listed as a stapled structure on the Australian Securities Exchange (ASX:APA) APA Infrastructure Trust APA Investment Trust (APA Infra) (APA Invest) • APA is comprised of two registered managed investment schemes: – APA Infrastructure Trust (ARSN 091 67
Slide 60: Endnotes
Endnotes 1. Page 8: Underlying earnings before interest, tax, depreciation, and amortisation (“Underlying EBITDA") excludes recurring items arising from other activities, transactions that are not directly attributable to the performance of APA Group's business operations and significant items. Repo
Slide 61: Endnotes
Endnotes 23. Page 26: Costs associated with technology and transformation projects to develop and uplift organisation capabilities, including SaaS customisation and configuration costs incurred during implementation. 24. Page 26: Net loss arising from electricity contracts for difference that econom
Slide 62: Endnotes
Endnotes 47. Page 45: Free Cash Flow is Operating Cash Flow adjusted for strategically significant transformation projects, acquisition and integration costs, payroll remediation payments to employees, less stay-in-business (SIB) capex. SIB capex includes operational assets lifecycle replacement cos
Slide 63: For further information
For further information Kynwynn Strong Michael Cox General Manager Investor Relations Head of Media Relations & & Capital Markets Financial Communications M: +61 410 481 383 M: +61 429 465 227 E: kynwynn.strong@apa.com.au E: michael.cox@apa.com.au www.apa.com.au