Apa Group · ASX:APA
Apa — Merger or Acquisition (December 2014)
58 slides from Apa's merger presentation, Dec 10, 2014
Slide 1: Acquisition of the QCLNG Pipeline and Entitlement Offer
For personal use only Acquisition of the QCLNG Pipeline and Entitlement Offer 10 December 2014 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Australian Pipeline Limited (ACN 091 344 704) in its capacity as the responsible entity of the Australian Pipeline Trust (ARSN 091 678 778) and APT Investment Trust For personal use only (ARSN 115 585 441) (APA Group). A reference in this presentatio
Slide 3: Disclaimer
Disclaimer Not an offer: This presentation is not a prospectus, product disclosure statement or other offering document under Australian law (and will not be lodged with ASIC) or any other law. This presentation is for For personal use only information purposes only and is not an invitation or offer
Slide 4: Table of Contents
Table of Contents Transaction Overview 5 For personal use only QCLNG Pipeline and Acquisition Details 10 Funding and Financial Impact 18 Offer Summary 25 Key Risks 28 International Selling Restrictions 44 Supplementary information 53 APA Group, December 2014 4 NOT FOR DISTRIBUTION OR RELEASE IN THE
Slide 5: Transaction overview
For personal use only Transaction overview
Slide 6: Transaction summary
Transaction summary APA has entered into an agreement to acquire the newly constructed QCLNG Pipeline from a BG Group entity through the acquisition For personal use only of the shares in QCLNG Pipeline Pty Ltd (PipeCo) for US$5,000 million1, representing an FY16 EV / EBITDA multiple of 13.0x. – Ope
Slide 7: Investment highlights
Investment highlights Revenue stability Revenues are fully contracted on a take-or-pay basis1, calculated based on a fixed rate of return on the For personal use only asset base, together with an operating cost pass-through Acquisition price reflects the contracted tariffs under the GTAs with primar
Slide 8: QCLNG Pipeline overview
QCLNG Pipeline overview Acquisition Represents a key component of the QCLNG QCLNG Pipeline Location For personal use only highlights Project, linking gas fields in the Surat Basin to the LNG plant on Curtis Island for export to Asia Pacific markets Benefits from 20 year take-or-pay1 arrangements to
Slide 9: Alignment with strategy and business model
Alignment with strategy and business model Expands contracted customer base with revenues provided by highly creditworthy counterparties, with the weighted average For personal use only credit profile of APA’s counterparties being enhanced following the transaction Strengthens contracted revenue pro
Slide 10: QCLNG Pipeline and acquisition details
For personal use only QCLNG Pipeline and acquisition details
Slide 11: Detailed due diligence undertaken
Detailed due diligence undertaken Detailed due diligence across key areas including but not limited to: For personal use only Asset Condition, Opex and Capex – APA’s engineering and operations personnel have conducted site visits, reviewed the construction and operations process and have met with QG
Slide 12: Foreign exchange hedging
Foreign exchange hedging APA has agreed to a USD denominated purchase price and will manage any exposure to fluctuations in the USD:AUD exchange For personal use only rate prior to financial close through foreign exchange hedging of the offer consideration raised in AUD – APA is hedging 100% of the
Slide 13: Overview of the QCLNG Project
Overview of the QCLNG Project QGC is developing the QCLNG Project For personal use only The Project proponents include entities owned by BG Group, CNOOC and Tokyo Gas The Project is to supply natural gas from the Surat basin to the QCLNG facility located on Curtis Island Two QCLNG trains with a comb
Slide 14: Asset characteristics
Asset characteristics For personal use only Main pipeline and facilities The Export Pipeline (346km) and Gas Collection Header pipeline (GCH) (196km) Three lateral pipelines connecting Bellevue, Jordan and Kenya central processing plants to the GCH Receipt Station located near Miles Delivery Station
Slide 15: Contracted tariff structure
Contracted tariff structure The QCLNG Pipeline has 20 year take-or-pay contracts across 3 GTAs1 commencing from Train 1 FCDD of LNG from Curtis Island For personal use only (which is a condition to completion) The take-or-pay tariffs under the GTAs are set to provide a fixed rate of return on the pi
Slide 16: APA's asset base and east coast gas grid
APA’s asset base and east coast gas grid For personal use only Acquisition further enhances APA’s position as Australia’s largest owner of gas transmission pipelines The QCLNG Pipeline complements the existing footprint of APA's gas infrastructure assets on the east coast APA is well positioned to b
Slide 17: Timing to completion
Timing to completion Binding Sale and Purchase Agreement (SPA) to acquire the QCLNG Pipeline has been executed with BG Group For personal use only Financial close under the SPA is subject to satisfaction of the following two conditions precedent1: – FCDD for the shipment of QCLNG commercial cargoes
Slide 18: Funding and financial impact
For personal use only Fundingand Funding andFinancial financialImpact impact
Slide 19: Acquisition funding
Acquisition funding Acquisition funding of US$5,211 million / A$6,304 million: For personal use only – A$1,839 million equity (equivalent to US$1,520 million) – US$3,691 million debt facility (equivalent to A$4,465 million) Offer price of A$6.60 per New Security Discounts relative to Closing Price D
Slide 20: Acquisition funding (cont'd)
Acquisition funding (cont’d) Fully underwritten accelerated renounceable entitlement offer launched today For personal use only 2 year US bank debt bridge facility intended to be progressively refinanced by the issue of medium to long-dated USD debt, either denominated in USD or in other currencies
Slide 21: Acquisition financial impact
Acquisition financial impact For the full financial year ending 30 June 2016, the asset is expected to: For personal use only – Contribute additional EBITDA of US$383 million to APA’s business (equivalent to A$464 million) – Contribute additional operating cash flow of approximately US$200 - 221 mil
Slide 22: Outlook and guidance for FY 2015
Outlook and guidance for FY 2015 APA standalone (pre-acquisition) guidance for EBITDA and net interest cost for FY 2015 is unchanged: For personal use only – Statutory EBITDA is expected within a range of A$1,170 million to A$1,190 million1 – Normalised continuing business EBITDA within a range of A
Slide 23: Distribution guidance for FY 2015
Distribution guidance for FY 2015 New Securities to be issued under the Entitlement Offer will rank equally with existing securities post the “ex” date for APA’s For personal use only FY 2015 interim distribution – expected to be 22 December 2014 – New Securities will be eligible for all future dist
Slide 24: Pro forma balance sheet
Pro forma balance sheet Pro forma Pro forma APA Pro forma Envestra Acquisition Balance Pro forma Funding Combined Balance For personal use only (A$ million) (30-Jun 14) Disposal Sheet2 for Acquisition Sheet Assets Current assets 203 - (6,224) 6,224 203 Property plant and equipment 5,574 - 2,689 - 8,
Slide 25: Offer Summary
For personal use only OfferSummary Offer Summary
Slide 26: Entitlement Offer details
Entitlement Offer details 1 for 3 accelerated renounceable entitlement offer at an offer price of A$6.60 per new stapled security (New For personal use only Offer structure and size Security) to raise gross proceeds of approximately A$1,839 million, comprising: – Entitlement Offer to existing eligib
Slide 27: Offer timetable
Offer timetable Key event Date1 For personal use only Trading halt and open Institutional Entitlement Offer Wednesday, 10 December 2014 Institutional Entitlement Offer closes Thursday, 11 December 2014 Institutional shortfall bookbuild Friday, 12 December 2014 Trading halt lifted Monday, 15 December
Slide 28: Key risks
For personal use only Key KeyRisks risks
Slide 29: Key risks
Key risks This section discusses some of the key risks associated with any investment in APA Group together with risks relating to the QCLNG Pipeline For personal use only acquisition and participation in the Entitlement Offer which may affect the value of APA Group Securities. The risks set out bel
Slide 30: Business risks
Business risks Economic regulation of APA Group For personal use only – Approximately 23% of APA Group’s revenue (excluding pass-through revenue) for FY 2014 were obtained from assets that are subject to regulation by the independent national and state energy regulators. Regulatory pricing periods g
Slide 31: Business risks (cont'd)
Business risks (cont’d) Gas demand risk For personal use only – The volume of gas that is transported by APA Group is dependent on end-user demand. The relative price of gas and its competitive position with other energy sources (including electricity, coal, fuel oils, solar, wind and other alternat
Slide 32: Business risks (cont'd)
Business risks (cont’d) Interest rates and refinancing risks For personal use only – APA Group is exposed to movements in interest rates where funds are borrowed at a floating interest rate and are not effectively hedged or where fixed rate debt is being refinanced. There is a risk that adverse inte
Slide 33: Business risks (cont'd)
Business risks (cont’d) Operational risk For personal use only – APA Group is exposed to a number of operational risks such as equipment failures or breakdowns, rupture of pipelines (including as a result of corrosion) with a risk of explosion, information technology systems failures or breakdowns,
Slide 34: Business risks (cont'd)
Business risks (cont’d) Environmental risks For personal use only – National, state and territory environmental laws and regulations affect the operations of APA Group’s assets. These laws and regulations set various standards regarding certain aspects of health and environmental quality, provide fo
Slide 35: Business risks (cont'd)
Business risks (cont’d) Insurance For personal use only – There may be some circumstances where APA Group’s insurance will not cover, or will not be adequate to cover, the consequences of adverse events arising from operations, or where APA Group may become liable for pollution or other operational
Slide 36: QCLNG Pipeline acquisition risks
QCLNG Pipeline acquisition risks Risk that material issues may not have been identified by due diligence investigations For personal use only – APA Group undertook a due diligence investigation process in respect of the QCLNG Pipeline acquisition and was provided with the opportunity to review certa
Slide 37: QCLNG Pipeline acquisition risks (cont'd)
QCLNG Pipeline acquisition risks (cont’d) Analysis of QCLNG Pipeline acquisition opportunity For personal use only – APA Group has undertaken financial, operational, asset condition, business and other analysis in respect of the QCLNG Pipeline acquisition in order to determine its attractiveness to
Slide 38: Offer and general risks
Offer and general risks Underwriting risk For personal use only – APA has entered into an underwriting agreement under which three underwriters have agreed to fully underwrite the Entitlement Offer, subject to the terms and conditions of the Underwriting Agreement between the parties. If certain con
Slide 39: Offer and general risks (cont'd)
Offer and general risks (cont’d) Underwriting risk (cont’d) For personal use only – In addition to these termination events, there are certain other defined restructure events including market disruption, hostilities, regulatory action, APA representations and warranties are untrue, change in law, c
Slide 40: Offer and general risks (cont'd)
Offer and general risks (cont’d) Renouncement risk For personal use only – If you are an eligible securityholder, and renounce your entitlement under the Entitlement Offer, there is no guarantee that any value will be received for your renounced entitlement through the bookbuild process. – The abili
Slide 41: Offer and general risks (cont'd)
Offer and general risks (cont’d) Economic risks For personal use only – Changes in global economic conditions (including changes in interest rates, inflation, foreign exchange rates and labour costs) as well as general trends in the Australian and overseas equity markets may affect the trading price
Slide 42: Offer and general risks (cont'd)
Offer and general risks (cont’d) Changes to accounting standards For personal use only – Changes to Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act could affect APA Group’s
Slide 43: Offer and general risks (cont'd)
Offer and general risks (cont’d) Other external factors For personal use only – Other external factors may impact APA Group‘s performance, including changes or disruptions to political, regulatory, legal or economic conditions or to national and international markets. – Natural phenomenon such as fi
Slide 44: International selling restrictions
International selling restrictions This presentation does not constitute an offer of entitlements or New Securities of the APA Group in any jurisdiction in which it would be unlawful. In For personal use only particular, this presentation may not be distributed to any person, and the entitlements an
Slide 45: International selling restrictions (cont'd)
International selling restrictions (cont’d) Canada (British Columbia, Ontario and Quebec provinces) (cont’d) For personal use only The following is a summary of the statutory rights of rescission or to damages, or both, available to purchasers in Ontario. In Ontario, every purchaser of the entitleme
Slide 46: International selling restrictions (cont'd)
International selling restrictions (cont’d) European Economic Area – Austria, Belgium, Denmark, Germany, Luxembourg and Netherlands For personal use only The information in this document has been prepared on the basis that all offers of entitlements and New Securities will be made pursuant to an exe
Slide 47: International selling restrictions (cont'd)
International selling restrictions (cont’d) Hong Kong For personal use only WARNING: This document has not been, and will not be, authorized by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the SFO). No action
Slide 48: International selling restrictions (cont'd)
International selling restrictions (cont’d) Italy (cont’d) For personal use only Any offer, sale or delivery of the entitlements or the New Securities or distribution of any offer document relating to these securities in Italy (excluding placements where a Qualified Investor solicits an offer from t
Slide 49: International selling restrictions (cont'd)
International selling restrictions (cont’d) Malaysia For personal use only This document may not be distributed or made available in Malaysia. No approval from the Securities Commission of Malaysia has been or will be obtained in relation to any offer of entitlements or New Securities. The entitleme
Slide 50: International selling restrictions (cont'd)
International selling restrictions (cont’d) Singapore For personal use only This document has not been registered as a prospectus with the Monetary Authority of Singapore (MAS) and, accordingly, statutory liability under the Securities and Futures Act, Chapter 289 (the SFA) in relation to the conten
Slide 51: International selling restrictions (cont'd)
International selling restrictions (cont’d) Switzerland For personal use only The entitlements and the New Securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock exchange or regulated trading facility in Switzerland. This do
Slide 52: International selling restrictions (cont'd)
International selling restrictions (cont’d) United Kingdom For personal use only Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of sec
Slide 53: Supplementary information
For personal use only Supplementary information Appendix
Slide 54: APA asset and investment portfolio
APA asset and investment portfolio For personal use only APA Group, December 2014 54 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 55: Appendix - Financial Details
For personal use only Appendix -–Financial Appendix FinancialDetails Details
Slide 56: Pro forma adjustments
Pro forma adjustments The Pro forma adjustments in preparation of the Pro forma APA Group Combined Balance Sheet, are summarised below: For personal use only 1. Pro forma Envestra Disposal Adjustment The pro forma Envestra disposal adjustment reflects the receipt of a final dividend of $21 million,
Slide 57: Key assumptions
Key assumptions Effect of the QCLNG Pipeline acquisition on earnings For personal use only Key assumptions used to determine the impact of the QCLNG Pipeline acquisition on EBITDA, net interest costs, operating cashflow and operating cashflow per security are set out below: Financial Close date is a
Slide 58: For further information contact
For personal use only For further information contact Delivering Australia’s Delivering Australia’senergy energy Peter Fredricson (02) 9693 0008 0409 344 834 Peter.Fredricson@apa.com.au or visit APA’s website www.apa.com.au