Apa Group · ASX:APA
Apa — H1 2021 Earnings Presentation
52 slides from Apa's earnings presentation, Feb 23, 2021
Slide 1: Results for the half year ended 31 December 2020
Results for the half year ended 31 December 2020 23 February 2021 22/02/2021
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Australian Pipeline Limited (ACN 091 344 704) as responsible entity of the Investment risk: An investment in securities in APA Group is subject to investment and other known and unknown Australian Pipeline Trust (ARSN 091 678 778) and APT Investment
Slide 3: 1H21 summary
1H21 summary • Solid financial performance in challenging market conditions, confirming resilient business model • Revenue down 0.6%, EBITDA down 2.3% and OCF up 1.4%* o Volume growth in key markets including WA, NT and sections of the East Coast Grid o Flat overall revenue reflects softer contract
Slide 4: Significant energy infrastructure investment required as global energy market transitions
Significant energy infrastructure investment required as global energy market transitions US $50+ trillion of investment required in next 20 Gas will continue to play critical role in the energy years regardless of scenario market regardless of scenario Global Energy Investments Global Energy Demand
Slide 5: Gas will continue to play a critical role in Australia's energy mix
Gas will continue to play a critical role in Australia’s energy mix • Future energy market requires both clean and reliable generation and transmission technologies, with gas providing Australian Domestic Gas Demand Under Different Climate Change Scenarios o energy companion for renewables and a net
Slide 6: Strong organic growth outlook
Strong organic growth outlook • Forecast >$1 billion of organic growth capex over FY21-23 • Significant progress made during 1H21 with $500 million+ committed • APA’s prospective organic growth pipeline >$5 billion (renewables and gas generation, transmission and energy storage) FY21 FY22 FY23 Commi
Slide 7: Growth markets for energy infrastructure has informed APA's refreshed strategy
Growth markets for energy infrastructure has informed APA’s refreshed strategy • Significant growth opportunities in renewables and firming, electrification and hydrogen infrastructure > • In Australia - >$60 billion of investment opportunities to 2040 − Renewables + firming + storage >$40 billion −
Slide 8: North America transaction pathway
North America transaction pathway Lessons learned through recent assessment of opportunities: Transaction pathway entry either via • gas pipelines and utilities; or • Opportunities in both the listed and unlisted space • electricity integrated energy infrastructure • Limited opportunities in 2020, d
Slide 9: APA launches Pathfinder Program to unlock next generation energy solutions
APA launches Pathfinder Program to unlock next generation energy solutions Focused on innovation to support Designed to identify opportunities to extend our core business by doing: the growth opportunities presented by energy transition • Pilot projects and strategic partnerships that focus on scala
Slide 10: Pathfinder Program: APA's Parmelia Gas Pipeline transformation to 100% hydrogen-ready
Pathfinder Program: APA’s Parmelia Gas Pipeline transformation to 100% hydrogen-ready • An Australian-first and one of few similar pipeline projects in the world today • 43 km section of the Parmelia Gas Pipeline (PGP) targeted to be 100% hydrogen-ready • Kwinana industrial precinct an ideal locatio
Slide 11: Refreshed strategy leveraging proven capability in energy infrastructure
Refreshed strategy leveraging proven capability in energy infrastructure Refreshed Strategy: • Contracted and regulated energy infrastructure • Deliver on our Customer Promise (gas, electricity and renewables) in Australia and • Disciplined investment, optimising securityholder North America returns
Slide 12: Investing in capability to support the delivery of our strategy
Investing in capability to support the delivery of our strategy New Executive Leadership New Capabilities Efficiency and Scale Team and Structure • A new operating model and • Strengthening our talent pool • Enhancing operational and organisational structure corporate systems & processes • Sustainab
Slide 13: APA's ambition to achieve Net Zero emissions by 2050
APA’s ambition to achieve Net Zero emissions by 2050 APA supports global transition to a lower carbon future • Net Zero emissions by 2050 to be embedded into decision-making, planning and business processes o Ambition is to achieve net zero operations emissions (Scope 1 and 2) by 2050 o Interim targ
Slide 14: Building our sustainability credentials and roadmap
Building our sustainability credentials and roadmap Sustainability at APA: it’s about being responsible in how we do business and contribute to society, so we create value for all stakeholders Strengthened our sustainability and community capability Developing a Sustainability Roadmap to guide a
Slide 15: 1H21 sustainability summary
1H21 sustainability summary • APA’s Climate Change Resilience Report released, demonstrating resilience under a range of climate scenarios including 1.5 c • Developed the Climate Change Management Plan Framework • Strengthened risk and procurement processes for modern slavery and published our first
Slide 16: 1H21 operational summary
1H21 operational summary Health, Safety, Environment and Heritage (HSEH) 16 TRIFR • TRIFR (7.73) and LTIFR (1.93) above target (6.5 and 1.0 respectively) 12 12.2 Contractor • Continue to implement safety education and awareness activities throughout the business, particularly when on-boarding contra
Slide 17: 1H21 operational summary
1H21 operational summary Operational Performance • Diamantina Power Station major overhaul completed on budget and schedule, 70,000 hours worked with no LTIs. Tremendous team effort: − Challenges of moving specialist and parts from overseas and interstates; and − Completed with excellent health and
Slide 18: Financial performance
Financial performance Adam Watson Chief Financial Officer
Slide 19: 1H21 results summary
1H21 results summary Results excluding significant item 1H21 1H20 Change Key Drivers $ million Volume growth in key markets, offset by softer contract Revenue excluding Pass-through(1) 1,071.8 1,077.8 (0.6%) renewals and lower energy consumption Higher investment in strategic development opportuniti
Slide 20: Orbost Gas Processing Plant non-cash impairment
Orbost Gas Processing Plant non-cash impairment Orbost Gas Processing Plant update • APA and Cooper Energy continue to work together to improve the plant’s operation and processing capacity, with the objective to achieve nameplate capacity of 68 TJ/day • Works planned over the next 12 months include
Slide 21: 1H21 EBITDA waterfall
1H21 EBITDA waterfall Key Drivers • Inflation linked tariff escalation • FX movements on CPI portion of Wallumbilla Gladstone Pipeline contract • Revenue from new asset (principally Orbost) • Variable revenues impacted by lower gas volumes in Victoria, lower revenues from renewables and power assets
Slide 22: 1H21 operating expenditure waterfall
1H21 operating expenditure waterfall Key Drivers • Operations and maintenance higher, consistent with volume growth and inflation • Asset Management included system upgrades in 1H20 • Higher investment in development opportunities and strengthening of capability • Corporate costs include further inc
Slide 23: 1H21 capital expenditure
1H21 capital expenditure $ Million 1H21 1H20 Key drivers: Growth Capex Growth Capex: Regulated 21.3 28.4 • Thomson Power Station construction Non-Regulated • Wallumbilla Hub capacity upgrade • Orbost Gas Processing Plant commission Queensland 39.5 14.1 • Eastern Goldfields Pipeline capacity expansio
Slide 24: Sustainable distributions
Sustainable distributions 1H21 Distributions Free Cash Flow Waterfall • 1H21 distribution of 24.0 cps, 4.3% increase on 1H20 443.4 • Payout ratio(1) of 54.5% 28.9 19.4 32.0 0.2 421.5 Distribution Guidance 2.8 • FY21 distribution guidance of 51.0 cps reflects 5.4 2.8 confidence in ability to consiste
Slide 25: Resilience in a rising rate environment
Resilience in a rising rate environment • Diverse range of long-dated debt facilities AUD debt(1) mitigates APA exposure to rising interest rate $10,000 US 144A Notes environment Medium Term Notes US Private Placement Notes • Debt facilities prudently hedged against interest Fixed interest rate debt
Slide 26: Strong balance sheet with opportunity to further enhance the capital structure
Strong balance sheet with opportunity to further enhance the capital structure • Cash and committed undrawn facilities of $2,054 million at 31 December 2020 o Prudent during uncertain market conditions, however demonstrated to be well in excess of business needs • Commitment to investment grade cred
Slide 27: Summary and outlook
Summary and outlook Rob Wheals CEO and Managing Director
Slide 28: Outlook and FY21 guidance
Outlook and FY21 guidance FY21 Guidance – On Track • FY21 EBITDA: $1,625 million to $1,665 million • FY21 Distribution per security: 51.0 cps (upgraded) • FY21 Net interest: $490 million to $500 million • Growth capital expenditure – expected to now exceed $1 billion over FY21-23 Outlook – Growth an
Slide 29: Delivering our vision: to be world class in energy solutions
Delivering our vision: to be world class in energy solutions Refreshed Strategy Growth opportunities Technology and innovation Aligned with purpose and vision and Energy infrastructure in Australia New energy infrastructure targeted at energy infrastructure and North America solutions (Pathfinder Pr
Slide 30: Questions and Answers
Questions and Answers Hooood 0000
Slide 31: Supplementary information
Supplementary information Hooood 0000 in
Slide 32: APA overview
APA overview Vy), oooog Ong ogg oo000
Slide 33: A leading energy infrastructure business
Snapshot of APA ….. a leading energy infrastructure business Market capitalisation Gas transmission (1) Gas storage $10.9 billion (as at 19 February 2020) 15,425 km transmission pipelines 12,000 tonnes LNG $0.6 billion (as at 30 June 2000) 18 PJ gas Gas distribution(2) Credit ratings >29,500 km Gas
Slide 34: Asset footprint
Asset footprint GLOSSARY: Assets and Investments Glossary Darwin WPP AGP Amadeus Gas Pipeline 734 PJ APA assets and investments McArthur BGP Bonaparte Gas Pipeline Bonaparte BGP Basin BWSF Badgingarra Wind and Solar Farms Basin APA new greenfield pipelines Beetaloo BWP Berwyndale Wallumbilla Pipelin
Slide 35: Continued growth momentum
Continued growth momentum EBITDA Operating cash flow $1,654 $1,096 $1,574 $1,032 $1,012 $1,518 $974 $1,470 $1,331 $862 $545 $822 $440 $747 1H20 1H21 1H20 1H21 $512 $519 $842 $823 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1H21 FY14 FY15 FY16 FY17 FY18 FY19 FY20 1H21 Total assets Distributions $16,007 $15,22
Slide 36: Sustainable distributions
Sustainable distributions 60 cents 55 cents 50.0 50 cents 47.0 45.0 45 cents 43.5 41.5 40 cents 38.0 35.5 36.3 34.4 35.0 35 cents 32.8 31.0 29.5 30 cents 28.0 25 cents 24.0 22.0 21.5 21.5 21.5 22.5 20 cents 15 cents 24.0 10 cents 5 cents 0 cents FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Slide 37: Group structure
Group structure • APA Group is listed as a stapled structure on the Australian Securities Exchange (ASX:APA) Group Structure • APA is comprised of two registered managed investment schemes: Australian Pipeline Trust APT Investment Trust (APT) (APTIT) − Australian Pipeline Trust (ARSN 091 678 778) −
Slide 38: Financial Metrics
Financial Metrics oooog oo000 Sh energy. connected.
Slide 39: 1H21 results summary including significant item
1H21 results summary including significant item Results 1H21 1H20 Change Key Drivers $ million Volume growth in key markets, offset by softer contract Revenue excluding Pass-through(1) 1,071.8 1,077.8 (0.6%) renewals and lower energy consumption Higher investment in strategic development opportuniti
Slide 40: Segment EBITDA by state
Segment EBITDA by state $ million 1H21 1H20 Change Key drivers Queensland 495.5 506.3 (2.1%) • Softer contract renewals New South Wales 83.6 81.6 2.4% • Higher gas volumes Victoria & South Australia 59.6 63.5 (6.1%) • Lower energy consumption due to COVID Northern Territory 11.4 8.6 33.1% • New gas
Slide 41: 5 year financials
5 year financials Financial Performance 1H21 FY20 FY19 FY18 FY17 FY16 Revenue $m 1,295.0 2,590.6 2,452.2 2,386.7 2,326.4 2,094.3 Revenue excluding pass-through(1) $m 1,071.8 2,129.5 2,031.0 1,941.4 1,888.3 1,656.0 EBITDA(2) $m 822.8 1,653.9 1,573.8 1,518.5 1,470.1 1,330.5 Depreciation and amortisati
Slide 42: 5 year financials (con't)
5 year financials (con’t) Segment EBITDA (Excluding Significant Item) 1H21 FY20 FY19 FY18 FY17 FY16 EBITDA (Continuing businesses) Energy Infrastructure East Coast: Queensland $m 495.5 1,007.9 1,010.1 962.2 925.4 855.8 New South Wales $m 83.6 160.8 149.4 147.1 149.5 121.7 Victoria $m 58.4 101.9 114.
Slide 43: Historical EBITDA by asset – Energy Infrastructure
Historical EBITDA by asset – Energy Infrastructure $ millions 1H21 FY20 FY19 FY18 FY17 FY16 East Coast Grid Wallumbilla Gladstone Pipeline 270.0 538.9 542.4 515.9 488.0 475.2 South West Queensland Pipeline 118.0 254.4 250.0 244.3 242.4 240.3 Moomba Sydney Pipeline(1) 83.6 160.8 149.4 147.1 149.5 121
Slide 44: Low risk business model
Low risk business model • Solid risk management processes in place • Continue to manage counterparty risks by: − Diversification of customers and industry exposures − Assessment of counterparty creditworthiness − Entering into long term contracts to support major capital spend Energy Infrastructure
Slide 45: Debt maturity profile
Debt maturity profile APA maintains diversity of funding sources and spread of maturities(1) 50 Undrawn committed facilitates Bank borrowings 296 US Private Placement Notes US 144A Notes Medium Term Notes USD denominated obligations (2) 1,396 (USD1,100) 150 1,140 (USD 886) 1,132 1,109 879 (USD 683)
Slide 46: Funding source
Funding source 3% Undrawn Bank Facilities 11% Drawn Bank Facilities 31 Dec 2020 Medium Term Notes Total Debt Facilities* $10,947m US 144A Notes Drawn Debt Facilities $9,697m 33% Total USPP Notes Drawn Bank Facilities $0m facilities Undrawn Bank Facilities $1,250m A$11b Cash at Bank $804m Available L
Slide 47: Debt facilities
Debt facilities Total committed debt facilities at 31 December 2020 $ million Facility Drawn Tenor amount amount 2017, 2019 & 2020 Bilateral bank facilities 250 0 3 to 5 year facilities maturing between May 2022 to December 2025 2018 Syndicated bank facilities 1,000 0 5 and 5.5 year tranches maturin
Slide 48: Energy market dynamics and overview
Energy market dynamics and overview
Slide 49: Australian gas market overview
Australian gas market overview Gas supply and demand AEMO 2020 Gas Statement of Opportunities: • Gas Supply from existing and committed gas developments is forecast to meet gas demands until 2023/24 WPP Darwin 734 PJ • Risks remain that any weather-driven variances could increase gas demand Bonapart
Slide 50: Regulation of Australian gas pipelines
Regulation of Australian gas pipelines • In 1H21, 8.2% of Energy Infrastructure revenue was from full regulated assets APA pipelines by regulation type • Gas pipelines are regulated by the Australian Energy Regulator (AER) or, the Economic Regulation Authority of Western Australia (ERA) • Australia’
Slide 51: Regulation of Australian gas pipelines (con't)
Regulation of Australian gas pipelines (con’t) Schedule of regulatory reset Current regulatory period 2021 2022 2023 2024 2025 dates for APA Amadeus Gas Pipeline Roma Brisbane Pipeline Victorian Transmission System Goldfields Gas Pipeline Access • Apply for a term, generally 5 years arrangement • Se
Slide 52: For further information contact
For further information contact: Yoko Kosugi GM Investor Relations and Analytics M: +61 438 010 332 E: yoko.kosugi@apa.com.au Or visit the APA website at: www.apa.com.au