Apa Group · ASX:APA
Apa — FY2022 Earnings Presentation
53 slides from Apa's earnings presentation, Aug 24, 2022
Slide 1: APA FY22 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 24 August 2022 ASX ANNOUNCEMENT AP
Slide 2: Responsibly transitioning energy
Responsibly transitioning energy FY2022 Full Year Result August 2022
Slide 3: Disclaimer
Disclaimer This presentation has been prepared by APA Group Limited (ACN 091 344 704) as responsible entity of the statements, opinions and estimates. APA Infrastructure Trust (ARSN 091 678 778) and APA Investment Trust (ARSN 115 585 441) (APA Group). Investors should form their own views as to thes
Slide 4: Acknowledgement of Traditional Custodians
In the spirit of reconciliation APA acknowledges the Traditional Custodians of country throughout Australia and their connections to land, sea and community. We pay our respects to their elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander Peoples today. APA
Slide 5: Solid financial results, ongoing investment in the energy transition and net zero targets
Solid financial results, ongoing investment in the energy transition and establishment of net zero targets APA has: • Delivered a solid FY22 result in a year that has highlighted the critical role gas plays to ensure energy security and reliability • Progressed infrastructure investments to support
Slide 6: Safety and reliability underpins everything we do
Safety and reliability underpins everything we do Reliable 99.9% Safety at 43% reduction infrastructure Gas transmission in Total Recordable the forefront operations nominations delivery(1) Injury Frequency Rate (TRIFR)(2) Total Recordable Injury Frequency Rate(3) 16 6.3 12 Contractors >96% ~95% 8 3
Slide 7: FY22 has delivered another solid result
FY22 has delivered another solid result Revenue1 up FY22 DPS4 FY23 DPS4 4% to $2,237m 53.0 cps 55.0 cps in line with guidance forecast to be up 4% on FY22 Underlying EBITDA2 up 4% to $1,692m • Revenue and earnings growth driven by a solid performance from our key Energy Infrastructure assets and pos
Slide 8: Progressing our strategy of investing in energy infrastructure for today and tomorrow
Through FY22 we continued to progress our strategy of investing in energy infrastructure for today and tomorrow Gas, electricity and renewables Next generation energy technologies infrastructure investments (Pathfinder Program) • Strategic investments in gas transmission pipelines including the East
Slide 9: Climate Transition Plan established with 2030 climate commitments
APA’s Climate Transition Plan established which details 2030 climate commitments on our pathway to net zero Fulfilled commitment to deliver interim targets and supporting plan Interim commitments1 to 2030: Goal: 35% reduction in operational Interim net zero commitments are: emissions intensity for p
Slide 10: Supporting Australia's energy transition
Supporting Australia's energy transition APA FY22 Results Investor Presentation 9
Slide 11: Gas generation in the NEM stepped up 50% to address shortfalls
Gas generation in the NEM stepped up 50% to address shortfalls in coal and renewable energy supply NEM generation by type; May 21 vs May 22 Gas generation in the NEM in May this year was 1.6 TWh, a 50% increase on May 2021… 17.1 TWh 17.4 TWh 6% 9% Gas • Coal generation in decline 9% Solar • Intermit
Slide 12: Gas balances the intermittency of renewables day-to-day
And gas does this on a day-to-day basis given the intermittency of renewables NEM half-hourly generation over the week 3 August to 10 August 2022 MW 30,000 25,000 Solar 20,000 Wind Hydro & Other 15,000 Gas Coal 10,000 5,000 0 4.8.22 5.8.22 6.8.22 7.8.22 8.8.22 9.8.22 10.8.22 Date Source: OpenNEM APA
Slide 13: Domestic gas investment: secure, affordable, low emissions transition pathway
Investment in domestic gas provides the most secure, affordable and low emissions pathway to achieve the energy transition Continued strong Government advocacy for domestic gas is required to ensure our energy system transitions with the strongest possible security of supply, at the lowest possible
Slide 14: APA supporting investment required for an orderly energy transition
APA supporting the necessary investment required to facilitate an orderly energy transition APA growth driver: APA growth driver: East Coast gas supply West Coast gas demand • Southern production declining as Gippsland basin matures(1) • Strong demand from resources sector, with expansion of west co
Slide 15: Policy certainty providing opportunities in electrification, renewables and new energy technologies
Greater policy certainty now providing opportunities for APA to invest in electrification, renewables and new energy technologies To get to net zero by 2050 we need to rebuild the NEM Electrification NSW Renewable Energy Zones (REZ) 2x Amount of electricity delivered Basslink Regulated/contracted 9x
Slide 16: Financial performance
Financial performance Adam Watson Chief Financial Officer APA FY22 Results Investor Presentation 15
Slide 17: A solid FY22 result led by inflation tailwinds and capital management
A solid FY22 result led by inflation tailwinds, operational activities and ongoing capital management initiatives Revenue(1) Free Cash Flow(3) Significant % of Investing to grow Strong balance up 4.3% up 19.8% revenue organic growth >$1.4b sheet and liquidity indexed to inflation Underlying DPS of 5
Slide 18: FY22 EBITDA growth, strong free cash flow, distributions in line with guidance
FY22 delivering EBITDA growth, strong free cash flow generation, distributions in line with guidance and a stronger balance sheet % Financial summary FY22 FY21(8) Change(9) Key points to note Revenue (excluding pass-through) (1) $m 2,236.6 2,144.5 4.3% • Solid result driven by favourable tariff esca
Slide 19: EBITDA growth driven by Energy Infrastructure
EBITDA growth driven by strong performance of Energy Infrastructure EBITDA by segment % FY22 FY21 Key drivers Change(3) Energy Infrastructure: • East Coast driven by ramp up of Orbost facility and stronger demand on the Victorian Transmission System East Coast $m 648.2 627.5 3.3% West Coast $m 287.8
Slide 20: Revenue growth driven by inflation and demand growth
Revenue growth driven by inflation increases and overall demand growth Key drivers $1m $3m $2,239m $3m • Favourable tariff escalation given exposure to Australian and US inflation, particularly for Wallumbilla Gas Pipeline in 2H22 with +7.5% $48m • Key contributors to operational revenue were strong
Slide 21: Operating cost discipline and investment in capability
Operating cost discipline and ongoing investment in capability to support long term growth • Operations and maintenance cost growth consistent $14m with volume growth and ramp up of Orbost $5m • Higher bidding costs associated with strategic growth $6m projects including Basslink and the pursuit of
Slide 22: Strong growth in Free Cash Flow
Strong growth in Free Cash Flow driven by EBITDA growth, cash tax benefit capital management initiatives 1,081m Key drivers of FCF(1) $19m • Higher Underlying EBITDA $3m • Lower cash interest and tax following 2H21 liability $35m management exercise and the benefit of accelerated depreciation • Lowe
Slide 23: APA well positioned to benefit from rising inflation
APA well positioned to benefit from rising inflation Revenue Drawn debt EBITDA Majority of APA’s revenue is indexed to inflation(1) Fully hedged/fixed with average maturity of 6.7 yrs(2) High EBITDA margins(3) EBITDA as % of revenue CPI linked revenue Drawn debt hedged or fixed at 30 June 2022 Costs
Slide 24: Investing to strengthen foundations for a sustainable future
Investing to strengthen our foundations for a sustainable future Technology Business Resilience Net Zero Investing in systems and processes Ongoing strengthening of APA's to drive efficiency, scalability and Delivering our Net Zero commitments business resilience improve employee experience Investin
Slide 25: Balance sheet capacity to invest in growth
Balance sheet capacity to invest in growth, with organic growth opportunities in excess of $1.4b Continued strengthening of Balance Sheet and liquidity Growth capex to increase in FY23 and FY24 as FY22 FY21 major projects are delivered Cash & Undrawn debt facilities $2.2b $1.9b Capex $m Net Debt $10
Slide 26: Disciplined capital allocation framework
Disciplined capital allocation framework to maximise securityholder value Stay In Business Foundational Organic growth and Distributions Other capital capex capex M&A opportunities management • Ensures safe and reliable • Programs to strengthen the • Creating long term value • Targeting a payout rat
Slide 27: Climate Transition Plan
Climate Transition Plan Rob Wheals CEO and Managing Director APA FY22 Results Investor Presentation 26
Slide 28: Building momentum in commitment to manage climate risk
Building APA’s momentum in its commitment to manage climate risk and opportunity Delivered on our commitment to set Target setting parameters interim targets • Sought to align with the objectives of the Paris • 2020: Climate Position Statement Agreement – well below 2oC • 2020: Resilience testing •
Slide 29: Our interim commitments to 2030
Our interim commitments to 2030 (1) Power generation and electricity Gas infrastructure Key supporting commitments transmission infrastructure Target: 30% emissions reduction Goal: 35% reduction in emissions intensity for power Incorporate Methane Guiding Principles generation Target: 100% renewable
Slide 30: Gas infrastructure emissions reduction of 30%
Reduction of gas infrastructure emission by 30% based on existing technology Considerations: Four material areas of emissions reduction Investment: and avoidance: • Prioritisation of structural abatement where • Required nominal investment is expected to reasonable; responsible offsets where 1. Comp
Slide 31: Emission intensity target of 35% through renewables investment
Emission intensity target of 35% by ongoing investment in renewables Efficient: Our generation portfolio is already efficient with our emissions intensity of 0.29 t CO2-e/MWh, less than half of the National Electricity Market average Goal to meet the AEMO Step Change scenario at 2030 and then aiming
Slide 32: Resilience testing across climate scenarios
Resilience testing confirms impact on different asset classes are highly dependent on climate scenarios 2020: APA 2020 Climate Change Resilience Report; testing resilience of APA at portfolio level 2022: Tested specific asset resilience of four of APA’s assets – Moomba Sydney Pipeline (MSP) and Sout
Slide 33: Summary and Outlook
Summary and Outlook Rob Wheals CEO and Managing Director APA FY22 Results Investor Presentation 32
Slide 34: APA well positioned to support the energy transition
APA well positioned to support the energy transition DPS guidance Inflation Organic growth Investing in our Strong balance pipeline business sheet & liquidity • FY23 DPS 55cps up • Majority of revenue • Organic growth in • Transformation • $2.2b of cash and 3.7% linked to inflation excess of $1.4b t
Slide 35: Strong foundations to pursue energy transition opportunities
Strong foundations to pursue the energy transition opportunities Clear evidence that gas is essential to ensure an orderly Investing in new energy technologies to facilitate the energy transition energy transition • APA investing in the expansion of necessary gas infrastructure to • Supporting elect
Slide 36: Q&A Session
Q&A Session APA FY22 Results Investor Presentation 35
Slide 37: Supplementary Financials
Supplementary Financials APA FY22 Results Investor Presentation 36
Slide 38: Historical underlying EBITDA by asset – Energy Infrastructure
Historical underlying EBITDA by asset – Energy Infrastructure $ millions FY22 FY21 FY20 FY19 FY18 East Coast Grid Wallumbilla Gladstone Pipeline 577.9 549.7 538.9 542.4 515.9 South West Queensland Pipeline 245.2 232.8 254.4 250.0 244.3 Moomba Sydney Pipeline 137.9 151.5 160.8 149.4 147.1 Victorian S
Slide 39: Revenue and EBITDA by geography
Revenue and EBITDA by geography 30-Jun-22 30-Jun-21 (1) Changes Changes %(2) Revenue Energy Infrastructure Queensland $m 1,240.4 1,191.3 49.1 4.1% New South Wales $m 166.4 177.9 -11.5 -6.5% Victoria $m 211.0 172.7 38.3 22.2% South Australia $m 2.5 3.1 -0.6 -19.9% Northern Territory $m 28.4 33.6 -5.2
Slide 40: FY22 Capital Expenditure
FY22 Capital Expenditure FY22 FY21 'Key Drivers: Growth capex Major growth capex projects Regulated $m 68.4 50.2 Non-Regulated $m • East Coast Expansion - East Coast Gas $m 129.3 47.9 • Kurri Kurri Lateral - West Coast Gas $m 217.4 106.4 • Northern Goldfields Interconnect - Power Generation $m 75.7
Slide 41: EBITDA bridge to Free Cash Flow
EBITDA bridge to Free Cash Flow $ million FY22 FY21 % Change Underlying EBITDA 1,692.3 1,628.8 4% less Equity Accounted Earnings (28.2) (30.9) (9%) Underlying EBITDA Excluding Associates/JV's 1,664.1 1,597.8 4% Change in Working Capital / Other 5.5 2.6 109% Payroll Review 4.3 4.2 2% Cash impact of N
Slide 42: Balance Sheet capacity to fund growth
Balance Sheet capacity to fund growth • $2.2b of liquidity • BBB/Baa2 ratings with stable outlook • FFO: Net Debt of 11.5% providing significant headroom to fund (2) growth and support capital management • No material debt refinancing obligations until FY25 (2) • Average cost of debt in FY22 4.6% (2
Slide 43: 5 year normalised financials
5 year normalised financials Financial Performance FY22 FY21(1) FY20(1) FY19(1) FY18(1) Revenue $m 2,732.4 2,605.3 2,590.6 2,452.2 2,386.7 Revenue excluding pass-through(2) $m 2,236.6 2,144.5 2,129.5 2,031.0 1,941.4 Underlying EBITDA(3) $m 1,692.3 1,628.8 1,649.9 1,570.0 1,514.8 Total reported EBITD
Slide 44: APA overview
APA overview APA FY22 Results Investor Presentation 43
Slide 45: APA is a leading Australian energy infrastructure business
APA is a leading Australian energy infrastructure business playing a key role in the transition of Australia's energy system Delivering secure, reliable and affordable energy Diverse energy infrastructure portfolio • Operating critical infrastructure to deliver gas to residential and commercial user
Slide 46: Existing APA operational footprint across energy infrastructure assets
Existing APA operational footprint diversified across a range of energy infrastructure assets APA FY22 Results Investor Presentation 45
Slide 47: Low risk business model
Low risk business model Characteristics of Energy Infrastructure (EI) revenue: EI Revenue by 4% A- rated or better customer credit rating • Solid risk management processes in place 14% BBB to BBB+ rated • Manage counterparty risks by: Investment Grade 7% ~82% 42% Not rated – Diversification of custo
Slide 48: Group structure
Group Structure Group structure APA Infrastructure Trust APA Investment Trust (APA Infra) (APA Invest) • APA Group is listed as a stapled structure on the Australian APA Group Limited Securities Exchange (ASX:APA) (Responsible Entity) • APA is comprised of two registered managed investment schemes:
Slide 49: Regulatory dynamics
Regulatory dynamics APA FY22 Results Investor Presentation 48
Slide 50: Regulation of Australian gas pipelines
Regulation of Australian gas pipelines APA pipelines by regulation type • In FY22, 8.2% of Energy Infrastructure revenue was from full regulated assets • 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 (continued)
Regulation of Australian gas pipelines (continued) Schedule of Current regulatory period 2022 2023 2024 2025 2026 regulatory reset dates for APA Vic Transmission System (1) Goldfields Gas Pipeline Amadeus Gas Pipeline Roma Brisbane Pipeline(2) Access • Apply for a term, generally 5 years arrangement
Slide 52: Thank you
always apa Powering ahead Thank you
Slide 53: For further information
For further information Kynwynn Strong General Manager, Investor Relations M: +61 410 481 383 E: kynwynn.strong@apa.com.au www.apa.com.au