Apa Group · ASX:APA
Apa — H1 FY2022 Earnings Presentation
47 slides from Apa's earnings presentation, Feb 23, 2022
Slide 1: Financial Results Presentation
Australian Pipeline Ltd ACN 091 344 704 | Australian Pipeline Trust ARSN 091 678 778 | APT 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 23 February 2022 ASX ANNOUN
Slide 2: Results for the half year ended 31 December 2021
Results for the half year ended 31 December 2021 23 February 2022
Slide 3: Disclaimer
disclaimer This presentation has been prepared by Australian Pipeline Limited (ACN 091 344 704) as responsible entity of the Australian performance to differ materially from such forward-looking statements, opinions and estimates. Pipeline Trust (ARSN 091 678 778) and APT Investment Trust (ARSN 115
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: Our people are the keys to our success
Our people are the keys to our success 4
Slide 6: APA is a leading energy infrastructure business
APA is a leading energy infrastructure business Creating value for our Securityholders and the Diverse energy infrastructure portfolio Community • Developing and operating critical energy Gas infrastructure Power Generation infrastructure Transmission (1) Renewable energy (1) – Australia's largest g
Slide 7: Relentless focus on operational reliability, health, safety and wellbeing
Relentless focus on operational reliability, health, safety and wellbeing Reliable 99.9% ~32% reduction Safety at the in Total Recordable infrastructure Gas transmission nominations delivery(1) forefront Injury Frequency Rate operations (TRIFR)(2) Total Recordable Injury Frequency >97% Rate(3) Gas t
Slide 8: Solid 1H22 financial results
Solid 1H22 financial results • Solid financial performance reflecting recent investments, improving conditions for gas infrastructure and the broader economic recovery Revenue up 4.3% with FCF up 22.6% driven by positive contributions Underlying higher EBITDA, lower from every operating EBITDA up 4.
Slide 9: Strong progress on the execution of APA's strategy
Strong progress on the execution of APA's strategy Gas, electricity and • $150m investment in Mica Creek Solar Next generation energy • Parmelia Gas Pipeline Hydrogen Project phase 2 renewables infrastructure Farm technologies • Proposal for a hydrogen feasibility study in the investments • Kurri Ku
Slide 10: Gas will play a critical role in Australia's energy system
Gas will play a critical role in Australia's energy system as an essential companion to renewables and a critical industrial energy source • In Australia, gas accounts for: National Electricity Market (NEM) Gas is typically around half the – 27% of primary energy Generation mix(1) emissions intensit
Slide 11: Removing coal power generation from South Australia increased gas share
Removing coal power generation from South Australia increased gas as a proportion of the state’s energy mix to 35% 14.4 TWh 14.9 TWh 5.7% • Five years after South Australia removed coal from 18.0% its energy system, gas continues to play a vital role to support renewables and has grown from 31% to 3
Slide 12: Organic growth pipeline progress across all energy markets
APA continues to make progress with our organic growth pipeline across all energy markets Gas infrastructure East Coast Grid Expansion Northern Goldfields Interconnect Kurri Kurri Lateral Pipeline • Increasing winter peak capacity up to • A new 580km pipeline that increases • Proposed development of
Slide 13: Acquisition of 100% of Basslink senior secured debt
APA is executing its strategy to grow its electricity footprint with a strategic investment to acquire 100% of Basslink senior secured debt Acquisition of 100% of Basslink senior secured debt(1) Debt acquired at a discount to face value. APA intends to work constructively with the receivers and mana
Slide 14: Critical role in Australia's energy transition via future energy technologies
APA is also playing a critical role in Australia's energy transition via its investment in future energy technologies Parmelia Gas Pipeline Hydrogen Project Victorian Transmission System Net Zero 2050 • Proposal to develop Australia’s first • Progressing our ambition to achieve • Proposed 100% hydro
Slide 15: Progressing our Sustainability Roadmap to 2024
Progressing our Sustainability Roadmap to 2024 BUILD ACCELERATE MAINTAIN & EVOLVE Priority issues to be built into strengths Fundamental issues which require strengthening Existing plans & processes to evolve via ESG lens • Climate Change Transition & Risk • Environmental and heritage management • S
Slide 16: Financial performance
Financial performance Adam Watson Chief Financial Officer APA 1H22 Results Investor Presentation 15
Slide 17: 1H22 solid financial performance
1H22 solid financial performance $1.1 billion $859.8 million $515.1 million up 4.3% up 4.5% up 22.6% Revenue(1) Underlying EBITDA(1) Free Cash Flow 25.0 cents $1.8 billion $155.6 million up 4.2% Cash and undrawn debt Profit after tax(2) Distribution Per Security facilities(3) Notes: (1) Revenue excl
Slide 18: 1H22 Revenue – positive contributions from all operating segments
1H22 Revenue – positive contributions from all operating segments Key Drivers • Favourable tariff escalation given exposure to Australian and US inflation indices • Operating revenue growth across all segments, with particularly strong growth from the Victorian Transmission System and Diamantina Pow
Slide 19: 1H22 Expenditure - operating cost discipline
1H22 Expenditure - operating cost discipline and investment in capability to support long term growth Key Drivers • Ongoing discipline in management of Operations & Maintenance • Higher bidding costs associated with corporate development activities • Higher insurance premiums, and enhancements acros
Slide 20: 1H22 Free Cash Flow and Distributions
1H22 Free Cash Flow and Distributions - solid earnings growth and benefits stemming from recent capital management initiatives Key Drivers Distribution target • Lower tax payments and interest paid as a result of the March 2021 $2.2b debt refinance • Payout ratio of 60-70% of Free Cash Flow(1) • Fav
Slide 21: Growing organic growth pipeline, now in excess of $1.4 billion
Growing organic growth pipeline, now in excess of $1.4 billion(1) FY22 FY23 FY24 Select major growth projects Northern Goldfields Interconnect $460m Gruyere Hybrid Energy Microgrid $40m Western Outer Ring Main $167m ECG Expansion stage 1 & 2(2) $270m Mica Creek Solar Farm $150m Kurri Kurri Pipeline(
Slide 22: Capital strategy complements strong investment fundamentals
Capital strategy complements strong investment fundamentals Strong distributions Stable business Enhanced investor (60% to 70% of free operations and solid engagement and cash flow on a full year cash flow conversion communication basis) High level of liquidity Strong balance sheet Low cost of capit
Slide 23: APA is positively leveraged to rising inflation
APA is positively leveraged to rising inflation Majority of APA’s revenue is 100% of drawn debt hedged High EBITDA margins(3) indexed to inflation(1) with average maturity of 7 yrs(2) CPI linked revenue Drawn debt hedged EBITDA as % of revenue Other revenue Costs as % of revenue With the majority of
Slide 24: Capital management delivering a strong balance sheet to support growth
Capital management delivering a strong balance sheet to support growth FFO : Debt of 11.5% providing BBB / Baa2 ratings with $1.8b of liquidity headroom to fund growth Stable outlooks and support capital management1 Average cost of debt No material debt 4.6% (1H21 5.2%) Drawn debt is 100% refinancin
Slide 25: FY22 Financial outlook
FY22 Financial outlook Distribution Beneficiary of reconfirmed FY22 distribution per rising inflation Rising inflation having a favourable security 53.0 cps impact on earnings, with almost all reconfirmed, a revenue inflation linked 3.9% increase on FY21 Wallumbilla Gas Investing to create Pipeline
Slide 26: Summary and Outlook
Summary and Outlook Rob Wheals CEO and Managing Director APA 1H22 Results Investor Presentation 25
Slide 27: Strong business fundamentals, delivering on strategy and growth opportunities
Strong business fundamentals, delivering on strategy and attractive growth opportunities to create securityholder value Leading energy Delivering on our Attractive growth infrastructure company strategy opportunities • Solid 1H22 financial performance • Organic pipeline in excess of $1.4billion • Fu
Slide 28: Q&A Session
Q&A Session APA 1H22 Results Investor Presentation 27
Slide 29: Supplementary information
Supplementary information APA 1H22 Results Investor Presentation 28
Slide 30: APA overview
APA overview APA 1H22 Results Investor Presentation 29
Slide 31: Existing APA operational footprint diversified across energy infrastructure assets
Existing APA operational footprint diversified across a range of energy infrastructure assets Assets Gas pipelines, processing & storage Gas-fired generation Renewables generation Electricity transmission Customers Servicing ~80 wholesale and >1.4 million network customers Operations >1,200 employee
Slide 32: Low risk business model
Low risk business model Energy Infrastructure revenue by Revenue type 11.7% Capacity charge • Solid risk management processes in place 2.3% Regulated • Continue to manage counterparty risks by: 8.9% ~87% Contracted fixed Take or Throughput & other variable • Diversification of customers and industry
Slide 33: Group structure
Group Structure Group structure Australian Pipeline Trust APT Investment Trust (APT) (APTIT) • APA Group is listed as a stapled structure on the Australian Australian Pipeline Limited Securities Exchange (ASX:APA) (Responsible Entity) • APA is comprised of two registered managed investment schemes:
Slide 34: Financial Metrics
Financial Metrics APA 1H22 Results Investor Presentation 33
Slide 35: 1H22 financial summary
1H22 financial summary Results $ million 1H22 1H21(1) Change Key Drivers Positive contribution across all segments including Victorian Revenue(2) 1,117.7 1,071.8 4.3% Transmission System, Diamantina Power Station and Asset Management Positive contribution across all operating segments partly offset
Slide 36: Underlying EBITDA by segment
Underlying EBITDA by segment $ million 1H22 1H21(1) Change Key drivers Increased contribution from Orbost and higher gas volumes in East Coast 341.9 326.8 4.6% Victoria West Coast 137.1 135.8 1.0% Contributions from newly commissioned laterals US CPI tariff impact and favourable foreign exchange hed
Slide 37: 1H22 underlying EBITDA up 4.5% to $860 million
1H22 underlying EBITDA up 4.5% to $860 million Key Drivers • Favourable tariff escalation given exposure to Australian and US inflation indices • Operating revenue growth across all segments, with particularly strong growth from the Victorian Transmission System and Diamantina Power Station • Asset
Slide 38: 1H22 capital expenditure
1H22 capital expenditure $ Million 1H22 1H21(1) Growth Capex Key drivers: Regulated 34.7 21.3 Major growth capex projects: Non-Regulated • East Coast Expansion – Stage 1 East Coast Gas 57.5 58.1 • Orbost Phase 2b upgrades West Coast Gas 76.3 33.7 • Kurri Kurri Lateral Power Generation 27.0 31.9 • No
Slide 39: 5 year normalised financials
5 year normalised financials Financial Performance 1H22 1H21 FY21 FY20(1) FY19(1) FY18(1) FY17 Revenue $m 1,384.4 1,295.0 2,605.3 2,590.6 2,452.2 2,386.7 2,326.4 Revenue excluding pass-through(2) $m 1,117.7 1,071.8 2,144.5 2,129.5 2,031.0 1,941.4 1,888.3 Underlying EBITDA(3) $m 859.8 822.8 1,633.0 1
Slide 40: Historical underlying EBITDA by asset – Energy Infrastructure
Historical underlying EBITDA by asset – Energy Infrastructure $ millions 1H22 1H21 FY21 FY20 FY19 FY18 FY17 East Coast Grid Wallumbilla Gladstone Pipeline 278.8 270.0 549.7 538.9 542.4 515.9 488.0 South West Queensland Pipeline 120.9 118.0 232.8 254.4 250.0 244.3 242.4 Moomba Sydney Pipeline (1) 76.
Slide 41: Debt maturity profile
Debt maturity profile APA maintains diversity of funding sources and spread of maturities Undrawn committed facilities 536 AUD AUD DCM bonds(2) USD DCM bonds(3) 1,396 (USD 1,100) 1,140 (USD 886) 879 (USD 683) 1,104 1,018 925 500 770 738 379 (USD 300) 650 450 200 50 50 133 FY22 FY23 FY24 FY25 FY26 FY
Slide 42: Energy market dynamics and overview
Energy market dynamics and overview APA 1H22 Results Investor Presentation 41
Slide 43: Australian gas market supply source transformation
Australian gas market supply source transformation AEMO forecast suggest shortfall in Eastern New Supply required to meet peak southern Australia gas production vs demand demand 2,000 PJ 2,116 PJ 1,943 PJ Forecast demand Northern production 17.2% 1,500 PJ storage 16.3% Supply Gap(1) 62.4% 1,000 PJ O
Slide 44: Electricity market transition
Electricity market transition AEMO Integrated System Plan 2020 State based support for continued renewables investment 50 GW 40 GW Solar Category NSW (2)1 19% Halving of emissions Generation Capacity 30 GW Category QLD 2 14% 50% Wind 20 GW Category VIC 3 25% 50% 10 GW Dispatchable(1) Category SA 4 5
Slide 45: Regulation of Australian gas pipelines
Regulation of Australian gas pipelines APA pipelines by regulation type • In 1H22, 8.9% 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 46: 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 Roma Brisbane Pipeline Victorian Transmission System Goldfields Gas Pipeline Amadeus Gas Pipeline Access • Apply for a term, generally 5 years arrangement
Slide 47: For further information
For further information Kynwynn Strong General Manager, Investor Relations M: M +61 410 481 383 E: kynwynn.strong@apa.com.au www.apa.com.au