Apa Group · ASX:APA
Apa — Investor Day (May 2021)
63 slides from Apa's investor day presentation, May 26, 2021
Slide 1: APA 2021 Investor Day ASX Announcement
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 26 May 2021 ASX ANNOUNCEMEN
Slide 2: APA Investor Day: Strategy and capability to deliver growth
For personal use only APA Investor Day 26 May 2021 Strategy and capability to deliver growth
Slide 3: Disclaimer
disclaimer For personal use only This presentation has been prepared by Australian Pipeline Limited (ACN 091 344 704) as responsible entity of the Australian Investors should form their own views as to these matters and any assumptions on which any forward-looking statements are Pipeline Trust (ARSN
Slide 4: Welcome
Welcome For personal use only Ask a question Please click on Or Press *1 3 Wind farm blade, Badgingarra Wind Farm in Western Australia
Slide 5: Strategy execution
Rob Wheals For personal use only CEO & Managing Director Strategy execution APA Investor Day 26 May 2021 4
Slide 6: Growth strategy with proven capability in energy infrastructure
Growth strategy with proven capability in energy infrastructure For personal use only Strategy: • Invest in gas, electricity and renewables • Respond to the changing needs of our customers infrastructure (contracted and regulated) in • Maintain disciplined investment, securityholder Australia and No
Slide 7: Proven success as a leading Australian energy infrastructure business
Proven success as a leading Australian energy infrastructure business For personal use only The drivers of our success to date Diverse energy infrastructure portfolio • Consolidated pipeline assets across Gas infrastructure Power Generation Australia over the past 20 years − Built the East Coast Gri
Slide 8: Growth markets for energy infrastructure have informed our strategy
Growth markets for energy infrastructure have informed our strategy For personal use only • Significant growth opportunities in renewables and firming, > >$68 electrification and hydrogen infrastructure • In Australia - >$68 billion of investment opportunities to 2040 − Gas pipeline infrastructure $
Slide 9: Changing generation mix requires significant global investment
Changing generation mix requires significant global investment For personal use only Generation capacity growth ~3x Significant annual investment Wind & solar accounting for ~60% by 2050 in electricity transmission(1) Gas key to firming 20,683 GW US$636 billion 6% Battery New 23% connections 39% Sol
Slide 10: Gas remains a critical energy source
Gas remains a critical energy source For personal use only • Gas accounts for 26% of primary energy consumption Current Australian primary energy Current Australian electricity consumption by fuel type(1) generation by fuel type(1) • 40% of domestic gas is used for electricity generation 2,402 PJ (3
Slide 11: Growth capex accelerating from recent lows
Growth capex accelerating from recent lows For personal use only Current market dynamics Organic growth capex(1) • Policy uncertainty $700 m • Shorter contract terms • Flexible supply arrangements with $600 m customers $500 m • Lower inflationary environment $400 m Recent developments $300 m • RIS
Slide 12: Growth strategy aligned with Net Zero ambition and Sustainability
Growth strategy aligned with Net Zero ambition and Sustainability Roadmap For personal use only • Net Zero ambition embedded in our decision-making − Interim targets to be established in FY2022 • A Climate Change Management Plan Net Zero developed ambition • Future growth opportunities will be consi
Slide 13: The right team to deliver
The right team to deliver For personal use only Operations and asset management Technology and transformation • Process safety and security of supply • Operational and information technology • Asset life cycle planning and management • Next generation energy solutions - Pathfinder program Darren Rog
Slide 14: Uniquely positioned for growth as the energy transition accelerates
Uniquely positioned for growth as the energy transition accelerates For personal use only What we are Why invest in APA • Uniquely diversified and integrated energy • Proven capabilities, skills and experiences in infrastructure business energy infrastructure operations and development • 8th largest
Slide 15: We have the strategy, capability and balance sheet to grow
We have the strategy, capability and balance sheet to grow For personal use only ➢ Growth in Australia − Julian Peck Strategy ➢ Pathfinder − Hannah McCaughey ➢ Growth in North America − Ross Gersbach 9:20am – 11:00am Q & A session #1 20 min break ➢ Capabilities to deliver growth − Darren Rogers, Nev
Slide 16: Targeting growth markets in energy infrastructure
Julian Peck For personal use only Group Executive Strategy and Commercial Targeting growth markets in energy infrastructure APA Investor Day 26 May 2021 15
Slide 17: Significant energy infrastructure investment required as the energy market transitions
Significant energy infrastructure investment required as the energy market transitions For personal use only Energy transition in Australia requires multiple energy solutions • Market forecast and visible pipeline suggests ~$68 billion of investment required by 2040 • Significant investment expected
Slide 18: Energy transition is well underway in Australia
Energy transition is well underway in Australia For personal use only AEMO Integrated System Plan 2020 State based support for continued renewables investment 50 GW 40 GW Solar Category NSW 1 16% Generation Capacity 30 GW Category QLD 2 11% 50% Wind 20 GW Category VIC 3 22% 50% 10 GW Dispatchable(1)
Slide 19: Positioned for further growth in renewables
Positioned for further growth in renewables For personal use only Foundations for further growth Existing presence in renewables and investment • APA is the 8th largest owner of • Capacity to leverage APA’s existing Australian renewable energy projects(1) national footprint to develop wind and solar
Slide 20: Electrification via transmission and distribution networks
Electrification via transmission and distribution networks For personal use only NSW and Victorian Renewable Energy Zones • Governments developing renewable energy zones (REZs) to combine infrastructure and attract private investment • Governments expected to welcome development contestability throu
Slide 21: Gas supporting energy decarbonisation
Gas supporting energy decarbonisation For personal use only Gas can ensure the reliability of a very high • Australia’s NEM(1) can be largely decarbonised renewable generation system (93%) at a lower by further investment in known gas and cost and lower emissions(3) renewables technologies Emission
Slide 22: Gas is the most reliable companion for renewables
Gas is the most reliable companion for renewables For personal use only Case Study South Australia 12th May 2021 – Gas delivered 75% of peak electricity consumption due to low wind and solar availability 2,000 MW 1,800 MW Solar Wind 1,600 MW Battery (Discharging) 1,400 MW Gas Peaking 1,200 MW Gas In
Slide 23: Pipeline gas is lower emissions and generally lower cost than imported LNG
Pipeline gas is lower emissions and generally lower cost than imported LNG For personal use only LNG gas price are generally more Emissions intensity estimate (Kg CO2-e per GJ) expansive and move volatile +19% 70KG $25 Vic gas spot price 60KG LNG spot price(1) $20 50KG 40KG $15 LNG Gas Pipeline Gas
Slide 24: Capability to grow in energy infrastructure
Capability to grow in energy infrastructure For personal use only Regulated/contracted Regulated/contracted Renewables Gas Infrastructure Electricity Infrastructure & Firming Infrastructure Stakeholder Operational capability Funding development management Commercial development Regulatory management
Slide 25: Next generation energy technologies
Hannah McCaughey For personal use only Group Executive Transformation & Technology Next generation energy technologies APA Investor Day 26 May 2021 24
Slide 26: Pathfinder to unlock next generation energy solutions
Pathfinder to unlock next generation energy solutions For personal use only 01 Initial focus areas R&D Investigate net zero technologies (e.g. Parmelia Hydrogen Project) Clean fuels 02 Projects Clean fuels, energy storage and renewable Energy storage hybrids (e.g. Gruyere Power Station Microgrid) 03
Slide 27: APA is well placed to participate in Australia's clean hydrogen economy
APA is well placed to participate in Australia’s clean hydrogen economy For personal use only Australia has a natural competitive advantage in clean hydrogen due to its vast land mass and abundant renewable resource Extensive pipeline network in proximity of existing and proposed renewables linking
Slide 28: Parmelia hydrogen project confirming adaptability of existing pipelines
Parmelia hydrogen project confirming adaptability of existing pipelines For personal use only Parmelia Gas Pipeline (PGP) Hydrogen Project Phase 1 (materials lab testing) completed(1) Testing of the pipeline confirms the technical Materials Hydrogen viability of the pipeline material to transport te
Slide 29: Actively investigating energy storage and microgrids
Actively investigating energy storage and microgrids For personal use only End user Mining site • Energy storage will be an important Indicative technology both on and off-grid microgrid • Customers are increasingly seeking structure integrated renewable solutions through innovation such as microgri
Slide 30: Economics of future energy solutions will drive demand
Economics of future energy solutions will drive demand For personal use only Global green hydrogen cost could be comparable to natural gas by 2050 • Clean hydrogen will become economical through: − government support and regulatory reform $70 GJ − scaled investments $60 GJ − low-cost renewable energ
Slide 31: Capability to participate in future energy solutions
Capability to participate in future energy solutions For personal use only Clean fuels Energy storage Microgrids Infrastructure Stakeholder Operational capability Funding development management Commercial development Regulatory management People and process safety Investment appraisal Project develo
Slide 32: Leveraging capability in one of the world's largest energy markets
Ross Gersbach For personal use only President North American Development Leveraging capability in one of the world’s largest energy markets APA Investor Day 26 May 2021 31
Slide 33: Energy infrastructure investment in the US will be significant
Energy infrastructure investment in the US will be significant For personal use only Energy transition in the US will require investment in multiple energy sources • Market forecast suggests ~US$2.7 trillion of investment required by 2040 • Significant investment expected in electrification and rene
Slide 34: Growth in multiple energy sources to support the energy transition
Growth in multiple energy sources to support the energy transition For personal use only Renewables, coupled with gas, expected Significant annual investment to attract significant investment through in electricity transmission(1) the energy transition US$123 billion 5,458 TWh 23% 4,127 TWh other 42
Slide 35: Substantial investment to be made developing renewables and electrification to achieve Net Zero
Substantial investment to be made developing renewables and electrification to achieve Net Zero For personal use only 2050 RE+ High electrification, renewables only Installed capacity on continental US scenario - Significant challenges exist to achieve Net as of 31 December 2020 Zero without gas − 5
Slide 36: Favourable dynamics driving US to be the world's largest natural gas market
Favourable dynamics driving US to be the world's largest natural gas market For personal use only The US is the world’s largest consumer of natural gas Abundance of natural gas reserves US 17,705 PJ • ~3,400 TCF of total US gas resources Russia 8,650 PJ A primary source of energy China 7,159 PJ • 3
Slide 37: Natural gas is the most cost-efficient and competitive source of energy for heating
Natural gas is the most cost-efficient and competitive source of energy for heating For personal use only ~3.6x Residential ~3x energy cost US$36 US$35 Low-cost natural gas in US (US$ per MMBtu) Natural Gas Electricity • Proximity to abundant reserves • Gas is cheaper than alternative energy sources
Slide 38: The US remains highly attractive
The US remains highly attractive For personal use only Disciplined focus Target markets aligned with refreshed strategy • Cold winter climate regions • Low cost energy sources • Stable and predictable earnings We have capability to successfully own, operate • Attractive returns on equity and develop
Slide 39: US energy infrastructure ambition
US energy infrastructure ambition For personal use only Regulated/contracted Regulated/contracted Renewables Gas Infrastructure Electricity Infrastructure and Firming • Attractive entry point • Integrated gas and electricity • Transferable skills and project distribution networks development experie
Slide 40: Q&A session #1
Q&A session #1 For personal use only Ask a question Please click on Or Press *1 APA Investor Day 26 May 2021 39
Slide 41: For personal use only
~< is) o pe a apa Ajuo Ssn feuosied 10}
Slide 42: Capability to deliver growth
Capability to deliver For personal use only growth Darren Rogers Group Executive Operations Nevenka Codevelle Group Executive Governance and External affairs APA Investor Day 26 May 2021 41
Slide 43: Existing APA operational footprint diversified across a range of energy infrastructure assets
Existing APA operational footprint diversified across a range of energy infrastructure assets For personal use only Assets Gas Pipeline, Processing & Storage Gas-fired Generation Renewables Generation Electricity Transmission Customers Servicing ~100 wholesale and >1.4 million network customers Oper
Slide 44: APA has deep experience owning and operating energy infrastructure
APA has deep experience owning and operating energy infrastructure For personal use only 15,425 km of pipelines, 18 PJ of storage and 90 TJ/d processing plant(1) 99.9% − Peak gas demand in Victorian is around two times Proven Reliable that of electricity Infrastructure Gas transmission − The energy
Slide 45: Delivered over $2 billion of energy infrastructure over the past 5 years
Delivered over $2 billion of energy infrastructure over the past 5 years For personal use only Murrin Murrin Compressor Station, WA Darling downs Solar Farm, QLD Reedy Creek Wallumbilla Pipeline, QLD Gruyere Power station and Badgingarra Wind and Solar Farms, WA Emu Downs Solar Farm, WA Yamarna gas
Slide 46: Relentless focus on the health, safety and wellbeing of our employees and contractors
Relentless focus on the health, safety and wellbeing of our employees and contractors For personal use only 18 Total Recordable Injury Frequency Rate (TRIFR) over FY21 15 12 9 Contractor 6 Total Employee 3 0 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 APA Inve
Slide 47: Process safety at the heart of ensuring safe and reliable energy supply
Process safety at the heart of ensuring safe and reliable energy supply For personal use only APA received the 2020 APGA annual safety award Wallumbilla Gas Hub in Queensland for process safety fundamentals APA Investor Day 26 May 2021 46
Slide 48: Utilising technology to ensure operations are safe and efficient
Utilising technology to ensure operations are safe and efficient For personal use only • Integrated Operations Centre (IOC) – centralised control and contact for all assets and customers − >$30m invested in technologies − Commercial, Operations and Asset Management capability for faster response • T
Slide 49: Case study: Pigging the Victorian Transmission System
Case study: Pigging the Victorian Transmission System For personal use only • Maintaining safe operation of the Victorian Transmission System (VTS) • Pipeline inspections using a bi-directional Pipeline Inspection Gauges (PIG) • 2km narrow section of VTS − Three years of planning, trials and prepara
Slide 50: Transferrable skills and experience to support delivery of diversified ambitions
Transferrable skills and experience to support delivery of APA's diversified energy infrastructure ambitions For personal use only Capabilities which are replicable across different energy infrastructure assets Operations Infrastructure development Commercial and corporate • People and Process safet
Slide 51: Positioning APA as an employer of choice
Positioning APA as an employer of choice For personal use only • Bright Sparks Graduate program: Top 100 Graduate Employer finalist • Australian Association of Graduate Employers: Top 40 intern program • Apprenticeship programs including partnership with Clontarf Foundation supporting young Aborigin
Slide 52: Accelerating momentum for improved sustainability outcomes
Accelerating momentum for improved sustainability outcomes For personal use only Government and • Sustainability roadmap developed Environment regulators • Net Zero ambition embedded in our strategy • Positive Regulatory Impact Statement (RIS) outcome Stakeholder • Foundation Energy Charter signator
Slide 53: Case study: building the West Coast Grid / Northern Goldfields Interconnect
Case study: building the West Coast Grid / Northern Goldfields Interconnect For personal use only Carnarvon Basin • Embedded key social • Detailed Customers performance indicators TGP environmental Environment and PPS NGP surveys completed suppliers • Advanced stage • Pipeline licence and Government
Slide 54: Capital management strategy
Adam Watson For personal use only Chief Financial Officer Capital management strategy APA Investor Day 26 May 2021 53
Slide 55: Capital management strategy focused on maximising security holder returns
Capital management strategy focused on maximising security holder returns For personal use only The Capital Management Strategy review has resulted in a number of modifications: − Established investment hurdle rates by asset class Capital Access to Allocation Capital − Execution of the liability man
Slide 56: APA remains competitive and disciplined in its ambitions for growth
APA remains competitive and disciplined in its ambitions for growth For personal use only Assessment completed to Investment hurdle rates established to reflect: ensure appropriate funding of various asset classes (renewables, electricity transmission, gas pipelines, Forward Cost of capital Gearing
Slide 57: Strong demand for APA capital and capacity to create value
Strong demand for APA capital and capacity to create value For personal use only Debt maturity profile as at 30 April 2021 536 50 Low interest rates and strong support for APA credit provided an opportunity to proactively address the 650 $2.2 billion of debt scheduled to mature in CY2022 1,428 1,396
Slide 58: Distribution policy balances strong investor returns whilst maintaining capital
Distribution policy balances strong investor returns whilst maintaining capital to fund organic growth For personal use only • APA targeting a payout ratio of approximately 60-70% of its Historical cash flow and payout ratios Free Cash Flow: 80% − Maintenance (stay-in-business) capex fully funded fr
Slide 59: Market guidance to be aligned with peers and focussed on investor returns
Market guidance to be aligned with peers and focussed on investor returns For personal use only FY21 guidance reconfirmed: • Distributions per security of 51.0 cps • Underlying EBITDA of between $1,625 million to $1,665 million • Underlying net interest of between $490 million to $500 million • The
Slide 60: A capital strategy that supports our growth ambitions
A capital strategy that supports our growth ambitions For personal use only Regulated/contracted Regulated/contracted Renewables Gas Infrastructure Electricity Infrastructure & Firming Distribution Low cost of Investment Treasury Insightful policy capital grade credit policies communications metrics
Slide 61: Q&A session #2
Q&A session #2 For personal use only Ask a question Please click on Or Press *1 APA Investor Day 26 May 2021 60
Slide 62: Strategy and capability to deliver our vision
Strategy and capability to deliver our vision For personal use only Refreshed strategy Growth opportunities Technology and innovation Aligned with purpose and vision and Energy infrastructure in New energy infrastructure targeted at energy infrastructure Australia and North America solutions (Pathfi
Slide 63: Yoko Kosugi, Investor Relations
For personal use only Yoko Kosugi General Manager Investor Relations & Analytics M: +61 438 010 332 E: ir@apa.com.au www.apa.com.au