Apa Group · ASX:APA
Apa — Investor Day (May 2020)
77 slides from Apa's investor day presentation, May 8, 2020
Slide 1: APA 2020 Virtual 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 8 May 2020 ASX ANNOUNCEMENT
Slide 2: APA Group investor briefing day 2020
APA Group investor briefing day 2020. Friday, 8 May 2020 Virtual event
Slide 3: Disclaimer
Disclaimer This presentation has been prepared by Australian Pipeline Limited (ACN 091 344 704) as responsible entity of the Australian Pipeline Trust (ARSN 091 678 778) and APT Investment Trust (ARSN 115 585 441) (APA Group). The information in this presentation does not contain all the information
Slide 4: Agenda
Agenda 8:30am Jennifer Blake 10:20am Darren Rogers 10:45am Nevenka Codevelle Investor Relations GE Operations GE Governance & -welcome & logistics -overview External Affairs -working with 8:33am Rob Wheals 10:28am Craig Stallan stakeholders to create CEO & Managing Acting GE Strategy & long term val
Slide 5: Ask a question
Ask a question At any time during the webcast, you can submit a question using the ASK A QUESTION box on the webcast dashboard: 3. To close the dashboard view at any time click the minus button at the top of the dashboard menu. 1. Select the ‘Ask a question’ 2. A question box will Q for Rob re: xxxx
Slide 6: Rob Wheals CEO & Managing Director
Rob Wheals CEO & Managing Director ● Welcome & overview ● The changing energy landscape ● Purpose, vision & strategic imperatives ● Decision compass, values & customer promise ● Operating model and leadership team ● Growth opportunities ● Summary 8/05/2020 –APA Investor Briefing Day 2020 5
Slide 7: A leading Australian energy infrastructure business
A leading Australian energy infrastructure business our footprint Gas transmission(1) Darwin Market capitalisation 15,425 km transmission pipelines $12 billion (as at 1 May 2020) Gas distribution(2) $0.6 billion (as at 30 Jun 2000) ~29,000 km gas mains & pipelines ~1.4 million gas consumers Assets o
Slide 8: Two decades of growth & adaptation
Two decades of growth & adaptation of investment into the Australian energy market 2000 2020 Pipeline company Energy Infrastructure 8/05/2020 –APA Investor Briefing Day 2020 company 7
Slide 9: 20 years creating value for securityholders
20 years creating value for securityholders strong track record TSR cents APA’s distributions have increased every year for nearly two decades 2500 60.0 TSR: 2,140%(1) since listing CAGR: 17.2% pa 50.0 2000 27.0* 47.0 45.0 43.5 41.5 40.0 1500 38.0 35.5 36.3 34.4 35.0 32.8 30.0 31.0 29.5 28.0 1000 24
Slide 10: Covid-19 & oil prices
Covid-19 & oil prices ● Pivotal part of essential service supply chain capacity contracts & regulated revenues protect against near-term volume risk but not entirely immune from longer term economic downturn ● Employees have responded to the challenge enabled continuing strong results & confir
Slide 11: Long-term success driven by fundamentals
Long-term success driven by fundamentals ● Growth in global energy demand ● Resilience of our low risk business model through economic cycles ● Portfolio of high-quality long-life assets ● Strong skills and capability to navigate a constantly changing environment ● Operational and safety excellence
Slide 12: Rob Wheals CEO & Managing Director
Rob Wheals CEO & Managing Director ● Welcome & overview ● The changing energy landscape ● Purpose, vision & strategic imperatives ● Decision compass, values & customer promise ● Operating model and leadership team ● Growth opportunities ● Summary 8/05/2020 –APA Investor Briefing Day 2020 11
Slide 13: Global primary energy demand continues to grow
global primary energy demand continues to grow under most scenarios Global Primary Energy Consumption Forecast Global Primary Energy Consumption 22,000 1920-2018, mtoe (IEA scenarios) 2018-2040, mtoe 20,000 +34% Millions of tonnes of oil equivalent 18,000 +24% 16,000 14,000 -7% 12,000 10,000 +43% 8,
Slide 14: The energy transformation is underway
The energy transformation is underway significant ongoing investment required Transformation is underway Challenges & opportunities ● Coal to renewables & gas ● Firming generation ● Rooftop solar ● Market structure ● Consumers selling into grid ● New gas supply ● Electrification e.g. EVs ● New techn
Slide 15: Transformation requires an holistic approach
Transformation requires an holistic approach Ambition to reduce emissions ● Ambition needs to be supported by a plan ● Plan needs to include impact Decarbonise supply HOLISTIC Decarbonise demand on costs, reliability and APPROACH resilience Balancing Power costs and conversion technologies 8/05/2020
Slide 16: A spectrum full of business opportunity for APA
A spectrum full of business opportunity for APA along the entire decarbonisation continuum low decarbonisation Illustrative deep decarbonisation $ Alternative Policy approaches $$$$$$$ lowest investment highest investment Technology Transition Partial decarbonisation Status quo decarbonisation Net z
Slide 17: Gas is a key enabler of the future energy mix
Gas is a key enabler of the future energy mix regardless of future scenario Total forecast worldwide natural gas usage The future of gas 7,000 +49% ● Electricity – decarbonising & firming 6,000 +37% 5,000 ● Industrial – key energy source 4,000 -2% ● Residential & Commercial – cost BCM 3,000 efficien
Slide 18: Rob Wheals CEO & Managing Director
Rob Wheals CEO & Managing Director ● Welcome & overview ● The changing energy landscape ● Purpose, vision & strategic imperatives ● Decision compass, values & customer promise ● Operating model and leadership team ● Growth opportunities ● Summary 8/05/2020 –APA Investor Briefing Day 2020 17
Slide 19: APA - embracing change – adapting and leading
APA - embracing change – adapting and leading Purpose: why we exist Vision: what we aspire to We strengthen To be world class in communities through energy solutions responsible energy By responsible energy we mean: As world class we want to be known for: • Doing the right thing, even in tough situa
Slide 20: Our Strategic Imperatives
Our Strategic Imperatives • Empower employees to make decisions. People & • Foster robust governance. Culture • Reward the right behaviours. Operational • Leverage our expertise to drive value. Excellence Customer • Provide single point of accountability. Centric Strategic • Allow us to provide the
Slide 21: Our Decision Compass, Values & Customer Promise
Our Decision Compass, Values & Customer Promise Our Purpose is we strengthen communities Our Decision Compass: through responsible energy. • Do things safely. • Take a long-term focus. Our Vision is to be world class • Manage APA money as if our own. in energy solutions. • Do what we say we’ll do. •
Slide 22: Operating model & leadership team
Operating model & leadership team strategic alignment CEO & MD Rob Wheals Corporate Functions: Govern & Support Business Units: Execution People, Governance North Transformation Strategy & Infrastructure Safety & Finance & External Operations & Technology Commercial Development America Culture Affai
Slide 23: Rob Wheals CEO & Managing Director
Rob Wheals CEO & Managing Director ● Welcome & overview ● The changing energy landscape ● Purpose, vision & strategic imperatives ● Decision compass, values & customer promise ● Operating model and leadership team ● Growth opportunities ● Summary 8/05/2020 –APA Investor Briefing Day 2020 22
Slide 24: Growth strategy
growth strategy playing a leadership role in a responsible energy environment EAST WEST APA’s strategy: “supply” ● Deliver services our customer value “demand” consistent with our Customer Promise - new infrastructure - new infrastructure to connect new gas for new projects ● Grow our pipelines and
Slide 25: Line of sight to over $4bn of growth opportunities
Line of sight to over $4bn of growth opportunities Prospective & Active Track record of growth capex investment: 5-10 years >$400 m pa average over the last 5 years >$4bn >$300 m pa average over the last 10 years A$m $800m $700m 743 $600m Active $500m 2-3 years $400m 402 463 ~250 373 ~$1bn $300m 346
Slide 26: Connection to new gas supply - East
EAST Connection to new gas supply - East ● Southern basins in accelerated decline, additional volumes required 2021 ● New supply required to meet existing demand ● Western Slopes Pipeline East Coast Australia gas supply and demand ● Frontier basin opportunities including: – Beetaloo / McArthur – Gal
Slide 27: Demand growth - West
Demand growth - West 734 PJ WEST 16,830 PJ ● Available and affordable supply 45,669 PJ ● Prospective Perth basin TGP PPS NGP ● Resource outlook remains strong with new connection demand continuing Western Iron ore GGP Australia Gold, Silver AL GPS Nickel, Cobalt, Manganese, Vanadium MP YGP Copper MM
Slide 28: Energy transformation
Energy transformation planning for an orderly transition ENERGY FUTURE “…the only way to meet the energy needs of the future without sacrificing standards of living, or undermining the economy, is by planning for an orderly transition that embraces science and technology as the stepping stones to th
Slide 29: US due diligence
US due diligence NORTH AMERICA ● Gas industry dynamics – Significant reserves, >30 years – Conservative pricing – Increasing domestic & export demand – Cost of electrification in colder regions is prohibitive & counterproductive from an emissions perspective ● Diversity of opportunities ● Political
Slide 30: Summary
Summary Growth with Reasonable Yield Strong business fundamentals Capability to navigate a constantly changing world ● High quality asset footprint ● Long term contracts ● Highly experienced team ● Long term & low risk ● Creditworthy growth capex counterparties ● Operational & safety excellence ● St
Slide 31: Ross Gersbach President North American Development
Ross Gersbach President North American Development ● US natural gas market overview ● Current market trends – LDCs and pipelines ● Economic & regulatory environment ● Screening criteria & target sectors ● US decarbonisation considerations 8/05/2020 –APA Investor Briefing Day 2020 30 30
Slide 32: U.S natural gas market overview
U.S natural gas market overview shale plays providing abundant, low-priced natural gas Current daily average dry gas production by region U.S. natural gas proved reserves & Henry Hub price (tcf & USD) Bakken (December 2019, bcf/d) 2.0 $10.5 600 proved reserves $9.0 500 proved Marcellus/Utica $7.5 40
Slide 33: Target sectors
Target sectors APA is focussing on lower risk businesses 8/05/2020 –APA Investor Briefing Day 2020 32
Slide 34: Screening criteria
Screening criteria APA’s experience to date has revealed a preference for the following asset characteristics • Regulated and/or contracted businesses Commercial #1 • Supportive regulatory environment environment • Geographic advantages and availability of follow on transactions Operational #2 • Exi
Slide 35: Economic & regulatory environment
Economic & regulatory environment US regulators have different objectives than Australian regulators Pipelines LDC’s • Returns are significantly higher in the US than in Australia, • LDC returns are set by State based regulators and often set as due to differing objectives among the regulators part
Slide 36: Current market trends in US LDCs & pipelines
Current market trends in US LDCs & pipelines estimated asset class of approximately USD 450 billion at the end of 2019(1) ● LDCs investing heavily in reliability, modernisation ● Opportunities exist for APA to participate in asset sale & integrity programs, often pre-approved by processes today regu
Slide 37: Price cycles
Price cycles APA’s currency relative to US gas LDC & pipeline peers has been quite favourable 20.0x NTM enterprise value / EBITDA multiple – last 10 years 17.0x APA 12.6x 14.0x +25% Gas LDCs 11.0x 12.5 x +46% 8.0x Pipeline 7.4x 5.0x (24%) Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-1
Slide 38: US decarbonisation considerations
US decarbonisation considerations significant regional variation in cost and feasibility • No US federal policy on economy-wide CO2 emissions reduction – Unlikely one will be enacted in the near term given the political environment ● Some states have set aggressive emissions-reduction targets requir
Slide 39: GHG emission reduction options
GHG emission reduction options electrification of residential heating the most costly option for decarbonisation (USD* / mt of CO2e removed) * Figures in real 2016 USD $900 $572 to $806 $800 • Does not include the significant cost of infrastructure modifications to $700 accommodate residential elect
Slide 40: US decarbonisation & gas pipelines
US decarbonisation & gas pipelines continued uses of natural gas will require pipeline transportation for years to come • Natural gas has uses in the U.S. not impacted by state- • Also, natural gas utilities will need reliable and consistent imposed emissions mandates or goals access to natural gas
Slide 41: Hannah McCaughey GE Transformation & Technology
Hannah McCaughey GE Transformation & Technology ● The energy transformation is underway ● Key technology transformations in play today and new waves emerging ● Gas is a key enabler of energy decarbonisation 8/5/2020 – APA Investor Briefing Day 2020 40
Slide 42: Transformation of energy is reshaping our world
Transformation of energy is reshaping our world clear trends are emerging Key Trends Decarbonisation is underway – significant investment already made and more required A portfolio of technology solutions will be required to meet the energy trilemma Data and technology will transform large infrastru
Slide 43: Four major energy technology transformations from recent decades
Four major energy technology transformations from recent decades that are still playing out 1 LNG (and floating LNG) has created new markets and further developments in technology will increasingly drive price convergence. 2 Shale gas has changed the economics of US industry and global energy market
Slide 44: Gas is a key enabler of the energy decarbonisation roadmap
Gas is a key enabler of the energy decarbonisation roadmap 8/05/2020 –APA Investor Briefing Day 2020 43
Slide 45: Q&A – session 1
Q&A – session 1 Use the ASK A QUESTION button to submit a question. For those dialled in, press *1 & wait for the operator before asking your question. 15min BREAK – stay logged into webcast -teleconference participants can hang up & dial in again pre-next session Next session: 10:20am Darren Rogers
Slide 46: Darren Rogers GE Operations
Darren Rogers GE Operations ● Operations – leverage scale & efficiency ● Customer focus ● Integrated Operations Centre ● Operational excellence 8/05/2020 –APA Investor Briefing Day 2020 45
Slide 47: Operating model - operations
Operating model - operations Purpose APA has brought together its Power, Transmission, Midstream and Network assets to safely drive efficiency and effectiveness by leveraging its scale to deliver value for its customers. Strategic imperatives Operational Customer People & Stakeholder Financial Growt
Slide 48: Operations overview
Operations overview Assets Customers ● Transmission Pipelines: + 15,000km , +250 Receipt & Delivery ● 74 compressors, + 30 operating bases across every state & territory ● 357 MW of renewable energy, 377 MW gas fired generation ● Storage: Dandenong LNG ~12,400 Tonnes, Mondarra: ~18PJ ● Mid stream as
Slide 49: Customer centric - IOC
Customer centric - IOC central point of contact for all national customers (scheduling, control and payment) ● Recently incorporated power & mid stream capability ● Scale delivers benefits – technology investment has paid off – 7.5m kilometres driven every year, all monitored through IVMS – Controls
Slide 50: Operational excellence- process safety
Operational excellence- process safety ● Process Safety - The safe operation of APA’s assets such that there is no major accident event as a result of a harmful substance release. ● APA framework based off international best in class ● Final stages of a 2 year implementation ● KPI & dashboard to dri
Slide 51: Integrity and reliability
Integrity and reliability Integrity Maintenance Comprehensive program to ensure the integrity of our assets including • Intelligent pigging, direct excavation and inspection of pipelines • Integrity program for above ground facilities Key contributor to Australian standard updates Share industry bes
Slide 52: Craig Stallan and Kevin Lester
Craig Stallan Acting GE Strategy & Commercial Kevin Lester GE Infrastructure Development ● Orbost Gas processing plant 8/5/2020 – APA Investor Briefing Day 2020 7/05/2020 51 51
Slide 53: Orbost gas processing plant – project background
Orbost gas processing plant – project background ● acquired by APA from Cooper Energy in 2017 ● extensive upgrade of the plant by APA – Multi Year Gas Processing Agreement + Options ● Former Patricia Baleen Gas Plant – Commissioned 2003 – Process Patricia Baleen Gas, export to EGP – Upgraded for Lon
Slide 54: Plant comparison
Plant comparison original current 8/05/2020 –APA Investor Briefing Day 2020 53
Slide 55: Transaction & project timeline
Transaction & project timeline ● Jan 2017 Cooper Energy commenced Sole Project detailed design ● Q1 2017 APA Due diligence of gas plant & development project ● Q2 2017 APA acquired Orbost gas plant from Cooper Energy ● Conditional agreements with Cooper for plant, project & processing ● 1 Jul 2017 A
Slide 56: Orbost supply
Orbost supply Orbost Gas Processing Plant was originally built to process gas from the Patricia / Baleen fields. Cooper Energy developed the Sole Gas field with two wells and The Longtom gas field constructed a 65km was developed and pipeline connecting the connected to Orbost field to Orbost. follo
Slide 57: APA upgrade project scope
APA upgrade project scope ● Plant upgrades to process sour gas to meet sale gas specification – Design specification - sour gas containing up to 3000ppm H2S at 68TJ/d ● Upgrade and modification to the existing Orbost Gas Plant: – Subsea control interfaces – Inlet metering & quality monitoring – Inle
Slide 58: Flow & process of gas at Orbost
Flow & process of gas at Orbost 8/05/2020 –APA Investor Briefing Day 2020 57
Slide 59: Highlights & challenges
Highlights & challenges ● Sole and Orbost Gas Plant will supply 10% of Victoria’s gas demand ● HSE performance – 1.4 million man hours and 20 months of construction and commissioning with zero LTIs (TRIFR = 2), no reportable environmental incidents and zero community complaints ● APA is a significan
Slide 60: Orbost – March 2020
Orbost – March 2020 8/05/2020 –APA Investor Briefing Day 2020 59
Slide 61: Peter Fredricson Chief Financial Officer
Peter Fredricson Chief Financial Officer ● Capital management ● Debt maturity profile & EMTN outcome ● Contract & counterparty creditworthiness ● FY20 Guidance 8/5/2020 – APA Investor Briefing Day 2020 7/05/2020 60 60
Slide 62: Strong liquidity & debt position
Strong liquidity & debt position overview credit ratings distribution policy Cash and committed Moody’s Baa2 Fully covered by operating cash flow undrawn facilities of (outlook Stable, confirmed Feb 2020) Grow generally in line with operating around $2.2 bn as at cash flow 30 April 2020 to meet
Slide 63: Debt maturity profile – post Euro MTN
Debt maturity profile – post Euro MTN APA’s debt maturity profile as at 30 April 2020 EUR 600 million 10.2 year Medium Term – 24 April 2020 $1,600m Headroom (bank borrowings) $1,400m Bank borrowings (1) ● Maturity date of 15 July 2030 Sterling MTN $1,200m ● Fixed coupon rate of 2.0% p.a. Euro MTN $1
Slide 64: Contract & counterparty creditworthiness
Contract & counterparty creditworthiness 1H FY20 Energy Infrastructure revenue split: Revenue Type ● APA’s assets deliver energy to markets, often long distances from where gas is produced ● Energy remains an essential input into our daily lives ● APA has not seen material & unusual changes to energ
Slide 65: FY20 guidance – April 2020
FY20 guidance – 21 April 2020 1H FY2020 results Revised 21 April 2020 Revised vs FY2019 results +3.8% to +5.2% EBITDA $1,660 - $1,690 million $1,635 - $1,655 million ($1,574 million) In the order of 50.0 cents +6.4% Distribution per security Unchanged per security (47.0cps) ● EBITDA reflects the ful
Slide 66: Nevenka Codevelle GE Governance & External Affairs
Nevenka Codevelle GE Governance & External Affairs Working with our stakeholders to create long term value ● Stakeholder value creation ● Consumers and communities ● Government and regulators ● Sustainable growth – a long term view 8/5/2020 – APA Investor Briefing Day 2020 7/05/2020 65 65
Slide 67: Stakeholder value creation
Stakeholder value creation A purpose-led organisation Driving change and shaping our internal and external environment communities through: • strategic focus on APA’s role in an regulators customers interconnected energy system strengthening • strengthened relationships with all government communiti
Slide 68: Customers and energy industry
Customers and energy industry getting it right Customer Promise Red Dot Program The Energy Charter Keeping the customer at the Focus on corporate culture Founding signatory to The Energy centre of everything we do. enhancement, measurement Charter, lead and contribute to and improvement initiatives.
Slide 69: Consumers and communities
Consumers and communities new ways of working Community Investment Increased focus on the people Program connecting our who use the energy we deliver business and our people to the for the lives they live communities where we work Engaging with, and listening to Understanding and consumers and the c
Slide 70: Government and regulators
Government and regulators collaborating for common goals Evolving ways of working… to drive better outcomes • Strengthen relationship with regulators and • Engaging with customers, consumer groups Government in lead up to regulatory engagement • Collaborative approach, co-design for • Participating
Slide 71: Taking a long term view
Taking a long term view making risk-based decisions today to deliver sustainable growth for the future Risk maturity: frameworks, Corporate governance measures and metrics. framework, early Embedding risk culture. adoption of standards. Understanding emerging Developing ESG capability, risks, includ
Slide 72: ESG spotlight: Responding to the risks and opportunities of climate change
ESG spotlight: Responding to the risks and opportunities of climate change Understand Act Communicate Scenario analysis Carbon management plan Climate change position statement • Second climate-related scenario • Enterprise-wide carbon • APA Climate Change Position analysis in flight management plan
Slide 73: Elise Manns GE People, Safety & Culture
Elise Manns GE People, Safety & Culture ● Operating under unique circumstances ● Focus areas ● HSE Strategic Plan FY20-FY22 8/5/2020 – APA Investor Briefing Day 2020 72
Slide 74: Our people are our strength
Our people are our strength from raging bush fires, floods and a global Pandemic, this year has been like no other Our focus has been on: ● Keeping our people and our contractors safe ● Embracing a de-centralised and digitally and healthy everyday; enhanced operating model to deliver industry leadin
Slide 75: Key Areas of Focus
Key Areas of Focus Safety and Environment: • FY 2020 TRIFR rate is disappointing but LTIR remains low Our STARS values: • New HSE Strategy with targeted health, safety and wellbeing interventions Safe. • Organisational structural changes to put expertise in the font-line Trustworthy. Adaptable. • Bu
Slide 76: HSE Strategic Framework: FY20 – FY22
HSE Strategic Framework: FY20 – FY22 Caring for people, communities, the environment and our assets Technology Environment HSE leadership Contractor Health and systems and and heritage and culture management Process safety wellbeing analytics management Creating a Critical to Caring for the Increasi
Slide 77: Final Q&A session
Final Q&A session Use the ASK A QUESTION button to submit a question. For those dialled in, press *1 & wait for the operator before asking your question. Contact: Jennifer Blake – Head of Investor Relations E Jennifer.blake@apa.com.au +61 455 071 006 8/05/2020 –APA Investor Briefing Day 2020 76