Annual Me e ting Pr e se ntation Atta c he d is the Chairma n a nd - - PDF document

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27 Oc to b e r 2016 ASX ANNOUNCE ME NT

APA Gr

• up (ASX: APA)

(a lso for r e le a se to APT Pipe line s L imite d (ASX: AQH))

Annual Me e ting Pr e se ntation

Atta c he d is the Chairma n a nd Ma na g ing Dire c to r’ s a ddre ss to the Annua l Me e ting .

Ne ve nka Code ve lle

Co mpa ny Se c re ta ry Austra lia n Pipe line L imite d F

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About APA Gr

• up (APA)

APA is Austra lia ’ s la rg e st na tura l g a s infra struc ture b usine ss, o wning a nd/ o r o pe ra ting a ro und $19 billio n o f e ne rg y infra struc ture a sse ts. Its g a s tra nsmissio n pipe line s spa n e ve ry sta te a nd te rrito ry o n ma inla nd Austra lia , de live ring a ppro xima te ly ha lf o f the na tio n’ s g a s usa g e . APA ha s dire c t ma na g e me nt a nd o pe ra tio na l c o ntro l o ve r its a sse ts a nd the ma jo rity o f its inve stme nts. APA a lso ho ld s mino rity inte re sts in a numb e r o f e ne rg y infra struc ture e nte rprise s inc luding SEA Ga s Pipe line , SEA Ga s (Mo rtla ke ) Pa rtne rship, E ne rg y I nfra struc ture I nve stme nts, GDI Allg a s Ga s Ne two rks a nd Dia ma ntina a nd L e ic hha rdt Po we r Sta tio ns. APT Pipe line s L imite d is a who lly o wne d sub sidiary o f Austra lia n Pipe line T rust a nd is the b o rro wing e ntity o f APA Gro up. F

• r mo re info rma tio n visit APA’ s we b site , a pa .c o m.a u

1

APA Group 2016 Annual Meeting 27 October 2016

Address by Chairman, Len Bleasel AM

Ladies and gentlemen, As Chairman, I am delighted to present another solid year of results for APA. The FY2016 results represent the outcome of a consistent and prudent strategy of growth, investment and innovation. As in previous years, I will focus my address on the strategy that has underpinned APA’s 16 years of continuous growth since listing. Our Managing Director, Mr Mick McCormack, will then provide a more detailed

• verview of what we have been doing and what we continue to do across the

country to create value for our customers and ultimately, you, our Securityholders. Let me first touch on our financial results. The strength of our low risk and resilient business model is reflected here on this

• slide. This year, APA did not record any significant items or divest any businesses,

therefore statutory and normalised results are the same. The difference is in the comparison against the previous year’s result. As you may recall in FY15, APA recorded significant items of $447.2 million before tax, mainly related to the profit

• n the sale of our investment in what is now called the Australian Gas Networks,

formerly Envestra. In the current year then, earnings before interest, tax, depreciation and amortisation (that is, EBITDA) increased both on a statutory and normalised basis to $1.33 billion. This was in line with our expectations and guidance that had been provided to the market through the year. Net profit after tax decreased both on a statutory and normalised basis to $180

• million. The main reason for this small reduction was the combination of the

higher depreciation and amortisation charges related to the Wallumbilla Gladstone Pipeline which had its first full year of contribution in FY 2016, as well as higher interest costs associated with the funding of that acquisition. However, the most important value driver for APA has always been Operating Cash Flow or OCF. OCF is the amount of cash flow generated from operations, after subtracting interest and tax payments. It is pleasing to note that OCF saw a solid increase from FY15, to $862.4 million in total, or 77.4 cents per security.

2

I will talk more about distributions in the next slide, however, total distributions for FY16 was 41.5 cents per security. APA’s long term vision, strategic planning and focused execution have seen the business continue to deliver prudent distribution growth and market-leading increases in value to our Securityholders. Your Board declared a final distribution of 22.5 cents in August, bringing total distributions for FY16 to 41.5 cents per security. This represents a 9.2% increase

• ver the previous year and, again, was in line with guidance provided earlier in

the financial year. As per our distribution policy, the distributions have been fully covered by

• perating cash flow with an appropriate amount of those cash flows retained

within the business to support our ongoing growth. The distribution paid this year represents 53.6% of operating cash flow. The Board believes that the distribution level and increase delivered, represent a solid base from which to increase distributions on a sustainable basis going forward. Indeed, FY16 total distributions reflect a 20% increase in distributions per security

• ver what was paid 5 years ago.

Measured and sustainable growth has always been our focus and will continue to be so. This prudent approach has translated directly into consistent returns for

• ur Securityholders throughout the market cycles.

APA’s total securityholder return, or TSR, which takes into account the capital appreciation of APA’s security price and assumes the reinvestment of distributions when they are declared, has outperformed the market and our peers in the utilities sector since listing in June 2000, achieving a compound annual growth rate of 19.1% per annum over that time. The commissioning of the multiple export LNG facilities at Gladstone has trebled the volume of gas moving around the east coast of Australia. In the far north and western regions of the country, commodity price volatility has created new dynamics in the resources sector. The east coast gas market in particular has drawn the attention of politicians and regulators in the last couple of years, resulting in reports from the Australian Energy Market Commission or the AEMC and the Australian Competition and Consumer Commission - the ACCC. These were considered by the Coalition of Australian Governments Energy Council which met in August and appointed Dr. Michael Vertigan to lead the Gas Market Reform Group, which will consider specific recommendations and processes going forward. Against this backdrop and as we do so annually, the Board and senior management reviewed our past performance and more importantly, looked at

• ur go-forward strategy.

3

We have built a business that is solid and sustainable and one we are very proud to be a part of. From having an appropriately structured balance sheet and risk framework, to using our in-house operational and development expertise to deliver energy when and where it is needed. But we continue to ask ourselves, whether there is anything we are missing and whether we were pursuing the appropriate opportunities? Through the annual review of our strategy, the simple answer was that we have been on the right track and yes, there continue to be growth opportunities ahead of us. We continue to believe that natural gas is an abundant, clean-fuel, which provides an affordable clean energy solution that will assist Australia in its transition to a carbon-constrained environment, while maintaining economic

• growth. Further, APA’s ability to connect Australia to its energy future can be

supplemented by extension of our asset footprint and expertise into the renewable energy space. To this end, APA has identified around $1.5 billion of organic growth opportunities that we will continue to pursue with our customers over the shorter term – in the next 3 years. These are split out into pipeline extensions and expansions of approximately $700 million, expansion of APA’s renewables and generation foot print in the order of $500 million and the expansion of our midstream asset foot print of approximately $300 million. These opportunities are all extensions of businesses that APA already operates and owns, and therefore have the appropriate level of expertise. In his address, the Managing Director will discuss more details around our growth

• strategy. Suffice to say, however, that our growth strategy will be executed

using the same disciplined and prudent investment criteria that have been the bedrock of our growth for the last 16 years. This includes ensuring that we maintain a strong balance sheet and appropriate capital management policies to enable us to fund these growth opportunities going forward. APA is, and will continue to be, an owner and operator of long term energy infrastructure that is underwritten by highly creditworthy counterparties. We will pursue opportunities that leverage our existing assets and skills. And, we will ensure appropriate risk allocation and funding mix ensuring we maintain the BBB and Baa2 investment grade credit ratings that underpin the strength of our balance sheet, as we continue to pursue appropriate growth for the business. APA will continue the execution of our strategy and your Board remains confident in APA’s ability to deliver sustainable growth into the future. Based on what we can see in the business and the energy markets today, we are comfortable with the EBITDA guidance of between $1.425 billion to $1.445 billion, an increase of $95 million to $115 million. This is the same level provided by management at the full year results announcement.

4

This is based on APA’s existing assets and businesses and includes full year contributions from acquisitions made and projects completed during FY16. Net interest costs are expected to be in the range of $510 million to $520 million. Your Board expects to pay total distributions in FY17 in the order of 43.5 cents per

• security. That would be a near 5% increase on FY16 distributions and represent a

24% increase in distributions per security over the previous 5 years. At this stage we do expect that a small level of franking credits will be available to Securityholders, but this will only be confirmed after APA’s tax return is filed and tax for FY16 is paid in early 2017. We are also reasonably comfortable in our forecasts as the APA business has been performing in line with these expectations during the first quarter of the 2017 financial year. Further, I would like to make some comments in relation to APA’s structure. APA’s stapled trust structure has served it well. For example, it provides flexibility to pay distributions out of “capital” rather than just profit. APA does not currently give Securityholders the right to vote on the remuneration report - it is not required to, given its stapled trust structure. However, APA is conscious of governance best practice and over the last few years, it has become increasingly clear that the ability to vote on the remuneration report has become an important issue for our Securityholders. Accordingly, the Board has determined that from next year’s Annual Meeting, APA will as a matter of policy, put a vote to its Securityholders to approve its remuneration report and to proceed as though the "two strikes rule" applies to APA. On behalf of the Board and our Securityholders, I would like to thank our Managing Director, Mick McCormack, his executive team and the people of APA, for their contributions during the year. Finally, I thank you, our investors, for your continued support, as APA continues to invest and innovate to fuel Australia’s energy future. I will now ask the Managing Director, Mick McCormack, to address the meeting.

5

Address by Managing Director, Mick McCormack

Thank you, Chairman, and welcome, ladies and gentlemen. As the Chairman has just noted, APA delivered another solid year of growth during FY16. Investment and innovation continue to define our business and FY16 was no different. Before I comment more on that, let me summarise the challenges in the energy markets that we face and outline what we have been doing to address them. As the Chairman has noted in his address, the dynamics experienced in the east coast gas market has resulted in reports from the AEMC and the ACCC, culminating in the COAG Energy Council meeting in August, where Dr. Michael Vertigan was appointed to lead the Gas Market Reform Group. The issues that are being considered by this group are listed on this slide. The group will also examine and lead the consultation process to consider the ACCC’s recommendation for a change to the test that determines which gas pipelines should be regulated referred to as the “coverage test”. Just last week, APA provided its comprehensive submission to Dr. Vertigan’s consultation process regarding this coverage test. Our submission, in its entirety, is on our website and we have also summarised it in an ASX released document and presentation, so I won’t go further into it in detail here. The ACCC’s report recommends a change to the coverage test that would lower the hurdle for more regulation on gas transmission pipelines. The recommendation is based on a view, we say erroneous, that pipeline’s are engaging in monopoly pricing. The examples that the ACCC point to in order to support the claim are limited and taken out of context, and do not justify the wholesale change to the regulatory settings advocated by the ACCC. APA’s strong view is that increased regulation on transmission pipelines will not stimulate more gas supply. Rather, it will stymie the investment and innovation in infrastructure needed to support gas suppliers in getting their gas to market. As Securityholders, you would be aware of the investment and innovation that APA has made to create and operate this unique infrastructure. We are proud of that investment which has been undertaken to meet the needs of our customers

• n terms that deliver value for them while also ensuring appropriate returns for

your company. APA is also involved in the relevant technical work streams established by the Gas Market Reform Group. It is expected that Dr. Vertigan will report his findings to the next COAG meeting in December. It is also expected that he will be presenting a work plan to progress consideration and potential implications of a number of other reform initiatives.

6

APA supports the objective of developing a more liquid gas market. Infrastructure is a capital intensive business. Certainty is required to ensure that the parties are willing to continue to invest and innovate. Given how much the pipeline sector has contributed to delivering increasingly flexible solutions to the gas market, APA continues to believe that we have been part of the solution, not the problem, in the gas supply debate. Increasing regulation will only stifle the investment and innovation that has served the industry well to date. In fact, a study conducted by a global economics advisory firm, The Brattle Group, found that APA’s East Coast Grid, which was formed as a result of the 2012 HDUF acquisition by APA, has contributed as much as $150 million to date in efficiency benefits to the market through the delivery of flexible, seamless services and

• perating pipeline assets more effectively. It also estimates further efficiency

benefits to the market, of as much as $32 million per annum going forward. The FY16 results reflect the benefits of our investments and innovation from prior years. The Wallumbilla Gladstone Pipeline’s first full year contribution has had a significant impact on our results, as expected. Additionally, prior year investments such as those on the South West Queensland Pipeline and the Victoria Northern Interconnect also increased our earnings base, as was expected at the time these investments were made. Each of these assets is critical to being able to provide broader services where they are needed by customers. During the year, over $650 million was spent on growing the business. We commissioned the Eastern Goldfields Pipeline, which is now delivering gas across 1,800 km of APA’s pipes, to remote gold mining operations in the middle

• f Western Australia. The new pipeline did not simply add a new delivery point
• n another APA pipeline. It has also increased reliability and safety in the way

those mines operate, saving fuel and greenhouse gas emissions for the environment along the way. We also continued to work on the Victoria Northern Interconnect expansions. Construction of Phase 2 of the expansions is underway and all looping will be complete in early 2017. This has increased the amount of gas that can move from Victoria to NSW and Queensland and back by nearly 10-times since 2008, to 200 TJ per day. We also added two new assets to APA’s broad based energy infrastructure

• portfolio. The Ethane Pipeline, which runs almost parallel to APA’s Moomba

Sydney Pipeline and has effectively been operated by APA since commissioning in the mid 90’s, and the Diamantina and Leichhardt Power Stations in Queensland, which APA jointly developed and operates.

7

Both were a perfect fit with APA’s growth strategy and investment criteria. Most importantly for Securityholders, both were operating cash flow accretive from day one of ownership. In terms of innovation, the completion of the transition of APA’s pipeline control rooms into the Integrated Operations Centre in Brisbane, or the IOC, has seen it deliver real benefits to the market during the year. In June / July this year, South Australia’s electricity prices soared to $9,000 MWh when the wind stopped blowing and gas fired electricity generation was brought back on line to keep the lights on. During that period, it was the ability of APA’s IOC to deliver fast turnaround to not just direct requests from customers to ship more gas into the state of South Australia, but also anticipated market ramifications, that contributed to managing the issues arising from the electricity shortfall. With the type of capability that our people and pipelines now have, I expect more and more customers will use our infrastructure more flexibly and manage their energy needs more dynamically going forward. As the Chairman has discussed in his address, APA will continue to pursue a carefully planned growth strategy. Execution of this strategy remains a strong focus for APA and I am pleased to be able to provide a few developments on the pillars of this strategy. In September, we announced the construction of the Reedy Creek Wallumbilla Pipeline, which is underwritten by a 20 year contract with Australia-Pacific LNG. The new 50km pipeline will link up to APA’s East Coast Grid at the Wallumbilla Gas hub and will enable APLNG to send gas to the domestic market or supplement its own production for LNG using gas from domestic gas sources. This sort of pipeline development, that enhances our existing assets is truly the ‘bread and butter’ of APA’s growth strategy, whilst at the same time significantly contributing to industry growth, encouraging supply development and providing increased flexibility of services to customers on the east coast. We continue our discussions with many of our customers on other opportunities such as this and believe that there are approximately $700 million of opportunities like this over the short term horizon. Recently, we announced that the Australian Renewable Energy Agency (“ARENA”) has selected APA’s 20MW Emu Downs Solar project as part of its Large Scale Solar funding program. The ARENA funding of $5.5 million is subject to APA finalising commercial agreements for this Project, which will be located adjacent to, and share infrastructure with, APA’s existing Emu Downs Wind Farm. APA is currently negotiating a long-term contract with an electricity retailer, that would underwrite the approximately $50 million construction cost of the solar panels and associated works on APA’s Emu Downs site.

8

The economic efficiencies of this project are not difficult to understand, given the solar panels will be able to connect to and share infrastructure that is already in use by the Emu Downs wind farm which has been owned and

• perated by APA since 2011. Our renewables and generation opportunities of

approximately $500 million are projects such as this, where APA is able to extend

• r expand its existing energy infrastructure base in these sub sectors to deliver

energy to our customers. This sector is not new to APA as we already own a number of renewable energy and power generation facilities across Australia. We see gas and renewables as a natural fit, complementing each other for the benefit of a more sustainable Australia. The third leg of the organic growth strategy is in midstream assets. Again, this is not new territory for APA. As many of you who are familiar with our business will know, APA owns midstream assets in the form of LNG storage in Victoria and gas processing and storage facilities in key gas producing regions of Queensland and Western Australia. We continue to have discussions with customers who are looking for economies of scale solutions to their infrastructure needs. We have sized the opportunities in this category at around $300 million over the next 3 years. We also continue to assess a number of relevant acquisition opportunities. The acquisition of the Mortlake Pipeline in a 50/50 joint venture with REST, our partner in SEA Gas Pipeline may have been small in the scheme of things, however, it was on strategy from APA’s perspective. The Mortlake Pipeline is connected to, and is operated by, SeaGas. We will continue to assess opportunities such as these when they come up and we will maintain a solid business and balance sheet to enable us to be flexible. Lastly, we mentioned at the full year results presentation that APA is beginning to assess possible international investment opportunities. To this end, we continue to conduct our due diligence. Since we get asked often about this, I’d like to point out that we are not in a rush to do anything. The intent of the announcement at the full year results was simply to be upfront and honest about

• ur plans. We will maintain our investment disciplines in everything we do and

we will continue to do the appropriate due diligence on any prospective investment prior to making any investment commitment. At APA, our reputation is important to us as we strongly believe that how we conduct our operations is also key to growing a sustainable business. Infrastructure and energy needs are long term investments as are the commitments that we make to our five stakeholder groups – customers, the environment, communities, our employees and our investors. Our vision is to connect Australia to its energy future and to do this we must connect with and respect our stakeholders.

9

Our customers are at the core of the success of our business. We pride ourselves

• n working with our customers to address their energy needs and make our

infrastructure as flexible as it can be, so we can deliver for our customers and ultimately for the betterment of the energy industry. We recognise the potential to impact the environment through our business activities and, with this in mind, we continue to pursue a high standard of environmental management. The shift towards a lower carbon economy is front

• f mind in APA’s growth aspirations. In FY2016, we participated in the voluntary

Carbon Disclosure Project, scoring highest amongst our direct peers. We also joined the Clean Energy Council to further our knowledge of renewable energy and low carbon markets, as we continue the development of wind and solar renewable energy projects and expand our portfolio of low emission generation assets. Our people are our greatest asset and we have continued our commitment to keep them safe through our culture of Zero Harm. We are unrelenting in our health and safety initiatives to ensure everyone is able to return home safely to their families at the end of each day. You will have noticed too, a refresh of our brand and corporate logo this year – the first in 16 years. With the growth in our business over the years to now being

• ne of Australia’s top 30 companies, and the addition of many employees

through various acquisitions along the way, it was an appropriate time to refocus the team of 1,600 people on what’s important to us. The red dot represents our continued enthusiasm for, and focus on, delivering for our stakeholders, be they sustainable returns for our investors or reliable energy supply for our customers. And last but not least, our investors. We will continue to aim to be a reliable and attractive investment which delivers superior returns for all of our investors. To ensure this we look after our balance sheet and make prudent investment decisions for the business. Which is an appropriate way to conclude my address. I would like to extend my sincere appreciation for your ongoing support of our

• business. I look forward to leading our business with the same enthusiasm and

focus that has brought us this far, to a future that promises to be even more exciting than our past. [ENDS]

APA Gr

• up annual me e ting

27 Oc tobe r 2016.

disc laime r

T his pre se nta tio n ha s b e e n pre pa re d b y Austra lia n Pipe line L imite d (ACN 091 344 704) a s re spo nsib le e ntity o f the Austra lia n Pipe line T rust (ARSN 091 678 778) a nd APTInve stme nt T rust (ARSN 115 585 441) (APA Gro up). T he info rma tio n in this pre se nta tio n do e s no t c o nta in a ll the info rma tio n whic h a pro spe c tive inve sto r ma y re q uire in e va lua ting a po ssible inve stme nt in APA Gro up a nd sho uld b e re a d in c o njunc tio n with the APA Gro up’ s

• the r pe rio dic a nd c o ntinuo us disc lo sure a nno unc e me nts whic h a re a va ila b le a t www.a pa .c o m.a u.

Allre fe re nc e s to do lla rs, c e nts o r ‘ $’ in this pre se nta tio n a re to Austra lia n c urre nc y, unle ss o the rwise sta te d. Not financ ial pr

• duc t advic e: Ple a se no te tha t Austra lia n Pipe line L

imite d is no t lic e nse d to pro vide fina nc ia l pro duc t a d vic e in re la tio n to se c uritie s in the APA Gro up. T his pre se nta tio n is fo r info rma tio n purpo se s o nly and is no t fina nc ial pro duc t o r inve stme nt a dvic e o r a re c o mme nda tio n to a c q uire APA Gro up se c uritie s a nd ha s b e e n pre pa re d witho ut ta king into a c c o unt the o b je c tive s, fina nc ia l situa tio n o r ne e ds o f individua ls. Be fo re ma king a n inve stme nt de c isio n, pro spe c tive inve sto rs sho uld c o nside r the a ppro pria te ne ss o f the info rma tio n ha ving re g a rd to the ir o wn o b je c tive s, fina nc ia l situa tio n a nd ne e ds a nd se e k pro fe ssio na l a dvic e if ne c e ssa ry. Past per for manc e: Pa st pe rfo rma nc e info rma tio n sho uld no t b e re lie d upo n a s (a nd is no t) a n indic a tio n o f future pe rfo rma nc e . F

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'ma y', 'pre dic t', 'pla n', 'pro po se ', 'will', 'b e lie ve ', 'fo re c a st', 'e stima te ', 'ta rg e t', 'o utlo o k', 'g uida nc e ' a nd o the r simila r e xpre ssio ns a nd inc lude , b ut a re no t limite d to , fo re c a st E BITa nd E BIT DA, o pe ra ting c a shflo w, distrib utio n g uida nc e a nd e stima te d a sse t life . APA Gro up b e lie ve s tha t the re a re re a so na b le g ro unds fo r the se fo rwa rd lo o king sta te me nts a nd d ue c a re a nd a tte ntio n ha ve b e e n use d in pre pa ring this pre se nta tio n. Ho we ve r, the fo rwa rd lo o king sta te me nts,

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pre dic tio ns o f future pe rfo rma nc e a nd invo lve kno wn a nd unkno wn risks a nd unc e rta intie s a nd o the r fa c to rs, ma ny o f whic h a re b e yo nd the c o ntro l o f APA Gro up, a nd ma y invo lve sig nific a nt e le me nts o f sub je c tive judg e me nt a nd a ssumptio ns a s to future e ve nts whic h ma y o r ma y no t be c o rre c t. T he re c a n b e no a ssura nc e tha t a c tua l o utc o me s will no t ma te ria lly diffe r fro m the se fo rwa rd-lo o king sta te me nts, o pinio ns a nd e stima te s. A numb e r o f impo rta nt fa c to rs c o uld c a use a c tua l re sults o r pe rfo rma nc e to diffe rma te ria lly fro m suc h fo rwa rd-lo o king sta te me nts, o pinio ns a nd e stima te s. Inve sto rs sho uld fo rm the ir o wn vie ws a s to the se ma tte rs a nd a ny a ssumptio ns o n whic h a ny fo rwa rd-lo o king sta te me nts a re b a se d. APA Gro up a ssume s no o blig a tio n to upda te o r re vise suc h info rma tio n to re fle c t a ny c ha ng e in e xpe c ta tio ns o r a ssumptio ns. Investment r isk: An inve stme nt in se c uritie s in APA Gro up is sub je c t to inve stme nt a nd o the r kno wn a nd unkno wn risks, so me o f whic h a re b e yo nd the c o ntro l o f APA Gro up. APA Gro up do e s no t g ua ra nte e a ny pa rtic ula r ra te o f re turn o r the pe rfo rma nc e o f APA Gro up. Non-IF R S financ ial me asur e s: APA Gro up re sults a re re po rte d unde r Inte rna tio na l F ina nc ia l Re po rting Sta nda rds (IF RS). Ho we ve r, inve sto rs sho uld b e a wa re tha t this pre se nta tio n inc lude s c e rta in fina nc ial me a sure s tha t a re no n-IF RS fina nc ial me a sure s fo r the purpo se s o f pro viding a mo re c o mpre he nsive unde rsta nding o f the pe rfo rma nc e o f the APA Gro up. T he se no n-I F RS fina nc ia l me a sure s inc lude E BIT , E BIT DA a nd o the r “no rma lise d” me a sure s. Suc h no n-IF RS info rma tio n is una udite d, ho we ve r the numb e rs ha ve b e e n e xtra c te d fro m the a udite d fina nc ia l sta te me nts. Not an offer: T his pre se nta tio n do e s no t c o nstitute a n o ffe r, invita tio n o r re c o mme nd a tio n to sub sc rib e fo r o r purc ha se a ny se c urity. In pa rtic ula r, this pre se nta tio n do e s no t c o nstitute a n o ffe r to se ll, o r a so lic ita tio n o f a n

• ffe r to b uy, a ny se c uritie s in the Unite d Sta te s. Se c uritie s ma y no t b e o ffe re d o r so ld, dire c tly o r indire c tly, in the Unite d Sta te s o r to pe rso ns tha t a re a c ting fo r the a c c o unt o r b e ne fit o f pe rso ns in the Unite d Sta te s, unle ss

the y ha ve b e e n re g iste re d unde r the U.S. Se c uritie s Ac t o f 1933, a s a me nde d (the U.S. Se c uritie s Ac t), o r a re o ffe re d a nd so ld in a tra nsa c tio n e xe mpt fro m, o r no t subje c t to , the re g istra tio n re q uire me nts o f the U.S. Se c uritie s Ac t a nd a ny o the r a pplic a b le sta te se c uritie s la ws. Non-GAAP financ ial me asur e s: Inve sto rs sho uld b e a wa re tha t c e rta in fina nc ia l da ta inc lude d in this pre se nta tio n a re "no n-GAAP fina nc ia l me a sure s" unde r Re g ula tio n G o f the U.S. Se c uritie s E xc ha ng e Ac t o f 1934, a s a me nde d. T he se me a sure s a re E BIT DA, no rma lise d E BI T DA a nd sta tuto ry E BIT

• DA. T

he disc lo sure o f suc h no n-GAAP fina nc ia l me a sure s in the ma nne r inc lude d in the pre se nta tio n ma y no t b e pe rmissible in a re g istra tio n sta te me nt unde r the U.S. Se c uritie s Ac t. T he se no n-GAAP fina nc ia l me a sure s do no t ha ve a sta nda rdise d me a ning pre sc rib e d b y Austra lia n Ac c o unting Sta nda rds a nd the re fo re ma y no t b e c o mpa ra b le to simila rly title d me a sure s pre se nte d b y o the r e ntitie s, a nd sho uld no t be c o nstrue d a s a n a lte rna tive to o the r fina nc ial me a sure s de te rmine d in a c c o rda nc e with Australia n Ac c o unting Sta nda rds. Altho ug h APA Gro up b e lie ve s the se no n-GAAP fina nc ia l me a sure s pro vide use ful info rma tio n to use rs in me a suring the fina nc ia l pe rfo rma nc e a nd c o nditio n o f its b usine ss, inve sto rs a re c a utio ne d no t to pla c e undue re lia nc e o n a ny no n-GAAP fina nc ial me a sure s inc lude d in this pre se nta tio n.

2

Chair man’s addr ess

Constr uc tion of APA’s newest pipeline – 293 km E aster n Goldfields Pipeline in WA – was c ompleted ahead of sc hedule in F Y2016

F Y16 r esults

2016 c hange

Statutor y r e sults

E BI T DA

$1,330.5 m

Up 4.8% Ne t pro fit a fte r ta x

$179.5 m

Do wn 67.9% Ope ra ting c a sh flo w(1)

$862.4 m

Up 53.4% Ope ra ting c a sh flo w pe r se c urity

77.4 c

Up 37.0%

Nor malise d r e sults(2)

E BI T DA fro m c o ntinuing b usine sse s(3)

$1,330.5 m

Up 61.8% Ne t pro fit a fte r ta x

$179.5 m

Do wn 12.0% Ope ra ting c a sh flo w(1)

$862.4 m

Up 58.2% Ope ra ting c a sh flo w pe r se c urity (c e nts)

77.4 c

Up 41.2%

Distr ibutions pe r se c ur ity 41.5 c

Up 9.2%

Notes:

(1) Ope ra ting c a sh flo w = ne t c a sh fro m o pe ra tio ns a fte r inte re st a nd ta x pa yme nts. (2) No rma lise d re sults e xc lude o ne -o ff sig nific a nt ite ms, re fle c ting APA’ s c o re e a rning s fro m o pe ra tio ns. T he re we re no sig nific a nt ite ms fo r the pe rio d, the re fo re no rma lise d a nd sta tuto ry re sults a re the sa me fo r F

• Y16. F

Y15 $356.0 millio n o f sig nific a nt ite ms (po st ta x). (3) E BI T DA fro m c o ntinuing b usine sse s e xc lude s dive ste d b usine ss fo r F Y15 (E BI T DA during F Y15 fro m AGN (fo rme rly E nve stra )). (4) Distrib utio n pa yo ut ra tio = to ta l distrib utio n pa yme nts a s a pe rc e nta g e o f no rma lise d o pe ra ting c a sh flo w.

4

sustainable distr ibution gr

• wth

Notes:

(1) Distrib utio n pa yo ut ra tio : distrib utio n pa yme nts a s a pe rc e nta g e o f o pe ra ting c a sh flo w. (2) Ba se d o n no rma lise d o pe ra ting c a sh flo w.

5

c ompound annual gr

• wth r

ate

19.1%

Or ganic gr

• wth oppor

tunitie s

$1.5b n o f o ppo rtunitie s a va ila b le o ve r the sho rt te rm (~3 ye a rs):  Pipe line e xte nsio ns a nd e xpa nsio ns c .$700 m  E xpa nd re ne wa b le s a nd g e ne ra tio n fo o tprint c .$500 m  E xpa nd midstre a m a sse t fo o tprint c .$300 m

Gr

• wth str

ategy c ontinues

Co ntinuing in c o nte xt o f:

• Appro pria te funding a nd c a pita l struc ture
• Co ntra c ts with stro ng c o unte rpa rtie s
• Appro pria te a llo c a tio n o f risk b e twe e n pa rtie s
• L

e ve ra g e o pe ra tio na l e xpe rtise Ong o ing a sse ssme nt o f inte rna tio na l o ppo rtunitie s

6

APA str ate gy – c onne c ting Austr alia to its e ne r gy futur e

F Y17 outlook

• Ba se d o n c urre nt o pe ra ting pla ns a nd

a va ila b le info rma tio n, E BI T DA fo r F Y2017 is e xpe c te d to b e within a ra ng e o f $1,425 millio n to $1,445 millio n

• Ne t inte re st c o sts fo r F

Y2017 e xpe c te d within a ra ng e o f $510 millio n to $520 millio n

• Distrib utio ns pe r se c urity fo r F

Y2017 e xpe c te d to b e in the o rde r o f 43.5 c e nts pe r se c urity, prio r to the b e ne fit o f a ny fra nking c re dits tha t ma y a rise a s a re sult o f the filing o f the F Y2016 ta x re turn

7

Managing Dir ec tor ’s addr ess

F ull year c ontr ibution fr

• m APA’s Wallumbilla Gladstone Pipeline, QL

D

APA in the dynamic gas mar ke t

E ast c oast gas c onsumption

Sour c e: AE

MO

Wholesale gas pr ic e – east c oast gas mar ket aver age Ga s Ma rke t Re fo rm Gro up (a ppo inte d b y COAG) to c o nside r:

• b e tte r info rma tio n fo r tra ding in the ma rke t
• the c re a tio n o f tra ding hub s in No rth a nd So uth
• e a sie r a c c e ss to tra nspo rt infra struc ture
• b e tte r pric ing info rma tio n
• e nc o ura g ing mo re g a s supply a nd mo re g a s supplie rs
• le a d c o nsulta tio n pro c e ss to c o nside r c ha ng e to

re g ula to ry c o ve ra g e te st fo r g a s pipe line s E ffic ie nc y b e ne fits o f the E a st Co a st Grid to the ma rke t o f:

• $120 - $150m sinc e 2012; a nd
• $15 - $32m p.a . g o ing fo rwa rd

T he Br attle Gr

• up Re por

t

(Be ne fits and Cost of Inte gr ation in T r ansmission/ T r anspor tation Ne twor ks, 2016)

9 Sour c e: Ga s Pric e T

re nds Re po rt, la rg e industria l c usto me r da ta , F e b 2016, Oa kle y Gre e nwo o d, c o mmissio ne d fo r the De pa rtme nt o f I ndustry, I nno va tio n a nd Sc ie nc e

ac hievements in F Y16

Diamantina ac quisition

• E

nte rprise va lue $700m

• L
• ng te rm c o ntra c ts with Gle nc o re ’ s Mo unt I

sa Mine s a nd the Que e nsla nd g o ve rnme nt o wne d E rg o n E ne rg y

E PX ac quisition

• E

nte rprise va lue $130m

• L
• ng te rm c o ntra c t with Qe no s to 2030

E aster n Goldfields Pipeline

• F
• unda tio n shippe r Ang lo Go ld Asha nti’ s mine s a t

T ro pic a na a nd Sunrise Da m plus Go ld F ie lds’ Gra nny Smith

Vic tor ia – Nor ther n Inter c onnec t

• I

nc re a se c a pa c ity to 200T J/ d c a pa c ity fro m ~17T J/ d sinc e 2008

Ac quisitions Or ganic gr

• wth

10

gr

• wth c ontinue s in F

Y17

E xpand mid-str eam asset footpr int Ac quisitions Pipeline extensions and expansions R eedy Cr eek Wallumbilla Pipeline

• Gre e nfie ld de ve lo pme nt
• Ca pe x spe nd ~$80m
• 20-ye a r ta ke -o r-pa y c o ntra c t with Austra lia

Pa c ific L NG (‘ APL NG’ )

• Co nne c t APL

NG’ s fa c ilitie s to Wa llumb illa g a s hub

E xpand r enewables and gener ation footpr int E mu Downs Solar Pr

• jec t
• Gre e nfie ld de ve lo pme nt, sub je c t to fina lisa tio n o f

c o mme rc ia l a g re e me nts

• Ca pe x spe nd ~$50m ($5.5m to b e funde d fro m

Austra lia n Re ne wa b le E ne rg y Ag e nc y (‘ ARE NA’ )’ s L a rg e Sc a le So la r funding pro g ra m

• Sha re infra struc ture with E

mu Do wns Wind F a rm

• Ga s sto ra g e , g a s pro c e ssing a nd g a the ring

fa c ilitie s

• Ne w GM hire d to le a d this b usine ss

Mor tlake Pipeline

• 50% inte re st a c q uire d via SE

A Ga s (Mo rtla ke ) Pa rtne rship

• L
• ng te rm o ffta ke c o ntra c t with Orig in E

ne rg y

11

sustainability

Our Values - ST AR S Our Stakeholder s Customer s

• We will de live r va lue to o ur c usto me rs a nd

c re a te re spo nsive so lutio ns to me e t the ir ne e ds

E nvir

• nment
• We will c o ntinue to de live r a n e nviro nme nta lly

re spo nsib le , sa fe a nd e sse ntia l se rvic e

Community

• We will po sitive ly e ng a g e with the c o mmunitie s

within whic h we o pe ra te

E mploye e s

• We will c o ntinue with o ur c o mmitme nt to

pro vide a stimula ting a nd re wa rding wo rking e nviro nme nt

Investor s

• We will c o ntinue to b e a re lia b le a nd a ttra c tive

inve stme nt whic h de live rs supe rio r re turns fo r Se c urityho lde rs

12

for mor e infor mation visit www.apa.c om.au