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AUSTRALIAN PIPELINE TRUST
Directors’ report
Remuneration report
Corporate governance statement
Consolidated statement of profit or loss
and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Declaration by the Directors of
Australian Pipeline Limited
Auditor’s Independence Declaration
Independent Auditor’s Report
1 1 8
Additional information
100
102
102
103
103
104
1 1 4
1 1 5
1 1 6
APT INVESTMENT TRUST
Directors’ report
Consolidated statement of profit or loss
and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Declaration by the Directors of
Australian Pipeline Limited
Auditor’s Independence Declaration
Independent Auditor’s Report
1
AUSTRALIAN PIPELINE TRUST
AND ITS CONTROLLED ENTITIES
ARSN 091 678 778
DIRECTORS’ REPORT
The Directors of Australian Pipeline Limited (“Responsible Entity”) submit their
APA is listed on the Australian Securities Exchange (“ASX”) and is included in
report and the annual financial report of Australian Pipeline Trust (“APT”) and
the S&P ASX 50 Index. Since listing in June 2000, its market capitalisation has
its controlled entities (together “APA” or “Consolidated Entity”) for the financial
increased more than 13‑fold to $6.46 billion (as at 19 August 2014), and it has
year ended 30 June 2014. This report refers to the consolidated results of APT
and APT Investment Trust (“APTIT”).
achieved total securityholder returns of 978% or annual compound growth rate
of 18.4%1 at the end of the financial year.
DIRECTORS
The names of the Directors of the Responsible Entity during the financial year
and since the financial year end are:
Leonard Bleasel AM
Chairman
Michael McCormack
Chief Executive Officer and Managing Director
Steven Crane
John Fletcher
Russell Higgins AO
Patricia McKenzie
Robert Wright
Details of the Directors, their qualifications, experience, special responsibilities
and directorships of other listed entities are set out on pages 13 to 15.
APA regulated and contracted revenue
APA derives its revenue streams through a mix of regulated revenue, long‑term
negotiated revenue contracts, asset management fees and investments.
Earnings are underpinned by strong cash flows generated from high quality,
well positioned, geographically diversified assets and a portfolio of highly
creditworthy customers.
A national regulatory regime provides mechanisms for regulatory pricing,
amongst other things, which is encapsulated in the National Gas Law and
National Gas Rules. The economic regulation aspects of the regime apply to
most gas distribution networks and a number of gas transmission pipelines in
Australia.
The regime provides for two forms of regulation based on a pipeline’s relative
market power – full regulation and light regulation. For assets under full
regulation, the regulator approves price and other terms of access for standard
The Company Secretary of the Responsible Entity during and since the financial
(“reference”) services as part of an access arrangement process, such that the
year end is Mark Knapman.
PRINCIPAL ACTIVITIES
The principal activities of APA during the course of the year were the ownership
and operation of energy infrastructure assets and businesses, including:
asset owner has a reasonable opportunity to recover at least the efficient costs
of owning and operating the asset to provide the reference services. Access
arrangement periods usually run for five years. For assets under light regulation,
contractual terms (including price) are negotiated between the service provider
and customer with recourse to arbitration by the regulator in the absence of
– energy infrastructure, primarily gas transmission businesses located across
agreement. APA assets subject to full regulation or light regulation are detailed
Australia;
below.
– asset management and operations services for the majority of APA’s energy
investments and for third parties; and
– energy investments in listed and unlisted entities.
FINANCIAL AND OPERATIONAL REVIEW
APA OVERVIEW
APA is Australia’s largest natural gas infrastructure business. It owns or has an
Contracted revenues are sourced from unregulated assets, assets under light
regulation and assets under full regulation. Contracts are generally for the
reservation of capacity, with the majority of the revenue fixed. Weighted
average contract term is greater than 10 years, and where new infrastructure is
required, terms tend to be 15 years or greater to fully underwrite the investment
by APA in any necessary expansion.
interest in approximately $12.3 billion of energy infrastructure across Australia,
Approximately 23% of APA’s FY14 revenue (excluding pass‑through revenue)
and operates these with a skilled workforce of in excess of 1,600 people.
APA has a diverse portfolio of 14,100 kilometres of gas transmission pipelines
that span every state and territory on mainland Australia and deliver about half
was subject to prices determined under full regulation. The majority of the
remaining 77% of APA’s revenue is generated from contracts which have set
terms, including negotiated pricing for the life of the contract.
the nation’s natural gas. It also owns other related energy infrastructure assets
APA ASSETS AND OPERATIONS
such as gas storage facilities and power generation assets.
APA has ownership interests in, and operates, the GDI (EII) Pty Ltd (“GDI”) gas
distribution network, and also operates the gas distribution network owned by
Envestra Limited (“Envestra”), which together comprise approximately 27,100
kilometres of gas mains and pipelines, and approximately 1.3 million gas
consumer connections.
On 7 August 2014, APA accepted the Cheung Kong Group’s (“CKI Consortium”)
takeover offer for its 33.0% interest in Envestra. APA retains its Operations and
Management Agreement on the Envestra assets, which runs to 2027 – see page 16.
APA also has minority interests in and operates other energy infrastructure
assets and businesses, including SEA Gas Pipeline, Energy Infrastructure
Investments, EII2 and Ethane Pipeline Income Fund.
APA’s objective of maximising securityholder value is achieved through
expanding and enhancing its infrastructure portfolio, securing low risk, long‑term
revenue on its assets, operating the business safely and efficiently and
generating further value through its many and varied service offerings.
APA is a major participant in developing, owning and operating natural gas
transportation infrastructure across Australia.
APA’s assets and operations are reported in three principal business segments:
– Energy Infrastructure, which includes all APA’s wholly or majority owned
pipelines, gas storage assets and the Emu Downs Wind Farm;
– Asset Management, which provides commercial, operating services and/or
asset maintenance services to the majority of its energy investments for
appropriate fees; and
– Energy Investments, which includes APA’s strategic stakes in a number of
investment vehicles that house energy infrastructure assets, generally
characterised by long‑term secure cash flows, with low ongoing capital
expenditure requirements.
1
Total securityholder return is the capital appreciation of the company’s security price, adjusted for capital management (such as security splits and consolidations) and assuming
reinvestment of distribution at the declared distribution rate per security. Figures quoted are sourced from IRESS and measured as at 30 June 2014.
2
APA GROUP / ANNUAL REPORT 2014 Energy Infrastructure assets
East coast gas grid
Roma Brisbane Pipeline (including Peat Lateral)
South West Queensland Pipeline
Carpentaria Gas Pipeline
Berwyndale Wallumbilla Pipeline
Moomba Sydney Pipeline
Central West Pipeline
Central Ranges Pipeline and distribution network
Victorian Transmission System
Dandenong LNG Storage Facility
SESA Pipeline
West Australian and Northern Territory assets
Goldfields Gas Pipeline (88.2%)
Pilbara Pipeline System
Parmelia Gas Pipeline
Mid West Pipeline (50%)
Mondarra Gas Storage Facility
Emu Downs Wind Farm
Amadeus Gas Pipeline
LENGTH/CAPACITY
REGULATORY STATUS
583 km / 233 TJ/d
936 km / 384 TJ/d
944 km / 119 TJ/d
112 km
Full regulation
Not regulated
Light regulation
Not regulated
2,029 km / 439 TJ/d
Light regulation (partial)
255 km
295 km
1,847 km / 1,030 TJ/d
12,000 tonnes
45 km
Total 7,044 km
Light regulation
Full regulation
Full regulation
Not regulated
Not regulated
1,590 km / 175 TJ/d
Full regulation
248 km
448 km
362 km
15 PJ
80 MW
1,673 km
Not regulated
Not regulated
Not regulated
Not regulated
Not regulated
Full regulation
Energy Investments and Asset Management
ENERGY INVESTMENT
Envestra (1)
OWNERSHIP
INTEREST
33.0% (1)
DETAIL
Gas distribution: 22,762 km of gas mains and pipelines, 1.19 million gas consumer
connections, 1,124 km of pipelines across SA, Vic, NSW, Qld and NT
ASSET MANAGEMENT
Operational services
GDI
20%
Gas distribution: 3,060 km of gas mains, 92,700 gas consumer connections in Qld
Operational services
SEA Gas Pipeline
50%
Gas pipeline: 680 km pipeline from Iona and Port Campbell, Vic to Adelaide, SA
Energy Infrastructure
Investments
19.9%
Gas pipelines: Telfer Gas Pipeline and lateral (488 km); Bonaparte Gas Pipeline (286 km);
Wickham Point Pipeline (13 km)
Electricity transmission cables: Murraylink (176 km) and Directlink (63 km)
Gas-fired power stations: Daandine power station (27 MW) and X41 power station (32 MW)
Gas processing facilities: Kogan North (12 TJ/day) and Tipton West (29 TJ/day)
EII2
20.2%
Wind generation: North Brown Hill Wind Farm (132 MW), SA
Ethane Pipeline
Income Fund
6.1%
Ethane pipeline: 1,375 km from Moomba to Port Botany, Sydney
Diamantina Power
Station joint venture
50%
Gas-fired power stations: Diamantina Power Station (242 MW) currently under
development and Leichhardt Power Station (60 MW)
Management services
Corporate support
services
Maintenance services
only
Operational services
Management services
Corporate support
services
Corporate support
services
Operational services
Management services
Corporate support
services
Corporate support
services
(1) On 7 August 2014, APA accepted the CKI Consortium’s takeover offer for its 33.0% interest in Envestra. APA retains its Operations and Management Agreement on the Envestra assets,
which runs to 2027, see page 11.
3
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED APA’s objective and strategy
APA’s objective to maximise the value of APA for its investors is supported by
This strategy has been relatively unchanged since listing. Consistent with this
its strategy to:
– focus on expanding and enhancing its natural gas infrastructure portfolio to
strategy, over the 2014 financial year APA commenced, continued or completed
the following growth development projects and acquisitions:
meet the increasing demand for natural gas services throughout Australia;
– expansion of the Mondarra Gas Storage Facility;
– capture revenue and operational synergies from its significant asset base;
– pipeline capacity expansions on the Victorian Transmission System and
– pursue asset development opportunities which leverage APA’s existing
Goldfields Gas Pipeline;
assets and utilise the depth of its comprehensive asset management and
– compressor facility projects at Wallumbilla and Moomba;
operational skills;
– development of the east coast grid services and operating framework; and
– enhance APA’s services to customers, including the development of more
– development of the Diamantina and Leichhardt gas fired power stations.
flexible and tailored services to better satisfy customer requirements; and
– strengthen its financial capability.
FINANCIAL REVIEW
The following table provides a summary of key financial data for the financial year:
YEAR ENDED 30 JUNE
Operating results including significant items
Total revenue
Pass‑through revenue (2)
Total revenue excluding pass-through
EBITDA
Depreciation and amortisation expense
EBIT
Finance costs and interest income
Profit before income tax and non-controlling interests
Income tax benefit/(expense)
Non‑controlling interests
Profit after income tax and non-controlling interests,
including significant items
Significant items after income tax (3)
Profit after income tax and non-controlling interests,
excluding significant items
Operating cash flow (4)
Operating cash flow per security (cents)
Normalised operating cash flow (5)
Normalised operating cash flow per security (cents) (4)
Earnings per security – reported (cents)
Earnings per security – normalised (cents) (6)
Distribution per security (cents)
Distribution payout ratio (7)
Net tangible asset per security ($)
2014
$000
2013 (1)
$000
1,395,992
1,272,267
403,477
992,515
747,334
(156,228)
591,106
(325,084)
266,022
77,684
(1)
343,705
144,060
199,645
431,541
51.6
439,742
52.6
41.1
23.9
36.25
68.9%
1.41
352,743
919,524
763,628
(130,461)
633,167
(290,916)
342,251
(49,869)
2,764
295,146
120,030
175,116
374,381
48.5
432,639
56.0
38.2
22.7
35.50
68.2%
1.42
$000
123,725
50,734
72,991
(16,294)
(25,767)
(42,061)
(34,168)
(76,229)
127,553
(2,765)
48,559
24,030
24,529
57,160
3.1
7,103
(3.4)
2.9
1.2
0.75
CHANGES
%
9.7
14.4
7.9
(2.1)
(19.8)
(6.6)
(11.7)
(22.3)
NM
NM
16.5
20.0
14.0
15.3
6.4
1.6
(6.1)
7.6
5.3
2.1
(0.01)
(0.7)
Weighted average number of securities (000)
835,751
772,314
(1) APA has adopted revised AASB 119 during the financial year. As the revised standard must be applied retrospectively, comparative numbers have been restated.
(2) Pass‑through revenue is revenue on which no margin is earned. Pass‑through revenue arises in the asset management operations in respect of costs incurred in, and passed on to Envestra
and GDI in respect of, the operation of the Envestra and GDI assets respectively.
(3) Significant items: 2014 relate to a once‑off adjustment to APA’s tax expense for the financial year to reflect a change in the treatment, for tax depreciation purposes only, of various capital
assets; 2013 relate to the acquisition of Hastings Diversified Utilities Fund and the reversal of some costs booked in relation to the sale of the Allgas business in December 2011.
(4) Operating cash flow = net cash from operations after interest and tax payments.
(5) Normalised operating cash flow excludes significant items.
(6) Normalised earnings exclude significant items – see page 5.
(7) Distribution payout ratio = total distribution payments as a percentage of normalised operating cash flow.
4
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 Profit after tax and non‑controlling interest, earnings before interest and tax (“EBIT”), and EBIT before depreciation and amortisation (“EBITDA”) excluding
significant items, are financial measures not prescribed by Australian Accounting Standards (“AIFRS”) and represent the profit under AIFRS adjusted for specific
significant items. The Directors consider these measures to reflect the core earnings of the Consolidated Entity, and these are therefore described in this report as
‘normalised’ measures.
The following table summarises key reconciling items between statutory profit after tax attributable to the APA securityholders and the normalised financial
measures described above:
Revenue excluding pass-through (4)
EBITDA
Depreciation and amortisation expense
EBIT
Finance costs and interest income
Profit before income tax and
non-controlling interests
2014 (1)
$000
SIGNIFICANT
ITEMS
–
–
–
–
–
–
NORMALISED
992,515
747,334
(156,228)
591,106
(325,084)
266,022
Income tax benefit/(expense)
(66,376)
144,060
Non‑controlling interests
Profit after income tax and
non-controlling interests
Operating cash flow (5)
(1)
–
(1)
199,645
439,742
144,060
(8,201)
343,705
431,541
STATUTORY
NORMALISED
992,515
747,334
(156,228)
591,106
919,524
661,943
(130,461)
531,482
(325,084)
(299,629)
266,022
77,684
231,853
(59,501)
2,764
175,116
432,639
2013 (2,3)
$000
SIGNIFICANT
ITEMS
–
101,685
STATUTORY
919,524
763,628
–
(130,461)
101,685
8,713
110,398
9,632
–
120,030
(58,258)
633,167
(290,916)
342,251
(49,869)
2,764
295,146
374,381
(1) Significant items: 2014 relate to a once‑off adjustment to APA’s tax expense for the financial year to reflect a change in the treatment, for tax depreciation purposes only, of various capital
assets.
(2) Significant items: 2013 relate to the acquisition of Hastings Diversified Utilities Fund and the reversal of some costs booked in relation to the sale of the Allgas business in December 2011.
(3) APA has adopted revised AASB 119 during the financial year. As the revised standard must be applied retrospectively, comparative numbers have been restated, but without any material
impact on previously reported results.
(4) Pass‑through revenue is revenue on which no margin is earned. Pass‑through revenue arises in the asset management operations in respect of costs incurred in, and passed on to Envestra
and GDI in respect of, the operation of the Envestra and GDI assets.
(5) Significant items for operating cash flow: 2014 relate to fees paid to Hastings Funds Management Limited ($8.2 million); 2013 relate to fees paid by Hastings Diversified Utilities Fund to
Hastings Funds Management Limited and advisers in respect of the takeover of the fund by APA ($58.3 million).
APA reported profit after tax and non‑controlling interests and including
Operating cash flow increased by 15.3% to $431.5 million (2013: $374.4 million),
significant items of $343.7 million, an increase of 16.5% compared with $295.1
and operating cash flow per security increased by 6.4%, or 3.1 cents, to 51.6
million reported last financial year. APA’s 2014 profit includes the significant
cents per security (2013: 48.5 cents).
item of $144.1 million relating to a once‑off adjustment to tax expense for the
financial year to reflect a change in the treatment, for tax depreciation purposes
only, of various capital assets acquired in 2006. This is compared with profit in
2013, which also includes a number of one‑off significant items, primarily
associated with the Hastings Diversified Utilities Fund (“HDF”) acquisition
(totalling $120.0 million).
Normalised profit after tax and non‑controlling interests (that is, excluding
significant items) increased by 14.0% to $199.6 million (2013: $175.1 million).
Operating cash flow was impacted by the one‑off payment of $8.2 million
during the financial year relating to the NSW Supreme Court’s decision in a
matter regarding fees payable to Hastings Funds Management Limited, which
APA is appealing, and the significant one‑off fees of $58.3 million paid by HDF
to Hastings Funds Management Limited and HDF’s advisers in respect of the
takeover by APA in the previous corresponding period.
Excluding these significant items, normalised operating cash flow was up by
1.6% to $439.7 million (2013: $432.6 million) and corresponding operating cash
Revenue (excluding pass‑through revenue) increased by $73.0 million to
flow per security was down 6.1%, or 3.4 cents, to 52.6 cents per security. This
$992.5 million, an increase of 7.9% on last financial year. Normalised EBITDA of
decrease is primarily due to an 8.2% increase in the average number of
$747.3 million was $85.4 million or 12.9% above last financial year (2013: $661.9
securities on issue this financial year.
million), and in line with APA’s guidance for the 2014 financial year of $740
million to $750 million.
APA’s distributions for the financial year totalled 36.25 cents per security, an
increase of 2.1%, or 0.75 cents, on last financial year, and in line with its guidance
The main factors driving the increase in normalised profit and EBITDA include:
of at least 36 cents per security. The distribution payout ratio of 68.9% based
– the full 12 months’ contribution of the South West Queensland Pipeline and
the Pilbara Pipeline System, consolidated since 9 October 2012;
– additional earnings from the expanded Mondarra Gas Storage Facility
commissioned July 2013;
– increased performance of Energy Investments; and
– increased customer contributions in Asset Management.
These increases were partially offset by reduced Victorian Gas Transmission
earnings as a result of the new access arrangement and the removal of
contributions from the Moomba Adelaide Pipeline System, which was
consolidated 9 October 2012 and sold 1 May 2013.
on normalised operating cash flow was slightly higher than the 68.2% ratio last
financial year, mainly due to the increased securities on issue. APA continues to
fully fund its distributions out of operating cash flows whilst also retaining
significant cash in the business to support ongoing growth.
5
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED CAPITAL MANAGEMENT
CREDIT RATINGS
APA securities on issue were unchanged during the financial year, with
APT Pipelines Limited, the borrowing entity of APA, maintained the following
835,750,807 securities on issue at 30 June 2014.
two investment grade credit ratings during the financial year:
During the financial year, APA completed the following financings:
– BBB long‑term corporate credit rating (outlook Stable) assigned by
– in December 2013, four existing $75 million bilateral bank facilities, due to
mature in mid‑2014, were extended. The limit of each facility was increased
to $100 million and their terms extended from three years to five years from
their new effective dates, to December 2018; and
– in June 2014, APA completed the refinancing of two syndicated bank debt
Standard & Poor’s (S&P) in June 2009, and last confirmed on 14 May 2014;
and
– Baa2 long‑term corporate credit rating (outlook Stable) assigned by
Moody’s Investors Service (Moody’s) in April 2010, and last confirmed on
20 February 2014.
facilities with three new facilities totalling $1.25 billion. The three new
INCOME TAX
facilities of $400 million, $425 million and $425 million have terms of 2.25
APA’s 2014 profit after tax includes a significant item of $144.1 million relating
years, 3.25 years and 5.25 years, maturing in September 2016, 2017 and
to a once‑off adjustment to tax expense for the financial year to reflect a
2019 respectively.
change in the treatment, for tax depreciation purposes only, of various capital
Loans already drawn under the bilateral bank facilities and the syndicated bank
assets acquired in 2006. This resulted in an income tax credit for the financial
facilities have subsequently rolled into the new facilities and the additional
year of $77.7 million.
headroom is available to support APA’s ongoing investment in the growth of its
infrastructure assets and for general corporate purposes.
Excluding significant items for this financial year and last financial year, the
effective income tax rate for the financial year is 25.0%, slightly lower than
At 30 June 2014, APA’s debt portfolio has a broad spread of maturities
25.7% last financial year.
extending out to 2024, with an average maturity of drawn debt of 5.4 years.
APA’s gearing 2 of 64.2% at 30 June 2014 was up from 62.8% at 30 June 2013,
as funding for APA’s growth infrastructure over the period under review has
been drawn from debt as well as operating cash flow remaining in the business.
At 30 June 2014, APA had around $800 million in cash and committed undrawn
facilities available to meet the continued capital growth needs of the business.
CAPITAL AND INVESTMENT EXPENDITURE 4
Capital expenditure (including stay‑in‑business capex) for the financial year
totalled $446.7 million compared with $397.4 million last financial year.
Growth project expenditure of $382.5 million was in respect of pipeline
capacity expansion in Western Australia, Victoria and New South Wales, and
additional compression facilities at Moomba and Wallumbilla. These capital
APA has a prudent treasury policy which requires conservative levels of
expenditures were generally either fully underwritten through long‑term
hedging of interest rate exposures to minimise the potential impacts from
contractual arrangements or have regulatory approval through a relevant
adverse movements in interest rates. All interest rate and foreign currency
access arrangement.
Investment expenditure for the financial year of $126.1 million is the increase in
APA’s net investment in the Diamantina Power Station joint venture through
the provision of shareholder loans as part of its long‑term funding commitment
to the project.
exposures on debt raised in foreign currencies have been hedged. APA also
enters into interest rate hedges for a proportion of the interest rate exposure on
its floating rate borrowings. As at 30 June 2014, 72.8% of interest obligations
on gross borrowings were either hedged or issued at fixed interest rates for
varying periods extending out in excess of 10 years.
BORROWINGS AND FINANCE COSTS
As at 30 June 2014, APA had borrowings of $4,789 million ($4,412 million at 30
June 2013) from a mix of syndicated bank debt facilities, bilateral debt facilities,
US Private Placement notes, European Medium Term Notes in several
currencies, Australian Medium Term Notes, United States 144A Notes and APA
Group Subordinated Notes.
Excluding significant items, net finance costs increased by $25.5 million, or
8.5%, to $325.1 million (2013: $299.6 million). The increase is primarily due to
increased borrowings. The average interest rate (including credit margins)
applying to drawn debt was 7.12 % for the financial year (2013: 7.35%).
APA’s interest cover ratio 3 for the financial year, at 2.31 times (2013: 2.30 times),
remains well in excess of its debt covenant default ratio of 1.1 times, and
distribution lock up ratio of 1.3 times.
2 Gearing ratio determined in accordance with covenants in certain senior debt facilities as net debt to net debt plus book equity.
3 For the calculation of interest cover, significant items are excluded from the EBITDA used.
4
Capital expenditure represents actual cash payments as disclosed in the cash flow statement, and it excludes accruals brought forward from the prior period and carried forward to the
next period.
6
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 Capital and investment expenditure for the financial year is detailed in the table below:
CAPITAL AND
INVESTMENT EXPENDITURE
(1)
Growth expenditure
Regulated
DESCRIPTION OF 2014 MAJOR PROJECTS
Victorian Transmission System
Winchelsea compression; Northern Interconnect looping
2014
$ MILLION
2013
$ MILLION
65.5
22.6
Major projects
Queensland
New South Wales
Western Australia
Other
Total growth capex
Stay‑in‑business capex
Customer contributions
Total capital expenditure
Acquisitions
Energy Investments
Total investment expenditure
Total capital and investment expenditure
Wallumbilla and Moomba compression
Moomba Sydney Pipeline southern expansion
Goldfields Gas Pipeline expansions
Victorian metering and LNG; maintenance system
Pilbara Pipeline relocation
Diamantina Power Station joint venture
206.6
13.2
73.4
23.8
317.0
382.5
45.1
19.1
446.7
–
126.1
126.1
572.8
80.8
23.8
208.9
29.0
342.6
365.2
24.7
7.5
397.4
330.8
–
330.8
728.2
(1) The capital expenditure shown in this table represents actual cash payments as disclosed in the cash flow statement, and excludes accruals brought forward from the prior financial year
and carried forward to next financial year.
DISTRIBUTIONS
Distributions paid to Securityholders during the financial year were:
APT profit distribution
APT capital distribution
APTIT profit distribution
APTIT capital distribution
Total
FINAL FY2013 DISTRIBUTION
PAID 11 SEPTEMBER 2013
INTERIM FY2014 DISTRIBUTION
PAID 12 MARCH 2014
CENTS PER
SECURITY
TOTAL
DISTRIBUTION
$000
CENTS PER
SECURITY
TOTAL
DISTRIBUTION
$000
16.02
–
2.32
0.16
18.50
133,877
–
19,424
1,313
154,614
14.56
0.49
2.30
0.15
17.50
121,663
4,056
19,241
1,295
146,255
On 20 August 2014, the Directors declared a final distribution for APA for the financial year of 18.75 cents per security which is payable on 10 September 2014 and
will comprise the following components:
APT profit distribution
APT capital distribution
APTIT profit distribution
APTIT capital distribution
Total
FINAL FY2014 DISTRIBUTION
PAYABLE 10 SEPTEMBER 2014
CENTS PER
SECURITY
TOTAL
DISTRIBUTION
$000
16.42
–
2.33
–
18.75
137,239
–
19,464
–
156,703
Total distribution for the financial year ended 30 June 2014 is 36.25 cents per security, an increase of 0.75 cents, or 2.1%, on the prior year.
Distribution information is presented on an accounting classification basis. The APA Group Annual Tax Statement and Annual Tax Return Guide (to be released
in September 2014) will provide the classification of distribution components for the purpose of preparation of Securityholder income tax returns.
7
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In March 2014, APA and Envestra entered into a Scheme Implementation Agreement, which was subsequently terminated by Envestra in May 2014 after it received
an alternative proposal from the CKI Consortium for a price of $1.32 per Envestra share, plus an entitlement to Envestra’s final dividend for the 2014 financial year.
The CKI Consortium formalised its bid for Envestra in its Bidder’s Statement issued on 20 June 2014. On 7 August 2014, APA accepted this offer for its entire interest
in Envestra of 33.0%. APA will receive $784 million in consideration in late August 2014, in addition to the $21 million it received on 25 July 2014, being the final
dividend of 3.5 cents per share paid by Envestra on that date. APA retains its Operations and Management Agreement on the Envestra assets, which runs to 2027.
Further information of APA’s disposal of its interest in Envestra is found on page 11.
BUSINESS SEGMENT PERFORMANCES AND OPERATIONAL REVIEW
Statutory reported revenue and EBITDA performance of APA’s business segments is set out in the table below:
YEAR ENDED 30 JUNE
Revenue (continuing business)
Energy Infrastructure
Queensland (2)
New South Wales
Victoria
South Australia
Western Australia (3)
Northern Territory
Energy Infrastructure total
Asset Management
Energy Investments
Total segment revenue
Pass‑through revenue
Unallocated revenue (interest income)
Divested business (4)
Total revenue
EBITDA (continuing business)
Energy Infrastructure
Queensland (2)
New South Wales
Victoria
South Australia
Western Australia (3)
Northern Territory
Energy Infrastructure total
Asset Management
Energy Investments
Total segment EBITDA
Divested business (4)
Total EBITDA before significant items
Significant items (5)
Total EBITDA
2014
$000
2013 (1)
$000
CHANGES
$000
%
271,747
133,554
153,669
2,687
237,564
24,848
824,069
99,171
68,133
991,373
403,477
1,142
–
217,530
139,321
162,582
2,164
196,878
23,001
741,476
82,293
51,180
874,949
352,743
11,697
32,878
1,395,992
1,272,267
212,833
106,615
114,702
2,204
173,139
13,520
623,013
56,188
68,133
747,334
–
747,334
–
163,748
112,085
122,973
1,732
135,980
11,748
548,266
41,889
51,177
641,332
20,611
661,943
101,685
54,217
(5,767)
(8,913)
523
40,686
1,847
82,593
16,878
16,953
116,424
50,734
(10,555)
(32,878)
123,725
49,085
(5,470)
(8,271)
472
37,159
1,772
74,747
14,299
16,956
106,002
(20,611)
85,391
(101,685)
24.9
(4.1)
(5.5)
24.2
20.7
8.0
11.1
20.5
33.1
13.3
14.4
(90.2)
NM
9.7
30.0
(4.9)
(6.7)
27.3
27.3
15.1
13.6
34.1
33.1
16.5
NM
12.9
NM
747,334
763,628
(16,294)
(2.1)
(1) APA has adopted revised AASB 119 during the financial year. As the revised standard must be applied retrospectively, comparative numbers have been restated.
(2) Includes the South West Queensland Pipeline revenue and EBITDA contributions from 9 October 2012.
(3) Includes the Pilbara Pipeline System revenue and EBITDA contributions from 9 October 2012.
(4) 2013: Consolidation of the Moomba Adelaide Pipeline System on 9 October 2012 until divestment on 1 May 2013.
(5) Significant items: 2013 relate primarily to one‑off items associated with the Hastings Diversified Utilities Fund acquisition.
8
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 APA’s operations and financial performance during the financial year principally
Transmission System. The agreement has an initial term of 4.5 years,
reflects the additional revenue from assets acquired in the 2013 financial year
commencing January 2015, and will replace a current contract between APA
and asset expansions, partially offset by the reduced Victorian Transmission
and EnergyAustralia for the transportation of gas from Moomba; and
System revenue.
EBITDA in APA’s continuing business, which excludes the Moomba Adelaide
Pipeline System that was divested on 1 May 2013, increased by $106.0 million,
or 16.5%, to $747.3 million.
APA continues to focus on the operation, development and enhancement of its
gas transmission and distribution assets, and energy investments across
mainland Australia.
ENERGY INFRASTRUCTURE
The Energy Infrastructure segment includes gas transmission and storage
assets and the Emu Downs Wind Farm. Revenue from these assets is derived
from either regulatory arrangements or capacity‑based contracts. Regulatory
arrangements on major assets are reviewed every five years. Contracts have a
weighted average length in excess of 10 years.
– in November 2013, APA announced a new gas transportation agreement
with Lumo Energy providing a revised suite of services from Victoria
through to Sydney using the Victorian Transmission System and Moomba
Sydney Pipeline. The agreement has a term of five and a half years,
commencing January 2015.
The Victorian Transmission System will be expanded to increase the firm peak
winter gas flows from Victoria into New South Wales by 145%, at a total cost of
approximately $160 million. See Victorian Transmission System (page 10) and
Moomba Sydney Pipeline (below) for more detail.
There were also a number of additional gas transportation and storage services
agreements executed during the financial year which utilise one or more
pipelines on the east coast grid, the most significant being, as announed in
June 2014, a new agreement with an existing customer for flexible gas
transportation services from multiple receipt and delivery points on the grid – in
The Energy Infrastructure segment contributed 83% of revenue and EBITDA.
particular utilising the Moomba Sydney Pipeline – as well as gas storage
Revenue (excluding pass‑through revenue) was $824.1 million, an increase of
services. The agreement, which commences in September 2015, is for an initial
11.1% on last financial year (2013: $741.5 million). EBITDA increased by 13.6% to
term of seven years with a further three year option.
$623.0 million on last financial year (2013: $548.3 million).
Against the backdrop of a very dynamic gas market in the south east of
The following key factors contributed to this result:
Australia, APA continues to adapt and progressively develop its gas pipeline
– additional contribution from the expanded Mondarra Gas Storage Facility,
infrastructure and services in response to the changing needs of customers.
which commenced commercial operation in July 2013;
An update on projects and developments is listed below by geographic region:
– full 12 months’ contribution from the South West Queensland Pipeline and
the Pilbara Pipeline System, compared with nine months last financial year;
– additional contribution from the expanded Goldfields Gas Pipeline; and
– an increase in volumes through the Victorian Transmission System to New
South Wales offset by the reduced regulatory tariffs of the new access
arrangement which commenced on 1 July 2013.
Queensland
– Wallumbilla compression facilities
In December 2012, APA announced it would proceed with the development
of expanded compression capacity and associated services at Wallumbilla
in Queensland. The expansion, totalling $125 million, is underpinned by a
15‑year revenue agreement with GLNG Operations Pty Ltd, with a further
East coast gas grid
five to 10 year option.
With the addition of the South West Queensland Pipeline as part of the
acquisition of HDF, APA now has a 7,000 km integrated pipeline grid on the
east coast of Australia, with the ability to transport gas seamlessly from
Construction continued during the financial year with completion expected
prior to January 2015.
multiple gas production facilities to gas users across four states.
– Moomba compression facilities and South West Queensland Pipeline
Customers using the grid now have flexibility in relation to receipt and delivery
points, with the potential to move between 30 receipt points and about 100
delivery points on the east coast. APA has developed the commercial and
operational framework to deliver this flexibility and other related services, such
as multi asset services, bi‑directional transportation and gas storage and
parking facilities.
eastern haul capital works
APA continued the $125 million compression capacity expansion project on
the Moomba end of the South West Queensland Pipeline. The project, which
commenced during HDF ownership of the asset, will support the west to
east gas transportation agreements on the South West Queensland Pipeline.
In addition, APA continued capital works on the South West Queensland
Pipeline, totalling $75 million, which facilitates eastern haul transportation
During the financial year, three new gas transportation agreements on the
services and pipeline bi‑directional capability. Both capital projects are
Moomba Sydney Pipeline System were executed to facilitate the increased
underpinned by long term revenue contracts.
transportation of gas from Victoria to New South Wales via the Victorian
Transmission System. The net revenue impact of these agreements is positive,
with the resultant increase in revenue on the Victorian Transmission System
more than offsetting reduced revenue on the Moomba Sydney Pipeline. The
agreements are summarised below:
– in September 2013, APA announced a new gas transportation and storage
services agreement with Origin Energy Limited on the Moomba Sydney
Pipeline. The agreement has a term of six years, commencing January 2014
and replacing a previous contract transporting gas from Moomba;
– in October 2013, APA announced a new gas transportation agreement with
EnergyAustralia Pty Ltd for the delivery of gas sourced from Victoria into
New South Wales via APA’s Moomba Sydney Pipeline and Victorian
Construction continued during the financial year with completion of
Moomba compression expected in the second quarter of the 2015 financial
year.
New South Wales
– Moomba Sydney Pipeline
New gas transportation agreements to provide increased gas flow from
Victoria into New South Wales were executed during the financial year (see
east coast grid on this page). These agreements underpin the $160 million
project to increase gas transportation capacity from Victoria into New
South Wales, which includes expanding capacity of the Culcairn compressor
in southern New South Wales. Capital works commences this financial year,
and are scheduled for completion by winter 2015.
9
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED APA is actively marketing capacity in the medium term to replace contracts
– Eastern Goldfields Pipeline
expiring in 2016. Options include delivery of supplies from new fields,
In July 2014, APA announced it will further expand its portfolio with the
storage services and the potential for the delivery of southern sourced gas
development of a new 292 km gas transmission pipeline, the Eastern
to northern markets.
Victoria
– Victorian Transmission System
Total gas volume transported through the Victorian Transmission System
was 233.1 PJ, down 3.0% on last financial year (2013: 240.5 PJ) due to much
warmer weather in the financial year and lower industrial demand. This was
Goldfields Pipeline, to supply mining operations in the eastern Goldfields
region of Western Australia. The pipeline is underpinned by two new, long
term gas transportation agreements with AngloGold Ashanti Australia
Limited for the transportation of gas through the Goldfields Gas Pipeline,
Murrin Murrin Lateral and the new Eastern Goldfields Pipeline to AngloGold’s
Sunrise Dam and Tropicana gold mining operations.
partially offset by increased gas exports to New South Wales (17.9 PJ in
APA will construct the Eastern Goldfields Pipeline and associated
FY14; 16.0 PJ in FY13). Peak day volume of 1,132 TJ was lower than last
infrastructure for an estimated total capital cost of $140 million, with
financial year (2013: 1,212 TJ).
completion expected prior to January 2016 when gas transportation
In March 2013, the Australian Energy Regulator (“AER”) issued its final
services are due to commence.
decision which did not accept APA’s revised access arrangement proposal.
– Pilbara Pipeline System
The AER subsequently published its own access arrangement for the
APA signed a new gas transportation agreement with Sub 161 for one year,
Victorian Transmission System. APA sought review of the AER’s decision to
with options to extend the term of the agreement. This required the
the Australian Competition Tribunal, whose decision was handed down on
construction of a new lateral and delivery station totalling $4 million, which
18 September 2013. APA was successful in respect of two aspects of the
is underwritten by the agreement. Sub 161 produces compressed natural
AER’s decision, which together represent approximately $20 million in
gas, supplying mining operations in the Pilbara region.
additional revenue over the current access arrangement period.
Northern Territory
APA commenced construction of the new $40 million compression facilities
– Pipeline link between the Northern Territory and south east Australia
at Winchelsea as part of the South West Pipeline augmentation approved in
In early 2014, APA commenced a feasibility study to link its pipeline
the current access arrangement. Completion is expected in December 2014.
infrastructure in the Northern Territory with its east coast gas grid. The
Construction of the first stage of looping of the Northern Interconnect
commenced, as part of the $160 million capital projects to provide additional
capacity in the northern zone of the system in accordance with regulatory
arrangements (Northern Zone augmentation) and new contractual
proposed pipeline link will create the opportunity for gas sourced from
onshore and offshore fields in the Northern Territory to supply markets in
the east, as well as supplying additional gas security for the Northern
Territory.
agreements – see east coast grid on page 9.
APA expects to complete the feasibility study within two years, at a total
Western Australia
– Goldfields Gas Pipeline
cost of approximately $2 million. Any commitment to develop the link will
require appropriate long term revenue agreements to underpin the project.
In December 2011 and January 2012, APA announced two new capacity
– Gas supply to the Australian Agricultural Company meat processing facility
expansions on the Goldfields Gas Pipeline to supply a new 20‑year gas
In March 2014, APA executed a long term agreement to deliver natural gas
transportation agreement with Rio Tinto and a new 15‑year gas transportation
to the Australian Agricultural Company meat processing facility near
agreement with the Mount Newman Joint Venture (85% BHP Billiton). The
Darwin, starting in mid‑2014. Under the agreement, gas sourced from the
expansions totalling $150 million (APA’s share: $132 million) neared
Amadeus Basin will be transported north to the customer’s facility via APA’s
completion during the financial year and will increase the pipeline’s capacity
Amadeus Gas Pipeline.
by 28% to 205 TJ/d. This additional capacity progressively became available
as required under the agreements, with some revenues commencing in
October 2013 and set to ramp up fully in the 2015 financial year.
ASSET MANAGEMENT
APA provides asset management and operational services to the majority of its
energy investments and to a number of third parties. Its main customers are
APA has been managing the construction project on behalf of the Goldfields
Envestra, Ethane Pipeline Income Fund, Energy Infrastructure Investments and
Gas Transmission Joint Venture through which APA owns 88.2% of the
GDI. Asset management services are provided to these customers under long
Goldfields Gas Pipeline.
term contracts.
APA and Murrin Murrin Operations Pty Limited recontracted for a further 15
Revenue (excluding pass‑through revenue) from asset management services
years of gas transportation services on the Goldfields Gas Pipeline and
increased by $16.9 million or 20.5% to $99.2 million (2013: $82.3 million) and
Murrin Murrin Lateral, commencing July 2014.
EBITDA increased by $14.3 million or 34.1% to $56.2 million (2013: $41.9 million).
– Mondarra Gas Storage Facility
The increase in revenue is due to an increase in customer contributions for
APA completed the expansion of its Mondarra Gas Storage Facility during
relocating APA infrastructure, totalling $23.4 million (2013: $10.2 million), as
the financial year, with commercial operations commencing 23 July 2013.
well as an increase in asset management fees from Envestra, which are
Work commenced in May 2011 following execution of a long‑term foundation
calculated as a percentage of revenue.
contract for storage capacity with Synergy (previously Verve Energy). The
facility’s commercial storage capacity has been increased from 3 PJ to 15 PJ
and provides APA’s customers with supply options and flexibility to better
manage their gas supply and demand portfolios.
ENERGY INVESTMENTS
APA has an interest in a number of energy investments across Australia,
including Envestra, SEA Gas Pipeline, Energy Infrastructure Investments,
Ethane Pipeline Income Fund, EII2 and GDI. APA holds a number of roles in
Most of the facility’s capacity is contracted for at least 20 years with
respect of the majority of these investments, in addition to its ownership
Synergy. During the financial year, APA executed several short term gas
interest. All investments are equity accounted, with the exception of APA’s
storage service agreements with other Western Australian customers,
interest in Ethane Pipeline Income Fund.
which utilise some of the remaining capacity of the facility.
10
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 EBITDA from these investments increased by 33.1% to $68.1 million, up from
TOTAL SECURITYHOLDER RETURN
$51.2 million last financial year, mainly due to the increase in Envestra’s
During the financial year, APA’s market capitalisation increased by 15.0% to
profitability.
At 30 June 2014, APA’s interest in Envestra was 33.0%. On 7 August 2014, APA
accepted CKI Consortium’s offer for all its Envestra shares, exiting its investment
in Envestra. However, APA will continue to operate Envestra’s assets under an
Operating and Management agreement that expires in 2027 – see below.
PROJECT UNDER DEVELOPMENT – DIAMANTINA POWER STATION AND
LEICHHARDT POWER STATION
APA and AGL Energy are jointly developing the Diamantina Power Station and
Leichhardt Power Station at Mount Isa, Queensland through a 50:50 owned
joint venture. The Diamantina Power Station is a 242 MW combined cycle gas‑
$5.76 billion at 30 June 2014. Distributions declared during the financial year
amounted to 36.25 cents per APA security. APA’s total securityholder return for
the financial year, which accounts for the capital appreciation of APA’s security
price and assumes the reinvestment of distributions at the declared time, was
21.6%, placing APA in the top 39th percentile of one year total shareholder
returns for the financial year and top 14th percentile of three year total
shareholder returns for ASX 100 listed companies 5. APA’s 10‑year total
securityholder return is 492%, a compound annual growth rate of 19.5%.
REGULATORY MATTERS
Key regulatory matters addressed during the financial year included:
fired power station. The adjacent Leichhardt Power Station is a 60 MW open
Victorian Transmission System access arrangement
cycle gas‑fired power station which will provide back‑up generation in support
In April 2012, APA submitted a revised access arrangement proposal for the
of availability commitments to customers. The power stations will be supplied
Victorian Gas Transmission System for the period 2013 to 2017. In March 2013,
with gas via APA’s Carpentaria Gas Pipeline.
the AER issued its final decision in which it did not accept APA’s proposal. The
The power stations are underpinned by long term energy supply agreements
through to 2031 with Mount Isa Mines Limited, a wholly owned subsidiary of
AER subsequently published its own access arrangement for the Victorian
Transmission System.
Glencore Xstrata, and Ergon Energy, Queensland’s state‑owned regional
The AER’s final decision includes a reduction in revenue that resulted from,
electricity supplier. Under the arrangements, AGL has contracted transportation
among other matters, a lower capital base reflecting lower actual capital
capacity in the Carpentaria Gas Pipeline for an initial ten‑year period.
expenditure in the previous access arrangement period and a significantly
In early October 2013, the Diamantina Power Station delivered its first power
lower allowed rate of return.
into the Mount Isa electricity grid as part of the commissioning of the first
APA sought review of the AER’s decision by the Australian Competition
40MW open cycle gas turbine generator. In January 2014, it commenced
Tribunal, whose decision was issued on 18 September 2013. APA was successful
supplying power commercially to one of its two major customers. Full
in respect of two aspects of the review of the AER’s decision, which together
combined cycle operation is due to commence in the last quarter of calendar
represent approximately $20 million in additional revenue over the current
2014. The Leichhardt Power Station was commissioned and became fully
access arrangement period.
operational in July 2014.
Rate of return guidelines
APA EXITS ITS INVESTMENT IN ENVESTRA
In December 2013, each of the AER and the Economic Regulation Authority
On 17 December 2013, APA and Envestra agreed to progress a scheme of
(“ERA”) published their respective initial Rate of Return Guideline, as required
arrangement proposal to combine the two businesses following a revised
by changes to the National Gas Rules implemented in 2012. The guidelines
proposal from APA, which implied a value of $1.17 per Envestra share (based on
highlight that the Capital Asset Pricing Model continues to dominate each of
an APA share price of $6.0974, the APA 30 day VWAP at close of business on
the Regulators’ respective approaches to determining the cost of equity. These
11 December 2013). Following completion of confirmatory due diligence, receipt
guidelines are not binding and service providers in their access arrangements
of certain binding confirmations from Envestra’s financiers and the issue of an
proposals to the AER and ERA can argue for departure from the relevant
Independent Expert Report, APA and Envestra entered into a Scheme
guideline.
Implementation Agreement, with an expected implementation date of early
June 2014.
However, on 8 May 2014, Envestra received a non‑binding proposal from the
CKI Consortium. Following due diligence and relevant approvals, on 30 May
HEALTH, SAFETY AND ENVIRONMENT
Health and safety reporting
The Lost Time Injury Frequency Rate (“LTIFR”) 6 for APA employees was 0.7 for
the financial year, down from 2.1 last financial year. There were two employee
2014 Envestra entered into a Bid Implementation Agreement with the CKI
and three contractor lost time injuries during the financial year, which is four
Consortium for a price of $1.32 per Envestra share, plus an entitlement to a final
fewer lost time injuries compared with the prior financial year.
dividend of 3.5 cents per share, which was paid on 25 July 2014. As a result,
Envestra terminated the Scheme Implementation Agreement with APA.
APA aims to be a “zero harm” workplace for its employees, contractors and the
broader communities in which it operates. During the financial year, APA
The CKI Consortium formalised its bid for Envestra in its Bidder’s Statement
launched its three year Strategic Improvement Plan, introducing 12 of its 17
dated 20 June 2014, with the offer open for acceptance from 4 July 2014 to
initiatives, including Leading Zero Harm. These initiatives were implemented
8 August 2014 (unless extended or withdrawn).
across all areas of APA’s business, and have contributed to the improvement in
On 7 August 2014, APA accepted the CKI Consortium offer for all its Envestra
this financial year’s health and safety performance.
shares. APA will receive $784 million in consideration, in addition to the
The Strategic Improvement Plan was developed following a corporate wide
$21 million final dividend paid by Envestra on 25 July 2014.
health and safety cultural survey in early 2013. Implementation of the plan is
The CKI Consortium offer is now expected to close on 21 August 2014.
improving APA’s understanding of the hazards and risks in its business,
identifying the controls needed to eliminate or mitigate these risks and
APA retains its Operations and Management Agreement on the Envestra
validating this with a robust assurance framework.
assets, which runs to 2027. Under that agreement, APA is paid all actual costs
and disbursements reasonably incurred or outlaid by APA in the performance
of its obligations under the agreement, and a management fee of 3% of the
total network revenue Envestra receives from the assets that APA manages.
5 Figures quoted are sourced from IRESS and measured as at 30 June 2014.
6 Lost Time Injury Frequency Rate is calculated as the work hours lost as a result of injury at work, multiplied by one million, divided by the total hours worked.
11
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED Other activities implemented during the financial year include:
APA’s summary of Scope 1 emissions and energy consumption for the 2013
– a new risk‑based approach to health and safety audits, which provides more
targeted compliance with APA’s Health, Safety and Environment system;
– an improved hazard profiling process that allows for a better understanding
of the workplace health and safety risks in each business unit and
operational site across APA; and
financial year are set out in the following table:
FINANCIAL YEAR
2013
2012
CHANGE
Scope 1 CO2 emissions (tonnes)
322,827
327,239
(4,412)
(1.4)%
Energy consumption (GJ) (1)
2,791,839 2,886,506
(94,667)
(3.3)%
– a new suite of safety performance measures, which include lead indicators
that measure performance against the proactive safety measures.
(1) In 2013 APA amended its NGER reporting methodology for energy consumption. 2012
figures have been adjusted to reflect this change
APA encourages healthy living and for the sixth year sponsored employees are
participating in the Global Corporate challenge. 37 teams (259 APA employees)
commenced a 16 week walking challenge with the aim of increasing the number
of steps they take and improving overall physical fitness. In addition, APA
provided an annual flu vaccination program and a confidential employee
Carbon legislation and repeal
A major element of the Clean Energy Act 2011, passed by the Senate on 8
November 2011, was the introduction of legislation to reduce carbon emissions.
The legislation put a price on carbon emissions from 1 July 2012.
assistance program that provides services to employees and their immediate
However, in July 2014, the carbon price legislation was repealed effective 1 July
families.
Environmental regulations
All pipeline, distribution and gas processing assets owned and/or operated by
2014. Consequently, the 2014 financial year is the final year for carbon liability
compliance. The Federal Government has proposed the Emissions Reduction
Fund as a replacement for the existing carbon legislation.
APA are designed, constructed, tested, operated and maintained in accordance
During the financial year APA recovered all its carbon related costs. From 1 July
with pipeline and distribution licences issued by the relevant state and territory
2014 APA will no longer have a carbon liability and will remove any pass‑
technical regulators. All licences require compliance with relevant federal, state
through carbon charges from customers’ charges.
and territory environmental legislation and Australian standards.
RISK OVERVIEW
The pipeline licences also require compliance with the Australian Standard AS
APA identifies risks to the business and puts in place mitigation actions to
2885 “Pipelines – Gas and Liquid Petroleum”, which has specific requirements
remove or minimise the negative impact and maximise the opportunities in
for the management of environmental matters associated with all aspects of
respect of these risks. Material risks are reviewed on an ongoing basis by APA’s
the high pressure pipeline industry.
Construction Environmental Management Plans satisfying Section 6 of the
Australian Pipeline Industry Association Code of Environmental Practice are
prepared as needed. Major project construction activities are audited or
Executive Risk Management Committee and the Board Audit and Risk
Management Committee, together with the relevant business units and internal
experts. Further information on this process is provided in APA’s Corporate
Governance Statement (refer to Principle 7).
inspected
in accordance with
the Environmental Management Plan
Risk assessment considers a combination of the probability and consequence of
requirements.
In accordance with Part 3 of AS 2885, Environmental
risks occurring. Listed below are the key risks identified that could materially
Management Plans satisfying Section 7 of the Code are in place for all operating
affect APA negatively. However, the materiality of risks may change and previously
pipelines and are managed in accordance with APA’s contracts and the terms
unidentified risks may emerge. These risks should be considered in connection
and conditions of the licences that APA has been issued.
with any forward looking statement by APA in this document or elsewhere.
The Safety and Operating Plan for APA’s distribution network has been audited
Key risks
in accordance with New South Wales technical regulatory requirements.
Economic regulation
Senior management reviews audit reports and any material breaches are
communicated to the Board. No significant breaches have been reported
during the financial year and APA has managed its assets in accordance with
the Environmental Management Plans that are in place.
Environmental reporting
APA has a number of price regulated assets and investments in its portfolio.
Regulatory pricing periods generally run for five years and reflect the
regulator’s determination of, amongst other matters, APA’s projected operating
and capital costs, and weighted average cost of capital. The price regulation
outcomes determined by the AER or ERA (for Western Australia) under an
access arrangement process for a full regulation asset may adversely affect
In October 2013, APA complied with Australia’s National Greenhouse and
APA’s revenue in respect of that asset.
Energy Reporting (“NGER”) obligations for the 2013 financial year. Energy
reporting for the 2014 financial year will be submitted in October 2014.
Bypass and competitive risk
Bypass and competitive risk occurs when a new transmission pipeline offers
APA’s main sources of emissions are from the combustion of natural gas in
gas transportation services to the same end market serviced by existing
compressor stations and from fugitive emissions associated with natural gas
pipelines. If a bypass risk eventuates, APA’s future earnings could be reduced if
pipelines. NGER compliance reporting applied to assets under APA’s operational
customers purchase gas transportation services from new pipelines, rather
control, which include Roma Brisbane Pipeline, Moomba Sydney Pipeline,
than from APA’s existing pipelines.
South West Queensland Pipeline, Northern Territory Natural Gas Distribution
Network, Goldfields Gas Pipeline (88.2% ownership), Diamantina Power Station
(50% equity ownership) and Allgas (20% equity ownership).
Gas demand risk
Reduced demand for gas, increased use of gas swap contracts by customers,
and increased use of non‑APA gas storage facilities may reduce the future
demand for pipeline capacity and transportation services and adversely impact
APA’s future revenue, profits and financial position.
12
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 Gas supply risk
Operational risk
A long‑term shortage of competitively priced gas, either as a result of gas
APA is exposed to a number of operational risks such as equipment failures or
reserve depletion, allocation of gas to other markets, or the unwillingness or
breakdowns, rupture of pipelines, information technology systems failures or
inability of gas production companies to produce gas, may adversely affect
breakdowns, employee or equipment shortages, contractor default, unplanned
APA’s revenue and the carrying value of APA’s assets.
interruptions, damage by third parties and unforeseen accidents. Operational
Counterparty risk
The failure of a counterparty to meet its contractual commitments to APA,
whether in whole or in part, would reduce future anticipated revenue unless
and until APA is able to secure an alternative customer. Counterparty risk also
disruption, or the cost of repairing or replacing damaged assets, could
adversely impact APA’s earnings. Insurance policies may only provide
protection for some, but not all, of the costs that may arise from unforeseen
events.
arises when contracts are entered into for derivatives with financial institutions.
Construction and development risk
Exposures are regularly monitored in accordance with APA’s Treasury Risk
APA develops new assets and undertakes expansion of its existing assets. This
Management Policy.
Interest rates and refinancing risks
APA is exposed to movements in interest rates where floating interest rate
funds are not effectively hedged. There is a risk that adverse interest rate
movements may affect APA’s earnings, both directly (through increased
interest payments) and indirectly (through the impact on asset carrying
values).
APA has borrowings extending through to 2022. Access to continuing financing
sources to extend and/or refinance debt facilities will be important. An inability
to secure new debt facilities at a similar quantum and cost to existing debt
involves a number of typical construction risks, including the failure to obtain
necessary approvals, employee or equipment shortages, higher than budgeted
construction costs and project delays, which may impact the commerciality
and economics of the development or otherwise impact on APA’s other assets.
If these risks materialise, this may adversely affect APA’s operations and/or
financial position and performance.
Disputes and litigation risks
In the course of its operations, APA may be involved in disputes and litigation.
There is a risk that material or costly disputes or litigation could affect APA’s
financial position and performance.
facilities may adversely affect APA’s operations and/or financial position and
GUIDANCE FOR 2015 FINANCIAL YEAR
performance.
Investment risk
APA may acquire infrastructure and related assets or undertake additional or
incremental investment in its existing assets. There is a risk that assumptions
and forecasts used in making investment decisions may ultimately not be
realised, and this may adversely affect APA’s financial position and performance.
Contract renewal risk
A large part of APA’s revenues are the subject of long‑term, negotiated revenue
contracts with end customers. Due to a range of factors, including customer
Based on current operating plans, APA expects statutory EBITDA for the full
year to 30 June 2015 to be in a range of $1,170 million to $1,190 million, inclusive
of a once‑off profit on sale of APA’s Envestra shares of around $430 million.
APA expects normalised EBITDA to be in the range of $740 million to $760
million, which represents an increase of approximately 6% to 9% on the 2014
financial year EBITDA of APA’s continuing business, which excludes equity
accounted earnings from Envestra of $50.1 million.
Net interest cost for the 2015 financial year is expected to be in a range of $315
million to $325 million.
demand risk, gas supply risk, counterparty risk, shorter term contracts and
Distribution per security for the 2015 financial year is expected to be at least
bypass and competitive risk, APA may not be successful in recontracting the
equal to that paid in respect of the 2014 financial year, that is, at least 36.25
available pipeline capacity when it comes due for contract renewal, and
cents per security.
consequently may adversely impact APA’s future revenue, profits and financial
position.
SUBSEQUENT EVENTS
Except as disclosed elsewhere in this report, the Directors are unaware of any
matter or circumstance that has occurred since the end of the financial year
that has significantly affected or may significantly affect the operations of APA,
the results of those operations or the state of affairs of APA in future years.
INFORMATION ON DIRECTORS AND COMPANY SECRETARY
Information relating to the qualifications and experience of the Directors and Company Secretary is set out below:
Leonard Bleasel AM
FAICD FAIM
Leonard (Len) Bleasel had a long career in the energy industry before retiring from management in 2001. He started his
career in AGL in 1958 and worked in a variety of roles, culminating in the position of Managing Director and CEO from 1990
Independent Chairman
to 2001.
Appointed 28 August 2007
Appointed Chairman
30 October 2007
Len is Chairman of the Taronga Conservation Society Australia and the Advisory Council for CIMB Securities International
(Australia) Pty Limited.
Len’s past appointments have included lead non‑executive director of QBE Insurance Group Limited, Chairman of Foodland
Associated Limited, ABN AMRO Australia Holdings Pty Limited, Solaris Power, the Australian Gas Association, Natural Gas
Corporation Holdings Ltd (New Zealand), Elgas Ltd, Auscom Holdings Pty Ltd, Industrial Pipe Systems Pty Ltd and East
Australian Pipeline Ltd, a director of St George Bank Limited and Gas Valpo (Chile), and Vice President of the Royal Blind
Society.
Len was awarded an AM in the General Division of the Order of Australia for services to the Australian gas and energy
industries and the community.
13
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED Michael McCormack
BSurv GradDipEng
MBA FAICD
Michael (Mick) McCormack has been Chief Executive Officer of APA since 1 July 2005 and Managing Director since 1 July
2006. He has over 25 years’ experience in the gas infrastructure sector in Australia and his career has encompassed all
aspects of the sector including commercial development, design, construction, operation and management of most of
Chief Executive Officer and
Australia’s natural gas pipelines and gas distribution systems.
Managing Director
Appointed Managing Director
1 July 2006
Steven Crane
BComm FAICD SF Fin
Independent Director
Appointed 1 January 2011
Mick is a Director of Envestra Limited and formerly a Director of the Australian Pipeline Industry Association and the
Australian Brandenburg Orchestra.
Steven (Steve) Crane has over 30 years’ experience in the financial services industry. His background is in investment
banking, having previously been Chief Executive Officer of ABN AMRO Australia and BZW Australia.
Steve has considerable experience as a non‑executive Director of listed entities. He is currently Chairman of nib holdings
limited, a Director of Bank of Queensland Limited, Transfield Services Limited and Taronga Conservation Society Australia,
and a member of the Advisory Council for CIMB Securities International (Australia) Pty Limited. He was formerly Chairman
of Adelaide Managed Funds Limited and Investa Property Group Limited, a Director of Adelaide Bank Limited, Foodland
Associated Limited and APA Ethane Limited, the responsible entity of Ethane Pipeline Income Fund, and a member of the
Advisory Council RBS Group (Australia) Pty Limited.
Steve is a member of the Audit and Risk Management Committee and the Remuneration Committee.
John Fletcher
BSc MBA FAICD
John Fletcher has over 35 years’ experience in the energy industry, having held a number of executive positions in AGL prior
to his retirement in 2003, including Chief Financial Officer. John has previously been a Director of Integral Energy, Natural
Independent Director
Gas Corporation Holdings Ltd (New Zealand), Foodland Associated Limited, Sydney Water Corporation and Alinta Energy
Appointed 27 February 2008
Group. He brings a wide commercial and financial practical knowledge to the Board.
John was previously an AGL appointed Director of Australian Pipeline Limited from 2000 to 2005.
John is the Chairman of the Remuneration Committee and a member of the Audit and Risk Management Committee.
Russell Higgins AO
BEc FAICD
Independent Director
Appointed 7 December 2004
Russell Higgins has extensive experience both locally and internationally in the energy sector and in economic and fiscal
policy. He was Secretary and Chief Executive Officer of the Department of Industry, Science and Resources from 1997 to
2002 and Chairman of the Australian Government’s Energy Task Force from 2003 to 2004.
Russell is a Director of Telstra Corporation Limited, Argo Investments Limited and the St James Ethics Foundation.
He is a former Chairman of the CSIRO Energy Transformed Flagship Advisory Committee, the Snowy Mountains Council and
the Australian Government’s Management Improvement Advisory Committee, and a former Director of Leighton Holdings
Limited, Ricegrowers Limited (trading as SunRice), Australian Biodiesel Group Limited, EFIC, CSIRO, Austrade and the
Australian Industry and Development Corporation, as well as a former member of the Australian Government’s Joint
Economic Forecasting Group. In 2006‑07, he was a member of the Prime Ministerial Task Group on Emissions Trading.
Russell is Chairman of the Health Safety and Environment Committee and a member of the Audit and Risk Management
Committee.
Patricia McKenzie
LLB FAICD
Independent Director
Patricia McKenzie has considerable expertise and experience in energy market regulation and, as a qualified solicitor,
extensive corporate legal experience. She is currently Chair of Healthdirect (National Health Call Centre Network Limited)
and a Director of Macquarie Generation, and was formerly a Director of Australian Energy Market Operator Limited (AEMO),
Appointed 1 January 2011
the national energy market operator for electricity and gas, and the Chief Executive Officer of Gas Market Company Limited,
the market administrator for retail competition in the gas industry in New South Wales and the Australian Capital Territory.
Patricia is a member of the Health Safety and Environment Committee and the Remuneration Committee.
Robert Wright
BCom FCPA
Robert Wright has over 30 years’ financial management experience, having held a number of Chief Financial Officer
positions, including Finance Director of David Jones Limited. He is currently the Chairman of Super Retail Group Limited and
Independent Director
APA Ethane Limited, the responsible entity of Ethane Pipeline Income Fund, and was previously Chairman of SAI Global
Appointed 11 February 2000
Limited, Dexion Limited and RCL Group Limited.
Robert is the Chairman of the Audit and Risk Management Committee and a member of the Health Safety and Environment
Committee.
In addition to being responsible for the secretariat function, Mark Knapman oversees corporate governance and the legal,
internal audit and financial services compliance functions.
Mark has extensive experience as a Company Secretary. He was Company Secretary and General Counsel of an ASX‑listed
company and Asia Pacific Legal Counsel and Company Secretary for a US multinational company prior to joining APA. Prior
to those roles he was a partner of an Australian law firm.
Mark is a Fellow of the Governance Institute of Australia (formerly Chartered Secretaries Australia) and the Institute of
Company Secretaries and Administrators, and is admitted to practice as a solicitor.
Mark Knapman
BCom LLB FGIA FCIS
Company Secretary
Appointed 16 July 2008
14
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 DIRECTORSHIPS OF OTHER LISTED COMPANIES
Directorships of other listed companies held by Directors at any time in the three years immediately before the end of the financial year are as follows:
NAME
COMPANY
PERIOD OF DIRECTORSHIP
Leonard Bleasel AM
QBE Insurance Group Limited
January 2001 to September 2012
Michael McCormack
Envestra Limited
Steven Crane
Transfield Services Limited
Bank of Queensland Limited
nib holdings limited
John Fletcher
–
Russell Higgins AO
Telstra Corporation Limited
Argo Investments Limited
Ricegrowers Limited
Since July 2007
Since February 2008
Since December 2008
Since September 2010
–
Since September 2009
Since September 2011
December 2005 to August 2012
Patricia McKenzie
Robert Wright
Leighton Holdings Limited
June 2013 to May 2014
–
Super Retail Group Limited
APA Ethane Limited (1)
SAI Global Limited
RCL Group Limited
–
Since May 2004
Since July 2008
October 2003 to October 2013
May 2006 to February 2012
(1) APA Ethane Limited is the responsible entity of the registered managed investment schemes that comprise Ethane Pipeline Income Fund, the securities in which are quoted on the ASX.
OPTIONS GRANTED
In this report, the term “APA securities” refers to the stapled securities each
comprising a unit in Australian Pipeline Trust stapled to a unit in APT Investment
INDEMNIFICATION OF OFFICERS AND EXTERNAL
AUDITOR
During the financial year, the Responsible Entity paid a premium in respect of a
Trust and traded on the Australian Securities Exchange (“ASX”) under the code
contract insuring the Directors and officers of the Responsible Entity and any
“APA”.
No options over unissued APA securities were granted during or since the end
of the financial year, no unissued APA securities were under option as at the
date of this report, and no APA securities were issued during or since the end
APA Group entity against any liability incurred in performing those roles to the
extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the
premium.
of the financial year as a result of the exercise of an option over unissued APA
Australian Pipeline Limited, in its capacity as Responsible Entity of Australian
securities.
Pipeline Trust and APT Investment Trust, indemnifies each person who is or has
been a Director or Company Secretary of the Responsible Entity or any APA
Group entity under a range of deed polls and indemnity agreements which
have been in place since 1 July 2000. This indemnity may extend to such other
officers or former officers of APA Group entities as the Board, in its discretion,
in each case determines. The indemnity operates to the full extent allowed by
law but only to the extent not covered by insurance, and is on terms the Board
considers usual for arrangements of this type.
Under its constitution, Australian Pipeline Limited (in its personal capacity)
indemnifies each person who is or has been a Director, Company Secretary or
executive officer of that company.
The Responsible Entity has not otherwise, during or since the end of the
financial year, indemnified or agreed to indemnify an officer or external auditor
of the Responsible Entity or any APA Group entity against a liability incurred by
such an officer or auditor.
15
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED DIRECTORS’ MEETINGS
During the financial year, 20 Board meetings, three Remuneration Committee meetings, four Audit and Risk Management Committee meetings and three Health
Safety and Environment Committee meetings were held. The following table sets out the number of meetings attended by each Director while they were a Director
or a committee member:
DIRECTORS
Leonard Bleasel AM (1)
Michael McCormack
Steven Crane
John Fletcher
Russell Higgins AO
Patricia McKenzie
Robert Wright
BOARD
REMUNERATION COMMITTEE
AUDIT AND RISK MANAGEMENT
COMMITTEE
HEALTH SAFETY AND
ENVIRONMENT COMMITTEE
A
20
20
20
20
20
20
20
B
20
20
20
20
20
20
20
A
–
–
3
3
–
3
–
B
–
–
3
3
–
3
–
A
–
–
4
4
4
–
4
B
–
–
4
4
4
–
4
A
–
–
–
–
3
3
3
B
–
–
–
–
3
3
3
A: Number of meetings held during the time the Director held office or was a member of the committee during the financial year.
B: Number of meetings attended.
(1) The Chairman attended all committee meetings ex officio.
DIRECTORS’ SECURITYHOLDINGS
The aggregate number of APA securities held directly, indirectly or beneficially by Directors or their Director related entities at the 30 June 2014 is 979,426
(2013: 979,426).
The following table sets out Directors’ relevant interests in APA securities as at 30 June 2014:
DIRECTORS
Leonard Bleasel AM
Michael McCormack
Steven Crane
John Fletcher
Russell Higgins AO
Patricia McKenzie
Robert Wright
FULLY PAID
SECURITIES AS AT
1 JULY 2013
SECURITIES
ACQUIRED
SECURITIES
DISPOSED
FULLY PAID
SECURITIES AS AT
30 JUNE 2014
460,664
208,590
100,000
66,188
92,040
12,500
39,444
979,426
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
460,664
208,590
100,000
66,188
92,040
12,500
39,444
979,426
The Directors hold no other rights or options over APA securities. There are no contracts to which a Director is a party or under which the Director is entitled to a
benefit and that confer a right to call for or deliver APA securities.
16
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 REMUNERATION REPORT
The Remuneration Report is attached to and forms part of this report.
AUDITOR
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the independence declaration of the auditor, Deloitte Touche
Tohmatsu (“Auditor”) as required under section 307C of the Corporations Act
2001 is included at page 97.
NON-AUDIT SERVICES
INFORMATION REQUIRED FOR REGISTERED
SCHEMES
Fees paid to the Responsible Entity and its associates (including Directors and
Secretaries of the Responsible Entity, related bodies corporate and Directors
and Secretaries of related bodies corporate) out of APA scheme property
during the financial year are disclosed in Note 46 to the financial statements.
Except as disclosed in this report, neither the Responsible Entity nor any of its
associates holds any APA securities.
Non‑audit services have been provided during the financial year by the Auditor.
The number of APA securities issued during the financial year, and the number
A description of those services and the amounts paid or payable to the Auditor
of APA securities at the end of the financial year, are disclosed in Note 31 to the
for the services are set out in Note 45 to the financial statements.
financial statements.
The Board has considered those non‑audit services provided by the Auditor
The value of APA’s assets as at the end of the financial year is disclosed in the
and, in accordance with written advice from the Audit and Risk Management
balance sheet in total assets, and the basis of valuation is included in Note 3 to
Committee (“Committee”), is satisfied that the provision of those services by
the financial statements.
the Auditor is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001 and did not compromise the
auditor independence requirements of the Act. The Board’s reasons for
concluding that the non‑audit services provided did not compromise the
Auditor’s independence are:
– all non‑audit services were subject to APA’s corporate governance
procedures with respect to such matters and have been reviewed by the
Committee to ensure they do not impact on the impartiality and objectivity
ROUNDING OF AMOUNTS
APA is an entity of the kind referred to in ASIC Class Order 98/0100 dated 10
July 1998 and, in accordance with that Class Order, amounts in the Directors’
report and the financial report are rounded to the nearest thousand dollars,
unless otherwise indicated.
Signed in accordance with a resolution of the Directors of the Responsible
Entity made pursuant to section 298(2) of the Corporations Act 2001.
of the Auditor;
On behalf of the Directors
– the non‑audit services provided did not undermine the general principles
relating to auditor independence as they did not involve reviewing or
auditing the Auditor’s own work, acting in a management or decision
making capacity for APA, acting as an advocate for APA or jointly sharing
risks and rewards; and
– the Auditor has provided a letter to the Committee with respect to the
Leonard Bleasel AM
Auditor’s independence and the Auditor’s independence declaration
Chairman
Robert Wright
Director
referred to above.
SYDNEY, 20 August 2014
17
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED AUSTRALIA N PI PELIN E T RUST AND ITS CO NTRO LLE D E NTI TI E S
REMUNERATION REPORT
INTRODUCTION
At APA, we are committed to disclosing a clear and transparent summary of our remuneration arrangements.
This report explains our approach to remuneration and sets out key 2014 remuneration details for the Directors of the Responsible Entity and key management
personnel of APA.
The people in those positions during or since the end of the financial year are listed below.
DIRECTORS OF THE RESPONSIBLE ENTITY
(1)
Leonard Bleasel AM
Michael McCormack
Steven Crane
John Fletcher
Russell Higgins AO
Patricia McKenzie
Robert Wright
KEY MANAGEMENT PERSONNEL
Michael McCormack
Peter Fredricson
Ross Gersbach
Robert Wheals
John Ferguson
Kevin Lester
Stephen Ohl (2)
Mark Knapman
Peter Wallace
Chairman APA Group
Chief Executive Officer and Managing Director
Chairman Remuneration Committee
Chairman Health Safety and Environment Committee
Chairman Audit and Risk Management Committee
Chief Executive Officer and Managing Director
Chief Financial Officer
Chief Executive Strategy and Development
Group Executive Transmission
Group Executive Networks
Group Executive Infrastructure Development
Group Executive Strategic Projects
Company Secretary
Group Executive Human Resources
(1) The Directors are defined as “key management personnel” under accounting standard AASB 124 – Related Party Disclosures (“AASB 124”) and are presented separately in this report.
(2) Stephen Ohl retired with effect from 1 July 2013.
HAVE THERE BEEN ANY CHANGES TO THE EXECUTIVE REMUNERATION
– facilitate effective attraction, retention and development of talented
STRUCTURE DURING FY2014?
employees;
There have been no changes to the remuneration structure during FY2014.
– consider and make recommendations to the Board on remuneration policies
For the year ending 30 June 2013 the Board restructured the ‘at risk’ aspects of
the Total Package Opportunity Incentive Plan (“TPOI Plan”) to more directly
align the interests of plan participants and securityholders, and importantly to
allow the Board to reward superior performance.
Firstly, the Long Term Incentive (“LTI”) plan which had only one hurdle, operating
cash flow per security (“OCFPS”), was changed to include two hurdles. The first
hurdle is total shareholder return (“TSR”) performance against the S&P ASX 100
and packages applicable to Directors and to senior executives of APA;
– ensure compliance with relevant legislation and corporate governance
principles on remuneration practices and employment policies; and
– promote diversity, on the basis of gender and other factors, in APA’s
workforce and to review the effectiveness of diversity practices and initiatives.
The members of the Remuneration Committee, all of whom are non‑executive
Directors, are:
comparator group and the second hurdle, performance against targets set for
– John Fletcher (Chairman);
growth in earnings before interest, tax, depreciation and amortisation divided by
– Steven Crane; and
funds employed (“EBITDA/FE”).
– Patricia McKenzie.
Secondly, both the Short Term Incentive (“STI”) plan and the LTI plan have a
The Chairman of the Board attends all meetings of the Remuneration
maximum opportunity of 150% subject to achieving exceptional or superior
Committee and the Managing Director attends by invitation. The Remuneration
performance.
Committee met three times during the year.
Thirdly, consistent with emerging good governance, last year the Board
The Remuneration Committee may seek external professional advice on any
introduced an Executive Remuneration Clawback Policy which provides that, in
matter within its terms of reference.
the event of a material misstatement in the year end accounts for the preceding
three years (which may affect one or more key management personnel), the
Board at its discretion may clawback some or all of any STI or LTI award or LTI
grant not yet vested. The policy appears on the Group website.
REMUNERATION COMMITTEE
The Remuneration Committee has been established by the Board to govern
OUR APPROACH TO NON-EXECUTIVE DIRECTOR REMUNERATION
We seek to attract and retain high calibre directors who are equipped with diverse
skills to oversee all functions of APA in an increasingly complex environment.
We aim to fairly remunerate Directors for their services relative to similarly
sized organisations.
and oversee Director and executive remuneration. The role of the Remuneration
Non‑executive Director remuneration comprises:
Committee is to:
– a base board fee;
– ensure the provision of a robust remuneration and reward system that
– an additional fee for serving on a committee of the Board; and
provides for the alignment of employee and securityholder interests;
– superannuation contributions.
18
APA GROUP / ANNUAL REPORT 2014 The Board determines base board fees and committee fees annually. It acts on
In 2003, the Board terminated the non‑executive Directors’ retirement benefit
advice from the Remuneration Committee which obtains external benchmark
plan so that the benefits to participating Directors that had accrued up to that
information from independent remuneration specialists. Such information
termination date were then quantified and preserved for payment on retirement
includes market comparisons paid by comparable companies in the ASX 100.
of those Directors. Robert Wright is the only current Director entitled to
Non‑executive Directors do not receive incentive payments of any type. One
off ‘per diems’ may be paid in exceptional circumstances. No payments have
been made under this arrangement in this reporting period.
Board and committee fees
benefits under the plan on his retirement from the Board.
Following external benchmarking and a review of APA’s performance relative to other companies, base board fees and fees for serving on a committee of the
Board were increased effective 1 January 2014.
Base board fees and committee fees are outlined below.
Effective 1 January 2014
Effective 1 January 2013
to 31 December 2013
(1)
FEES
Board fees
Remuneration Committee fees
Audit and Risk Management Committee fees
Health Safety and Environment Committee fees
Board fees
Remuneration Committee fees
Audit and Risk Management Committee fees
Health Safety and Environment Committee fees
(1) Excludes superannuation guarantee levy.
Total remuneration earned and received
CHAIRMAN
$000/PA
MEMBER
$000/PA
370
32
38
32
330
31
37
31
129
16
19
16
120
15.5
18.5
15.5
The following table outlines the total remuneration earned and received by non‑executive Directors during FY2014, calculated in accordance with applicable
accounting standards.
Non-Executive Directors (1)
L F Bleasel AM
2014
2013
S Crane
2014
2013
J A Fletcher
2014
2013
R A Higgins AO
2014
2013
P M McKenzie
2014
2013
M Muhammad (2)
2014
2013
R J Wright
2014
2013
Total Remuneration: Non-Executive Directors
2014
2013
SHORT-TERM
EMPLOYMENT
BENEFITS
POST-EMPLOYMENT
BENEFITS
SALARY/FEES
$
SUPERANNUATION
$
TOTAL
$
353,252
317,252
158,970
146,970
160,598
156,723
174,723
160,223
156,000
143,000
–
43,043
177,738
164,238
1,181,281
1,131,449
28,698
24,998
14,530
13,230
30,078
19,012
15,953
14,427
14,250
12,850
–
–
16,226
14,763
119,735
99,280
381,950
342,250
173,500
160,200
190,676
175,735
190,676
174,650
170,250
155,850
–
43,043
193,964
179,001
1,301,016
1,230,729
(1) The remuneration for the Chief Executive Officer and Managing Director, Michael McCormack, is included with the remuneration disclosures for key management personnel for FY2014
on page 26.
(2) Muri Muhammad resigned as a Director on 24 October 2012.
19
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUED
OUR APPROACH TO EXECUTIVE REMUNERATION
What is our executive remuneration strategy?
Our executive remuneration strategy is to:
– attract and retain key executives who will create long‑term sustainable value for Securityholders;
– motivate and reward executives having regard to the overall performance of APA, the performance of the executive measured against pre‑determined
objectives and the external compensation environment;
– target at least the market median using external benchmark data;
– appropriately align the interests of executives with those of Securityholders; and
– comply with applicable legal requirements and appropriate standards of governance.
We aim to pay competitive remuneration and this is communicated as Total Remuneration Opportunity (“TRO”).
Total
Remuneration
Opportunity
=
Total Fixed
Remuneration
(TFR)
+
Short-term
Incentive
(STI)
+
Long-term
Incentive
(LTI)
Performance based ‘at risk’ remuneration
Each individual’s TRO is dependent on their level in the organisation and their capacity to influence outcomes.
What is the remuneration mix?
APA’s remuneration mix for senior executives is structured as a mix of fixed remuneration and ‘at risk’ short and long‑term incentive components. The proportion
of fixed versus ‘at risk’ remuneration varies at different levels within APA, reflecting the varying capacity of employees to influence APA’s operational performance
and returns to Securityholders.
For the Managing Director and other key management personnel, the remuneration mix is:
Chief Executive Officer and
Managing Director
Other key management
personnel 7
40%
30%
30%
‘at risk’ components
50%
25%
25%
‘at risk’ components
TFR
STI L
LTI
TI
An overview of remuneration components
Each remuneration component has a different purpose:
REMUNERATION COMPONENT
PURPOSE
HOW REWARD IS DELIVERED
Total Fixed Remuneration (“TFR”)
To reflect the market value of the role and the
The total of base salary (which includes cash,
individual’s skills and experience.
superannuation guarantee levy, vehicles and parking)
and incidental benefits paid in monthly instalments.
‘AT RISK’ COMPONENTS
Short‑term incentive (“STI”)
To reward strong performance against the
Cash‑based incentive based on a mix of financial and
achievement of specific business objectives.
non‑financial key performance
indicators paid
annually after the audited accounts are approved.
Long‑term incentive (“LTI”)
To link executive reward with securityholder
Cash‑settled incentive based on achievement of an
value.
annual Board‑mandated set of performance hurdles
paid in three equal annual instalments starting one
year after the year of allocation.
7 Other than the Company Secretary who has a mix of 58%, 21% and 21%.
20
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014
TOTAL FIXED REMUNERATION (“TFR”)
What is the purpose of the individual executive’s KPIs ?
The total of base salary, including cash, superannuation guarantee levy, vehicles
The KPIs are designed to put a proportion of executive remuneration ’at risk’
and parking and incidental benefits.
against meeting individual KPIs linked to:
TFR is reviewed annually and is determined by reference to independent
– various financial measures such as cost control, revenue and cash generation
external remuneration benchmarking information, taking into account an
and capital expenditure management. This reflects APA’s strategic goal of
individual’s responsibilities, performance, qualifications and experience.
increasing OCFPS over the medium term, thereby increasing securityholder
‘AT RISK’ REMUNERATION
’At risk’ remuneration is made up of two elements, STI and LTI. Before any STI
payments or LTI allocations are made the organisation must achieve at least the
Board‑approved performance hurdles. Each of these components is discussed
in more detail below.
SHORT-TERM INCENTIVE (“STI”)
A cash-based incentive used to reward strong performance against the
achievement of financial and non-financial targets or key performance
indicators.
returns and aligning the interests of executives with those of securityholders;
and
– non‑financial measures through the delivery of individual KPIs linked to
long‑term strategic measures, including health, safety and environment
targets, project delivery and reinforcement of an ethical and values‑based
culture.
How is performance measured?
At the beginning of the financial year, the Board, at the recommendation of the
Remuneration Committee, determines the appropriate
level of OCFPS
performance that will form the basis of the STI and the appropriate financial
What are the performance hurdles of the STI plan?
and non‑financial KPIs for the Chief Executive Officer. The Board also reviews
The STI is structured around two interlocked components: firstly, the business
the KPIs that the Chief Executive Officer will use to assess the performance of
achieving a predetermined level of financial return or performance hurdle
his direct reports.
defined by reference to OCFPS and, secondly, executives achieving their
predetermined, individual key performance indicators (“KPIs”). Notwithstanding
executives’ performance against their KPIs, should APA not reach the
predetermined minimum OCFPS, no STI will be payable. Conversely, should
APA achieve exceptional or superior OCFPS performance, up to a maximum of
At the end of the financial year, after the audited financial results are available
and provided that the performance hurdles are met, the Board determines the
performance against KPIs of the Chief Executive Officer and the Chief Executive
Officer’s direct reports and approves the STI amounts to be paid.
150% of STI could be payable. This plan structure is directly linked to APA’s
What is the value of the STI opportunity?
strategic goal of increasing operating cash flows over the medium term,
thereby improving total securityholder value. Using OCFPS as the key
The STI amount payable is capped, the Chief Executive Officer’s STIs at 150% of
30% of TRO, and his direct reports’ STI at 150% of 25% of TRO 8.
performance hurdle for STIs ensures the
interests of executives and
securityholders are aligned. The predetermined, minimum OCFPS at which the
“gate opens” for STI awards is followed by increasingly more difficult OCFPS
hurdles which must be achieved before higher STIs are payable, dependent at
all times on the individual executive achieving their respective KPIs.
How is the STI reward delivered?
All STI awards are paid in cash usually in September of the new financial year
following the completion of the audit of the annual accounts.
For FY2014, the STI outcomes are shown in the table below for key management personnel:
KEY MANAGEMENT PERSONNEL
(1)
Michael McCormack
Peter Fredricson
Ross Gersbach
Robert Wheals
John Ferguson
Kevin Lester
Mark Knapman
Peter Wallace
(1) Stephen Ohl retired with effect from 1 July 2013.
LONG-TERM INCENTIVE (“LTI”)
STI EARNED
($)
1,463,962
534,375
512,595
341,090
304,463
269,955
236,445
296,204
STI EARNED
(%)
STI FORFEITED
($)
STI FORFEITED
(%)
91.0%
95.0%
86.4%
91.0%
88.3%
85.7%
90.7%
85.3%
144,788
28,125
80,655
33,910
40,537
45,045
24,245
51,047
9.0%
5.0%
13.6%
9.0%
11.7%
14.3%
9.3%
14.7%
A cash-settled incentive based on the APA security price which links executive
continuing to improve performance against the funds employed in the business
reward to Securityholder value based on the achievement of key financial and
over the longer term.
comparator group measures.
The TSR hurdle is linked to APA’s ranking on that measure relative to the S&P
WHAT ARE THE KEY PERFORMANCE HURDLES OF THE LTI PLAN?
ASX 100. LTI awards do not commence until APA achieves a relative position of
The LTI component of ‘at risk’ remuneration is subject to two equally weighted
at least the median of the S&P ASX 100 group of companies (P50). On
performance hurdles. The first hurdle is TSR (being, generally, growth in the
achieving P50, the LTI awards increase as APA’s performance on the TSR
security price assuming reinvestment of distributions) performance against the
measure increases relative to the S&P ASX 100.
S&P ASX 100 comparator group, and the second hurdle is performance against
target EBITDA/FE.
The EBITDA/FE hurdle is set to reflect a financial productivity improvement on
the previous year. LTI awards do not commence unless this improvement has
These LTI measures of TSR and EBITDA/FE are appropriate longer term award
been achieved. On achieving this productivity improvement, the LTI awards
hurdles based on the experience of APA Securityholders and the goal of
increase as the EBITDA/FE performance increases.
8 Other than for the Company Secretary whose STI is capped at 150% of 21% of TRO.
21
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUED What is the purpose of the LTI?
How are the LTI allocations delivered?
The LTI plan is designed to put a proportion of executive remuneration at risk
An LTI allocation vests in three equal instalments over the three financial years
against meeting longer term financial targets linked to TSR and EBITDA/FE.
following the allocation, with the initial one‑third vesting at the end of the first
This directly aligns the interests of plan participants and securityholders and
allows the Board to reward superior performance.
What form does the LTI take?
Eligible participants are entitled to an LTI allocation in the form of reference
units which exactly mirror the value of APA securities. The reference units
allocated under the LTI plan are not actual APA securities, but notional
financial year, one‑third at the end of the second financial year, and one‑third
at the end of the third financial year.
As LTI allocations are subject to the achievement of a pre‑allocation
performance hurdle, they are not subject to further performance tests at the
vesting dates. However, participants must remain employed by APA to access
the vested benefit.
securities with a value equivalent to the LTI allocation.
Upon vesting, the LTI is delivered in cash. The cash payment is equal to the
number of reference units vesting on the vesting date multiplied by the 30
trading day VWAP of APA securities immediately prior to the opening of the
APA security trading window, following the announcement of APA’s annual
financial results to the ASX. APA provides fully in its accounts for the obligations
of the LTI in the year in which the LTI allocation is made.
Each reference unit is valued at the equivalent of the 30 trading day volume
weighted average market price (“VWAP”) of an APA security immediately prior
to the opening of the APA security trading window, following the announcement
of APA’s annual financial results to the ASX.
What is the value of the LTI opportunity?
LTI participants are advised of their maximum LTI opportunity, expressed as a
percentage of their TRO. The actual individual LTI allocation is determined at
the completion of the financial year and is based on TSR performance against
the S&P ASX 100 comparator group and improvement in EBITDA/FE
performance.
The maximum LTI allocation is capped at 150% of the participant’s maximum
LTI opportunity.
For FY2014, the actual LTI performance achieved was 79.8% for TSR against S&P ASX 100 and 100% for EBITDA/FE growth. LTI allocations are shown in the table
below for all key management personnel:
KEY MANAGEMENT PERSONNEL
(1)
Michael McCormack
Peter Fredricson
Ross Gersbach
Robert Wheals
John Ferguson
Kevin Lester
Mark Knapman
Peter Wallace
(1) Stephen Ohl retired with effect from 1 July 2013
What rights are attached to an LTI reference unit?
LTI EARNED
($)
LTI FORFEITED
($)
946,017
337,069
355,495
224,713
206,736
188,759
156,214
208,084
644,733
225,431
237,755
150,287
138,264
126,241
104,476
139,166
The LTI is a cash‑settled plan and participants are not allocated APA securities. LTI allocations do not entitle participants to vote at securityholders meetings or to
be paid distributions.
No options or other equity instruments are issued to APA employees or Directors under the LTI plan.
Changes to LTI TSR methodology for FY2015
As APA has been included in the S&P ASX 100 index for the last three years, the Remuneration Committee considers it appropriate that in future, commencing in
FY2015, the TSR be measured over a three year cycle to remove short term fluctuations and more closely reflect the longer term intent of the LTI plan.
22
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 n
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24
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014
REMUNERATION DURING FY2014
ACTUAL REMUNERATION
Actual remuneration received by the Managing Director and other key management personnel is defined as the ‘take home’ pay received by them in the relevant year.
The table below sets out actual cash payments made to the relevant key management personnel during FY2014. This table differs from the information provided
under the section “Total remuneration earned” which reflects the total remuneration earned by key management personnel in a year some of which will only be
paid in later years.
Actual LTI payments represent the amount of reference units that vested and were converted to cash payments to the individual during the year, regardless of
when the LTI was initially allocated.
The table below does not show LTI allocations in FY2014 or previous years that are still subject to performance or employment conditions because those LTI
allocations are still at‑risk of forfeiture.
The actual STI payments represent the amounts earned by the key management personnel in the prior financial year (2012) but only paid in August 2013 (as they
are dependent on the approval by the Board of the audited annual accounts) and individual performance assessed at that time.
The following table outlines the actual remuneration received by key management personnel during FY2014:
KEY MANAGEMENT PERSONNEL
Michael McCormack
Peter Fredricson
Ross Gersbach
Robert Wheals
John Ferguson
Kevin Lester (1)
Stephen Ohl (2)
Mark Knapman
Peter Wallace
Total
TOTAL FIXED
REMUNERATION
$
1,430,000
750,000
791,000
500,000
460,000
420,000
–
480,000
463,000
STI
$
1,132,313
477,375
505,080
239,663
267,143
180,216
–
215,482
237,263
LTI
$
1,192,802
484,371
551,035
199,327
194,610
–
–
250,093
100,250
OTHER
$
–
202,000
228,667
60,000
60,000
100,000
353,716
–
–
TOTAL PAID
2014
$
3,755,115
1,946,746
2,075,782
998,990
981,753
700,216
353,716
945,575
800,513
TOTAL PAID
2013
$
2,947,801
1,430,171
1,781,566
754,059
813,573
320,833
1,027,020
795,900
534,886
5,294,000
3,254,535
2,972,488
1,004,383
12,525,406
10,405,808
(1) Kevin Lester joined APA as Group Executive Infrastructure Development on 6 August 2012.
(2) Stephen Ohl retired with effect from 1 July 2013. A termination payment of $353,716 (representing the termination benefit of $245,000 plus statutory entitlements) was made during
FY2014.
25
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUED TOTAL REMUNERATION EARNED
The following table outlines the total remuneration earned by key management personnel during FY2014, calculated in accordance with accounting standards:
SHORT-TERM EMPLOYMENT BENEFITS
POST-EMPLOYMENT
SALARY/FEES
$
SHORT‑TERM
INCENTIVE SCHEME
$
NON‑MONETARY
$
SUPERANNUATION
$
LONG-TERM
INCENTIVE PLANS
SHARE‑BASED
PAYMENTS
$
(1)
OTHER
PAYMENTS
$
(2)
TOTAL
$
KEY MANAGEMENT PERSONNEL
M J McCormack
2014
2013
P J Fredricson
2014
2013
R M Gersbach
2014
2013
R A Wheals
2014
2013
J L Ferguson
2014
2013
K Lester(3)
2014
2013
S P Ohl(4)
2014
2014
M T Knapman
2014
2013
P J Wallace
2014
2013
1,405,000
1,463,962
1,167,500
1,132,313
725,000
653,530
761,303
707,608
475,000
390,000
435,000
358,130
395,000
299,905
–
465,530
455,000
411,000
438,000
345,149
534,375
477,375
512,595
505,080
341,090
239,663
304,463
267,143
269,955
180,216
–
312,375
236,445
215,482
296,204
237,263
–
–
–
–
11,922
11,922
–
–
–
–
–
–
–
–
–
–
–
–
25,000
25,000
25,000
16,470
17,775
16,470
25,000
25,000
25,000
24,870
25,000
20,928
–
24,470
25,000
25,000
25,000
24,999
1,301,316
1,165,290
501,596
462,536
558,598
522,376
251,563
193,639
238,352
185,791
103,441
45,835
–
–
202,000
202,000
228,667
228,667
60,000
60,000
60,000
130,000
–
100,000
4,195,278
3,490,103
1,987,971
1,811,911
2,090,860
1,992,123
1,152,653
908,302
1,062,815
965,934
793,396
646,884
–
–
–
362,815
245,000
1,410,190
245,153
234,415
210,465
129,441
–
–
–
–
961,598
885,897
969,669
736,852
TOTAL REMUNERATION
2014
2013
5,089,303
3,959,089
4,798,352
3,566,910
11,922
11,922
192,775
203,207
3,410,484
3,302,138
550,667
965,667
13,214,240
12,848,196
(1) Cash settled share‑based payments.
(2) Other payments include Loyalty Payment instalments. Refer to “Executive contracts” section for more information.
(3) Kevin Lester joined APA as Group Executive Infrastructure Development on 6 August 2012.
(4) Stephen Ohl retired with effect from 1 July 2013.
26
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014
TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT PERSONNEL
LOANS TO DIRECTORS AND KEY MANAGEMENT PERSONNEL
No loans have been made to Directors or key management personnel.
DIRECTORS AND KEY MANAGEMENT PERSONNEL EQUITY HOLDINGS
The following table sets out the relevant interests of Directors and key management personnel in APA securities:
L F Bleasel AM
S Crane
J A Fletcher
R A Higgins AO
P M McKenzie
R J Wright
M J McCormack
P J Fredricson
R M Gersbach
R A Wheals
J L Ferguson
M T Knapman
P J Wallace
OPENING BALANCE
AT 1 JULY 2013
SECURITIES
ACQUIRED
SECURITIES
DISPOSED
CLOSING BALANCE
AT 30 JUNE 2014
460,664
100,000
66,188
92,040
12,500
39,444
208,590
7,716
485
1,500
1,967
7,201
6,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
460,664
100,000
66,188
92,040
12,500
39,444
208,590
7,716
485
1,500
1,967
7,201
6,000
In accordance with APA’s Securities Trading Policy, a Director or Designated Person (as defined in this policy) with price‑sensitive information relating to APA
which is not generally available is precluded from trading in APA securities. That no APA securities were acquired or disposed of by Directors or key management
personnel during FY2014 reflects the application of that restriction over a large part of the year due to APA’s corporate activity, and the fact that the Distribution
Reinvestment Plan was suspended in June 2013.
OTHER TRANSACTIONS WITH DIRECTORS AND KEY MANAGEMENT PERSONNEL OF APA AND THE RESPONSIBLE ENTITY
Other than non‑executive Directors’ compensation, executive compensation and equity holdings disclosed in this report, there are no other transactions with the
Directors and key management personnel of APA and the Responsible Entity.
LINK BETWEEN REMUNERATION AND APA’S PERFORMANCE
The Board’s key principle in establishing the remuneration structure of key management personnel is that remuneration should be linked to performance.
The following table provides financial information with respect to APA’s performance over the last five years reflecting the link between performance and remuneration.
YEAR ENDED 30 JUNE
EBITDA before significant items ($m)
Profit after income tax and non‑controlling interests
before significant items ($m)
Profit after income tax and non‑controlling interests
after significant items ($m)
Earnings per security – normalised (cents)
Earnings per security – reported (cents)
OCFPS before significant items (cents)
OCFPS after significant items (cents)
Distribution per security (cents)
Closing security price at 30 June ($)
2014
747.3
199.6
343.7
23.9
41.1
52.6
51.6
36.3
6.89
2013 (1)
661.9
175.1
295.1
22.7
38.2
56.0
48.5
35.5
5.99
2012
535.5
140.3
130.7
21.9
20.4
52.5
52.5
35.0
4.99
2011
489.6
108.9
108.5
19.7
19.7
52.6
52.6
34.4
4.07
2010
460.0
100.4
100.4
19.4
19.4
51.9
51.9
32.8
3.60
(1) The balances for 2013 have been restated for the effect of applying accounting standard AASB 119 ‘Employee Benefits’.
27
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUED EXECUTIVE CONTRACTS
The terms of the contractual arrangements for each of the key management personnel are set out in the table below:
NAME AND TITLE AND COMMENCEMENT DATE
TERM AND TERMINATION PROVISIONS/BENEFITS
Michael McCormack
Managing Director
since 1 July 2006
Chief Executive Officer
1 July 2005 to 30 June 2006
Commenced 1 March 2000
Peter Fredricson
Chief Financial Officer
Commenced 1 June 2009
No defined term.
On termination with cause APA will pay any TFR due and owing at the date of termination and any accrued leave
entitlements.
On termination without cause, APA will pay 52 weeks TRO, any incentives earned but not paid and all leave
entitlements. APA will also pay any TRO due and owing at the date of termination.
Mr McCormack is required to give APA twelve months’ notice.
No defined term.
On termination with cause, APA will pay any TFR due and owing at the date of termination and any accrued leave
entitlements.
On termination without cause, APA will pay 13 weeks TFR, any notice period not worked, any bonus entitlement
not yet paid and any accrued leave entitlement. APA will also pay any TRO due and owing at the date of termination.
Mr Fredricson is required to give APA six months’ notice.
In return for increased notice, non‑compete and non‑solicitation provisions, and due to the critical nature of the
role of Chief Financial Officer with regard to the growth, integration and financial challenges facing APA, Mr
Fredricson was placed on a loyalty and performance bonus effective from March 2012 for three years and became
entitled to the payment of the first instalment in April 2013.
Ross Gersbach
No defined term.
Chief Executive Strategy and Development
Commenced 1 February 2008
On termination with cause, APA will pay any TFR due and owing at the date of termination and any accrued leave
entitlements.
On termination without cause, APA will pay 13 weeks TFR, any notice period not worked, any bonus entitlement
not yet paid and any accrued leave entitlement. APA will also pay any TRO due and owing at the date of termination.
Mr Gersbach is required to give APA six months’ notice.
In return for increased notice, non‑compete and non‑solicitation provisions, and due to the critical nature of the
role of Chief Executive Strategy and Development with regard to the growth, integration and financial challenges
facing APA, Mr Gersbach was placed on a loyalty and performance bonus effective from March 2012 for three years
and became entitled to the first instalment in April 2013.
Robert Wheals
No defined term.
On termination with cause, APA will pay any TFR due and owing at the date of termination and any accrued leave
entitlements.
On termination without cause, APA will pay 13 weeks TFR, any notice period not worked, any bonus entitlement
not yet paid and any accrued leave entitlement. APA will also pay any TRO due and owing at the date of termination.
Mr Wheals is required to give APA six months’ notice.
In return for increased notice, non‑compete and non‑solicitation provisions, and due to the critical nature of the
role of Group Executive Transmission under the major restructure of the business, Mr Wheals was placed on a
loyalty and performance bonus effective from March 2012 for two years and became entitled to the first instalment
in April 2013.
No defined term.
On termination with cause, APA will pay any TFR due and owing at the date of termination and any accrued leave
entitlements.
On termination without cause, APA will pay 13 weeks TFR, any notice period not worked, any bonus entitlement
not yet paid and any accrued leave entitlement. APA will also pay any TRO due and owing at the date of termination.
Mr Ferguson is required to give APA six months’ notice.
In return for increased notice, non‑compete and non‑solicitation provisions, and due to the critical nature of the role
of Group Executive Networks under the major restructure of the business, Mr Ferguson was placed on a loyalty and
performance bonus effective from March 2012 for two years and became entitled to the first instalment in April 2013.
Group Executive Transmission
Commenced 22 September 2008
John Ferguson
Group Executive Networks
Commenced 29 September 2008
28
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 NAME AND TITLE AND COMMENCEMENT DATE
TERM AND TERMINATION PROVISIONS/BENEFITS
Kevin Lester
No defined term.
Group Executive Infrastructure Development
Commenced 6 August 2012
On termination with cause, APA will pay any TFR due and owing at the date of termination and any accrued leave
entitlements.
On termination without cause, APA will pay 13 weeks TFR, any notice period not worked, any bonus entitlement
not yet paid and any accrued leave entitlement. APA will also pay any TRO due and owing at the date of termination.
Mark Knapman
Company Secretary
Commenced 16 July 2008
Mr Lester is required to give APA six months’ notice.
No defined term.
On termination with cause or following long‑term illness or incapacity, APA will pay any TFR due and owing at the
date of termination and any accrued leave entitlements.
On termination without cause, APA will pay 26 weeks TFR, any incentives earned but not paid on their due date
and any accrued leave entitlement. APA will also pay any TRO due and owing at the date of termination.
Mr Knapman is required to give APA three months’ notice.
Peter Wallace
No defined term.
Group Executive Human Resources
Commenced 4 April 2011
On termination with cause, APA will pay any TFR due and owing at the date of termination and any accrued leave
entitlements.
On termination without cause, APA will pay 13 weeks TFR, any notice period not worked, any bonus entitlement not
yet paid and any accrued leave entitlement. APA will also pay any TRO due and owing at the date of termination.
Mr Wallace is required to give APA six months’ notice.
REMUNERATION ADVISERS
During FY2014, the following remuneration information was obtained and considered by the Remuneration Committee:
– Egan & Associates provided benchmarking information for non‑executive Directors’ remuneration;
– Ernst & Young provided benchmarking information for the remuneration of the Chief Executive Officer and Managing Director and other key management
personnel; and
– CIMB Capital Markets (Australia) Limited provided information on the TSR measure.
All these advisers were engaged directly on instruction from, and reported directly to, the Chairman of the Remuneration Committee and were independent and
free from influence by key management personnel.
29
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESREMUNERATION REPORT CONTINUED CORPORATE GOVERNANCE STATEMENT
APA Group (“APA”) comprises two registered investment schemes, Australian
Non-executive Directors’ letter of appointment
Pipeline Trust and APT Investment Trust, the securities in which are “stapled”
The current non‑executive Directors have each received a letter of appointment
together, and their controlled entities.
documenting, among other issues:
Australian Pipeline Limited (“Responsible Entity”) is the responsible entity of
– the roles and responsibilities of the Board and each of its Committees;
those trusts and is responsible for APA’s corporate governance practices.
– expectations of the time commitment to be made by Directors in serving on
The ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations articulate eight core principles of good corporate
governance and, for each of those principles, recommendations as to their
implementation. Adoption of the Council’s recommendations is not compulsory.
However, under the Listing Rules of ASX Limited (“ASX”) a listed entity is
required to provide a statement in its Annual Report disclosing the extent to
the Board and its Committees, and of their participation in an annual review
of the Board, its Committees and individual Directors;
– requirements with respect to the disclosure of Directors’ interests;
– the fees payable to the Directors; and
– key policies that Directors are required to comply with, such as APA’s
Securities Trading Policy.
which it has adopted the recommendations in the reporting period and, if it has
Management: service contracts, induction and performance evaluations
not adopted any of the recommendations, to explain why.
The Managing Director and each of the executives who report to him have
Each of the principles of good corporate governance has been responded to in
turn in this statement and the table at the rear of this statement provides a
service contracts setting out their responsibilities, conditions of service and
termination entitlements.
checklist of APA’s adoption of the ASX Corporate Governance Council’s
Newly appointed senior executives complete an induction program on the
recommendations. Explanations for departures from the recommendations are
management of the business covering topics that include financial matters,
set out in this statement.
Various references are made below to APA’s website as a source of information on
corporate governance practices and documentation. The home page for APA’s
website is www.apa.com.au, and the link entitled “About APA” leads to the
strategic direction, operations, risk management, health and safety,
environmental issues and governance matters. APA also conducts annual
processes relating to talent and succession management, and the development
of leadership capabilities.
corporate governance material. Securityholders who do not have internet access
APA has processes in place to review the performance of senior management.
but wish to read that material should telephone 1800 992 312 (or +61 1800 992 312,
Each senior executive, including the Managing Director, has personal objectives
if calling from outside Australia) and ask for a copy of the relevant material to be
as well as objectives related to the performance of business or functional units
sent to them.
In this statement, the term “Reporting Period” means the period of 12 months
to 30 June 2014.
This statement responds to the Second Edition of the Corporate Governance
Principles and Recommendations. The ASX Corporate Governance Council
issued the Third Edition of the publication in March 2014 that APA proposes to
commence reporting against in 2015, when it reports on the 2015 financial year.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND
OVERSIGHT
Board and its Committees
The Board of Directors of the Responsible Entity (“Board”) is accountable to
securityholders for the proper management of APA’s business and affairs. It
operates in accordance with a Charter, which is published on APA’s website.
and APA as a whole. They are reviewed against those objectives at least
annually. A performance review of senior management has been conducted
during the Reporting Period in accordance with that process.
Performance evaluation of the Managing Director is handled by the Chairman
with the assistance of the Remuneration Committee and a report is provided to
and reviewed by the Board. Assessment and monitoring of the performance of
other senior executives are handled by the Managing Director who reports on
those matters to the Chairman and the Remuneration Committee.
Company Secretary
The Company Secretary is accountable to the Board, through the Chairman, on
matters to do with the functioning of the Board, including advising the Board
and its Committees on governance matters, monitoring that Board policies and
procedures are followed, coordinating the timely despatch of Board papers,
drafting minutes of meetings and similar matters. The decision to remove or
The Board normally meets 11 times each year, with additional meetings being
appoint the Company Secretary requires the Board’s approval.
held as required. The number of times it met during the Reporting Period and
Directors’ attendance at those meetings are set out in the Directors’ Report for
the Reporting Period.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Board membership
The Board determines its size and composition, subject to limits imposed by
To assist the Board in carrying out its responsibilities, the following standing
the Responsible Entity’s constitution. The constitution provides for a minimum
Committees of its members have been established:
of three Directors and a maximum of 12.
Each Committee has its own Charter that describes the roles and responsibilities
The names of the current Directors and their experience, terms of office and
delegated to the Committee by the Board, and those Charters are published on
membership of Board Committees are set out in the Directors’ Report for the
APA’s website. The Charters for the Board and its Committees are reviewed by
Reporting Period.
the Board annually, and were last reviewed in July 2014.
The composition of the Board is determined in accordance with the following
The Board delegates responsibility for implementing the strategic direction
principles:
and managing the day‑to‑day operations of APA to the Managing Director. The
Managing Director consults with the Chairman, in the first instance, on matters
that are sensitive, extraordinary or of a strategic nature. The Board has
approved specific limits of authority for management with respect to approval
of expenditure, contracts and other matters, and regularly reviews those limits.
– a majority of the Board will be comprised of independent Directors;
– the Chairman will be an independent Director; and
– a person cannot hold the positions of both Chairman and Chief Executive
Officer.
30
APA GROUP / ANNUAL REPORT 2014 The Responsible Entity’s constitution requires one‑third of its Directors (excluding
– experience in the development and implementation of strategy; and
the Managing Director and any Director who is standing for re‑election after
– experience in the oversight of health, safety and environmental risks and
having been appointed as an additional Director or to fill a vacancy) to retire from
challenges.
office at the annual general meeting of the Responsible Entity each year. If the
calculation of that one‑third is not a whole number, the number of Directors
required to retire by this “rotation” process is rounded to the nearest whole
number. Retiring Directors are eligible for re‑election.
Selection and appointment of Directors
The functions with respect to selection and appointment of new Directors,
Board succession and related matters are handled by the Board, not a
Nomination Committee. Ultimate responsibility for such matters rests with the
The Responsible Entity’s constitution also provides that if the Board appoints a
full Board and the Board considers the efficient handling of those matters is not
Director to fill a vacancy or as an addition to the Board, the new Director will
diminished by the absence of a Nomination Committee.
hold office until the end of the next annual general meeting of the Responsible
Entity and is eligible for re‑election.
When looking to appoint a new Director, the Board predefines the skills and
experience required of candidates for the role to ensure that the required mix
Securityholders’ right to nominate a Director and to vote on nominees
of skills and experience will be represented on the Board and, based on that
The Deed Poll initially executed by the Responsible Entity in 2004 and
work, seeks a list of potential candidates believed to satisfy those requirements.
amended with APA securityholders’ approval in 2011 (a copy of which is
available on APA’s website) affords APA securityholders certain rights in
respect to nominees for the position of Director on the Board.
At least 75 days before annual general meetings of the Responsible Entity,
securityholders are notified by an announcement to ASX that they may
nominate a person to fill a vacancy on the Board that arises on retirement of
either a Director under the “rotation” process or a Director appointed by the
Board since the last annual general meeting.
If the Board is not satisfied with the quality or diversity of the candidates
identified in that process, it may consider it appropriate to instruct a search
firm to identify additional suitable candidates.
The Chairman conducts an initial interview of the short‑listed candidates and,
subject to them being available for and interested in the position, they are then
interviewed by the Board. The Board assesses potential candidates against the
predefined requirements and also considers their qualifications, backgrounds
and personal qualities, and appropriate background checks are undertaken in
If securityholders wish to exercise that right, at least 60 days before the annual
respect to a candidate before they are appointed as a Director.
general meeting they must send the Responsible Entity a signed nomination
form and the nominee’s signed consent to act as a Director.
In the interest of gender diversity, the Board has determined that the short‑
listed candidates for an available Board position must include at least one
In the notice of meeting for the annual meeting of securityholders (“Annual
qualified female candidate and, where a search firm is engaged, the Board will
Meeting”), the Responsible Entity advises securityholders of all candidates
instruct them accordingly.
who have been validly nominated for the position of Director, including the
Responsible Entity’s nominations and nominations made by securityholders in
accordance with the process described above, and securityholders are afforded
the opportunity to vote on the nominations at the Annual Meeting.
Annual review of performance of the Board, its Committees and Directors
A review process to assess the performance of the Board, its Committees and
individual Directors is undertaken each year. The last review was conducted in
December 2013 and the review for the Reporting Period is expected to be
Independence of Directors
completed in December 2014.
The Board assesses the
independence of non‑executive Directors on
appointment and annually having regard to the Independence of Directors
Policy (published on APA’s website).
Each Director completes a questionnaire, the responses are collated and the
Board then meets to discuss and consider the results of that process and to
determine any actions arising from the review. The Chairman also meets with
The Directors’ Report for the Reporting Period identifies which Directors are
each Director individually to discuss the review and the Director’s own
considered to be independent at the date of the report. A majority of the
performance and to seek feedback on the Chairman’s performance.
current Directors are independent.
Matters covered by the review include the role and performance of the Board
In considering the independence of Robert Wright, the Board (other than Mr
and its Committees, Directors’ understanding of APA’s long‑term objectives
Wright) noted that he has served as a Director for 14 years, having been
and key risks to the business and achievement of those objectives, succession
appointed in 2000, and that the Independence of Directors Policy recognises
planning and the effectiveness of the Chairman in leading the Board.
that a Director’s length of service may be a relevant factor in determining their
independence. However, the Board was satisfied that Mr Wright continues to
demonstrate independent judgement and character in performing his role on
the Board and as a member of the Committees on which he serves, and
therefore considers him to be independent.
Board skills and experience
The Board considers that a diverse range of skills, experience and backgrounds
is required on the Board to effectively govern the business. It determines and
reviews from time to time the mix of skills and diversity that it looks to achieve
in its membership which, in broad terms, includes the following:
Directors’ access to information, management and professional advice
Subject to normal privacy requirements, Directors have access to APA’s records
and information, and to the Company Secretary and other senior management
personnel.
The Board receives regular detailed reports on financial, commercial and
operational aspects of APA’s business and may request elaboration or
explanation of those reports. At the two‑day annual Board strategy review,
Directors are updated on industry developments, regulatory changes and other
background information relevant to the Board’s review of strategy. Ad hoc
briefings are also provided to the Board on relevant industry, legislative and
– knowledge of the business sectors in which APA operates;
regulatory changes.
– senior executive and international business experience;
– financial acumen and relevant operating experience;
– knowledge of global capital markets;
– experience in regulatory and government policy;
APA’s external auditor updates the members of the Audit and Risk Management
Committee and other members of the Board who attend the Committee’s
meetings on developments in accounting standards and the key areas of focus
for the regulator, the Australian Securities and Investments Commission, in
financial reporting.
31
CORPORATE GOVERNANCE STATEMENT CONTINUED While most Board meetings are held in Sydney, where APA’s head office is
Raising awareness of the benefits of diversity and inclusion within APA
located, some are held in other locations where APA has a presence, providing
through an education program. An awareness session will be included in the
Directors with the opportunity to receive presentations from and speak to local
next annual Leadership Conference in October 2013
APA employees about the business, to inspect APA’s assets and facilities and,
APA’s 2013 Leadership Conference included a session on diversity and inclusion
where appropriate, to engage with customers and government representatives.
and a presentation to the top 110 leadership group on the business imperatives
The Board collectively, and each Director individually, may seek independent
of diversity and inclusion.
professional advice at APA’s expense. Prior approval of the Chairman is
Subsequent to this conference, APA engaged the services of a consulting
required, but this may not be unreasonably withheld.
organisation who specialise in organisational diagnostics and diversity and
Directors and senior management are encouraged to broaden their knowledge
inclusion. APA then completed the following activities:
of APA’s business and to keep abreast of developments in business more
– a review of the APA policies with regard to diversity, inclusion and equal
generally by attending relevant courses, seminars and conferences. Where
employment opportunity;
appropriate, APA will meet expenses involved in such activities.
– a review of APA behaviours, practices and processes and how these may be
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
Code of Conduct and policies
The Board and senior management are firmly committed to ensuring that they
and all employees observe high standards of ethical behaviour and conduct.
shaping the current profile of the organisation;
– a review of current and emerging legislation and its impact;
– analysis of the expectations and trends from external stakeholders (peak
industry bodies, securityholders, lenders, etc.);
– analysis of peer group and competitor emerging trends and good practice;
APA’s Code of Conduct sets out the behaviour required of Directors and
– analysis of internal demographic metrics as well as conducting employees’
employees and recognises the responsibilities of APA and its personnel to
exit interviews with regard to staff turnover, reasons for leaving APA,
securityholders, customers, suppliers, employees and the community. It also
employment attractiveness of APA and disputes and grievances; and
requires that breaches of the code are reported and provides a mechanism to
– analysis of leadership and employee expectations through survey, focus
enable breaches to be reported without fear of retribution. The code is
groups and interviews.
published on APA’s website.
Based on the above work, APA has developed a Diversity and Inclusion Strategy
A number of APA’s policies aim to foster a culture of compliance and ethical
which includes a clear vision, the foundations needed to achieve the vision and
and responsible decision‑making. APA’s Whistleblower Policy encourages the
focus areas that are important to APA.
reporting of matters of concern and suspected wrongdoing, such as dishonest
or fraudulent conduct, breaches of legislation and other conduct that may
cause financial loss to APA or be otherwise detrimental to its reputation or
interests, and describes the protection to be afforded to whistleblowers who
report such conduct against reprisals, discrimination, harassment or other
Implementing a graduate program with a target of at least 50% female
participants by March 2014
APA has not yet finalised the design of the graduate program and will be
finalising this in the next reporting period.
disadvantage resulting from their reports.
Designing an employee value proposition, with an element on attracting
APA’s Securities Trading Policy, published on its website, provides that subject
to some exceptions Directors and designated management personnel must not
buy or sell APA securities during either of the following “closed periods”:
women to APA into non-traditional roles, by December 2013
The current APA employee value proposition has been completed. It focuses in
particular on the benefits that APA offers women in non‑administrative areas of
the business, including rewarding, interesting and challenging work, flexible
– the period starting 1 January and ending on the second business day after
working arrangements, career progression, benefits and entitlements, a family
the release of APA’s half yearly results to the ASX, or
friendly work place and breastfeeding accreditation. The profile of women
– the period starting 1 July and ending on the second business day after the
within APA has been raised through testimonials being posted on APA’s
release of APA’s annual results to the ASX,
website and included in APA’s corporate video, to showcase what APA has to
unless exceptional circumstances apply, and they may only buy or sell APA
offer prospective candidates in the external market.
securities outside those closed periods if they obtain clearance to do so in
Developing the APA brand with a focus on raising APA’s profile for attracting
accordance with the process described in the policy. Directors and employees
women through social media such as LinkedIn, e-recruitment tools, network
are precluded from buying or selling securities at any time if they are aware of
groups and sponsorships. These programs will be fully operational by
any price‑sensitive information which has not been made public.
June 2014
Diversity and Inclusion
APA values diversity and recognises that to continue to be a relevant and
innovative organisation, it must leverage the full potential of its people.
Embracing individual diversity encourages diversity of thought, which is
conducive to better decision making and opportunity for innovation. It is also
about taking advantage of all available talent for the benefit of the organisation.
Substantial investment in APA’s brand and reinvigorated recruitment practices
have been completed and rolled out in 2014. Advertising, recruitment practices,
internal appointments, external appointments, external pools of talent, internal
high potential candidates and successors were all reviewed within the
recruitment process with the view to identifying and hiring or promoting
women who meet the merit requirements of available roles.
APA also recognises that creating sustainable shareholder wealth depends on
In addition, hiring managers have received training on the recruitment process,
its ability to attract and retain an engaged, highly skilled and motivated
including making sound, unbiased decisions in their recruitment decisions.
workforce. Therefore, diversity makes good business sense.
Following the review of recruitment practices, all management level recruitment
APA’s Diversity Policy is available on its website.
decisions must include at least one woman on the interviewing panel and all
Diversity objectives
In 2014 APA sought to focus its diversity and inclusion efforts on the following
elements (the sections in bold italics below being the objectives and initiatives
identified in APA’s 2013 corporate governance statement):
management positions must seek to have at least one woman in the short list
of candidates.
32
CORPORATE GOVERNANCE STATEMENT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 Completing a pay equity review
The Committee is required by its Charter to meet at least four times each year.
In 2013 the business conducted a pay equity review, following similar reviews in
The number of times it met during the Reporting Period and the Committee
2011 and 2012. Across all pay grades for all employees the gap in remuneration
members’ attendance at those meetings are set out in the Directors’ Report for
between men compared to women in like‑for‑like roles has now been reduced
the Reporting Period.
from 5.7% in 2012 to less than 3.4% in 2013. This was achieved through
accelerated pay increases for women whose remuneration was identified as
being below that of men with comparable merit, experience and competencies
in comparable roles. Another pay equity review will be completed in 2014.
External auditor and their independence
Apart from reviewing the integrity of APA’s financial reporting, the Committee
receives reports from the external auditor, monitors their effectiveness and
independence and makes recommendations to the Board on the appointment
In 2015 APA will be reporting on the progress it has made on the three year
or replacement (subject to Securityholders’ approval, if applicable) of the
Diversity and Inclusion Strategy and the milestones set out in that document.
external auditor.
The strategy will centre on building the following foundations:
– an inclusive work culture;
– knowledge and collaboration;
– people systems; and
– APA values.
Building on these foundations will help achieve the vision and deliver on the
three focus areas of diversity of thought, gender diversity and age diversity
that were identified through the data collection mechanisms outlined earlier in
this section.
The Diversity and Inclusion Strategy is available on the APA website.
APA workforce gender profile (2014)
The External Auditor Appointment and Independence Policy (published on
APA’s website) documents the process for appointment of the auditor and for
monitoring the auditor’s independence. Pursuant to that policy, the lead
partner and the review or concurring partner of the external auditor must be
rotated at least every five years, followed by a two year minimum time‑out
period during which they may not take part in the audit. With Greg Couttas of
Deloitte Touche Tohmatsu having been appointed the lead audit partner for the
APA audit in December 2009, he will be replaced in that role by Andrew
Griffiths, a partner of the same firm, with effect from commencement of the
audit for the six months to 31 December 2014.
In the Reporting Period, APA conducted a tender for external audit services,
inviting responses from all four major audit firms. After the responses to the
The following profile of APA’s workforce was reported to the Workplace Gender
tender and presentations from the respondent firms were reviewed, and based
Equality Agency (“WGEA”) in 2014.
on a recommendation from the Audit and Risk Management Committee, the
Percentage of non‑executive Directors who are women
Percentage of workforce who are women
Percentage of leadership roles* filled by women
Percentage of technical and trades roles filled by women
17%
27%
16.5%
4.5%
*
Leadership roles are defined in accordance with the WGEA (ANZSCO)
occupational categories and comprise all levels of management (i.e. Key
Management Personnel, General Manager and Manager roles), excluding team
leader and supervisory roles.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Audit and Risk Management Committee
Board approved Deloitte Touche Tohmatsu continuing as external auditor.
The external auditor’s independence could be impaired or compromised, or be
interpreted as being impaired or compromised, through the provision of some
non‑audit services or by the quantum of fees paid to the auditor for such
services. Accordingly, the Audit and Risk Management Committee has
approved a list of non‑audit services that the external auditor may perform and
the process for those services being approved, identified a list of prohibited
services and determined a maximum dollar limit on non‑audit services provided
by the auditor in any financial year. The Directors’ Report for the Reporting
Period contains a section on non‑audit services provided by the auditor that
includes an explanation of the basis on which the Board remains satisfied as to
The Board has established an Audit and Risk Management Committee, the
the auditor’s independence.
composition of which is determined in accordance with the following principles:
– the Committee will have at least three members;
– all members of the Committee will be independent, non‑executive Directors;
and
– the Committee Chairman cannot also be the Chairman of the Board.
The Directors’ Report for the Reporting Period identifies the current members
of the Committee and their qualifications and experience. The Chairman of the
Board, although not a member of the Committee, usually attends Committee
meetings.
The roles and responsibilities delegated to the Committee are set out in the
Committee’s Charter which is published on APA’s website.
The Managing Director, Chief Financial Officer, Company Secretary, Head of
Risk and Insurance, other senior management personnel, as required, and the
external and internal auditors attend Committee meetings at the discretion of
the Committee. The external and internal auditors receive all Committee papers
and regularly meet with the Committee, without management present, at
Committee meetings.
The minutes of each meeting of the Audit and Risk Management Committee are
reviewed at the subsequent meeting of the Board and the Committee Chairman
reports to the Board on the Committee’s activities and recommendations.
As referred to under Principle 6 below, the external auditor attends the Annual
Meeting and is available at the meeting to answer questions from securityholders
about the conduct of the audit and the preparation and content of the
independent Audit Report.
Reimbursement of Responsible Entity’s costs
The Responsible Entity’s costs incurred in acting as responsible entity of
Australian Pipeline Trust and APT Investment Trust are reimbursed by APA. The
actual cost recovery in the Reporting Period was $3,178,000 (2013: $2,728,000).
The Responsible Entity does not make a profit, nor seek performance fees.
The constitutions of Australian Pipeline Trust and APT Investment Trust enable
the Responsible Entity to charge fees up to 0.5% per annum of the value of
gross assets; however, the right to charge such fees has been waived to the
extent it exceeds the Responsible Entity’s costs.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
APA’s Market Disclosure Policy, published on APA’s website, aims to ensure that
information that a person could reasonably expect to have a material effect on
the APA security price, whether the information is positive or negative, is
announced to the market by release to ASX in accordance with the ASX Listing
Rules and the Corporations Act 2001.
The Company Secretary is the nominated continuous disclosure officer.
33
CORPORATE GOVERNANCE STATEMENT CONTINUED All ASX announcements are posted on APA’s website as soon as reasonably
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
possible after notification to ASX.
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
Communications with Securityholders
The identification and effective management of risk, including calculated risk‑
taking, are viewed as an essential part of APA’s approach to creating long‑term
securityholder value.
APA aims to ensure its Securityholders are informed of all significant
Risk management framework and responsibilities
developments affecting APA’s state of affairs and business. Information is
The Board is responsible for adopting and reviewing APA’s approach to the
communicated to Securityholders by a number of means, including the following:
identification, evaluation and management of risks that are material to the
– an Annual Report, comprising the Financial Report, Directors’ Report and
fulfilment of APA’s objectives.
Audit Report, sent to Securityholders who have elected to receive the report;
The Board has delegated certain responsibilities with respect to risk
– an Annual Review sent to Securityholders who elect to receive either the
management to its Audit and Risk Management Committee described under
statutory report or the Annual Review alone;
Principle 4 above. The Committee’s primary function with respect to risk is to
– a biannual newsletter sent to Securityholders who have not elected to
maintain and oversee a sound system of internal risk management controls
receive the Annual Report, and to all Securityholders on the announcement
based on the Board’s adopted risk management approach.
of the half year results;
– the interim (half yearly) report and Directors’ commentary on that report;
– announcements to ASX and media releases;
Specific risk management responsibilities of the Audit and Risk Management
Committee include:
– “Open Briefings” prepared from time to time to provide an update to
– reviewing and approving APA’s risk profile, Risk Management Policy and
investors, and released to ASX;
framework;
– investor presentations, including presentations made in investor roadshows
– reviewing at least annually APA’s implementation of the Risk Management
in Australia and offshore, copies of which are released to ASX;
Policy and framework; and
– the Annual Meeting of Securityholders;
– receiving and reviewing management’s report on the effectiveness of risk
– webcasting of half year and annual results presentations, the Annual
management and internal control systems and otherwise monitoring the
Meeting and announcements of major events; and
effectiveness of the risk management framework and the system of internal
– the Investor Centre section of APA’s website on which the reports, ASX and
control, and progress against agreed risk management plans.
media releases, presentations and other documents referred to above are
posted.
The Managing Director is accountable for ensuring that a risk management
system is established, implemented and maintained in accordance with APA’s
APA’s website also contains information of interest to Securityholders and
Risk Management Policy and framework.
potential investors about APA’s assets and investments and the economic
regulation to which some of its assets are subject.
Senior management is accountable for risk management within the areas
under their control, including devolution of the risk management process to
Securityholders may elect to receive APA’s Securityholder communications
operational managers, and is responsible for:
(including the Annual Report, Annual Review, distribution statements and tax
guides) electronically. Securityholders and others may also elect on APA’s
website to receive ASX and media announcements and newsletters by email,
and may also ask questions through an email link provided on the website.
Annual Meeting of Securityholders
– reviewing the measures of risk impact severity that underlies the analysis of
material risks, to ensure the measures remain current to APA’s context;
– identifying material risks that may impact on APA’s business plans and
objectives and the development, implementation, performance and review
of risk management plans. In doing so, senior management considers both
APA encourages Securityholders to participate in its Annual Meetings. A Notice
financial risk and non‑financial risk, including operational, environmental,
of Meeting setting out the agenda for the Annual Meeting and explaining
strategic, market‑related, compliance and reputation risk;
resolutions on which securityholders may vote is sent to all securityholders and
– confirming the effectiveness of controls in management of risks within the
to ASX prior to the meeting. Securityholders who cannot attend an Annual
defined appetite for retention of risk;
Meeting in person may appoint a proxy and may read the Chairman and
– aggregating operational risk data across APA, and monitoring external
Managing Directors’ addresses that are sent to ASX and posted on APA’s
factors, to facilitate monitoring of APA’s risk profile; and
website, and listen to a webcast of the meeting available through the website.
– contributing advice, leadership and facilitation in the development of
At the Annual Meeting, the Chairman encourages questions and comments
group‑wide risk controls.
from securityholders and seeks to ensure the meeting is managed to give
The Head of Risk and Insurance, who reports to the Chief Financial Officer and
securityholders an opportunity to participate. Questions on operational
provides a report to each meeting of the Audit and Risk Management Committee,
matters may be answered by the Managing Director or another appropriate
is responsible for:
member of senior management. Securityholders are also invited to send
written questions ahead of the meeting and, where there is a common theme
to a number of questions, either the Chairman or the Managing Director will
commonly seek to provide an answer in their address.
– overseeing and facilitating the co‑ordination of the risk management
activities of senior management;
– reporting to the Committee on APA’s risk profile and the implementation
and effectiveness of risk management plans;
The external auditor attends Annual Meetings and is available to respond to
– contributing
leadership and facilitation of the
implementation and
questions from securityholders about the conduct of the audit and the
assurance of group‑wide risk controls; and
preparation and content of the independent Audit Report.
– working with senior management to design and develop risk education and
The 2014 Annual Meeting will be held in Sydney on 24 October 2014. A notice
communication forums.
of that meeting and a proxy form will be sent to Securityholders some weeks
APA’s management has reported to the Audit and Risk Management Committee
before the meeting, and details of the meeting are also available from APA’s
during the Reporting Period on its assessment of the effectiveness of
website.
34
management by APA of its material risks.
CORPORATE GOVERNANCE STATEMENT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 Assurance from Chief Executive Officer and Chief Financial Officer
External advice
In the course of approving the Financial Report for the Reporting Period, the
The Committee may seek external professional advice on any matter within its
Board considered a written statement from the Chief Executive Officer and the
terms of reference. As stated in APA’s Remuneration Report referred to below,
Chief Financial Officer to the effect that, to the best of their knowledge and
independent remuneration consultants were engaged by the Chairman of the
belief, their declaration pursuant to section 295A of the Corporations Act 2001
Remuneration Committee to provide comparative market data with respect to
(broadly, that the Financial Report gives a true and fair view in all material
non‑executive Director and executive remuneration during the Reporting
respects of APA’s financial position and complies in all material respects with
Period.
relevant accounting standards) is founded on a sound system of risk
management and internal control and that system is operating effectively in all
material respects in relation to financial reporting risks, based on the
management framework adopted by APA. The Board requires such a statement
for each reporting period.
Internal audit
APA has developed a framework for Internal Audit within the group.
Remuneration Report
The Corporations Act 2001 does not require registered investment schemes like
Australian Pipeline Trust and APT Investment Trust to include a Remuneration
Report as part of the annual Directors’ Report, but APA has chosen to do so for
the Reporting Period and prior periods.
The Remuneration Report distinguishes the structure of non‑executive Directors’
remuneration from that of the Managing Director and other senior executives,
Internal Audit provides an independent, objective perspective to the Audit and
and sets out details of the components of remuneration and total remuneration
Risk Management Committee on the internal controls implemented to address
paid to those individuals over the Reporting Period.
APA’s key strategic, operational and financial risks and assists senior
management in the effective discharge of their responsibilities to the Board in
the area of risk management and internal control, by providing independent
appraisals of the adequacy and effectiveness of risk management and internal
control systems.
Unvested benefits under APA’s long term incentive plan
The Remuneration Report describes APA’s long term incentive plan under
which the benefits to executives who participate in the plan are related to the
price of APA securities and vest over three years. An aim of the plan is to align
the interests of the plan’s participants with the interests of Securityholders.
Internal Audit, currently outsourced to PricewaterhouseCoopers, reports
APA recognises that the use of arrangements such as hedging or derivative
directly to the Audit and Risk Management Committee so as to bring the
financial products that operate to limit for participants the economic risk of
requisite degree of independence and objectivity to the role. Before each
their unvested benefits are likely to reduce the intended alignment of those
financial year, Internal Audit, in consultation with management, prepares an
interests. Consequently, it is APA policy that participants in the long term
internal audit plan for the next three years and submits the plan to the
incentive plan must not use, nor allow to be used, any such arrangements in
Committee for review and approval. At each of its meetings, the Committee
relation to their unvested benefits.
receives a report from Internal Audit on activities undertaken in accordance
with the approved plan.
“Clawback” of performance-based remuneration
The Remuneration Report summarises APA’s Executive Remuneration
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
Clawback Policy pursuant to which the Board, in certain circumstances
Remuneration Committee
involving a misstatement in the Financial Report for any of the preceding three
The Board has established a Remuneration Committee to consider and make
financial years due to a material non‑compliance with a financial reporting
recommendations to the Board on, among other things, remuneration policies
requirement or certain misconduct of an executive, may require the executive
applicable to Board members and senior management.
to repay all or part of their short term or long term incentives, withhold
The composition of the Remuneration Committee is determined in accordance
with the following principles:
– the Committee will have at least three members;
– all members of the Committee will be non‑executive Directors and a
majority of them will be independent Directors; and
– the Committee Chairman will be an independent Director.
payment of the executive’s unpaid incentive entitlements and/or forfeit the
executive’s unvested entitlements. The Executive Remuneration Clawback
Policy is available on APA’s website.
Retirement benefits
In 2003 the Board terminated the non‑executive Directors’ retirement benefit
plan so that the benefits to participating Directors that had accrued up to
termination were then quantified and preserved for payment on retirement of
The Directors’ Report for the Reporting Period identifies the current members
those Directors. Under the plan, after three years’ service a Director was
of the Committee and their qualifications and experience. The Chairman of the
entitled to the equivalent of the emoluments received over the most recent 12
Board, although not a member of the Committee, usually attends Committee
months. After 10 years’ service, the entitlement increased to the equivalent of
emoluments received during the most recent three years. No additional
entitlement accrued after 10 years. For periods between three and 10 years, the
entitlement was calculated on a pro‑rata basis.
Robert Wright is the only current Director entitled to benefit under the plan on
retirement from the Board.
meetings.
The roles and responsibilities delegated to the Remuneration Committee are
set out in the Committee’s Charter which is published on APA’s website.
The Managing Director attends meetings of the Committee by invitation when
required to report on and discuss senior management performance and
remuneration matters.
The Committee Chairman reports to the Board on the Committee’s activities
and recommendations.
The Committee is required by its Charter to meet at least twice each year. The
number of times it met during the Reporting Period and the Committee
members’ attendance at those meetings are set out in the Directors’ Report for
the Reporting Period.
35
CORPORATE GOVERNANCE STATEMENT CONTINUED CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS ISSUED BY ASX CORPORATE GOVERNANCE COUNCIL
COMPLY
YES/NO
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions
Yes
1.1
1.2
1.3
Companies should disclose the process for evaluating the performance of senior executives
Companies should provide the information indicated in the Guide to reporting on Principle 1
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
2.1
2.2
2.3
2.4
2.5
2.6
A majority of the board should be independent directors
The chair should be an independent director
The roles of chair and chief executive officer should not be exercised by the same individual
The board should establish a nomination committee
Companies should disclose the process for evaluating the performance of the board, its committees and individual directors
Companies should provide the information indicated in the Guide to reporting on Principle 2
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
3.1
Companies should establish a code of conduct and disclose the code or a summary of that code as to:
– the practices necessary to maintain confidence in the company’s integrity
– the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders
– the responsibility and accountability of individuals for reporting and investigating reports of unethical practices
3.2
3.3
3.4
Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include
requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the
objectives and progress in achieving them
Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in
accordance with the diversity policy and progress towards achieving them
Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior
management positions and women on the board.
3.5
Companies should provide the information indicated in the Guide to reporting on Principle 3
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
4.1
4.2
4.3
4.4
The board should establish an audit committee
The audit committee should be structured so that it:
– consists only of non‑executive directors
– consists of a majority of independent directors
– is chaired by an independent chair, who is not chair of the board
– has at least three members
The audit committee should have a formal charter
Companies should provide the information indicated in the Guide to reporting on Principle 4
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
5.1
Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure
accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies
5.2
Companies should provide the information indicated in the Guide to reporting on Principle 5
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
6.1
Companies should design a communications policy for promoting effective communication with shareholders and encouraging their
participation at general meetings and disclose their policy or a summary of that policy
6.2
Companies should provide the information indicated in the Guide to reporting on Principle 6
Yes
Yes
Yes
Yes
Yes
No (1)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
(1) The Board has chosen not to have a separate nomination committee, as explained in the section of this statement entitled “Principle 2: Structure the board to add value” under the
heading “Selection and appointment of directors”.
36
CORPORATE GOVERNANCE STATEMENT CONTINUEDAPA GROUP / ANNUAL REPORT 2014 PRINCIPLE 7: RECOGNISE AND MANAGE RISK
COMPLY
YES/NO
Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies Yes
7.1
7.2
7.3
The board should require management to design and implement the risk management and internal control system to manage the
company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that
management has reported to it as to the effectiveness of the company’s management of its material business risks
The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial
officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound
system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial
reporting risks
7.4
Companies should provide the information indicated in the Guide to reporting on Principle 7
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
8.1
8.2
8.3
The board should establish a remuneration committee
The remuneration committee should be structured so that it:
– consists of a majority of independent directors
– is chaired by an independent director
– has at least three members
Companies should clearly distinguish the structure of non‑executive directors’ remuneration from that of executive directors and senior
executives
8.4
Companies should provide the information indicated in the Guide to reporting on Principle 8
Yes
Yes
Yes
Yes
Yes
Yes
Yes
37
CORPORATE GOVERNANCE STATEMENT CONTINUED AUSTRALI AN PIPE LIN E T RUST AND I TS CO NTRO LLE D E NTI TIE S
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the financial year ended 30 June 2014
CONTINUING OPERATIONS
Revenue
Share of net profits of associates and joint ventures accounted for using the equity method
Gain on previously held interest in HDF on obtaining control
Asset operation and management expenses
Depreciation and amortisation expense
Other operating costs – pass‑through
Finance costs
Employee benefit expense
Other expenses
Profit before tax
Income tax benefit/(expense)
Profit for the year
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit plan
Income tax relating to items that will not be reclassified subsequently
Items that may be reclassified subsequently to profit or loss:
(Loss)/gain on available‑for‑sale investments taken to equity
Gain on available‑for‑sale investment reclassified to profit or loss
Transfer of gain on cash flow hedges to profit or loss
Loss on cash flow hedges taken to equity
(Loss)/gain on associate hedges taken to equity
Income tax relating to items that may be reclassified subsequently
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
Profit attributable to:
Equityholders of the parent
Non‑controlling interest – APT Investment Trust equityholders
APA stapled securityholders
Non‑controlling interest – other
Total comprehensive income attributable to:
Equityholders of the parent
Non‑controlling interest – APT Investment Trust equityholders
APA stapled securityholders
Non‑controlling interest – other
EARNINGS PER SECURITY
Basic and diluted (cents per security)
NOTE
2014
$000
2013
(RESTATED)
$000
6
6
7
7
7
7
7
9
1,331,703
64,289
1,395,992
–
(65,570)
(156,228)
(403,477)
(326,226)
(168,615)
(9,854)
266,022
77,684
343,706
6,796
(2,039)
4,757
(2,823)
–
72,522
(154,309)
(7,928)
27,504
(65,034)
(60,277)
283,429
304,999
38,706
343,705
1
343,706
245,583
37,845
283,428
1
283,429
1,227,399
44,868
1,272,267
142,333
(96,903)
(130,461)
(352,743)
(302,613)
(174,496)
(15,133)
342,251
(49,869)
292,382
17,901
(5,371)
12,530
25,519
(142,333)
91,438
(144,702)
14,316
46,382
(109,380)
(96,850)
195,532
257,003
38,143
295,146
(2,764)
292,382
161,310
36,986
198,296
(2,764)
195,532
38
41.1
38.2
Diluted earnings per security is exactly the same as basic earnings per security.
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
38
APA GROUP / ANNUAL REPORT 2014 AUST RALI AN PI PE LINE T RUST AND ITS CO NT RO LLE D ENTITIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2014
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
Goodwill
Other intangible assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Borrowings
Other financial liabilities
Provisions
Other
Total current liabilities
NON-CURRENT LIABILITIES
Trade and other payables
Borrowings
Other financial liabilities
Deferred tax liabilities
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
NOTE
2014
$000
2013
(RESTATED)
$000
39
11
12
13
14
15
16
18
20
21
22
23
24
25
26
27
28
24
29
30
9
27
28
7,009
156,439
16,575
17,349
5,996
80,955
164,569
16,469
12,726
5,662
203,368
280,381
147,835
110,768
593,325
5,574,481
1,150,500
170,804
21,429
7,769,142
7,972,510
185,988
–
90,574
81,003
15,975
373,540
34,318
168,540
589,131
5,280,411
1,150,500
177,015
18,632
7,418,547
7,698,928
190,062
80,910
126,385
81,943
12,921
492,221
3,599
3,749
4,708,283
4,233,242
216,936
110,783
47,442
15,438
177,256
213,932
47,930
16,669
5,102,481
4,692,778
5,476,021
2,496,489
5,184,999
2,513,929
39
AUSTRALIAN PI PE LIN E T RUST AND ITS CO NTRO LLE D E NTI TI E S
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONTINUED
As at 30 June 2014
EQUITY
Australian Pipeline Trust equity:
Issued capital
Reserves
Retained earnings
Equity attributable to securityholders of the parent
Non‑controlling interests:
APT Investment Trust:
Issued capital
Reserves
Retained earnings
Equity attributable to securityholders of APT Investment Trust
Other non‑controlling interest
Total non‑controlling interests
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
NOTE
2014
$000
2013
(RESTATED)
$000
31
32
33
34
34
34
34
1,816,460
1,820,516
(116,243)
200,978
(52,070)
146,762
1,901,195
1,915,208
576,172
(394)
19,465
595,243
51
595,294
2,496,489
578,780
467
19,424
598,671
50
598,721
2,513,929
40
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A
AUSTRALIA N PIP ELIN E T RUST AND I TS CO NTRO LLE D E NTI TI E S
CONSOLIDATED STATEMENT OF CASH FLOWS
For the financial year ended 30 June 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Payments by HDF to Hastings Funds Management for management and performance fees
Payments by HDF for takeover defense costs
Dividends received
Proceeds from repayment of finance leases
Interest received
Interest and other costs of finance paid
Income tax refund/(paid)
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for equity accounted investments
Payments for controlled entities net of cash acquired
Payments for intangible assets
Loans advanced to related parties
Proceeds from sale of businesses
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Proceeds from issue of securities
Payment of debt issue costs
Payments of security issue costs
Payments for early settlement of loans and derivatives
Distributions paid to:
Securityholders of APT
Securityholders of non‑controlling – APTIT
Securityholders of other non‑controlling interests
Net cash provided by/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
42
NOTE
2014
$000
2013
$000
1,461,695
(767,599)
(8,201)
–
61,971
4,693
5,965
1,347,848
(703,790)
(31,590)
(26,668)
54,615
4,724
19,335
(327,124)
(289,952)
141
39(c)
431,541
(141)
374,381
(446,754)
(397,451)
39(b)
42
43
797
–
(24)
(677)
(126,127)
1,487
(571,298)
605
(65,451)
(265,321)
(1,107)
–
411,364
(317,361)
1,585,833
2,822,243
(1,208,915)
(2,872,000)
–
(10,178)
(60)
–
83,166
(25,867)
(8,717)
(34,919)
(259,598)
(201,898)
(41,271)
–
65,811
(73,946)
80,955
7,009
(54,758)
(13,249)
(305,999)
(248,979)
329,934
80,955
39(a)
APA GROUP / ANNUAL REPORT 2014 AUST RALI AN PI PE LINE T RUST AND ITS CO NT RO LLE D ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial year ended 30 June 2014
1. GENERAL INFORMATION
APA Group comprises of two trusts, Australian Pipeline Trust (“APT”) and APT Investment Trust (“APTIT”), which are registered managed investment schemes
regulated by the Corporations Act 2001. APT units are “stapled” to APTIT units on a one‑to‑one basis so that one APT unit and one APTIT unit form a single stapled
security which trades on the Australian Security Exchange under the code “APA”.
Australian Accounting Standards require one of the stapled entities of a stapled structure to be identified as the parent entity for the purposes of preparing a
consolidated financial report. In accordance with this requirement, APT is deemed to be the parent entity. The results and equity attributable to APTIT, being the
other stapled entity which is not directly or indirectly held by APT, are shown separately in the financial statements as non controlling interests.
The financial report represents the consolidated financial statements of APT and APTIT, their respective subsidiaries and share of joint arrangements and associates
(together “APA Group”). For the purposes of preparing the consolidated financial report, APA Group is a for‑profit entity.
APT’s registered office and principal place of business is as follows:
Registered office and principal place of business
Level 19, HSBC Building
580 George Street, SYDNEY NSW 2000
Tel: (02) 9693 0000
The principal activities of the APA Group during the course of the year were the ownership and operation of energy infrastructure, including:
– Energy infrastructure businesses located across Australia;
– Energy investments, including Envestra Limited (“Envestra”), SEA Gas Pipeline, Ethane Pipeline Income Fund (“EPX”), Energy Infrastructure Investments Pty
Limited (“EII”), EII 2 Pty Limited (“EII2”), GDI (EII) Pty Ltd (“GDI”), Diamantina Power Station (“DPS”); and
– Asset management and operations services for the majority of APA Group’s energy investments and other third parties.
2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
(a) Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)
The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported in these financial
statements.
In the current period, APA Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and
effective for the current reporting periods.
AASB 119 Employee benefits (revised)
APA Group adopted the revised AASB 119 from 1 July 2013. The revised standard includes changes to the recognition of income and expenses associated with the
superannuation defined benefit plans in which APA Group participates. Under the revised standard, return on plan assets has been calculated based on the rate
used to discount the obligations rather than the expected rate of return on these assets. As the revised standard must be applied retrospectively, adjustments to
the retirement benefit obligations have been recognised at the beginning of the earliest period presented (1 July 2012) and the statement of profit or loss and other
comprehensive income and statement of financial position were restated for the year ended 30 June 2013.
APA Group has obtained actuarial assessments and applied amendments retrospectively with the cumulative impacts shown in the following table:
Impact on profit
Profit before income tax
Income tax
Profit after tax
Impact on statement of financial position
Net defined benefit superannuation liabilities
Deferred tax
Net liabilities
Retained earnings (opening balance)
Reserves
Total equity
CUMULATIVE IMPACTS
INCREASE/(DECREASE)
1 JUL 2012
$000
30 JUN 2013
$000
(2,750)
825
(1,925)
1,925
–
1,925
(5,173)
1,552
(3,621)
(2,312)
694
(1,618)
1,925
3,314
5,239
43
2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)
(a) Standards and Interpretations affecting amounts reported in the current period (and/or prior periods) (continued)
AASB 13 Fair value measurement
AASB 13 explains how to measure fair value and aims to enhance fair value disclosures, and is effective for annual reporting periods beginning after 1 January 2013.
In accordance with transitional provisions, AASB 13 has been applied prospectively from 1 July 2013.
AASB 13 requires inclusion of a measure for credit risk in the calculations of assets and liabilities recorded at fair value. This change is applied prospectively and
has not had a significant impact on the fair value of APA Group’s assets and liabilities for the year ended 30 June 2014, however has resulted in additional fair value
disclosures as provided in Note 40.
Control and joint arrangements
AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, AASB 127 Separate Financial Statements
(Dec 2012), AASB 128 Investments in Associates and Joint Ventures (Dec 2012) and AASB 2012‑10 Amendments to Australian Accounting Standards – Transition
Guidance and Other Amendments.
AASB 10 was applied by APA Group from 1 July 2013. AASB 10 replaces the previous guidance on control and retains the core principle that a Consolidated Entity
presents a parent and its subsidiaries as if they are a single economic entity. Whereas the control definition in the previous guidance focussed on ‘risks and
rewards’, AASB 10 focuses on the combination of power, exposure to variable returns and ability to use the power to affect the returns.
The transitional provisions permit prior period comparatives to not be restated where the accounting outcome under the previous guidance is the same as that
under AASB 10 as at the date of initial application, 1 July 2013. For all other situations, comparatives are restated retrospectively in accordance with AASB 108
Accounting Policies, Changes in Accounting Estimates and Errors as if AASB 10 had always been applied.
AASB 11 Joint Arrangements was applied by APA Group from 1 July 2013 and provides a new definition of joint venture and joint operation which removes
optionality around accounting for joint ventures. Under AASB 11 investments in joint ventures are classified as either joint operations or joint ventures depending
on the contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement. Joint ventures are defined by a right to net
profit and net assets of the joint arrangement and are required to be equity accounted. Joint operations are defined by a right to assets and obligation for liabilities
of the joint arrangements.
There has been no change in accounting for existing arrangements for the year ended 30 June 2014 as a result of applying these standards. However, should any
arrangements take place which change existing interests or create new interests in controlled entities, the accounting for such transactions may be different to
that applied to transactions in the past.
AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and unconsolidated structured
entities. The application of AASB 12 has resulted in more disclosures and has been included in Note 17, Note 18 and Note 19.
AASB 124 Related party disclosures
AASB 2011‑4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements.
The amendments remove the individual remuneration disclosures and disclosures about equity holdings, loans and other transactions with key management
personnel. As a result, only aggregate remuneration disclosures are provided in Note 46(a) and Note 46(b).
(b) Standards and Interpretations issued not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were on issue but not yet effective, that are relevant to
APA Group.
STANDARD/INTERPRETATION
– AASB 9 ‘Financial Instruments’, and the relevant amending standards
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
EXPECTED TO BE
INITIALLY APPLIED IN THE
FINANCIAL YEAR ENDING
1 January 2017
30 June 2018
The following Standard was issued by the International Accounting Standards Board but not yet effective. The Australian equivalent Standard has not yet been
issued.
– IFRS 15 'Revenue from Contracts with Customers'
1 January 2017
30 June 2018
The potential impact of the initial application of the Standards above is yet to be determined.
44
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 3. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
Joint operations: A joint arrangement in which the parties that share joint
These general purpose financial statements for the year ended 30 June 2014
control have rights to the assets, and obligations for the liabilities, relating to
have been prepared in accordance with the Corporations Act 2001, Australian
the arrangement. In relation to its interest in a joint operation, APA Group
Accounting Standards and other authoritative pronouncements of the
recognises its share of assets and liabilities, revenue from the sale of its share
Australian Accounting Standards Board and
interpretations (AIFRS).
of the output and its share of any revenue generated from the sale of the
Compliance with Australian Accounting Standards ensures that the financial
output by the joint operation and its share of expenses. These are incorporated
statements and notes also comply with International Financial Reporting
into APA Group’s financial statements under the appropriate headings.
Standards (IFRS).
(iii) Associates
The financial report has been prepared on the basis of historical cost, except for
An associate is an entity over which APA Group has significant influence and
the revaluation of financial instruments. Historical cost is generally based on
that is neither a subsidiary nor a joint arrangement. Investments in associates
the fair values of the consideration given in exchange for goods and services.
are accounted for using the equity accounting method.
The financial report is presented in Australian dollars and all values are rounded
to the nearest thousand dollars ($000) in accordance with ASIC Class Order
98/0100, unless otherwise stated.
Under the equity accounting method the investment is recorded initially at cost
to APA Group, including any goodwill on acquisition. In subsequent periods the
carrying amount of the investment is adjusted to reflect APA Group’s share of
The financial report was authorised for issue by the Directors on 20 August 2014.
the retained post‑acquisition profit or loss and other comprehensive income,
The principal accounting policies adopted in the preparation of this financial
less any impairment.
report are set out below. These policies have been consistently applied to all
Losses of an associate or joint venture in excess of APA Group’s interests
the periods presented, unless otherwise stated.
(which includes any long‑term interests, that in substance, form part of the net
(a) Working capital position
The working capital position as at 30 June 2014 for APA Group is that current
liabilities exceed current assets by $170.2 million ($211.8 million for 30 June
investment) are recognised only to the extent that there is a legal or
constructive obligation or APA Group has made payments on behalf of the
associate or joint venture.
2013) primarily as a result of $90.6 million (AUD equivalent) of cash flow hedge
(c) Business combinations
liabilities.
APA Group has access to sufficient available committed, un‑drawn bank
facilities of $835.5 million ($891.7 million for 30 June 2013).
Acquisitions of businesses are accounted for using the acquisition method.
Under the acquisition method of accounting, the purchase consideration is
allocated to the identifiable assets acquired and liabilities and contingent
liabilities assumed (the identifiable net assets) on the basis of their fair value at
The Directors continually monitor APA Group’s working capital position,
the date of acquisition which is the date on which control is obtained.
including forecast working capital requirements and have ensured that there
are appropriate refinancing strategies and adequate committed funding
facilities in place to accommodate debt repayments as and when they fall due.
(b) Basis of consolidation
Provisional fair values allocated at a reporting date are finalised within 12
months of the acquisition date. The excess of the consideration transferred, the
amount of any non‑controlling interest in the acquiree and the acquisition‑date
fair value of any previous equity interest in the acquiree over the fair value of
The financial statements comprise the consolidation of the accounts of APT
the identifiable net assets acquired is recorded as goodwill. Any shortfall is
and APTIT (together “the Trusts”) and their respective subsidiaries (together
immediately recognised in the statement of profit or loss.
“APA Group”) together with APA Group’s share of joint arrangements,
associates and joint ventures accounted for as described below.
All intragroup transactions and balances have been eliminated on consolidation.
Where necessary, adjustments are made to the assets, liabilities, and results of
subsidiaries, joint arrangements, associates and joint ventures to bring their
accounting policies into line with those used by APA Group.
(i) Subsidiaries
Costs related to the acquisition of a subsidiary are expensed as incurred.
On an acquisition‑by‑acquisition basis, APA Group recognises any non‑
controlling interest in the acquiree either at the non‑controlling interest’s
proportionate share of the acquiree’s identifiable net assets or at fair value.
Goodwill and amounts attributable to non‑controlling interests will differ
depending on the basis used.
Where APA Group has a previously held non‑controlling interest in the acquiree,
Subsidiaries are entities controlled by APT. Control exists where APT has power
this is remeasured to fair value at the date control is gained with any gain or
over the entities, i.e. existing rights that give them the current ability to direct
loss recognised in the statement of profit or loss. Amounts recognised in other
the relevant activities of the entities (those that significantly affect the returns);
comprehensive income prior to the acquisition are reclassified to profit and
exposure, or rights, to variable returns from their involvement with the entities;
loss.
and the ability to use their power to affect those returns.
(ii) Joint arrangements
(d) Financial assets and liabilities
Available-for-sale financial assets
A joint arrangement is an arrangement whereby two or more parties have joint
Certain shares held by APA Group are classified as being available‑for‑sale.
control. Joint control is the contractually agreed sharing of control such that
These assets are initially recognised at fair value plus any directly attributable
decisions about the relevant activities of the arrangement (those that
transaction costs. Subsequent to initial recognition, they are measured at fair
significantly affect the returns) require the unanimous consent of the parties
value and changes therein, other than impairment losses, which are recognised
sharing control. APA Group has two types of joint arrangements:
in other comprehensive income and accumulated in the available‑for‑sale
Joint ventures: A joint arrangement in which the parties that share joint control
have rights to the net assets of the arrangement. Joint Ventures are accounted
investment revaluation reserve. When these assets are derecognised, the gain
or loss in equity is reclassified to profit or loss.
for using the equity accounting method; and
Dividends on available‑for‑sale equity instruments are recognised in profit or
loss when the APA Group’s right to receive the dividends is established.
45
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Financial assets and liabilities (continued)
(f) Borrowing costs
Loans and receivables
Borrowing costs directly attributable to the acquisition, construction or
Trade receivables, loans, and other receivables that have fixed or determinable
production of qualifying assets, which are assets that necessarily take a
payments that are not quoted in an active market are classified as loans and
substantial period of time to get ready for their intended use or sale, are added
receivables. Trade and other receivables are initially recognised at fair value
to the cost of those assets, until such time as the assets are substantially ready
plus any directly attributable transaction costs. Subsequent to
initial
for their intended use or sale. Investment income earned on the temporary
recognition, they are stated at their amortised cost less impairment.
investment of specific borrowings pending their expenditure on qualifying
Trade and other payables
assets is deducted from the borrowing costs eligible for capitalisation.
Trade and other payables are recognised when APA Group becomes obliged to
All other borrowing costs are recognised in profit or loss in the period in which
make future payments resulting from the purchase of goods and services.
they are incurred.
Trade and other payables are initially recognised at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, they are stated
at amortised cost.
Impairment of financial assets
(g) Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation
and impairment losses. Work in progress is stated at cost. Cost includes
expenditure that is directly attributable to the acquisition or construction of the
Financial assets, other than those at fair value through profit or loss, are
item.
assessed for indicators of impairment at the end of each reporting period.
Financial assets are impaired where there is objective evidence that as a result
of one or more events that occurred after the initial recognition of the financial
asset the estimated future cash flows of the investments have been
unfavourably impacted.
For financial assets carried at amortised cost, the amount of the impairment is
the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance
account and the loss is recognised in the statement of profit or loss.
In the case of equity securities classified as available‑for‑sale, an evaluation is
Depreciation is provided on property, plant and equipment excluding land.
Depreciation is calculated on either a straight‑line or throughput basis
depending on the nature of the asset so as to write off the net cost of each
asset over its estimated useful life.
Leasehold improvements are depreciated over the period of the lease or
estimated useful life, whichever is the shorter, using the straight‑line method.
The estimated useful lives and depreciation methods are reviewed at the end of
each reporting period, with the effect of any changes recognised on a
prospective basis.
The following estimated useful lives are used in the calculation of depreciation:
made as to whether a decline in fair value is “significant” or “prolonged” based
– buildings
on an analysis of indicators such as significant adverse changes in the
– compressors
30 – 50 years;
10 – 50 years;
technological, market, economic or legal environment in which the company
– gas transportation systems
10 – 80 years;
invested in operates. If such evidence exists for available‑for‑sale financial
– meters
20 – 30 years; and
assets, the cumulative loss, measured as the difference between acquisition
– other plant and equipment
3 – 20 years.
cost and the current fair value, less any impairment loss previously recognised
in the statement of profit or loss is removed from equity and recognised in the
statement of profit or loss.
(h) Employee benefits
Provision is made for benefits accruing to employees in respect of wages and
salaries, incentives, annual leave, long service leave and sick leave when it is
With the exception of available‑for‑sale equity instruments, if, in a subsequent
probable that settlement will be required and they are capable of being
period, the amount of the impairment loss decreases and the decrease can be
measured reliably. Provisions made in respect of employee benefits expected
related objectively to an event occurring after the impairment was recognised,
to be settled within 12 months, are measured at their nominal values using the
the previously recognised impairment loss is reversed through profit or loss to
remuneration rates expected to apply at the time of settlement. Provisions
the extent the carrying amount of the investment at the date the impairment is
made in respect of employee benefits which are not expected to be wholly
reversed, does not exceed what the amortised cost would have been had the
settled within 12 months are measured as the present value of the estimated
impairment not been recognised. In respect of available‑for‑sale equity
future cash outflows to be made by APA Group in respect of services provided
instruments, any subsequent increase in fair value after an impairment loss is
by employees up to reporting date.
recognised in other comprehensive income.
Defined contribution plans
Cash and cash equivalents
Contributions to defined contribution plans are expensed when incurred.
Cash comprises cash on hand and demand deposits. Cash equivalents are
short‑term, highly liquid investments that are readily convertible to known
amounts of cash, which are subject to insignificant risk of changes in values.
(e) Borrowings
Defined benefit plans
For defined benefit plans, the cost of providing benefits is determined using
the projected unit credit method, with actuarial valuations being carried out at
each reporting date. Actuarial gains and losses and the return on plan assets
Borrowings are recorded initially at fair value, net of transaction costs.
(excluding interest) are recognised immediately in the statement of financial
Subsequent to initial recognition, borrowings are measured at amortised cost
position with a charge or credit recognised in other comprehensive income in
with any difference between the initial recognised amount and the redemption
the period in which they occur. Remeasurement, comprising of actuarial gains
value being recognised in the statement of profit or loss and other
and losses and the return on plan assets (excluding interest), is recognised in
comprehensive income over the period of the borrowing using the effective
other comprehensive income and immediately reflected in retained earnings
interest method.
and will not be reclassified to profit or loss.
Past service cost is recognised in profit or loss in the period of a plan amendment.
46
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Employee benefits (continued)
Note 40 contains details of the fair values of the derivative instruments used
The defined benefit obligation recognised in the consolidated statement of
for hedging purposes. Movements in the hedging reserve in equity are also
financial position represents the actual deficit or surplus in APA Group’s
detailed in Note 32.
defined benefit plans. Any asset resulting from this calculation is limited to the
present value of economic benefits available in the form of refunds and
reductions in future contributions to the plan.
(i) Intangible assets and goodwill
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair
value hedges are recorded in profit or loss immediately, together with any
changes in the fair value of the hedged item that is attributable to the hedged
Intangible assets acquired separately are carried at cost less accumulated
risk. Hedge accounting is discontinued when APA Group revokes the hedging
amortisation and accumulated impairment losses. Intangible assets acquired in
relationship or the hedging instrument expires or is sold, terminated, or
a business combination are identified and recognised separately from goodwill
exercised, or no longer qualifies for hedge accounting. The adjustment to the
and are initially recognised at their fair value at the acquisition date and
carrying amount of the hedged item arising from the hedged risk is amortised
subsequently at cost
less accumulated amortisation and accumulated
to profit or loss from that date.
impairment losses.
Cash flow hedges
Amortisation is recognised on a straight‑line basis over their estimated useful
The effective portion of changes in the fair value of derivatives that are
lives. The estimated useful life and amortisation method are reviewed at the
designated and qualify as cash flow hedges
is recognised
in other
end of each annual reporting period, with the effects of any changes in estimate
comprehensive income. The gain or loss relating to the ineffective portion is
being accounted for on a prospective basis.
recognised immediately in profit or loss as part of other expenses or other
Goodwill is not amortised; it is tested annually for impairment or more
income.
frequently if events or changes in circumstances indicate a potential
Amounts deferred in equity are recycled in profit or loss in the periods when
impairment. The APA Group’s impairment policy is explained in Note 3(n).
the hedged item is recognised in profit or loss in the same line of the statement
(j) Derivative financial instruments
APA Group enters into a variety of derivative financial instruments to manage
its exposure to interest rate and foreign exchange rate risk, including foreign
exchange forward contracts, interest rate swaps and cross currency swaps.
Further details of derivative financial instruments are disclosed in Note 40.
Derivatives are initially recognised at fair value at the date a derivatives contract
is entered into and subsequently remeasured to their fair value at each reporting
period. The resulting gain or loss is recognised in profit or loss immediately
unless the derivative is designated and effective as a hedging instrument, in
which event the timing of the recognition in profit or loss depends on the nature
of the hedge relationship. APA Group designates certain derivatives as hedges
of the fair value of recognised assets or liabilities or firm commitments (fair
of comprehensive income as the recognised hedged item. However, when the
forecast transaction that is hedged results in the recognition of a non‑financial
asset or a non‑financial liability, the gains and losses previously deferred in
equity are transferred from equity and included in the initial measurement of
the cost of the asset or liability.
Hedge accounting is discontinued when APA Group revokes the hedging
relationship or the hedging instrument expires or is sold, terminated, or
exercised, or no longer qualifies for hedge accounting. Any cumulative gain or
loss deferred in equity at that time remains in equity and is recognised when
the forecast transaction is ultimately recognised in profit or loss. When a
forecast transaction is no longer expected to occur, the cumulative gain or loss
that was deferred in equity is recognised immediately in profit or loss.
value hedges) or, hedges of highly probable forecast transactions or of foreign
(k) Financial instruments issued by APA Group
currency risk of firm commitments (cash flow hedges).
Debt and equity instruments
A derivative with a positive fair value is recognised as a financial asset, a
derivative with a negative fair value is recognised as a financial liability. The fair
value of hedging derivatives is classified as either current or non‑current based
on the timing of the underlying cash flows of the instrument. Cash flows due
within 12 months of the reporting date are classified as current and cash flows
Debt and equity instruments are classified as either liabilities or equity in
accordance with the substance of the contractual arrangement. An equity
instrument is any contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity instruments issued by APA
Group are recorded at the proceeds received, net of direct issue costs.
due after 12 months of the reporting date are classified as non‑current.
Financial guarantee contract liabilities
Hedge accounting
APA Group designates certain hedging instruments, which include derivatives,
embedded derivatives and non‑derivatives in respect of foreign currency risk,
as either fair value hedges or cash flow hedges.
Hedges of foreign exchange and interest rate risk on firm commitments are
accounted for as cash flow hedges.
Financial guarantee contract liabilities are measured initially at their fair values
and subsequently at the higher of the amount recognised as a provision and
the amount initially recognised less cumulative amortisation in accordance
with the revenue recognition policies.
Transaction costs arising on the issue of equity instruments
Transaction costs arising on the issue of equity instruments are recognised
directly in equity as a reduction of the proceeds of the equity instruments to
At the inception of the hedge relationship, APA Group documents the
which the costs relate. Transaction costs are the costs that are incurred directly
relationship between the hedging instrument and hedged item, along with its
in connection with the issue of those equity instruments and which would not
risk management objectives and its strategy for undertaking various hedge
have been incurred had those instruments not been issued.
transactions. Furthermore, at the inception of the hedge and on an ongoing
basis, APA Group documents whether the hedging instrument that is used in
the hedging relationship is highly effective in offsetting changes in fair values
or cash flows of the hedged item.
Interest and distributions
Interest and distributions are classified as expenses or as distributions of profit
consistent with the consolidated statement of financial position classification
of the related debt or equity instruments or component parts of compound
instruments.
47
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Foreign currency transactions
Deferred tax is provided using the balance sheet liability method, providing for
Both the functional and presentation currency of APA Group and APT is
temporary differences between the carrying amounts of assets and liabilities
Australian dollars (A$). All foreign currency transactions during the financial
for financial reporting purposes and the amounts used for taxation purposes.
year are brought to account using the exchange rate in effect at the date of the
The following temporary differences are not provided for: initial recognition of
transaction. Foreign currency monetary items at reporting date are translated
goodwill, initial recognition of assets or liabilities that affect neither accounting
at the exchange rate existing at that date and resulting exchange differences
nor taxable profit, and differences relating to investments in wholly‑owned
are recognised in profit or loss in the period in which they arise.
entities to the extent that they will probably not reverse in the foreseeable
(m) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and
services tax (“GST”), except where the amount of GST incurred is not
recoverable from the taxation authority. Receivables and payables are
future. The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and liabilities,
using the tax rates enacted or substantively enacted by the end of the reporting
period.
recognised inclusive of GST, except for accrued revenue and accrued expense
A deferred tax asset is recognised only to the extent that it is probable that
at balance dates which exclude GST.
The net amount of GST recoverable from, or payable to, the taxation authority
is included as part of receivables or payables. GST receivable or GST payable is
future taxable profits will be available against which the asset can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
only recognised once a tax invoice has been issued or received.
Tax consolidation
Cash flows are included in the statement of cash flows on a gross basis. The
GST component of cash flows arising from investing and financing activities
which is recoverable from, or payable to, the taxation authority is classified
within operating cash flows.
(n) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject
to amortisation and are tested annually for impairment, or more frequently if
events or changes in circumstances indicate that they might be impaired.
Property, plant and equipment and intangible assets with finite lives are
APT and its wholly‑owned Australian tax resident entities are part of a tax‑
consolidated group under Australian taxation law. The head entity within the
tax‑consolidated group is APT.
Tax expense/income, deferred tax liabilities and deferred tax assets arising
from temporary differences of the members of the tax‑consolidated group are
recognised in the separate financial reports of the members of the tax‑
consolidated group using the ‘separate taxpayer within group’ approach, by
reference to the carrying amounts in the separate financial reports of each
entity and the tax values applying under tax consolidation.
reviewed for impairment if there is an indication that the carrying amount may
Any current tax liabilities (or assets) and deferred tax assets arising from
not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs to sell, and value in use. For the purposes of
unused tax losses of the wholly‑owned entities are assumed by the head entity
in the tax‑consolidated group and are recognised as amounts payable
(receivable) to (from) other entities in the tax‑consolidated group in
conjunction with any tax funding arrangement amounts.
assessing impairment, assets are grouped at the lowest levels for which there
The head entity recognises deferred tax assets arising from unused tax losses
are separately identifiable cash inflows which are largely independent of the
of the tax‑consolidated group to the extent that it is probable that future
cash inflows from other assets or groups of assets (cash‑generating units).
taxable profits of the tax‑consolidated group will be available against which the
Assets other than goodwill that suffered an impairment are reviewed for
assets can be utilised.
possible reversal of the impairment at each reporting period.
(r) Leased assets
(o) Inventories
Leases are classified as finance leases when the terms of the lease transfer
Inventories are stated at the lower of cost and net realisable value. Net
substantially all the risks and rewards incidental to the ownership of the leased
realisable value represents the estimated selling price for the inventories less all
asset to the lessee. All other leases are classified as operating leases.
estimated costs of completion and costs necessary to make the sale.
Group as lessor
(p) Security-based payments
Amounts due from a lessee under finance leases are recorded as receivables.
APA Group provides benefits to certain employees in the form of cash settled
Finance lease receivables are initially recognised at amounts equal to the
security‑based payments. For cash settled security‑based payments, a liability
present value of the minimum lease payments receivable plus the present value
equal to the portion of services received is recognised at the current fair value
of any unguaranteed residual value expected to accrue at the end of the lease
determined at each reporting date.
(q) Income tax
Income tax on the profit or loss for the financial year comprises current and
term. Finance lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the net investment outstanding in respect of
the leases.
deferred tax. Income tax is recognised in the statement of profit or loss and
Group as lessee
other comprehensive income except to the extent that it relates to items
Assets held under finance leases are initially recognised at their fair value or, if
recognised directly in equity, in which case it is recognised in equity. Current
lower, at amounts equal to the present value of the minimum lease payments,
tax is the expected tax payable on the taxable income for the financial year,
each determined at the inception of the lease. The corresponding liability to the
using tax rates enacted or substantively enacted by the end of the reporting
lessor is included in the consolidated statement of financial position as a
period, and any adjustment to tax payable in respect of previous financial
finance lease obligation. Lease payments are allocated between finance
years. Current tax for current and prior periods is recognised as a liability (or
charges and reduction of the lease obligation so as to achieve a constant rate
asset) to the extent that it is unpaid (or refundable).
of interest on the remaining balance of the liability.
Finance lease assets are amortised on a straight‑line basis over the estimated
useful life of the asset.
48
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES
(r) Leased assets (continued)
OF ESTIMATION UNCERTAINTY
Operating lease payments are recognised as an expense on a straight‑line basis
In the application of APA Group’s accounting policies, management is required
over the lease term, except where another systematic basis is more
to make judgements, estimates and assumptions about the carrying values of
representative of the time patterns in which economic benefits from the leased
assets and liabilities that are not readily apparent from other sources. The
asset are consumed.
(s) Provisions
A provision is recognised when there is a legal, equitable or constructive
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from
estimates.
obligation as a result of a past event, it is probable that a future sacrifice of
The estimates and underlying assumptions are reviewed on an ongoing basis.
economic benefits will be required to settle the obligation and the amount of
Revisions to accounting estimates are recognised in the period in which the
the provision can be measured reliably.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the financial year, taking
estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future
periods.
into account the risks and uncertainties surrounding the obligation. Where a
Impairment of assets
provision is measured using the cash flows estimated to settle the present
Determining whether property, plant and equipment, identifiable intangible
obligation, its carrying amount is the present value of those cash flows.
assets and goodwill are impaired requires an estimation of the value‑in‑use or
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, the receivable is recognised as an
asset if it is probable that recovery will be received and the amount of the
receivable can be measured reliably.
(t) Revenue recognition
fair value of the cash‑generating units. The calculations require APA Group to
estimate the future cash flows expected to arise from cash‑generating units
and suitable discount rates in order to calculate the present value of cash‑
generating units.
Estimates and assumptions used are reviewed on an ongoing basis.
Revenue is recognised to the extent that it is probable that the economic
Determining whether available‑for‑sale investments are impaired requires an
benefits will flow to APA Group and the revenue can be reliably measured.
assessment as to whether declines in value are significant or prolonged.
Amounts disclosed as revenue are net of duties and taxes paid. Revenue is
Management has taken into account a number of qualitative and quantitative
recognised for the major business activities as follows:
factors in making this assessment. Any assessment of whether a decline in
Sales revenue
Sales revenue represents revenue earned for the transportation of gas,
generation of electricity and other related services and is recognised when the
services are provided.
Pass-through revenue
Pass‑through revenue is revenue on which no margin is earned and is offset by
corresponding pass‑through costs.
Interest revenue
Interest revenue is recognised as it accrues using the effective interest method.
Sale of non-current assets
value represents an impairment would result in the transfer of the decrement
from reserves to the statement of profit or loss and other comprehensive
income.
Useful lives of non-current assets
APA Group reviews the estimated useful lives of property, plant and equipment
at the end of each annual reporting period. Any reassessment of useful lives in
a particular year will affect the depreciation or amortisation expense.
Fair value of financial instruments
APA Group has financial instruments that are carried at fair value in the
statement of financial position. The best evidence of fair value is quoted prices
in an active market. If the market for a financial instrument is not active, APA
The net gain or loss on sale of a non‑current asset is included as income at the
Group determines fair value by using various valuation models. The objective of
date control of an asset passes to the buyer. This is usually when an
using a valuation technique is to establish the price that would be received to
unconditional contract of sale is signed. The gain or loss on disposal is
sell an asset or paid to transfer a liability between market participants. The
calculated as the difference between the carrying amount of the asset at the
chosen valuation models make maximum use of market inputs and rely as little
time of disposal and the net proceeds on disposal (including incidental costs).
as possible on entity specific inputs. The fair values of all positions include
Dividend revenue
Dividend revenue is recognised when the right to receive a dividend has been
established.
Finance lease income
Finance lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the Group’s net investment outstanding in
respect of the leases.
assumptions made on the recoverability based on the counterparty’s and APA
Group’s credit risk.
Details of the inputs to the fair value of financial instruments are included in
Note 40.
49
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 5. SEGMENT INFORMATION
APA Group operates in one geographical segment, being Australia.
(a) Description of reportable segments
APA Group comprises the following reportable segments:
– Energy Infrastructure, which includes all wholly or majority owned pipelines, gas storage assets and the Emu Downs Wind Farm;
– Asset Management, which provides commercial, operating services and/or asset maintenance services to APA Group’s energy investments for appropriate
fees; and
– Energy Investments, which includes APA Group’s strategic stakes in a number of investment vehicles that house energy infrastructure assets, generally
characterised by long term secure cashflows, with low capital expenditure requirements.
(b) Reportable segments
2014
SEGMENT REVENUE (a)
External sales revenue
Equity accounted net profits
Pass‑through revenue
Finance lease and investment interest income
Distribution – other entities
Total segment revenue
Other interest income
Consolidated revenue
SEGMENT RESULT
ENERGY
INFRASTRUCTURE
$000
ASSET
MANAGEMENT
$000
ENERGY
INVESTMENTS
$000
CONSOLIDATED
$000
820,478
–
8,925
3,591
–
99,171
–
394,552
–
–
–
64,289
–
3,311
533
919,649
64,289
403,477
6,902
533
832,994
493,723
68,133
1,394,850
1,142
1,395,992
Earnings before interest, tax, depreciation and amortisation ("EBITDA")
619,422
56,188
533
676,143
Share of net profits of associates and joint ventures accounted for using
the equity method
Finance lease and investment interest income
Total EBITDA
Depreciation and amortisation
Earnings before interest and tax ("EBIT")
Net finance costs (b)
Profit before tax
Income tax benefit
Profit for the year
–
3,591
623,013
(151,610)
471,403
–
–
56,188
(4,618)
51,570
64,289
3,311
68,133
64,289
6,902
747,334
–
(156,228)
68,133
591,106
SEGMENT ASSETS AND LIABILITIES
Segment assets
Carrying value of investments accounted for using the equity method
6,877,648
248,972
151,690
593,325
Unallocated assets (c)
Total assets
Segment liabilities
Unallocated liabilities (d)
Total liabilities
273,654
75,792
–
(a) The revenue reported above represents revenue generated from external customers, any intersegment sales were immaterial.
(b) Excluding finance lease and investment interest income, and any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting purposes, but including other
interest income.
(c) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts and equity forwards.
(d) Unallocated liabilities consist of current and non‑current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts.
50
(325,084)
266,022
77,684
343,706
7,278,310
593,325
100,875
7,972,510
349,446
5,126,575
5,476,021
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 5. SEGMENT INFORMATION (CONTINUED)
(b) Reportable segments (continued)
2013
SEGMENT REVENUE (b)
External sales revenue
Equity accounted net profits
Pass‑through revenue
Finance lease and investment interest income
Distribution – other entities
Total segment revenue
Other interest income
Consolidated revenue
SEGMENT RESULT
ENERGY
INFRASTRUCTURE
(RESTATED)
$000
(a)
ASSET
MANAGEMENT
(RESTATED)
$000
ENERGY
INVESTMENTS
$000
(f)
CONSOLIDATED
(RESTATED)
$000
770,532
–
8,449
3,822
–
82,293
–
344,294
–
–
782,803
426,587
–
44,868
–
3,069
3,243
51,180
852,825
44,868
352,743
6,891
3,243
1,260,570
11,697
1,272,267
Earnings before interest, tax, depreciation and amortisation ("EBITDA")
524,407
41,889
145,573
711,869
Share of net profits of associates and joint ventures accounted for using
the equity method
Finance lease and investment interest income
Total EBITDA
Depreciation and amortisation
Earnings before interest and tax ("EBIT")
Net finance costs (c)
Profit before tax
Income tax expense
Profit for the year
–
3,822
528,229
(125,671)
402,558
–
–
41,889
(4,790)
37,099
SEGMENT ASSETS AND LIABILITIES
Segment assets
Carrying value of investments accounted for using the equity method
6,608,054
235,631
44,868
3,069
193,510
–
193,510
35,490
589,131
Unallocated assets (d)
Total assets
Segment liabilities
Unallocated liabilities (e)
Total liabilities
284,049
69,918
–
44,868
6,891
763,628
(130,461)
633,167
(290,916)
342,251
(49,869)
292,382
6,879,175
589,131
230,622
7,698,928
353,967
4,831,032
5,184,999
(a) Revenue of $32.9 million, expenses of $12.3 million, profit before income tax of $18.2 million, profit after income tax of $13.4 million are attributable to the Moomba Adelaide Pipeline
System which was acquired in October 2012 divested in May 2013. Included within asset operation and management expenses are significant items of $18.6 million resulting from the
write back of transaction costs relating to the prior year divestment of the APA Gas Networks business and $12.4 million of transaction costs on acquisition of Hastings Diversified Utilities
Fund.
(b) The revenue reported above represents revenue generated from external customers, any intersegment sales were immaterial.
(c) Excluding finance lease and investment interest income, and any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting purposes, but including other
interest income.
(d) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts and equity forwards.
(e) Unallocated liabilities consist of current and non‑current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts.
(f) Included in EBITDA for energy investments is a significant item of $142.3 million gain on the previously held interest in HDF on obtaining control.
(c) Other segment information
Revenue from major products and services
The revenue from major products and services is shown by the reportable segments. No further analysis is required.
Information about major customers
Included in revenues arising from energy infrastructure of $820.5 million (2013: $770.5 million) are revenues of approximately $384.4 million (2013: $373.8 million)
which arose from sales to APA Group’s top three customers.
51
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 6. REVENUE
An analysis of APA Group’s revenue for the year is as follows:
Continuing operations
OPERATING REVENUE
Energy infrastructure revenue:
– energy infrastructure revenue
– pass‑through revenue
Asset management revenue:
– asset management revenue
– pass‑through revenue
FINANCE INCOME
Interest
Redeemable ordinary shares (EII) and redeemable preference shares (GDI) interest income
Finance lease income
OTHER INCOME
Dividends
Rental income
Share of net profits of associates and joint ventures accounted for using the equity method
2014
$000
2013
$000
819,899
8,925
828,824
99,171
394,552
493,723
1,322,547
1,142
3,311
3,591
8,044
533
579
1,331,703
64,289
1,395,992
769,895
8,449
778,344
82,293
344,294
426,587
1,204,931
11,697
3,069
3,822
18,588
3,243
637
1,227,399
44,868
1,272,267
52
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 7. EXPENSES
Profit before tax includes the following expenses:
DEPRECIATION AND AMORTISATION EXPENSE
Depreciation of non‑current assets
Amortisation of non‑current assets
OTHER OPERATING COSTS – PASS-THROUGH
Gas pipeline costs
Management, operating and maintenance costs
FINANCE COSTS
Interest on bank overdrafts and borrowings
Amortisation of deferred borrowing costs
Other finance costs
Less: amounts included in the cost of qualifying assets
Loss/(gain) on derivatives
Unwinding of discount on non‑current liabilities
The average interest rate on funds borrowed is 7.44% p.a. (2013: 7.77% p.a.) including amortisation of borrowing costs and other finance costs.
EMPLOYEE BENEFIT EXPENSE
Post‑employment benefits:
Defined contribution plans
Defined benefit plans
Termination benefits
Cash settled share‑based payments
Other employee benefits
OTHER EXPENSES
Doubtful debts
Impairment of intangibles
Impairment of goodwill (a)
Loss on disposal of property, plant and equipment
Other
2014
$000
2013
$000
151,132
5,096
156,228
8,925
394,552
403,477
124,787
5,674
130,461
8,449
344,294
352,743
324,122
316,438
9,245
9,031
342,398
(18,069)
324,329
787
1,110
9,257
9,378
335,073
(25,020)
310,053
(8,179)
739
326,226
302,613
2014
$000
2013
(RESTATED)
$000
9,648
4,468
14,116
1,004
22,452
131,043
168,615
985
1,792
–
115
6,962
9,854
9,176
5,128
14,304
4,941
26,568
128,683
174,496
805
2,075
1,867
480
9,906
15,133
(a) The impairment in the 2013 financial year relates to a reassessment of renewal opportunities beyond current contracted terms for minor contracts in the asset management business.
53
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 8. SIGNIFICANT ITEMS
Individually significant income/(expenses) included in profit after related income tax expense are as follows:
SIGNIFICANT INCOME/(EXPENSE) ITEMS
Write back of transaction costs on sale of Allgas Distribution Network
Gain on previously held interest in HDF on obtaining control
Transaction costs on acquisition of HDF
Integration costs on acquisition of HDF
Significant items incurred by APA Group
Management and performance fees charged to HDF by Hastings Funds Management
Takeover response costs incurred by HDF
Significant items incurred by HDF
Total significant items impacting EBITDA
Significant items impacting finance costs:
Gain on settlement of HDF interest rate swaps
Profit from significant items before income tax
Income tax related to significant items above
Write back of deferred tax on obtaining control of HDF
Income tax benefit on tax cost base step up(a)
Profit from significant items after income tax
2014
$000
2013
$000
–
–
–
–
–
–
–
–
–
–
–
–
–
144,060
144,060
18,588
142,333
(12,404)
(4,481)
144,036
(35,438)
(6,913)
(42,351)
101,685
8,713
110,398
2,818
6,814
–
120,030
(a) APA Group made a once‑off adjustment to its tax expense for the year ended 30 June 2014 to reflect a change in the treatment, for tax depreciation purposes only, of various capital
assets.
9. INCOME TAX
Income tax recognised in profit or loss
TAX (EXPENSE)/INCOME COMPRISES:
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to current tax of prior years
Deferred tax expense relating to the origination and reversal of temporary differences
Total tax benefit/(expense)
ATTRIBUTABLE TO:
Profit from continuing operations
2014
$000
(1,063)
1,061
(2)
77,686
77,684
2013
(RESTATED)
$000
(7,313)
7,518
205
(50,074)
(49,869)
77,684
(49,869)
The prima facie income tax expense on pre‑tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:
Profit before tax
Income tax expense calculated at 30%
Non‑assessable trust distribution
Non deductible expenses
Non assessable income
Unfranked dividends from associates
Tax benefit on tax cost base step up
Adjustment recognised in the current year in relation to the current tax of prior years
54
266,022
(79,807)
11,611
(3,054)
15,034
(11,221)
(67,437)
144,060
1,061
77,684
342,251
(102,675)
11,443
(15,629)
58,939
(9,465)
(57,387)
–
7,518
(49,869)
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 9. INCOME TAX (CONTINUED)
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under the Australian tax
law. There has been no change in the corporate tax rate when compared with the previous reporting period.
Income tax recognised directly in equity
The following deferred amounts were charged/(credited) directly to equity during the period:
DEFERRED INCOME TAX
Revaluation of financial instruments treated as cash flow hedges
Actuarial movements on defined benefit plans
Revaluation of available‑for‑sale financial assets
Security issue costs
Income tax benefit reported in equity
DEFERRED TAX BALANCES
Deferred tax liabilities
Temporary differences
Deferred tax assets
Temporary differences
Tax losses
Deferred tax balances
Deferred tax (liabilities)/assets arise from the following:
2014
GROSS DEFERRED TAX LIABILITIES
Intangible assets
Property, plant and equipment
Deferred expenses
Investments equity accounted
Available for sale investments
GROSS DEFERRED TAX ASSETS
Provisions
Cash flow hedges
Defined benefit obligation
Security issue costs
Deferred revenue
Other
Tax losses
2014
$000
26,913
(2,039)
589
–
25,463
2013
(RESTATED)
$000
11,685
(5,371)
34,697
32
41,043
(540,896)
(540,896)
(553,626)
(553,626)
96,975
333,138
430,113
71,007
268,687
339,694
(110,783)
(213,932)
OPENING
BALANCE
$000
CHARGED
TO INCOME
$000
CHARGED
TO EQUITY
$000
ACQUISITIONS/
DISPOSALS
$000
CLOSING
BALANCE
$000
(3,975)
(497,925)
(47,535)
(3,445)
(746)
(553,626)
36,361
27,527
6,225
368
467
59
268,687
339,694
(213,932)
538
11,296
(2,148)
295
–
9,981
1,087
236
142
(182)
1,998
(27)
64,451
67,705
77,686
–
–
–
2,160
589
2,749
–
24,753
(2,039)
–
–
–
–
22,714
25,463
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,437)
(486,629)
(49,683)
(990)
(157)
(540,896)
37,448
52,516
4,328
186
2,465
32
333,138
430,113
(110,783)
55
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 9. INCOME TAX (CONTINUED)
Deferred tax balances (continued)
Deferred tax (liabilities)/assets arise from the following:
OPENING
BALANCE
$000
CHARGED
TO INCOME
$000
CHARGED
TO EQUITY
$000
ACQUISITIONS/
DISPOSALS
$000
CLOSING
BALANCE
$000
2013 (RESTATED)
GROSS DEFERRED TAX LIABILITIES
Intangible assets
Property, plant and equipment
Deferred expenses
Investments equity accounted
Available for sale investments
GROSS DEFERRED TAX ASSETS
Provisions
Cash flow hedges
Defined benefit obligation
Security issue costs
Deferred revenue
Other
Tax losses
Unrecognised deferred tax assets
(4,598)
(418,239)
(59,132)
(440)
(35,443)
(517,852)
30,084
12,410
11,564
531
(511)
(6,567)
150,234
197,745
623
(46,493)
(7,741)
290
–
(53,321)
5,244
(12,926)
32
(195)
978
6,580
3,534
3,247
(320,107)
(50,074)
–
–
–
(3,295)
34,697
31,402
–
14,980
(5,371)
32
–
–
–
9,641
41,043
The following deferred tax assets have not been brought to account as assets:
Tax losses – capital
Tax consolidation
Relevance of tax consolidation to the Group
–
(33,193)
19,338
–
–
(3,975)
(497,925)
(47,535)
(3,445)
(746)
(13,855)
(553,626)
1,033
13,063
–
–
–
46
114,919
129,061
115,206
36,361
27,527
6,225
368
467
59
268,687
339,694
(213,932)
2014
$000
2013
$000
32,069
30,044
APT and its wholly‑owned Australian resident entities formed a tax‑consolidated group with effect from 1 July 2003 and are therefore taxed as a single entity from
that date. The head entity within the tax‑consolidated group is APT. The members of the tax‑consolidated group are identified at Note 41.
Nature of tax funding arrangement and tax sharing agreement
Entities within the tax‑consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the
tax funding arrangement, APT and each of the entities in the tax‑consolidated group have agreed to pay a tax equivalent payment to or from the head entity based
on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax‑
consolidated group.
The tax sharing agreement entered into between members of the tax‑consolidated group provides for the determination of the allocation of income tax liabilities
between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax‑consolidated group. The effect of the tax
sharing agreement is that each member’s liability for the tax payable by the tax‑consolidated group is limited to the amount payable to the head entity under the
tax funding arrangement.
56
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 10. DISTRIBUTIONS
RECOGNISED AMOUNTS
Final distribution paid on 11 September 2013
(2012: 14 September 2012)
Profit distribution ‑ APT (a)
Profit distribution ‑ APTIT (a) (Note 34)
Capital distribution ‑ APT (Note 31)
Capital distribution ‑ APTIT (Note 34)
Interim distribution paid on 12 March 2014
(2012: 13 March 2013)
Profit distribution ‑ APT (a)
Profit distribution ‑ APTIT (a) (Note 34)
Capital distribution ‑ APT (Note 31)
Capital distribution ‑ APTIT (Note 34)
Total distributions recognised
Profit distributions (a)
Capital distributions
UNRECOGNISED AMOUNTS
Final distribution payable on 10 September 2014 (b)
(2013: 11 September 2013)
Profit distribution – APT (a)
Profit distribution – APTIT (a)
Capital distribution – APT
Capital distribution – APTIT
(a) Profit distributions were unfranked (2013: unfranked).
(b) Record date 30 June 2014.
2014
CENTS PER
SECURITY
APT AND APTIT
2014
TOTAL
$000
2013
CENTS PER
SECURITY
2013
TOTAL
$000
32,786
21,160
47,182
14,879
116,007
121,930
18,719
‑
‑
5.09
3.28
7.32
2.31
18.00
14.74
2.26
‑
‑
17.00
140,649
25.37
9.63
194,595
62,061
16.02
2.32
–
0.16
18.50
133,877
19,424
–
1,313
154,614
16.02
2.32
–
0.16
18.50
14.56
2.30
0.49
0.15
17.50
35.20
0.80
16.42
2.33
–
–
133,877
19,424
–
1,313
154,614
121,663
19,241
4,056
1,295
146,255
294,205
6,664
137,239
19,464
–
–
18.75
156,703
The final distribution in respect of the financial year has not been recognised in this financial report because the final distribution was not declared, determined or
publicly confirmed prior to the end of the financial year.
Adjusted franking account balance (tax paid basis)
2014
$000
5,107
2013
$000
3,609
57
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 11. TRADE AND OTHER RECEIVABLES
Trade receivables
Allowance for doubtful debts
Receivables from associates and related parties
Finance lease receivables (Note 35)
Interest receivable
Other debtors
Trade receivables are non‑interest bearing and are generally on 30 day terms.
Ageing of past due but not impaired
30 – 60 days
60 – 90 days
90 – 120 days
Movement in the allowance for doubtful debts
Balance at beginning of year
Charged to profit or loss
Balance at end of year
2014
$000
96,644
(1,790)
94,854
56,936
4,575
63
11
2013
$000
104,483
(805)
103,678
55,931
4,744
146
70
156,439
164,569
3,129
662
1,817
5,608
805
985
1,790
5,806
1,167
3,037
10,010
–
805
805
In determining the recoverability of a trade receivable, APA Group considers any change in the credit quality of the trade receivable from the date the credit was
initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated.
136
–
–
1,654
1,790
2,407
–
13,883
285
16,575
32
219
232
322
805
1,927
1,788
12,469
285
16,469
Ageing of impaired receivables
Not past due
30 – 60 days
60 – 90 days
90 – 120 days
12. OTHER CURRENT FINANCIAL ASSETS
Derivatives at fair value:
Equity forward contracts
Foreign exchange contracts – cash flow hedges
Cross currency interest rate swaps – cash flow hedges
Financial assets carried at amortised cost:
Redeemable preference share interest
58
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 13. INVENTORIES
Spare parts
Gas stock
14. OTHER CURRENT ASSETS
Prepayments
15. NON-CURRENT RECEIVABLES
Finance lease receivables (Note 35)
Loan receivable – related party (a)
2014
$000
14,261
3,088
17,349
2013
$000
11,860
866
12,726
5,996
5,662
29,747
118,088
147,835
34,318
–
34,318
(a) During the year, APA Group increased its net investment in Diamantina Power Station (DPS) through the provision of shareholder loans as part of its long‑term funding commitment to
the project. Per AASB 128, APA’s share of movements in DPS’s equity have been offset against the balance of shareholder loans receivable.
16. OTHER NON-CURRENT FINANCIAL ASSETS
Available‑for‑sale investments carried at fair value:
Ethane Pipeline Income Fund
Financial assets carried at amortised cost:
Redeemable ordinary shares
Redeemable preference shares
Derivatives – at fair value:
Equity forward contracts
Cross currency interest rate swaps – cash flow hedges
4,571
7,394
18,218
10,400
1,597
75,982
110,768
17,264
10,400
1,894
131,588
168,540
Available‑for‑sale investments consist of investments in ordinary securities, and therefore have no fixed maturity date or coupon rate. The fair value of listed
available‑for‑sale investments has been determined directly by reference to published price quotations in an active market.
Redeemable ordinary shares relate to APA Group’s 19.9% investment in Energy Infrastructure Investments Pty Ltd where APL, as responsible entity for APTIT,
acquired the redeemable ordinary shares, which include a debt component. This debt component amortises over ten years from December 2008 at 12% per annum.
Redeemable preference shares relate to APA Group’s 20% interest in GDI (EII) Pty Ltd. In December 2011, APA sold 80% of its gas distribution network in South
East Queensland (Allgas) into an unlisted investment vehicle, GDI (EII) Pty Ltd. At that date GDI issued 52 million Redeemable Preference Shares (RPS) to its
owners. The shares attract periodic interest payments and have a redemption date 10 years from issue.
59
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 17. SUBSIDIARIES WITH NON-CONTROLLING INTERESTS
OWNERSHIP INTEREST
HELD BY THE GROUP
%
OWNERSHIP INTEREST
HELD BY NCI
%
NAME OF SUBSIDIARY
PRINCIPAL ACTIVITY
APT Investment Trust
Inter‑entity investment and financing
2014
–
2013
–
2014
100
2013
100
APT has one material non‑controlled subsidiary, APTIT. APT is deemed the parent entity of APA Group comprising of the stapled structure of APT and APTIT.
Equity attributable to other trusts stapled to the parent is a form of non‑controlling interest and represents 100% of the equity of APTIT.
Summarised financial information for APTIT is set out below, the amounts disclosed are before inter‑company eliminations.
FINANCIAL POSITION
Current assets
Non‑current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity attributable to non-controlling interests
FINANCIAL PERFORMANCE
Revenue
Expenses
Profit for the year
Other comprehensive income
Total comprehensive income allocated to non-controlling interests for the year
CASH FLOWS
Net cash provided by operating activities
Net cash provided by / (used in) investing activities
Distributions paid to non‑controlling interests
Net cash used in financing activities
2014
$000
2013
$000
670
594,584
595,254
11
11
595,243
595,243
38,718
(12)
38,706
(861)
37,845
39,695
1,592
(41,273)
(41,287)
641
598,054
598,695
24
24
598,671
598,671
38,155
(12)
38,143
(1,157)
36,986
40,821
(3,635)
(54,758)
(37,186)
The accounting policies of APTIT are the same as those applied to APA Group.
There are no material guarantees, contingent liabilities or restrictions imposed on APA Group from APTIT’s non‑controlling interests.
60
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 18. JOINT VENTURES AND ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD
The table below lists APA Group’s interest in joint ventures and associates that are reported as part of the Energy Investments segment. APA Group provides asset
management, operation and maintenance services and corporate services, in varying combinations to the majority of energy infrastructure assets housed within
PRINCIPAL ACTIVITY
COUNTRY OF INCORPORATION
2014
2013
OWNERSHIP INTEREST
%
these entities.
NAME OF ENTITY
Joint ventures:
SEA Gas
Gas transmission
Diamantina Power Station
Power generation (gas)
Energy Infrastructure Investments
Unlisted energy vehicle
EII 2
Associates:
GDI (EII)
Envestra Limited (a)
Power generation (wind)
Gas distribution
Gas distribution
Investment in joint ventures and associates
Australia
Australia
Australia
Australia
Australia
Australia
50.00
50.00
19.90
20.20
20.00
33.05
2014
$000
593,325
50.00
50.00
19.90
20.20
20.00
33.05
2013
$000
589,131
(a) Envestra Limited is an ASX listed gas distribution and transmission company, owning approximately 22,000 kms of distribution networks and over 1,000 kms of transmission pipelines.
APA Group owns 33.05% and also has a long term agreement to operate and maintain Envestra’s assets. The fair value of APA Group’s investment in Envestra as at 30 June 2014 is
$807.5m ($590.8m for 30 June 2013) based on quoted market prices. Refer to Note 50 regarding events subsequent to year‑end, relating to APA Group’s investment in Envestra.
Aggregated information in respect of the joint ventures is set out below:
JOINT VENTURES
Aggregate carrying amount of investment
APA Group's aggregated share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
2014
$000
2013
$000
179,820
185,363
11,973
(8,783)
3,190
10,119
8,371
18,490
Summarised financial information for Envestra being APA Group’s only material associate is set out below. The summarised financial information below is prepared
in accordance with AIFRS and represents amounts published in the associate’s financial statements for the year ended 30 June 2014.
FINANCIAL POSITION
Current assets
Non‑current assets
Total assets
Current liabilities
Non‑current liabilities
Total liabilities
Net assets
82,300
86,200
3,306,700
3,150,700
3,389,000
3,236,900
73,300
126,700
2,454,700
2,268,400
2,528,000
861,000
2,395,100
841,800
61
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 18. JOINT VENTURES AND ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
FINANCIAL PERFORMANCE
Revenue
Profit before income tax expense
Net profit after tax
Other comprehensive income
Total comprehensive income
2014
$000
2013
$000
554,400
218,700
153,000
(18,800)
134,200
507,500
153,800
107,800
23,400
131,200
Dividend and summarised financial information relating to the interest in Envestra recognised in the consolidated financial statements is set out below.
ENVESTRA
Dividends received from the associate during the year
Aggregate carrying amount of investment
APA Group's aggregated share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
ASSOCIATES – OTHER
Aggregate carrying amount of investment
APA Group's aggregated share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
38,000
382,926
50,113
825
50,938
31,551
369,989
32,799
6,308
39,107
30,579
33,780
2,204
29
2,233
1,950
(362)
1,588
Contingent liabilities and capital commitments
APA Group’s share of the contingent liabilities, capital commitments and other expenditure commitments of joint operations is disclosed in Note 49 and Note 44
respectively.
19. JOINT OPERATIONS
APA Group is a venturer in the following joint operations:
NAME OF VENTURE
PRINCIPAL ACTIVITY
Goldfields Gas Transmission
Gas pipeline operation – Western Australia
Mid West Pipeline
Gas pipeline operation – Western Australia
(a) On 17 August 2004, APA acquired a direct interest in the Goldfields Gas Transmission joint operations as part of the SCP Gas Business acquisition.
(b) Pursuant to the joint venture agreement, APA Group receives a 70.8% share of operating income and expenses.
OUTPUT INTEREST
2014
%
88.2 (a)
50.0 (b)
2013
%
88.2 (a)
50.0 (b)
62
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 20. PROPERTY, PLANT AND EQUIPMENT
GROSS CARRYING AMOUNT
Balance at 1 July 2012
Additions
Disposals
Derecognised on disposal of subsidiary (Note 43)
Acquisitions through business combinations (Note 42)
Transfers
Balance at 30 June 2013
Additions
Disposals
Transfers
Balance at 30 June 2014
ACCUMULATED DEPRECIATION
Balance at 1 July 2012
Disposals
Derecognised on disposal of subsidiaries (Note 43)
Depreciation expense
Transfers
Balance at 30 June 2013
Disposals
Depreciation expense
Balance at 30 June 2014
NET BOOK VALUE
As at 30 June 2013
As at 30 June 2014
FREEHOLD LAND
AND BUILDINGS
– AT COST
$000
LEASEHOLD
IMPROVEMENTS
– AT COST
$000
PLANT AND
EQUIPMENT
– AT COST
$000
117,595
8,537
(7,573)
(3,648)
16,190
–
131,101
–
(33)
8,366
139,434
2,222
2,717
–
–
–
–
4,939
–
–
76
3,579,033
4,562
(4,597)
(372,380)
1,896,192
216,777
5,319,587
32,129
(6,126)
WORK IN
PROGRESS
– AT COST
$000
325,049
368,231
–
(327)
20,972
(219,571)
TOTAL
$000
4,023,899
384,047
(12,170)
(376,355)
1,933,354
(2,794)
494,354
5,949,981
413,985
–
446,114
(6,159)
–
421,036
(429,478)
5,015
5,766,626
478,861
6,389,936
(17,392)
(1,927)
(532,382)
200
19
(2,376)
473
(19,076)
7
(2,785)
(21,854)
–
–
(233)
–
3,470
3,108
(122,178)
(352)
(2,160)
(648,334)
–
(128)
(2,288)
5,240
(148,219)
(791,313)
–
–
–
–
–
–
–
–
–
(551,701)
3,670
3,127
(124,787)
121
(669,570)
5,247
(151,132)
(815,455)
112,025
117,580
2,779
2,727
4,671,253
4,975,313
494,354
478,861
5,280,411
5,574,481
63
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 21. GOODWILL
GROSS CARRYING AMOUNT
Balance at beginning of financial year
Acquisitions (Note 42)
Disposals (Note 43)
Goodwill impairment
Balance at end of financial year
2014
$000
2013
$000
1,150,500
–
–
–
411,883
765,476
(24,992)
(1,867)
1,150,500
1,150,500
ALLOCATION OF GOODWILL TO CASH-GENERATING UNITS
Goodwill has been allocated for impairment testing purposes to the following individual cash‑generating units:
Individual cash-generating units
– Asset Management business
– Energy Infrastructure:
• New South Wales pipelines;
• Victorian Transmission System;
• South West Queensland Pipeline; and
• Other energy infrastructure.
The carrying amount of goodwill allocated to cash‑generating units that are significant individually or in aggregate is as follows:
Asset Management business
Energy Infrastructure
New South Wales pipelines
Victorian Transmission System
South West Queensland Pipeline
Other energy infrastructure (a)
31,456
31,456
146,008
105,061
707,843
160,132
146,008
105,061
663,268
204,707
1,150,500
1,150,500
(a) Primarily represents goodwill relating to the Roma to Brisbane Pipeline ($76.4m) and the Pilbara Pipeline System ($32.6m).
During the period, APA completed the purchase price accounting exercise for
For non‑regulated assets, APA has assumed no capacity expansion beyond
the acquisition of HDF in accordance with the requirements of AASB 3 ‘Business
installed and committed levels; utilisation of capacity is based on existing
Combinations’. The total fair value of other assets and liabilities acquired
contracts, government policy settings and expected market outcomes.
remain unchanged from their provisionally determined carrying values
reported at 30 June 2013.
The recoverable amounts of cash‑generating units are determined based on
value‑in‑use calculations. These calculations use cash flow projections based
on a five year financial business plan and thereafter a further 15 year financial
model. This is the basis of the Group’s forecasting and planning processes
As contracts mature, given ongoing demand for capacity, it is assumed that
capacity is resold.
Asset management cash flow projections reflect long term agreements with
assumptions of renewal on similar terms and conditions based on management
expectations.
which represents the underlying long term nature of associated customer
Cash flow projections are estimated for a period of up to 20 years, with a
contracts on these assets.
For fully regulated assets, cash flows have been extrapolated on the basis of
existing transportation contracts and government policy settings, and expected
terminal value, recognising the long term nature of the assets. The pre‑tax
discount rates used are 8.25% p.a. (2013: 8.25% p.a.) for energy infrastructure
assets and 8.25% p.a. (2013: 8.25% p.a.) for asset management.
contract renewals with a resulting average annual growth rate of 1.9% p.a.
These assumptions have been determined with reference to historic
These expected cash flows are factored into the regulated asset base and do
information, current performance and expected changes taking into account
not exceed management’s expectations of the long‑term average growth rate
external information.
for the market in which the cash generating unit operates.
64
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 22. OTHER INTANGIBLE ASSETS
CONTRACT AND OTHER INTANGIBLES
Gross carrying amount
Balance at beginning of financial year
Acquisitions / additions
Impairment
Balance at end of financial year
Accumulated amortisation and impairment
Balance at beginning of financial year
Amortisation expense
Balance at end of financial year
Net book value
2014
$000
2013
$000
206,061
677
(1,792)
204,946
(29,046)
(5,096)
(34,142)
170,804
207,031
1,105
(2,075)
206,061
(23,372)
(5,674)
(29,046)
177,015
APA Group holds various third party operating and maintenance contracts. The combined gross carrying amount of $204.9 million amortises over terms ranging
from one to 60 years. Useful life is determined based on the underlying contractual terms plus estimations of renewal of up to two terms where considered
probable by management. Amortisation expense is included in the line item of depreciation and amortisation expense in the statement of profit or loss and other
comprehensive income.
23. OTHER NON-CURRENT ASSETS
Line pack gas
Gas held in storage
Other assets
24. TRADE AND OTHER PAYABLES
CURRENT
Trade payables (a)
Other payables (b)
NON-CURRENT
Other payables
(a) Trade payables are non‑interest bearing and are normally settled on 15 – 30 day terms.
(b) Predominantly consists of capital expenditure accruals and external interest payable accruals.
25. CURRENT BORROWINGS
UNSECURED – AT AMORTISED COST
Guaranteed Senior Notes (a)
16,152
5,085
192
21,429
27,037
158,951
185,988
3,599
3,599
10,922
5,085
2,625
18,632
28,427
161,635
190,062
3,749
3,749
–
80,910
(a) Represented USD denominated private placement notes of US$74 million measured at the exchange rate at reporting date which matured 9 September 2013.
65
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014
26. OTHER CURRENT FINANCIAL LIABILITIES
Derivatives
Derivatives that are designated and effective as hedging instruments carried at fair value:
Forward foreign exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Cross currency interest rate swaps – cash flow hedges
27. PROVISIONS
CURRENT
Employee benefits (a)
Other (Note 36)
NON-CURRENT
Employee benefits (a)
Other (Note 36)
(a) The aggregate employee benefit liability recognised and included in the financial statements is as follows:
CURRENT
Incentives
Cash settled security‑based payments
Leave balances
Termination benefits
NON-CURRENT
Cash settled security‑based payments
Retirement benefit obligation (Note 37)
Leave balances
28. OTHER LIABILITIES
CURRENT
Unearned revenue – other
NON-CURRENT
Unearned revenue – other
66
2014
$000
1,246
17,712
71,616
90,574
2014
$000
73,899
7,104
81,003
38,833
8,609
47,442
25,217
9,263
37,310
2,109
73,899
15,818
14,426
8,589
38,833
2014
$000
15,975
15,975
15,438
15,438
2013
$000
–
22,500
103,885
126,385
2013
(RESTATED)
$000
71,098
10,845
81,943
42,995
4,935
47,930
23,042
8,193
38,030
1,833
71,098
15,215
20,749
7,031
42,995
2013
$000
12,921
12,921
16,669
16,669
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014
29. NON-CURRENT BORROWINGS
UNSECURED – AT AMORTISED COST
Bank borrowings (a)
Guaranteed Senior Notes (b)
Subordinated Notes (c)
Less: unamortised borrowing costs
2014
$000
2013
$000
1,014,500
3,214,082
515,000
(35,299)
525,000
3,227,340
515,000
(34,098)
4,708,283
4,233,242
(a) Relates to the non‑current portion of long‑term borrowings. Refer to Note 40 for details of interest rates and maturity profiles.
(b) Represents USD denominated private placement notes of US$725 million, CAD MTN of C$300 million, GBP MTN of £350 million, JPY MTN of ¥10,000 million and USD denominated 144a
notes of US$750 million measured at the exchange rate at reporting date, and A$314.9 million of AUD denominated private placement notes and AUD medium term notes (MTN) of
A$300 million. Refer to Note 40 for details of interest rates and maturity profiles.
(c) Represents AUD denominated subordinated notes. Refer to Note 40 for details of interest rates and maturity profiles.
30. OTHER NON-CURRENT FINANCIAL LIABILITIES
Derivatives
Derivatives that are designated and effective as hedging instruments carried at fair value:
Interest rate swaps – cash flow hedges
Cross currency interest rate swaps – cash flow hedges
17,377
199,559
216,936
29,512
147,744
177,256
31. ISSUED CAPITAL
Securities
835,750,807 securities, fully paid (2013: 835,750,807 securities, fully paid) (a)
1,816,460
1,820,516
Movements
Balance at beginning of financial year
835,751
1,820,516
Issue of securities under Distribution Reinvestment Plan
Issue of securities in business combination
Capital return to securityholders (Note 10)
Issue cost of securities
Tax relating to security issue costs
Balance at end of financial year
(a) Fully paid securities carry one vote per security and carry the right to distributions.
2014
NO. OF
SECURITIES
000
2014
$000
2013
NO. OF
SECURITIES
000
–
–
–
–
–
–
–
(4,056)
–
–
644,486
15,548
175,717
–
–
–
2013
$000
1,138,205
63,503
672,630
(47,182)
(6,672)
32
835,751
1,816,460
835,751
1,820,516
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to issued capital from 1 July 1998. Therefore, the Trust
does not have a limited amount of authorised capital and issued securities do not have a par value.
67
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014
32. RESERVES
Hedging
Asset revaluation
Available‑for‑sale investment revaluation
HEDGING RESERVE
Balance at beginning of financial year
Gain/(loss) recognised:
Interest rate swaps/currency swaps
Deferred tax related to gains/losses recognised
Transferred to profit or loss:
Interest rate swaps/currency swaps
Deferred tax related to amounts transferred to profit or loss
Share of hedge reserve of associate
Deferred tax related to share of hedge reserve
Balance at end of financial year
2014
$000
2013
$000
(125,275)
(62,475)
8,669
363
8,669
1,736
(116,243)
(52,070)
(62,475)
(35,212)
(154,309)
(144,702)
46,293
43,411
72,522
(21,757)
(7,928)
2,379
(125,275)
91,438
(27,431)
14,316
(4,295)
(62,475)
The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the
hedge is recognised in profit or loss when the hedged transaction impacts profit or loss, or is included as a basis adjustment to the non‑financial hedge item,
consistent with the applicable accounting policy.
ASSET REVALUATION RESERVE
Balance at beginning of financial year
Balance at end of financial year
8,669
8,669
8,669
8,669
The asset revaluation reserve arose on the revaluation of the existing interest in a pipeline as a result of a business combination. Where revalued pipelines are sold,
the portion of the asset revaluation reserve which relates to that asset is effectively realised and is transferred directly to retained earnings. The reserve can be
used to pay distributions only in limited circumstances.
AVAILABLE-FOR-SALE INVESTMENT REVALUATION RESERVE
Balance at beginning of financial year
Revaluation (loss)/gain recognised
Gain transferred to profit or loss
Deferred tax related to gains/losses recognised
Balance at end of financial year
1,736
(1,962)
–
589
363
82,696
26,676
(142,333)
34,697
1,736
The available‑for‑sale investment revaluation reserve arises on the revaluation of available‑for‑sale financial assets. Where a revalued financial asset is sold, the
portion of the reserve which relates to that financial asset is effectively realised and is recognised in profit or loss. Where a revalued financial asset is impaired, that
portion of the reserve which relates to that financial asset is recognised in profit or loss.
OTHER RESERVES
Balance at beginning of financial year
Acquisition of non‑controlling interest
Transfer to retained earnings
Balance at end of financial year
–
–
–
–
–
(2,765)
2,765
–
The other reserves balance arose on acquiring the remaining interest in the Hastings Diversified Utilities Fund following control being obtained on 9 October 2013.
The balance of the reserve was transferred to retained earnings on completion of the acquisition.
68
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014
33. RETAINED EARNINGS
Balance at beginning of financial year
Net profit attributable to securityholders
Distributions paid (Note 10)
Transfer from reserves on acquisition of non‑controlling interest in HDF
Actuarial gain on defined benefit plans recognised directly to retained earnings after tax
34. NON-CONTROLLING INTERESTS
APT Investment Trust
Other non‑controlling interest
APT INVESTMENT TRUST
Balance at beginning of financial year
Issue of securities under distribution reinvestment plan
Issue of securities under security purchase plan
Distribution – capital return (Note 10)
Issue cost of securities
Tax relating to security issue costs
Balance at end of financial year
Reserves:
Available for sale investment revaluation reserve:
Balance at beginning of financial year
Valuation loss recognised
Retained earnings:
Balance at beginning of financial year
Net profit attributable to APTIT equityholders
Distributions paid (Note 10)
Balance at end of financial year
OTHER NON-CONTROLLING INTEREST
Issued capital
Reserves
Retained earnings
2014
$000
146,762
304,999
(255,540)
–
4,757
200,978
2014
$000
595,243
51
595,294
578,780
–
–
(2,608)
–
–
2013
(RESTATED)
$000
34,710
257,003
(154,716)
(2,765)
12,530
146,762
2013
$000
598,671
50
598,721
364,066
19,663
–
(14,879)
(2,105)
–
576,172
578,780
467
(861)
(394)
19,424
38,706
(38,665)
19,465
4
1
46
51
1,624
(1,157)
467
21,160
38,143
(39,879)
19,424
4
1
45
50
69
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014
35. LEASES
Leasing arrangements – receivables
Finance lease receivables relate to the lease of a metering station, natural gas vehicle facilities, X41 power station expansion and two pipeline laterals.
FINANCE LEASE RECEIVABLES
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Minimum future lease payments receivable (a)
Gross finance lease receivables
Less: unearned finance lease receivables
Present value of lease receivables
Included in the financial statements as part of:
Current trade and other receivables (Note 11)
Non‑current receivables (Note 15)
(a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual.
NON-CANCELLABLE OPERATING LEASES – OTHER
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
2014
$000
2013
$000
7,668
20,724
26,181
54,573
54,573
(20,251)
34,322
4,575
29,747
34,322
9,927
21,776
22,808
54,511
8,336
24,249
30,324
62,909
62,909
(23,847)
39,062
4,744
34,318
39,062
9,120
23,200
25,066
57,386
70
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014
36. OTHER PROVISIONS
Balance at 30 June 2013
Additional provisions recognised
Unwinding of discount
Reductions arising from payments/other sacrifices of future economic benefits
Reductions resulting from re‑measurement or settlement without cost
Balance at 30 June 2014
Current (Note 27)
Non‑current (Note 27)
Balance at 30 June 2012
Additional provisions recognised
Unwinding of discount
Reductions arising from payments/other sacrifices of future economic benefits
Reductions resulting from re‑measurement or settlement without cost
Balance at 30 June 2013
Current (Note 27)
Non‑current (Note 27)
ABANDONMENT
$000
(a)
(b)
OTHER
$000
4,935
1,258
596
–
–
6,789
–
6,789
6,789
10,845
7,505
–
(5,097)
(4,329)
8,924
7,104
1,820
8,924
ABANDONMENT
$000
(a)
(b)
OTHER
$000
4,354
294
287
–
–
4,935
–
4,935
4,935
12,395
2,905
–
(2,455)
(2,000)
10,845
10,845
–
10,845
TOTAL
$000
15,780
8,763
596
(5,097)
(4,329)
15,713
7,104
8,609
15,713
TOTAL
$000
16,749
3,199
287
(2,455)
(2,000)
15,780
10,845
4,935
15,780
(a) Costs of dismantling pipelines and restoring the sites on which the pipelines are located, and costs of dismantling leasehold improvements and restoring leased premises are to be
included in the cost of the assets at inception and required to be accounted for in accordance with AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’.
(b) Includes pipeline rectification works.
71
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 37. EMPLOYEE SUPERANNUATION PLANS
All employees of APA Group are entitled to benefits on retirement, disability or
The most recent actuarial valuations of plan assets and the present value of the
death from an industry sponsored fund, or an alternative fund of their choice.
defined benefit obligation were carried out at 30 June 2014 by Mercer
APA Group has three plans with defined benefit sections (due to the acquisition
(Australia) Pty Ltd and Russell Investments (2013: Mercer (Australia) Pty Ltd
of businesses) and a number of other plans with defined contribution sections.
and Russell Investments). The present value of the defined benefit obligation,
The defined benefit sections provide lump sum benefits upon retirement based
and the related current service cost and past service cost, were measured using
on years of service. The defined contribution sections receive fixed contributions
the projected unit credit method.
from APA Group and APA Group’s legal and constructive obligations are limited
to these amounts.
The following sets out details in respect of the defined benefit plans only:
AMOUNTS RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Current service cost
Net interest expense
Components of defined benefit costs recognised in profit or loss
Remeasurement on the net defined benefit liability:
2014
$000
3,901
567
4,468
2013
(RESTATED)
$000
4,246
882
5,128
Return on plan assets (excluding amounts included in net interest expense)
(10,870)
(14,306)
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Actuarial gains and losses arising from experience adjustments
Components of defined benefit costs recognised in other comprehensive income
Total recognised in the statement of profit or loss and other comprehensive income
AMOUNTS RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION
Fair value of plan assets
Present value of benefit obligation
Net liability – non-current (Note 27)
MOVEMENTS IN LIABILITY DURING THE YEAR
Balance at beginning of year
Expense recognised in profit or loss
Amount recognised in retained earnings (prior to tax effect)
Contributions from employer
Balance at end of year (a)
(a) The above balances are recorded within the provisions section of the statement of financial position; refer to Note 27.
Movements in the present value of the defined benefit obligations in the current period were as follows:
Opening defined benefit obligation
Current service cost
Interest cost
Contributions from plan participants
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Actuarial gains and losses arising from experience adjustments
Benefits paid
Taxes and premiums paid
Closing defined benefit obligation
72
(96)
(878)
5,048
(6,796)
(2,328)
130,195
(144,621)
(14,426)
(20,749)
(4,468)
6,796
3,995
–
(8,171)
4,576
(17,901)
(12,773)
118,404
(139,153)
(20,749)
(38,545)
(5,128)
17,901
5,023
(14,426)
(20,749)
139,153
139,203
3,901
4,520
1,627
(96)
(878)
5,048
(7,891)
(763)
144,621
4,246
3,644
1,442
–
(8,171)
4,576
(4,786)
(1,001)
139,153
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 37. EMPLOYEE SUPERANNUATION PLANS (CONTINUED)
Movements in the present value of the plan assets in the current period were as follows:
Opening fair value of plan assets
Interest income
Actual return on plan assets excluding interest income
Contributions from employer
Contributions from plan participants
Benefits paid
Taxes and premiums paid
Closing fair value of plan assets
2014
$000
2013
(RESTATED)
$000
118,404
100,658
3,953
10,870
3,995
1,627
(7,891)
(763)
130,195
2,762
14,306
5,023
1,442
(4,786)
(1,001)
118,404
The average principal actuarial assumptions used in determining post‑employment obligations for APA Group’s plans are shown below (expressed as weighted
averages):
Discount rate (p.a.)
Expected salary rate increase (p.a.)
The invested defined benefit assets were held in the following classes:
Australian equities
International equities
Fixed income
Property
Alternatives
Cash
2014
%
3.5
4.0
29.9
25.0
10.6
8.2
18.4
7.9
2013
%
3.3
4.0
29.1
29.9
11.8
8.2
15.7
5.2
Significant actuarial assumptions used in the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analysis below
has been determined based on reasonable possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other
assumptions constant.
– If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by $5,873,000 (increase by $6,675,000)
– If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $3,651,000 (decrease by $3,326,000)
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in
assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit
method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the statement of
financial position.
APA Group expects $2.2 million in contributions to be paid to the defined benefit plans during the year ending 30 June 2015.
73
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014
38. EARNINGS PER SECURITY
Basic and diluted earnings per security (cents)
2014
41.1
2013
(RESTATED)
38.2
The earnings and weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security are as follows:
Net profit attributable to securityholders for calculating basic and diluted earnings per security ($000)
343,705
295,146
Adjusted weighted average number of ordinary securities used in the calculation of basic and diluted
earnings per security (000)
NO. OF SECURITIES
2014
835,751
2013
772,314
39. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments, net
of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows is reconciled to the related items
in the statement of financial position as follows:
Cash at bank and on hand (a)
Short‑term deposits
2014
$000
5,954
1,055
7,009
2013
$000
79,931
1,024
80,955
APA Group had no restricted cash as at 30 June 2014.
(a) Australian Pipeline Limited held nil cash on deposit as at 30 June 2014 ($5.0 million for 30 June 2013). To meet its financial requirements as the holder of an Australian Financial Services
Licence, cash on deposit was replaced with a bank guarantee during the current reporting period.
(b) Investments acquired and disposed of
Equity accounted investments
There has no been no change in the holding of APA Group’s equity accounted investments for the financial year ended 30 June 2014. In the prior financial year,
$31.6 million was invested in Envestra through the Dividend Reinvestment Plan and an additional amount of $33.9 million was invested in Envestra through a share
placement.
74
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 39. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)
(c) Reconciliation of profit for the year to the net cash provided by operating activities
Profit for the year
Gain on previously held interest in HDF on obtaining control
Acquisition costs on business combinations
Write back of transaction costs on sale of Allgas Distribution Network
Loss on disposal of property, plant and equipment
Impairment of goodwill
Share of net profits of jointly controlled entities accounted for
using the equity method
Dividends/distributions received from equity accounted investments
Depreciation and amortisation expense
Finance costs
Changes in assets and liabilities:
Trade and other receivables
Inventories
Other assets
Trade and other payables
Provisions
Other liabilities
Income tax balances
Net cash provided by operating activities
(d) Financing facilities
UNSECURED FACILITIES
Bank borrowings (a)
Amounts used
Amounts unused
Guaranteed Senior Notes (b)
Amounts used
Amounts unused
Subordinated Notes (c)
Amounts used
Amounts unused
2014
$000
343,706
–
–
–
115
–
2013
(RESTATED)
$000
292,382
(142,333)
12,408
(18,483)
480
1,867
(64,289)
(44,868)
61,418
156,228
11,142
5,948
(4,623)
4,291
5,962
885
(11,558)
(77,684)
431,541
48,452
130,461
1,481
4,248
706
(1,605)
(5,407)
12,093
30,068
52,431
374,381
2014
$000
2013
$000
1,014,500
835,500
1,850,000
525,000
891,667
1,416,667
3,214,082
3,308,250
–
–
3,214,082
3,308,250
515,000
515,000
–
–
515,000
515,000
(a) Relates to the non‑current portion of long‑term borrowings. Refer to Note 40 for details of interest rates and maturity profiles.
(b) Represents USD denominated private placement notes of US$725 million, CAD MTN of C$300 million, GBP MTN of £350 million, JPY MTN of ¥10,000 million and USD denominated 144a
notes of US$750 million measured at the exchange rate at reporting date, and A$314.9 million of AUD denominated private placement notes and AUD medium term notes (MTN) of
A$300 million. Refer to Note 40 for details of interest rates and maturity profiles.
(c) Represents AUD denominated subordinated notes. Refer to Note 40 for details of interest rates and maturity profiles.
75
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 40. FINANCIAL INSTRUMENTS
(a) Capital risk management
APA Group seeks to minimise the effects of these risks through natural hedges
APA Group manages its capital structure to ensure that entities in the group
and by using derivative instruments to directly hedge the exposures. The use of
will be able to continue as a going concern while maximising the return to
financial derivatives is governed by APA Group’s Board approved Treasury Risk
security holders through the optimisation of the debt to equity structure.
Management Policy, which provides written principles on foreign exchange
APA Group’s overall capital management strategy is to continue to target
strong BBB/Baa2 investment grade ratings through maintaining sufficient
flexibility to fund organic growth and investment from internally generated and
retained cash flows, equity and, where appropriate, additional debt funding.
The capital structure of the APA Group consists of debt, which includes
borrowings disclosed in Notes 25 and 29, cash and cash equivalents, and equity
attributable to equity holders of the parent, comprising issued capital, reserves
risk, interest rate risk, credit risk, the use of financial derivatives and non‑
derivative financial instruments, and the investment of excess liquidity. APA
Group does not enter into or trade financial instruments, including derivative
financial instruments, for speculative purposes.
The Corporate Treasury function reports monthly to APA Group’s Board of
Directors, which monitors risks and policies implemented to mitigate risk
exposures.
and retained earnings as disclosed in Notes 31, 32 and 33 respectively.
(c) Market risk management
The APA Group’s operations are conducted primarily through its subsidiaries.
APA Group’s market risk exposure is primarily to the financial risk of changes in
interest rates and foreign currency exchange rates. The APA Group enters into
Operating cash flows are used to maintain and expand APA Group’s assets, as
a variety of derivative financial instruments to manage its exposure to interest
well as to make distributions to security holders and to repay maturing debt.
rate and foreign currency risk, including:
APA Group’s policy is to borrow locally and from overseas, using a variety of
– foreign exchange forward contracts to hedge the exchange rate risk arising
capital markets and bank loan facilities, to meet anticipated funding requirements.
on the importation of equipment from a range of international suppliers;
Controlled entities are subject to externally imposed capital requirements.
These relate to the Australian Financial Services Licence held by Australian
Pipeline Limited, the Responsible Entity of the APA Group and were adhered to
– currency swaps to manage the foreign currency risk associated with foreign
currency denominated borrowings; and
– interest rate swaps to mitigate the risk of rising interest rates.
for the entirety of the 2014 and 2013 periods.
There has been no change from the previous period to the nature of APA
APA Group’s capital risk management strategy remains unchanged from the
previous period.
Gearing ratio
APA Group’s Board of Directors reviews the capital structure on a regular basis.
As part of the review, the Board considers the cost of capital and the state of
the markets. APA Group targets gearing in a range of 65% to 68%. Gearing is
Group’s exposure to market risks or the manner in which it manages and
measures the risks.
APA Group is also exposed to price risk arising from its investments in and
forward purchase contracts over listed equities. The majority of this exposure
arises from APA Group’s investment in Ethane Pipeline Income Fund which is
publicly traded on the Australian Securities Exchange (ASX).
determined as the proportion of net debt to net debt plus equity. Based on
(d) Foreign currency risk management
recommendations of the Board, APA Group balances its overall capital structure
APA Group undertakes certain transactions denominated in foreign currencies
through new equity issues, through the issue of new debt or the redemption of
and hence exposures to exchange rate fluctuations arise. Exchange rate
existing debt and through a disciplined distribution payment policy.
exposures are managed within approved policy parameters utilising foreign
(b) Financial risk management objectives
APA’s Corporate Treasury function provides services to the business, co‑
ordinates access to domestic and international financial markets, and monitors
and manages the financial risks relating to the operations of the group. These
risks include market risk (including currency risk, interest rate risk and price
risk), credit risk and liquidity risk.
exchange contracts, including forward contracts and cross currency swap
contracts. All foreign currency exposure was managed in accordance with the
Treasury Risk Management Policy in both 2013 and 2014.
76
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 40. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Foreign currency risk management (continued)
The carrying amount of the APA Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:
US dollar borrowings
Cross currency swaps
Japanese yen borrowings
Cross currency swaps
Canadian dollar borrowings
Cross currency swaps
British pound borrowings
Cross currency swaps
Foreign exchange contracts
LIABILITIES
ASSETS
2014
$000
2013
$000
2014
$000
2013
$000
1,564,655
1,693,637
(1,564,655)
(1,693,637)
104,681
(104,681)
298,378
(298,378)
635,268
(635,268)
–
(1,246)
110,203
(110,203)
311,947
(311,947)
581,866
(581,866)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,788
Forward foreign exchange contracts
It is the policy of APA Group to enter into various foreign exchange contracts to cover 100% of all foreign currency exposures in excess of US$1 million that are
certain. Basis adjustments are made to the carrying amounts of non‑financial hedged items when the anticipated purchase takes place.
The following table details the forward foreign currency contracts outstanding at reporting date:
OUTSTANDING CONTRACTS
2014
Buy US dollars
Less than 3 months
3 to 6 months
6 to 12 months
2013
Buy US dollars
Less than 3 months
3 to 6 months
6 to 12 months
AVERAGE
EXCHANGE
RATE
FOREIGN
CURRENCY
2014
US$000
CONTRACT
VALUE
2014
$000
FAIR VALUE
2014
$000
0.8704
0.8808
0.8981
0.9966
1.0155
0.9500
14,133
1,334
204
15,671
12,910
2,990
3,585
19,485
16,238
1,515
227
17,980
12,954
2,944
3,774
19,672
(1,152)
(86)
(8)
(1,246)
1,222
358
208
1,788
APA Group has entered into contracts to purchase equipment in foreign
Cross currency swap contracts
currencies from overseas suppliers. APA Group has entered into forward
Under cross currency swap contracts, APA Group agrees to exchange specified
foreign exchange contracts to hedge the exchange rate risk arising from these
principal and interest foreign currency amounts at agreed future dates at a
anticipated future transactions, which are designated as cash flow hedges.
specified exchange rate. Such contracts enable APA Group to mitigate the risk
As at reporting date, the aggregate amount of unrealised loss under forward
foreign exchange contracts deferred in the hedging reserve relating to these
anticipated future transactions is $1.2 million (2013: unrealised gain of $1.8
million). It is anticipated that the capital purchases will take place within the
of adverse movements in foreign exchange rates in relation to principal and
interest payments arising under the 2003, 2007, 2009 and 2012 US dollar note
issues, the 2012 Japanese yen, the 2012 Canadian dollar and the 2012 British
pound medium term note issues.
next financial year at which stage unrealised mark‑to‑market amounts in equity
APA Group receives fixed amounts in the various foreign currencies and pays
will be included in the carrying amount of the asset being purchased.
both variable interest rates (based on Australian BBSW) and fixed interest rates
based on agreed interest rate swap rates.
77
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 40. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Foreign currency risk management (continued)
Cross currency swap contracts (continued)
The following table details the swap contracts principal and interest payments over various durations as at the reporting date:
EXCHANGE RATE
AMOUNT
2014
$
2013
$
2014
$000
2013
$000
2003 USPP NOTE ISSUE
Buy US dollars – interest
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
Buy US dollars – principal
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
2007 USPP NOTE ISSUE
Buy US dollars – interest
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
Buy US dollars – principal
2 years to 5 years
5 years and more
2009 USPP NOTE ISSUE
Buy US dollars – interest
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
Buy US dollars – principal
2 years to 5 years
5 years and more
78
0.6573
0.6573
0.6573
–
0.6573
0.6573
0.6573
–
0.8068
0.8068
0.8068
0.8068
0.8068
0.8068
0.7576
0.7576
0.7576
0.7576
0.7576
0.7576
0.6573
0.6573
0.6573
0.6573
0.6573
0.6573
0.6573
0.6573
0.8068
0.8068
0.8068
0.8068
0.8068
0.8068
0.7576
0.7576
0.7576
0.7576
0.7576
0.7576
(16,480)
(11,125)
(14,425)
–
(42,030)
(19,671)
(16,480)
(22,665)
(2,885)
(61,701)
–
(112,582)
(185,608)
(95,847)
–
(281,455)
(29,737)
(29,737)
(66,726)
(28,310)
(154,510)
(342,092)
(153,694)
(495,786)
(15,934)
(15,934)
(29,894)
(4,385)
(66,147)
(85,787)
(98,997)
(184,784)
–
(185,608)
(95,847)
(394,037)
(29,737)
(29,737)
(77,969)
(46,805)
(184,248)
(190,878)
(304,908)
(495,786)
(15,934)
(15,934)
(37,057)
(13,156)
(82,081)
(85,787)
(98,997)
(184,784)
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 40. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Foreign currency risk management (continued)
Cross currency swap contracts (continued)
2012 JPY MTN ISSUE
Buy Japanese yen – interest
Less than 1 year
1 year to 2 years
2 years to 5 years
Buy Japanese yen – principal
2 years to 5 years
2012 CAD MTN ISSUE
Buy Canadian dollars – interest
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
Buy Canadian dollars – principal
5 years and more
2012 US144A ISSUE
Buy US dollars – interest
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
Buy US dollars – principal
5 years and more
2012 GBP MTN ISSUE
Buy British pounds – interest
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
Buy British pounds – principal
5 years and more
EXCHANGE RATE
AMOUNT
2014
$
2013
$
2014
$000
2013
$000
79.4502
79.4502
79.4502
79.4502
79.4502
79.4502
(1,543)
(1,543)
(3,086)
(6,172)
(1,543)
(1,543)
(4,629)
(7,715)
79.4502
79.4502
(125,865)
(125,865)
1.0363
1.0363
1.0363
1.0363
1.0363
1.0363
1.0363
1.0363
(12,289)
(12,289)
(36,867)
(6,145)
(67,590)
(12,289)
(12,289)
(36,867)
(18,434)
(79,879)
1.0363
1.0363
(289,494)
(289,494)
1.0198
1.0198
1.0198
1.0198
1.0198
1.0198
1.0198
1.0198
(28,498)
(28,498)
(85,495)
(99,744)
(242,235)
(28,498)
(28,498)
(85,495)
(128,242)
(270,733)
1.0198
1.0198
(735,438)
(735,438)
0.6530
0.6530
0.6530
0.6530
0.6530
0.6530
0.6530
0.6530
(22,779)
(22,779)
(68,338)
(136,677)
(250,573)
(22,779)
(22,779)
(68,338)
(159,456)
(273,352)
0.6530
0.6530
(535,988)
(535,988)
79
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 40. FINANCIAL INSTRUMENTS (CONTINUED)
(d) Foreign currency risk management (continued)
Foreign currency sensitivity analysis
APA Group is exposed to movements in the USD, JPY, CAD and GBP through its fully hedged borrowings from global debt capital markets and its current
obligations to future purchases of capital equipment. The entire foreign currency cash flows arising from the USPP, US144a and MTN issues have been swapped;
as such, APA Group has no currency risk associated with those note issues. Therefore, the sensitivity analysis has only been performed on the forward foreign
exchange contracts. The following table details APA Group’s sensitivity to a 10% decrease and increase in the Australian dollar against the relevant foreign
currencies. The sensitivity rate used is 10% and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis
includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.
A$ depreciating by 10%
Profit
Other equity (a)
A$ appreciating by 10%
Profit
Other equity (a)
2014
$000
–
(1,846)
–
1,510
2013
$000
–
(2,365)
–
1,935
(a) This is as a result of the changes to the fair value of forward foreign exchange contracts designated as cash flow hedges. Negative amounts denote a credit to equity.
(e) Interest rate risk management
APA Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. This risk is managed by APA Group by maintaining an
appropriate mix between fixed and floating rate borrowings, through the use of interest rate swap contracts. Hedging activities are evaluated regularly to align
with interest rate views and defined policy, ensuring appropriate hedging strategies are applied. Hedging activity is complemented by “natural hedges” from
regulatory resets and CPI adjusted revenues.
APA Group’s exposures to interest rate risk on financial liabilities are detailed in the liquidity risk management section of this note. Exposure to financial assets is
limited to cash and cash equivalents amounting to $7.0 million as at 30 June 2014 (2013: $80.6 million).
Interest rate swap contracts
Under interest rate swap contracts, APA Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional
principal amounts. Such contracts enable APA Group to mitigate the risk of cash flow exposures on the issued variable rate debt held. The fair value of interest
rate swaps at the reporting date is determined by discounting the future cash flows using the yield curves at reporting date. The average interest rate is based on
the outstanding balances at the end of the financial year.
The following table details the notional principal amounts and remaining terms of the cross currency and interest rate swap contracts outstanding as at the end
of the financial year:
WEIGHTED AVERAGE
INTEREST RATE
NOTIONAL
PRINCIPAL AMOUNT
FAIR VALUE
2014
% P.A.
2013
% P.A.
2014
$000
2013
$000
2014
$000
2013
$000
CASH FLOW HEDGES
Pay fixed AUD interest – receive floating AUD or fixed/floating foreign currency
Less than 1 year
1 year to 2 years
2 years to 5 years
5 years and more
5.90
7.10
7.75
7.24
7.03
5.90
7.62
7.24
100,000
310,608
649,591
1,813,611
2,873,810
187,582
100,000
713,137
2,060,672
3,061,391
(1,852)
(66,627)
(130,564)
(16,621)
(215,664)
(34,411)
(4,804)
(128,246)
13,426
(154,035)
APA Group had no fair value hedges in 2013 or 2014.
The interest rate swaps settle on a quarterly or semi‑annual basis. The floating rate benchmark on the interest rate swaps is Australian BBSW. APA Group will settle
the difference between the fixed and floating interest rate on a net basis.
All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce
APA Group’s cash flow exposure resulting from variable interest rates on borrowings.
80
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014
40. FINANCIAL INSTRUMENTS (CONTINUED)
(e) Interest rate risk management (continued)
Interest rate sensitivity analysis
(g) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual
The sensitivity analysis below has been determined based on the exposure to
obligations resulting in financial loss to APA Group. APA Group has adopted
interest rates for both derivative and non‑derivative instruments held. A 100
the policy of only dealing with creditworthy counterparties and obtaining
basis point increase or decrease is used and represents management’s
sufficient collateral or bank guarantees where appropriate as a means of
assessment of the greatest possible change in interest rates. At reporting date,
mitigating any risk of loss. For financial investments or market risk hedging,
if interest rates had been 100 basis points higher or lower and all other variables
APA Group’s policy is to deal with highly rated counterparties. As at the
were held constant, APA Group’s:
– net profit would decrease by $13,045,000 or increase by $13,045,000
(2013: decrease by $7,400,000 or increase by $7,400,000). This is mainly
attributable to APA Group’s exposure to interest rates on its variable rate
borrowings, including its Australian Dollar subordinated notes; and
reporting date, all counterparties of this type were A‑ (Standard & Poor’s)/A3
(Moody’s) or higher. APA Group’s exposure to financial instrument and deposit
credit risk is closely monitored against counterparty credit limits imposed by
the Treasury Risk Management Policy approved by the Board. These limits are
regularly reviewed by the Board.
– equity reserves would increase by $6,923,000 with a 100 basis point
Trade receivables consist of mainly corporate customers which are diverse and
decrease in interest rates or decrease by $6,386,000 with a 100 basis point
geographically spread. Most significant customers have an investment grade
increase in interest rates (2013 : increase by $13,360,000 or decrease by
rating from either Standard & Poor’s or Moody’s. Ongoing credit monitoring of
$10,971,000 respectively). This is due to the changes in the fair value of
the financial position of customers is maintained.
derivative interest instruments.
The carrying amount of financial assets recorded in the financial statements,
APA Group’s profit sensitivity to interest rates has increased during the current
net of any allowances, represents APA Group’s maximum exposure to credit
period due to the overall increase in the level of APA Group’s unhedged floating
risk in relation to those assets.
rate borrowings. The valuation of the increase/decrease in equity reserves is
based on 1.00% p.a. increase/decrease in the yield curve at the reporting date.
The decrease in sensitivity in equity is due to a decrease in the notional value
of interest rate swaps.
(f) Price risk management
Cross guarantee
In accordance with a deed of cross guarantee, APT Pipelines Limited, a
subsidiary of APA Group, has agreed to provide financial support, when and as
required, to all wholly‑owned controlled entities with either a deficit in
shareholders’ funds or an excess of current liabilities over current assets. The
APA Group is exposed to price risk arising from its investments in and forward
fair value of the financial guarantee as at 30 June 2014 has been determined to
purchase contracts over listed equities. The investments and forward purchase
be immaterial and no liability has been recorded (2013: $nil).
contracts are held to meet strategic or hedging objectives rather than for
trading purposes. APA Group does not actively trade any of these holdings.
Equity price sensitivity
(h) Liquidity risk management
APA Group has a policy dealing with liquidity risk which requires an appropriate
liquidity risk management framework for the management of APA Group’s
The sensitivity analysis below has been determined based on the exposure to
short, medium and long‑term funding and liquidity management requirements.
equity price risks at the reporting date. At the reporting date, if the prices of
Liquidity risk is managed by maintaining adequate cash reserves and banking
APA Group’s equity investments had been 5% p.a. higher or lower:
facilities, by monitoring and forecasting cash flow and where possible arranging
liabilities with longer maturities to more closely match the underlying assets of
APA Group.
– net profit would have been unaffected as the equity investments are
classified as available‑for‑sale and no investments were disposed of or
impaired, there is also nil effect from the forwards as the corresponding
exposure will offset in full (2013: $nil); and
– equity reserves would decrease/increase by $96,000 (2013: $219,000), due
to the changes in the fair value of available‑for‑sale shares.
APA Group’s analysis of its exposure to equity prices has established that,
overall, its sensitivity declined during the current period compared to the prior
period. This outcome is largely a result of the decrease in the security price of
Ethane Pipeline Income Trust.
81
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 2014
$000
2013
$000
1,014,500
835,500
1,850,000
525,000
891,667
1,416,667
1,083,934
1,188,472
–
–
1,083,934
1,188,472
300,000
300,000
–
–
300,000
300,000
104,681
–
104,681
298,378
–
298,378
110,203
–
110,203
311,947
–
311,947
515,000
515,000
–
–
515,000
515,000
795,587
820,031
–
–
795,587
820,031
635,268
–
635,268
581,866
–
581,866
40. FINANCIAL INSTRUMENTS (CONTINUED)
(h) Liquidity risk management (continued)
Details of undrawn facilities available to APA Group are shown in the table below:
FINANCING FACILITIES
Unsecured bank facilities with various maturity dates through to 2019
– amount used
– amount unused
Unsecured long term private placement notes with various maturity dates through to 2022
– amount used
– amount unused
Unsecured Australian Dollar medium term note with maturity in 2020
– amount used
– amount unused
Unsecured Japanese Yen medium term note with maturity in 2018
– amount used
– amount unused
Unsecured Canadian Dollar medium term notes with maturity in 2019
– amount used
– amount unused
Unsecured Australian Dollar subordinated notes with maturity in 2072
– amount used
– amount unused
Unsecured US144a medium term notes with maturity in 2022
– amount used
– amount unused
Unsecured British Pound medium term notes with maturity in 2024
– amount used
– amount unused
82
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014
40. FINANCIAL INSTRUMENTS (CONTINUED)
(h) Liquidity risk management (continued)
Liquidity and interest risk table
Detailed below are APA Group’s remaining contractual maturities for its non‑
All foreign currency note exposures (both principal and interest) have been fully
derivative financial liabilities. The table has been drawn up based on the
hedged back into Australian dollars at fixed interest rates for the entire duration
undiscounted cash flows of financial liabilities taking account of the earliest
of the note exposure. Therefore the table below shows the undiscounted
date on which APA Group can be required to pay. The table includes both
Australian dollar cash flows associated with the foreign currency notes, cross
interest and principal cash flows.
currency interest rate swaps and fixed interest rate swaps in aggregate.
AVERAGE
INTEREST RATE
% P.A.
LESS THAN
1 YEAR
$000
1 – 5 YEARS
$000
MORE THAN
5 YEARS
$000
2014
FINANCIAL LIABILITIES
Trade and other payables
Unsecured bank borrowings (a)
2012 Subordinated Notes (b)
Interest Rate Swaps (Net Settled)
Guaranteed Senior Notes:
Denominated in A$
2007 Series A (c)
2007 Series C (c)
2007 Series E (d)
2007 Series G (e)
2007 Series H (e)
2010 AUD Medium Term Note (f)
Denominated in US$ (rates shown are the coupon rate of the US dollar notes)
2003 Series C (g)
2003 Series D (h)
2007 Series B (c)
2007 Series D (d)
2007 Series F (e)
2009 Series A (i)
2009 Series B (j)
2012 US 144a (k)
Denominated in stated foreign currency
2012 JPY Medium Term Note (l)
2012 CAD Medium Term Note (m)
2012 GBP Medium Term Note (n)
–
4.04
3.05
6.11
7.33
7.38
7.40
7.45
7.45
7.75
5.77
6.02
5.89
5.99
6.14
8.35
8.86
3.88
1.23
4.25
4.25
185,988
88,608
36,802
6,841
367
7,318
5,045
6,002
4,617
23,250
14,175
6,911
13,986
11,111
11,354
9,752
11,761
49,392
8,535
19,690
39,351
–
1,052,698
160,229
4,237
5,733
113,793
88,349
24,008
18,468
93,000
192,773
120,169
218,851
195,657
45,416
100,375
47,075
196,358
151,565
78,010
158,159
–
–
3,031,374
–
–
–
–
98,588
75,837
334,875
–
–
–
–
187,787
–
104,797
907,571
–
299,178
753,173
(a) Facilities mature on 8 July 2014 ($50 million limit), 23 July 2016 ($400 million limit), 12 October 2016 ($150 million limit), 23 July 2016 ($425 million limit), 19 December 2018 ($300 million
limit), 23 December 2018 ($100 million limit), and 23 July 2019 ($425 million limit, undrawn at year end).
560,856
3,064,923
5,793,180
(b) Matures on 1 October 2072.
(c) Matures on 15 May 2017.
(d) Matures on 15 May 2019.
(e) Matures on 15 May 2022.
(f) Matures on 22 July 2020.
(g) Matures on 9 September 2015.
(h) Matures on 9 September 2018.
(i) Matures on 1 July 2016.
(j) Matures on 1 July 2019.
(k) Matures on 11 October 2022.
(l) Matures on 22 Jun 2018.
(m) Matures on 24 July 2019.
(n) Matures on 26 November 2024.
83
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 40. FINANCIAL INSTRUMENTS (CONTINUED)
(h) Liquidity risk management (continued)
Liquidity and interest risk table (continued)
2013
FINANCIAL LIABILITIES
Trade and other payables
Unsecured bank borrowings (a)
2012 Subordinated Notes (b)
Interest Rate Swaps (Net Settled)
Guaranteed Senior Notes:
Denominated in A$
2007 Series A (b)
2007 Series C (b)
2007 Series E (c)
2007 Series G (d)
2007 Series H (d)
2010 AUD Medium Term Note (j)
Denominated in US$ (rates shown are the coupon rate of the US dollar notes)
2003 Series B (e)
2003 Series C (f)
2003 Series D (g)
2007 Series B (b)
2007 Series D (c)
2007 Series F (d)
2009 Series A (h)
2009 Series B (i)
2012 US 144a (l)
Denominated in stated foreign currency
2012 JPY Medium Term Note (k)
2012 CAD Medium Term Note (l)
2012 GBP Medium Term Note (o)
AVERAGE
INTEREST RATE
% P.A.
LESS THAN
1 YEAR
$000
1 – 5 YEARS
$000
MORE THAN
5 YEARS
$000
–
4.53
3.05
6.15
7.33
7.38
7.40
7.45
7.45
7.75
5.67
5.77
6.02
5.89
5.99
6.14
8.35
8.86
3.88
1.23
4.25
4.25
190,062
22,747
27,712
10,300
367
7,318
5,045
6,002
4,617
23,250
116,813
14,175
6,911
13,986
11,111
11,354
9,752
11,761
49,123
8,535
19,529
39,351
–
534,564
167,966
9,641
6,100
121,111
20,178
24,008
18,468
93,000
–
206,948
27,721
232,837
44,442
45,416
110,127
47,075
196,627
160,100
78,171
158,159
–
–
3,113,913
–
–
–
73,215
104,590
80,454
358,125
–
–
99,359
–
162,325
199,142
–
116,558
956,694
–
318,708
792,524
(a) Facilities mature on 15 July 2014 ($225 million limit), 24 August 2014 ($75 million limit), 2 November 2014 ($483 million limit), 2 November 2015 ($483 million limit, undrawn at year end)
and 12 October 2016 ($150 million limit, undrawn at year end).
609,821
2,302,659
6,375,607
(b) Matures on 1 October 2072.
(c) Matures on 15 May 2017.
(d) Matures on 15 May 2019.
(e) Matures on 15 May 2022.
(f) Matures on 22 July 2020.
(g) Matures on 9 September 2013.
(h) Matures on 9 September 2015.
(i) Matures on 9 September 2018.
(j) Matures on 1 July 2016.
(k) Matures on 1 July 2019.
(l) Matures on 11 October 2022.
(m) Matures on 22 Jun 2018.
(n) Matures on 24 July 2019.
(o) Matures on 26 November 2024.
84
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 40. FINANCIAL INSTRUMENTS (CONTINUED)
(i) Fair value of financial instruments
– the fair values of forward foreign exchange contracts included in hedging
Fair value measurements recognised in the statement of financial position
assets and liabilities are calculated using discounted cash flow analysis
The following table provides an analysis of financial instruments that are
based on observable forward exchange rates at the end of the reporting
measured subsequent to initial recognition at fair value, grouped into Levels 1
period and contract forward rates discounted at a rate that reflects the
to 3 based on the degree to which the fair value is observable.
credit risk of the various counterparties. The instruments are classified in
– Level 1 fair value measurements are those derived from quoted prices
the fair value hierarchy at level 2;
(unadjusted) in active markets for identical assets or liabilities.
– the fair values of interest rates swaps, cross currency swaps, equity forwards
– Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
and other derivative instruments included in hedging assets and liabilities
are calculated using quoted prices. Where such prices are not available, use
is made of discounted cash flow analysis using observable yield curves at
the end of the reporting period and contract rates discounted at a rate that
– Level 3 fair value measurements are those derived from valuation techniques
reflects the credit risk of the various counterparties. Where the valuation is
that include inputs for the asset or liability that are not based on observable
based on quoted prices the instruments are classified in the fair value
market data (unobservable inputs).
hierarchy at level 1, where a discounted cash flow valuation is used the
There have been no transfers between the levels during 2014 (2013: none).
instruments are classified as level 2;
Transfers between levels of the fair value hierarchy occur at the end of the
– the fair values of other financial assets and financial liabilities (excluding
reporting period. Transfers between level 1 and level 2 are triggered when there
derivative instruments) are determined in accordance with generally
are quoted prices available in active markets. Transfers into level 3 are triggered
accepted pricing models based on discounted cash flow analysis using
when the observable inputs become no longer observable, or vice versa for
prices from observable current markets discounted at a rate that reflects
transfer out of level 3.
the credit risk of the various counterparties. The instruments are classified
Fair value of the Group’s financial assets and liabilities that are measured
in the fair value hierarchy at level 2;
at fair value on a recurring basis
– the fair value of financial guarantee contracts is determined based upon the
The fair values of financial assets and financial liabilities are measured at the
probability of default by the specified counterparty extrapolated from
end of each reporting period and determined as follows:
market‑based credit information and the amount of loss, given the default.
– the fair values of available‑for‑sale financial assets and financial liabilities
The instruments are classified in the fair value hierarchy at level 2; and
with standard terms and conditions and traded on active liquid markets are
– the carrying value of financial assets and liabilities recorded at amortised
determined with reference to quoted market prices, these instruments are
cost in the financial statements approximate their fair value having regard
classified in the fair value hierarchy at level 1;
to the specific terms of the agreements underlying those assets and
liabilities.
85
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 40. FINANCIAL INSTRUMENTS (CONTINUED)
(i) Fair value of financial instruments (continued)
Fair value hierarchy
2014
Financial assets measured at fair value
Available‑for‑sale listed equity securities
Ethane Pipeline Income Fund
Equity forwards designated as fair value through profit and loss
Cross Currency Interest Rate Swaps used for hedging
Financial liabilities measured at fair value
Interest rate swaps used for hedging
Cross Currency Interest Rate Swaps used for hedging
Forward foreign exchange contracts used for hedging
2013
Financial assets measured at fair value
Available‑for‑sale listed equity securities
Ethane Pipeline Income Fund
Equity forwards designated as fair value through profit and loss
Cross Currency Interest Rate Swaps used for hedging
Forward foreign exchange contracts used for hedging
Financial liabilities measured at fair value
Interest rate swaps used for hedging
Cross Currency Interest Rate Swaps used for hedging
LEVEL 1
$000
LEVEL 2
$000
LEVEL 3
$000
TOTAL
$000
4,571
–
–
4,571
–
–
–
–
7,394
–
–
–
7,394
–
–
–
–
4,004
77,115
81,119
31,041
261,739
1,246
294,026
–
3,822
132,718
1,788
138,328
47,088
239,665
286,753
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,571
4,004
77,115
85,690
31,041
261,739
1,246
294,026
7,394
3,822
132,718
1,788
145,722
47,088
239,665
286,753
Fair value measurements of financial instruments measured at amortised cost
Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and financial liabilities recognised at amortised cost
in the financial statements approximate their fair values.
FINANCIAL LIABILITIES
Unsecured long term private placement notes
Unsecured Australian Dollar medium term notes
Unsecured Japanese Yen medium term note
Unsecured Canadian Dollar medium term notes
Unsecured Australian Dollar subordinated notes
Unsecured US Dollar 144a medium term notes
Unsecured British Pound medium term note
CARRYING AMOUNT
FAIR VALUE (a)
2014
$000
2013
$000
2014
$000
2013
$000
1,083,934
300,000
104,681
298,378
515,000
795,587
635,268
1,188,472
300,000
110,203
311,947
515,000
820,031
581,866
1,227,760
1,434,441
343,276
107,717
322,535
570,923
792,363
643,420
371,212
114,146
344,358
513,611
757,775
550,282
3,732,848
3,827,519
4,007,994
4,085,825
(a) The fair values have been determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current markets,
discounted at a rate that reflects the credit risk of the various counterparties. The instruments are classified in the fair value hierarchy at level 2.
The financial liabilities included in the table above are fixed rate borrowings. Other debts held by APA Group are floating rate debts and amortised cost approximates
its fair value.
86
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 41. SUBSIDIARIES
NAME OF ENTITY
PARENT ENTITY
Australian Pipeline Trust (a)
SUBSIDIARIES
APT Pipelines Limited (b),(c)
Australian Pipeline Limited (b)
Agex Pty Ltd (b),(c)
Amadeus Gas Trust
APT Goldfields Pty Ltd (b),(c)
APT Management Services Pty Limited (b),(c)
APT Parmelia Gas Pty Ltd (b),(c)
APT Parmelia Holdings Pty Ltd (b),(c)
APT Parmelia Pty Ltd (b),(c)
APT Parmelia Trust (b)
APT Petroleum Pipelines Holdings Pty Limited (b),(c)
APT Petroleum Pipelines Pty Limited (b),(c)
APT Pipelines (NSW) Pty Limited (b),(c)
APT Pipelines (NT) Pty Limited (b),(c)
APT Pipelines (QLD) Pty Limited (b),(c)
APT Pipelines (WA) Pty Limited (b),(c)
APT Pipelines Investments (NSW) Pty Limited (b),(c)
APT Pipelines Investments (WA) Pty Limited (b),(c)
East Australian Pipeline Pty Limited (b),(c)
Gasinvest Australia Pty Ltd (b),(c)
Goldfields Gas Transmission Pty Ltd (b)
N.T. Gas Distribution Pty Limited (b),(c)
N.T. Gas Easements Pty Limited (b),(c)
N.T. Gas Pty Limited
Roverton Pty Ltd (b),(c)
SCP Investments (No. 1) Pty Limited (b),(c)
SCP Investments (No. 2) Pty Limited (b),(c)
SCP Investments (No. 3) Pty Limited (b),(c)
Sopic Pty Ltd (b),(c)
Southern Cross Pipelines (NPL) Australia Pty Ltd (b),(c)
Southern Cross Pipelines Australia Pty Limited (b),(c)
Trans Australia Pipeline Pty Ltd (b),(c)
Western Australian Gas Transmission Company 1 Pty Ltd (b),(c)
GasNet Australia Trust (b)
APA GasNet Australia (Holdings) Pty Limited (b),(c)
APA GasNet Australia (Operations) Pty Limited (b),(c)
APA GasNet A Pty Limited (b),(c)
GasNet A Trust
APA GasNet Australia (NSW) Pty Limited (b),(c)
APA GasNet B Pty Limited (b),(c)
APA GasNet Australia Pty Limited (b),(c)
COUNTRY OF REGISTRATION/
INCORPORATION
OWNERSHIP INTEREST
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Cayman Islands
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
96
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
96
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
96
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
96
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
87
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 41. SUBSIDIARIES (CONTINUED)
NAME OF ENTITY
GasNet B Trust (b)
GasNet Australia Investments Trust
APA Operations Pty Limited (b),(c)
APT AM Holdings Pty Limited (b),(c)
APT O&M Holdings Pty Ltd (b),(c)
APT O&M Services Pty Ltd (b),(c)
APT O&M Services (QLD) Pty Ltd (b),(c)
APT Water Management Pty Ltd (b),(c)
APT Water Management Holdings Pty Ltd (b),(c)
APT AM (Stratus) Pty Limited (b),(c)
APT Facility Management Pty Limited (b),(c)
APT AM Employment Pty Limited (b),(c)
APT Sea Gas Holdings Pty Limited (b),(c)
APT SPV2 Pty Ltd (b)
APT SPV3 Pty Ltd (b)
APT Pipelines (SA) Pty Limited (b),(c)
APT (MIT) Services Pty Limited (b),(c)
APA Operations (EII) Pty Limited (b),(c)
APA Pipelines (QNSW) Pty Limited (b),(c)
Central Ranges Pipeline Pty Ltd (b),(c)
APA Country Pipelines Pty Limited (b),(c)
North Western Natural Gas Company Pty Limited (b),(c)
APA Facilities Management Pty Limited (b),(c)
APA (NBH) Pty Limited (b),(c)
APA Pipelines Investments (BWP) Pty Limited (b),(c)
APA Power Holdings Pty Limited (b),(c)
APA (EDWF Holdco) Pty Ltd (b),(c)
APA (BWF Holdco) Pty Ltd (b),(c)
EDWF Holdings 1 Pty Ltd (b),(c)
EDWF Holdings 2 Pty Ltd (b),(c)
EDWF Manager Pty Ltd (b),(c)
Wind Portfolio Pty Ltd (b),(c)
Griffin Windfarm 2 Pty Ltd (b)
APA AM (Allgas) Pty Limited (b),(c)
APA DPS Holdings Pty Limited (b),(c)
APA Power PF Pty Limited (b),(c)
APA Sub Trust No 1 (b)
APA Sub Trust No 2 (b)
APA Sub Trust No 3 (b)
APA (Pilbara Pipeline) Pty Ltd (b),(c)
APA (Sub No 3) International Holdings 1 Pty Ltd (b),(c),(f)
APA (Sub No 3) International Holdings 2 Pty Ltd (b),(c),(f)
APA (Sub No 3) International Nominees Pty Ltd (b),(c),(f)
APA (SWQP) Pty Limited (b),(c)
88
COUNTRY OF REGISTRATION/
INCORPORATION
OWNERSHIP INTEREST
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 41. SUBSIDIARIES (CONTINUED)
NAME OF ENTITY
APA (WA) One Pty Limited (b),(c)
APA AIS 1 Pty Limited (b),(c)
APA AIS 2 Pty Ltd (b),(c)
APA AIS Pty Limited (b),(c)
APA Biobond Pty Limited (b),(c)
APA East One Pty Limited (b),(c),(f)
APA East Pipelines Pty Limited (b),(c)
APA EE Pty Limited (b),(c)
APA EE Australia Pty Limited (b),(c)
APA EE Corporate Shared Services Pty Limited (b),(c)
APA EE Holdings Pty Limited (b),(c)
Epic Energy East Pipelines Trust (b)
APA (NT) Pty Limited (b),(c),(f)
Epic Energy South Australia Pty Limited (d)
MAPS FinCo Pty Limited (e)
COUNTRY OF REGISTRATION/
INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
OWNERSHIP INTEREST
2014
%
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
2013
%
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
(a) Australian Pipeline Trust is the head entity within the tax‑consolidated group.
(b) These entities are members of the tax‑consolidated group.
(c) These wholly‑owned subsidiaries have entered into a deed of cross guarantee with APT Pipelines Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to
prepare and lodge an audited financial report.
(d) Entity was acquired and disposed of during the 2013 year.
(e) Entity was deregistered during the year.
(f) Entity party to a revocation deed in relation to the APT Pipelines Limited deed of cross guarantee lodged with ASIC on 1 August 2014.
42. ACQUISITION OF BUSINESSES
On 9 October 2012, APA obtained control of the Hastings Diversified Utilities Fund (HDF) when the takeover offer was declared unconditional. APA held a controlling
interest of 54.94% on the acquisition date resulting in a non‑controlling interest of 45.06%. Compulsory acquisition was completed on 24 December 2012 and accordingly
APA acquired the remaining non‑controlling interest. Provisional values were assigned to the identifiable assets and liabilities acquired pending finalisation of the
purchase price allocation (PPA) exercise. During the current year, APA completed the PPA exercise in accordance with the requirements of AASB 3 ‘Business Combinations’.
The total fair value of other assets and liabilities acquired remain unchanged from their provisionally determined carrying values reported at 30 June 2013.
The acquisition was paid for in cash and securities issued. Acquisition‑related costs of $21,037,000 were incurred during the prior year of which $12,404,000 of
the costs were recognised as an expense and $8,633,000 of the costs were recognised in equity relating to the securities issued.
Revenue for the 2013 financial year included $152,938,000 in respect of HDF. Included in profit before non‑controlling interests for the 2013 financial year was a
loss of $10,458,000 attributable to HDF, as below:
EBITDA from HDF's Epic Energy pipeline assets
Management and performance fees charged by Hastings Funds Management
Takeover response costs paid by HDF
Integration costs on acquisition
EBITDA for HDF Group
HDF Depreciation
HDF Net finance costs
HDF Income tax expense
Net loss after tax attributable to HDF Group
$000
115,171
(35,438)
(6,913)
(4,481)
68,339
(19,366)
(51,548)
(7,883)
(10,458)
Due to the impact of a number of one‑off items in the prior year (including takeover defence costs, debt facility refinancing costs and swap break costs),
implementation of an internalised management model following the change of responsible entity, and the divestment of the Moomba‑Adelaide Pipeline System,
it is not practical to present meaningful pro‑forma results reflecting HDF as if it had been acquired on 1 July 2012.
89
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 42. ACQUISITION OF BUSINESSES (CONTINUED)
NAMES OF BUSINESS ACQUIRED
PRINCIPAL ACTIVITY
DATE OF
ACQUISITION
During the financial year ended 30 June 2013
PROPORTION
ACQUIRED
%
COST OF
ACQUISITION
$000
Hastings Diversified Utilities Fund (HDF)
Gas Transmission
9 October 2012 – 24 December 2012
100
1,233,847
2013
FAIR VALUE
ON ACQUISITION
$000
104,500
23,963
79
1,930
104,408
1,727
15,278
1,933,354
765,476
8,090
(44,190)
(1,325,000)
(43,897)
(19,044)
(644)
(1,201)
1,524,829
(290,982)
1,233,847
(104,500)
(884,665)
12,380
257,062
8,259
265,321
HASTINGS DIVERSIFIED UTILITIES FUND
Net assets acquired
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Deferred tax assets
Other
Non-current assets
Receivables
Property, plant and equipment
Goodwill
Other
Current liabilities
Trade and other payables
Current borrowings
Other financial liabilities
Provisions
Other
Non-current liabilities
Provisions
Fair value of net assets acquired
Previously held interest
Cost of acquisition
Cash balances acquired
Securities issued as part consideration
Transaction costs paid
Net cash outflow on acquisition
Prior year transaction costs paid
Total cash outflow on acquisitions
During the current financial year additional costs of $0.024 million pertaining to the acquisition of HDF were paid.
90
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 43. DISPOSAL OF BUSINESSES
On 1 May 2013, pursuant to the undertaking provided to the Australian Consumer and Competition Commission as part of the acquisition of HDF, APA completed
the sale of the Moomba Adelaide Pipeline System (MAPS). The net proceeds received from Queensland Investment Corporation totalled $391.7 million net of cash
balances sold and after transaction costs.
NET ASSETS DISPOSED
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Non-current assets
Property, plant and equipment
Goodwill
Intangibles
Other
Total assets
Current liabilities
Trade and other payables
Provisions
Other
Non-current liabilities
Deferred tax liabilities
Provisions
Total liabilities
Net assets
Profit on sale before transaction costs
Transactions costs
Loss on disposal (after transaction costs)
Less: Cash and cash equivalents disposed
Payables – sale of business
Net cash inflow on disposal
Net cash inflow/(outflow) on transaction costs relating to prior year disposal
Total proceeds on sale of businesses
2013
MOOMBA ADELAIDE
PIPELINE SYSTEM
1 MAY 2013
$000
3,546
5,453
1,350
294
373,228
24,992
–
1,811
410,674
(3,229)
(1,659)
–
(10,798)
(311)
(15,997)
394,677
5,807
(5,807)
–
(3,546)
595
391,726
19,638
411,364
During the current financial year proceeds of $1.487 million were received due to finalisation of the sale of businesses, net of associated transaction costs.
91
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 44. COMMITMENTS FOR EXPENDITURE
CAPITAL EXPENDITURE COMMITMENTS
Plant and equipment
APA GROUP’S SHARE OF JOINTLY CONTROLLED OPERATION’S COMMITMENTS
Plant and equipment
45. REMUNERATION OF EXTERNAL AUDITOR
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
Auditing the financial report
Compliance plan audit
Tax compliance and advice (a)
Other assurance services (a)
2014
$000
2013
$000
87,835
119,413
16,458
45,637
2014
2013
700,000
21,500
8,500
414,000
1,144,000
765,300
20,700
193,305
505,000
1,484,305
(a) Services provided were in accordance with the external auditor independence policy. Other assurance services comprise financial due diligence, preparation of investigating accountants
reports and assurance services in relation to debt raisings, a scheme of arrangement and a proposed takeover offer.
46. DIRECTOR AND KEY MANAGEMENT PERSONNEL COMPENSATION
(a) Directors compensation
The aggregate compensation made to Directors of APA Group is set out below:
Short‑term employment benefits
Post‑employment benefits
Total Remuneration for Non-Executive Directors
Short‑term employment benefits
Post‑employment benefits
Cash settled share‑based payments
Total Remuneration for Executive Director (a)
Total Remuneration for Directors
(b) Key management personnel compensation (a)
The aggregate compensation made to key management personnel of APA Group is set out below:
Short‑term employment benefits
Post‑employment benefits
Cash settled share‑based payments
Retention award
Termination payments
1,181,281
119,735
1,131,449
99,280
1,301,016
1,230,729
2,868,962
25,000
1,301,316
4,195,278
2,299,813
25,000
1,165,290
3,490,103
5,496,294
4,720,832
9,060,314
192,775
3,410,484
550,667
–
8,377,184
203,207
3,302,138
720,667
245,000
13,214,240
12,848,196
(a) The remuneration for the Chief Executive Officer and Managing Director, Michael McCormack, is also included in the remuneration disclosure for key management personnel.
92
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 47. RELATED PARTY TRANSACTIONS
(a) Equity interest in related parties
Details of the percentage of ordinary securities held in subsidiaries are disclosed in Note 41 and the details of the percentage held in joint operations are disclosed
in Note 19. Details of interests in joint ventures and associates are disclosed in Note 18.
(b) Responsible Entity – Australian Pipeline Limited
The Responsible Entity is wholly owned by APT Pipelines Limited.
(c) Transactions with key management personnel
Transactions between the entities that comprise APA Group during the financial year consisted of:
– dividends;
– asset lease rentals;
– loans advanced and payments received on long‑term inter‑entity loans;
– management fees;
– operational services provided between entities;
– payments of distributions;
– payments of capital distributions (returns of capital); and
– equity issues.
The above transactions were made on normal commercial terms and conditions. The Group charges interest on inter‑entity loans from time to time.
All transactions between the entities that comprise APA Group have been eliminated on consolidation.
Refer to Note 41 for details of the entities that comprise APA Group.
Australian Pipeline Limited
Management fees of $3,177,861 (2013: $2,727,683) were paid to the Responsible Entity as reimbursement of costs incurred on behalf of APA. No amounts were paid
directly by APA to the Directors of the Responsible Entity, except as disclosed at Note 46.
Australian Pipeline Limited, in its capacity as trustee and Responsible Entity of the Trust, has guaranteed the payment of principal, interest and other amounts as
provided in the senior debt facilities of APT Pipelines Limited, the principal borrowing entity of APA Group.
93
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 47. RELATED PARTY TRANSACTIONS (CONTINUED)
(d) Transactions with other related parties
Transactions with associates and joint ventures
The following transactions occurred with APA Group’s associates and joint ventures on normal market terms and conditions:
2014
SEA Gas
Energy Infrastructure Investments
EII 2
APA Ethane Ltd
Diamantina Power Station
GDI (EII)
Envestra Limited
DIVIDENDS FROM
RELATED PARTIES
$000
SALES TO RELATED
PARTIES
$000
PURCHASES FROM
RELATED PARTIES
$000
AMOUNT OWED BY
RELATED PARTIES
$000
AMOUNT OWED TO
RELATED PARTIES
$000
11,298
4,283
2,405
–
–
5,433
38,000
61,419
3,256
22,755
641
200
3,083
49,435
369,471
448,841
–
250
–
–
–
18
578
846
98
1,935
–
–
–
4,994
40,400
47,427
–
–
–
–
–
–
–
–
At year end, APA Group had a shareholder loan to Diamantina Power Station of $118.1 million.
2013
SEA Gas
Energy Infrastructure Investments
EII 2
APA Ethane Ltd
Diamantina Power Station
GDI (EII)
Envestra Limited
DIVIDENDS FROM
RELATED PARTIES
$000
SALES TO RELATED
PARTIES
$000
PURCHASES FROM
RELATED PARTIES
$000
AMOUNT OWED BY
RELATED PARTIES
$000
AMOUNT OWED TO
RELATED PARTIES
$000
6,673
4,296
2,047
–
–
3,886
31,551
48,453
3,122
23,317
654
200
4,392
39,626
326,935
398,246
5
–
–
–
–
–
1,255
1,260
107
5,911
40
–
143
5,077
35,644
46,922
–
–
–
–
–
–
–
–
Interest income on a shareholder loan to Diamantina during the year was $3.6 million.
At year end, APA Group had receivables with other related parties of $9.0 million.
94
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 48. PARENT ENTITY INFORMATION
The accounting policies of the parent entity, which have been applied in determining the financial information below, are the same as those applied in the
consolidated financial statements. Refer to note 3 for a summary of significant accounting policies relating to the group.
FINANCIAL POSITION
Assets
Current assets
Non‑current assets
Total assets
Liabilities
Current liabilities
Non‑current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Reserves
Available‑for‑sale investment revaluation reserve
Total equity
FINANCIAL PERFORMANCE
Profit for the year
Other comprehensive income
Total comprehensive income
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
No guarantees have been entered into by the parent entity in relation to the debts of its subsidiaries.
Contingent liabilities of the parent entity
No contingent liabilities have been identified in relation to the parent entity.
49. CONTINGENCIES
CONTINGENT LIABILITIES
Bank guarantees
CONTINGENT ASSETS
2014
$000
2013
$000
845,650
1,083,512
1,929,162
98,427
–
98,427
1,830,735
1,816,460
13,912
902,410
1,029,610
1,932,020
98,473
–
98,473
1,833,547
1,820,516
11,294
363
1,737
1,830,735
1,833,547
258,159
(1,373)
256,786
156,128
(607)
155,521
28,553
157,200
–
–
50. EVENTS OCCURRING AFTER REPORTING DATE
On 7 August 2014, APA Group announced that it will accept Cheung Kong Group consortium’s offer for Envestra Limited as detailed in the bidder’s statement
dated 20 June 2014. The offer consideration is $1.32 per Envestra share amounting to $783.8 million in gross proceeds and will realise an estimated pre‑tax profit
of $430 million which will be reported in the consolidated results of APA Group in the 2015 year. On the 25 July 2014, APA Group received $20.8 million being the
final dividend of 3.5 cents per share paid by Envestra on that date. APA Group will use the consideration received to fund ongoing growth and investment projects
over the coming 12 to 18 months. APA Group retains its Operations and Management Agreement on the Envestra assets, which runs to 2027.
On 20 August 2014, the Directors declared a final distribution of 18.75 cents per security ($156.7 million) for APA Group (comprising a distribution of 16.42 cents
per security from APT and a distribution of 2.33 cents per security from APTIT), made up of 18.75 cents per security unfranked profit distribution. The distribution
will be paid on 10 September 2014.
Other than the events disclosed above, there have not been any events or transactions that have occurred subsequent to year end that would require adjustment
to or disclosure in the accounts.
95
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 AUSTRALIAN PI PE LIN E T RUST AND ITS CO NTRO LLE D E NTI TI E S
DECLARATION BY THE DIRECTORS
OF AUSTRALIAN PIPELINE LIMITED
For the financial year ended 30 June 2014
The Directors declare that:
(a) in the Directors’ opinion, there are reasonable grounds to believe that Australian Pipeline Trust will be able to pay its debts as and when they become due and
payable;
(b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with
Accounting Standards and giving a true and fair view of the financial position and performance of APA Group;
(c)
in the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards as stated in Note 3 to
the financial statements; and
(d) the Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the Directors
Leonard Bleasel AM
Chairman
SYDNEY, 20 August 2014
Robert Wright
Director
96
APA GROUP / ANNUAL REPORT 2014 AUST RALI AN PI PE LINE T RUST AND ITS CO NT RO LLE D ENTITIES
AUDITOR’S INDEPENDENCE DECLARATION
For the financial year ended 30 June 2014
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX: 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
ww.deloitte.com.au
The Directors
Australian Pipeline Limited as responsible entity for
Australian Pipeline Trust
HSBC Building
Level 19, 580 George Street
Sydney NSW 2000
20 August 2014
Dear Directors
Auditor’s Independence Declaration to Australian Pipeline Limited as responsible entity for
Australian Pipeline Trust
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Australian Pipeline Limited as responsible entity for
Australian Pipeline Trust.
As lead audit partner for the audit of the financial statements of Australian Pipeline Trust for the
financial year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
G Couttas
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
97
AUSTRALIA N PIP ELIN E T RUST AND I TS CO NTRO LLE D E NTI TI E S
INDEPENDENT AUDITOR’S REPORT
For the financial year ended 30 June 2014
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX: 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Unitholders of Australian Pipeline Trust
We have audited the accompanying financial report of Australian Pipeline Trust, which comprises the
statement of financial position as at 30 June 2014, the statement of profit or loss and other
comprehensive income, the statement of cash flows and the statement of changes in equity for the year
ended on that date, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity, comprising the Trust
and the entities it controlled at the year’s end or from time to time during the financial year as set out
on pages 38 to 96.
Directors’ Responsibility for the Financial Report
The directors of Australian Pipeline Limited are responsible for the preparation of the financial report
that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to enable
the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error. In Note 3, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements
comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the entity’s
preparation of the financial report that gives a true and fair view, in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
98
APA GROUP / ANNUAL REPORT 2014
AUST RALI AN PI PE LINE T RUST AND ITS CO NT RO LLE D ENTITIES
INDEPENDENT AUDITOR’S REPORT
CONTINUED
For the financial year ended 30 June 2014
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of Australian Pipeline Limited as responsible entity for
Australian Pipeline Trust would be in the same terms if given to the directors as at the time of this
auditor’s report.
Opinion
In our opinion:
(a) the financial report of Australian Pipeline Trust is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial statements also comply with International Financial Reporting Standards as disclosed
in Note 3.
DELOITTE TOUCHE TOHMATSU
G Couttas
Partner
Chartered Accountants
Sydney, 20 August 2014
99
APT INVESTMENT TRUST
AND ITS CONTROLLED ENTITIES
ARSN 115 585 441
DIRECTORS’ REPORT
The Directors of Australian Pipeline Limited (“Responsible Entity”) submit their
Details of the Directors, their qualifications, experience, special responsibilities
report and the annual financial report of APT Investment Trust (“APTIT”) and its
and directorships of other listed entities are set out on pages 13 to 15.
controlled entities (together “Consolidated Entity”) for the financial year ended
30 June 2014. This report refers to the consolidated results of APTIT, one of the
two stapled entities of APA Group, with the other stapled entity being
Australian Pipeline Trust (together “APA”).
DIRECTORS
The names of the Directors of the Responsible Entity during the financial year
and since the financial year end are:
Leonard Bleasel AM
Chairman
Michael McCormack
Chief Executive Officer and Managing Director
The Company Secretary of the Responsible Entity during and since the financial
year end is Mark Knapman.
PRINCIPAL ACTIVITIES
APTIT operates as an investment and financing entity within the APA stapled
group.
REVIEW AND RESULTS OF OPERATIONS
APTIT reported net profit after tax of $38.7 million (2013: $38.1 million) for the
year ended 30 June 2014 on total revenue of $38.7 million (2013: $38.2 million).
Steven Crane
John Fletcher
Russell Higgins AO
Patricia McKenzie
Robert Wright
DISTRIBUTIONS
Distributions paid to Securityholders during the financial year were:
APTIT profit distribution
APTIT capital distribution
Total
FINAL FY2013 DISTRIBUTION
PAID 11 SEPTEMBER 2013
INTERIM FY2014 DISTRIBUTION
PAID 12 MARCH 2014
CENTS PER
SECURITY
TOTAL
DISTRIBUTION
$000
CENTS PER
SECURITY
TOTAL
DISTRIBUTION
$000
2.32
0.16
2.48
19,424
1,313
20,737
2.30
0.15
2.45
19,241
1,295
20,536
On 20 August 2014, the Directors declared a final distribution for APTIT for the year of 2.33 cents per security which is payable on 10 September 2014 and will
comprise the following components:
APTIT profit distribution
APTIT capital distribution
Total
FINAL FY2014 DISTRIBUTION
PAYABLE 10 SEPTEMBER 2014
CENTS PER
SECURITY
TOTAL
DISTRIBUTION
$000
2.33
–
2.33
19,464
–
19,464
Distribution information is presented on an accounting classification basis. The APA Annual Tax Statement and Annual Tax Return Guide (to be released in
September 2014) will provide the classification of distribution components for the purpose of preparation of Securityholder income tax returns.
100
APA GROUP / ANNUAL REPORT 2014
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
In March 2014, APA and Envestra Limited (“Envestra”) entered into a Scheme
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s independence declaration as required under section
Implementation Agreement, which was subsequently terminated by Envestra
307C of the Corporations Act 2001 is included on page 115.
in May 2014 after it received an alternative proposal from a consortium of
companies in the Cheung Kong Group (“CKI Consortium”) for a price of $1.32
per Envestra share, plus an entitlement to Envestra’s final dividend for the 2014
financial year.
ROUNDING OF AMOUNTS
APA is an entity of the kind referred to in ASIC Class Order 98/0100 dated 10
July 1998 and, in accordance with that Class Order, amounts in the Directors’
report and the financial report are rounded to the nearest thousand dollars,
The CKI Consortium formalised its bid for Envestra in its Bidders Statement
unless otherwise indicated.
issued on 20 June 2014. On 7 August 2014, APA accepted this offer for its entire
interest in Envestra of 33.0%. APA will receive $783.8 million in consideration,
in addition to the $20.8 million it received on 25 July 2014, being the final
Signed in accordance with a resolution of the Directors of the Responsible
Entity made pursuant to section 298(2) of the Corporations Act 2001.
dividend of 3.5 cents per share paid by Envestra on that date. APA retains its
On behalf of the Directors
Operations and Management Agreement on the Envestra assets, which runs to
2027.
Leonard Bleasel AM
Chairman
Robert Wright
Director
SYDNEY, 20 August 2014
SUBSEQUENT EVENTS
Except as disclosed elsewhere in this report, the Directors are unaware of any
matter or circumstance that has occurred since the end of the financial year
that has significantly affected or may significantly affect the operations of the
Consolidated Entity, the results of those operations or the state of affairs of the
Consolidated Entity in future years.
OTHER INFORMATION
Details of the Directors and Company Secretary of the Responsible Entity are
set out in the Australian Pipeline Trust Directors’ report at pages 2 to 17. That
report also contains information on the Directors’ directorships of other listed
companies, their attendance at meetings and securityholdings, options,
indemnification of officers, remuneration and the auditor’s provision of non‑
audit services and independence.
INFORMATION REQUIRED FOR REGISTERED
SCHEMES
Fees paid to the Responsible Entity and its associates (including directors and
secretaries of the Responsible Entity, related bodies corporate and directors
and secretaries of related bodies corporate) out of APA scheme property
during the financial year are disclosed in Note 17 to the financial statements.
Except as disclosed in this report, neither the Responsible Entity nor any of its
associates holds any APA securities.
The number of APA securities issued during the financial year, and the number
of APA securities at the end of the financial year, are disclosed in Note 10 to the
financial statements.
The value of APA’s assets as at the end of the financial year is disclosed in the
balance sheet in total assets, and the basis of valuation is included in Note 2 to
the financial statements.
101
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESDIRECTORS’ REPORT CONTINUED APT INVESTM ENT T RUST AN D ITS CO NTRO LLE D ENTI TI E S
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the financial year ended 30 June 2014
CONTINUING OPERATIONS
Revenue
Expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified to profit and loss:
Loss on available‑for‑sale investments taken to equity
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
Profit Attributable to:
Equityholders of the parent
Total comprehensive income attributable to:
Equityholders of the parent
EARNINGS PER SECURITY
NOTE
4
4
2014
$000
38,718
(12)
38,706
–
38,706
(861)
(861)
37,845
38,706
38,706
2013
$000
38,155
(12)
38,143
–
38,143
(1,157)
(1,157)
36,986
38,143
38,143
37,845
36,986
Basic and diluted earnings per security (cents)
12
4.6
4.9
Diluted earnings per security is exactly the same as basic earnings per security.
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
APT INVESTM ENT T RUST AN D ITS CO NTRO LLE D ENTI TI E S
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2014
CURRENT ASSETS
Receivables
NON–CURRENT ASSETS
Receivables
Other financial assets
Total non–current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
102
APA GROUP / ANNUAL REPORT 2014
NOTE
6
7
8
9
10
11
2014
$000
670
10,623
583,961
594,584
595,254
11
11
2013
$000
641
11,260
586,794
598,054
598,695
24
24
595,243
598,671
576,172
(394)
19,465
595,243
578,780
467
19,424
598,671
A PT IN VEST ME NT TRUST AND I TS CO N TR O LLED ENT I TIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the financial year ended 30 June 2014
Balance at 1 July 2012
Profit for the year
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
Issue of capital (net of issue costs)
Distributions to securityholders
Balance at 30 June 2013
Balance at 1 July 2013
Profit for the year
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
Distributions to securityholders
Balance at 30 June 2014
NOTE
11
10
5
11
5
ISSUED
CAPITAL
$000
364,066
–
–
–
229,593
(14,879)
578,780
578,780
–
–
–
(2,608)
576,172
RESERVES
$000
1,624
–
(1,157)
(1,157)
–
–
467
467
–
(861)
(861)
–
(394)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
A PT IN VESTM ENT TRUST AND ITS CO NTRO LLE D ENTI TIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the financial year ended 30 June 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Trust distribution – related party
Capital distribution received – external
Dividends received
Interest received – related parties
Finance lease receivable repayments
Receipts from customers
Payments to suppliers
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment received from/(advances to) related parties
Net cash provided by/(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of securities
Payment of security issue costs
Distributions to securityholders
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
RETAINED
EARNINGS
$000
21,160
38,143
–
38,143
–
(39,879)
19,424
19,424
38,706
–
38,706
(38,665)
19,465
2014
$000
23,013
–
126
15,199
1,168
201
(12)
TOTAL
$000
386,850
38,143
(1,157)
36,986
229,593
(54,758)
598,671
598,671
38,706
(861)
37,845
(41,273)
595,243
2013
$000
25,190
271
150
13,888
1,167
167
(12)
39,695
40,821
1,592
1,592
(3,635)
(3,635)
–
(14)
(41,273)
(41,287)
–
–
–
19,663
(2,091)
(54,758)
(37,186)
–
–
–
103
APT INVEST MEN T T RUST AN D ITS CO NTRO LLE D ENTI TI E S
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the financial year ended 30 June 2014
1. GENERAL INFORMATION
Adoption of new and revised Accounting Standards
APT Investment Trust (“APTIT” or “Trust”) is one of the two stapled trusts of
(a) Standards and Interpretations affecting amounts reported in the current
APA Group (“APA Group”), the other stapled trust being Australian Pipeline
period (and/or prior periods)
Trust (“APT”). Each of APT and APTIT are registered managed investment
The following new and revised Standards and Interpretations have been
schemes regulated by the Corporations Act 2001. APTIT units are “stapled” to
adopted in the current period and have affected the amounts reported in these
APT units on a one‑to‑one basis so that one APTIT unit and one APT unit form
financial statements.
a single stapled security which trades on the Australian Securities Exchange
under the code “APA”.
In the current period, the Consolidated Entity has adopted all of the new and
revised Standards and Interpretations issued by the AASB that are relevant to
This financial report represents the consolidated financial statements of APTIT
its operations and effective for the current reporting periods.
and its controlled entities (together the “Consolidated Entity”). For the
purposes of preparing the consolidated financial report, the Consolidated
Entity is a for‑profit entity.
AASB 13 Fair value measurement
AASB 13 explains how to measure fair value and aims to enhance fair value
disclosures, and is effective for annual reporting periods beginning after 1
APTIT’s registered office and its principal place of business are as follows:
January 2013. In accordance with transitional provisions, AASB 13 has been
Registered office and principal place of business
applied prospectively from 1 July 2013.
Level 19, HSBC Building
580 George Street
SYDNEY NSW 2000
Tel: (02) 9693 0000
APTIT operates as an investment entity within the Australian Pipeline Trust
AASB 13 requires inclusion of a measure for credit risk in the calculations of
assets and liabilities recorded at fair value. This change is applied prospectively
and has not had a significant impact on the fair value of the Consolidated
Entity’s assets and liabilities for the year ended 30 June 2014, but has resulted
in additional fair value disclosures as provided in Note 15.
stapled group.
Control
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
These general purpose Financial Statements for the year ended 30 June 2014
have been prepared in accordance with the Corporations Act 2001, Australian
Accounting Standards and other authoritative pronouncements of the
AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in
Other Entities, AASB 127 Separate Financial Statements (Dec 2012), AASB 128
Investments in Associates and Joint Ventures (Dec 2012) and AASB 2012‑10
Amendments to Australian Accounting Standards – Transition Guidance and
Other Amendments.
Australian Accounting Standards Board and
Interpretations (AIFRS).
AASB 10 was applied by the Consolidated Entity from 1 July 2013. AASB 10
Compliance with Australian Accounting Standards ensures that the Financial
replaces the previous guidance on control and retains the core principle that a
Statements and notes also comply with International Financial Reporting
Consolidated Entity presents a parent and its subsidiaries as if they are a single
Standards (IFRS).
The financial report has been prepared on the basis of historical cost, except for
the revaluation of certain non‑current assets and financial instruments.
economic entity. Whereas the control definition in the previous guidance
focussed on ‘risks and rewards’, AASB 10 focuses on the combination of power,
exposure to variable returns and ability to use the power to affect the returns.
Historical cost is generally based on the fair values of the consideration given
The transitional provisions permit prior period comparatives to not be restated
in exchange for goods and services. The financial report is presented in
where the accounting outcome under the previous guidance is the same as that
Australian dollars and all values are rounded to the nearest thousand dollars
under AASB 10 as at the date of initial application, 1 July 2013. For all other
($000) in accordance with ASIC Class Order 98/0100, unless otherwise stated.
situations, comparatives are restated retrospectively in accordance with AASB
The financial report was authorised for issue by the Directors on 20 August 2014.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Consolidated Entity’s accounting policies, management
is required to make judgements, estimates and assumptions about the carrying
values of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future
periods. Refer to Note 3 for a discussion of critical judgements in applying the
entity’s accounting policies, and key sources of estimation uncertainty.
108 Accounting Policies, Changes in Accounting Estimates and Errors as if
AASB 10 had always been applied.
AASB 12 is a new disclosure standard and is applicable to entities that have
interests in subsidiaries, joint arrangements, associates and unconsolidated
structured entities.
AASB 124 Related party disclosures
AASB 2011‑4 Amendments to Australian Accounting Standards to Remove
Individual Key Management Personnel Disclosure Requirements.
The amendments remove the
individual remuneration disclosures and
disclosures about equity holdings, loans and other transactions with key
management personnel. As a result, only aggregate remuneration disclosures
are provided in Note 17.
104
APA GROUP / ANNUAL REPORT 2014 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of preparation (continued)
(b) Standards and Interpretations issued not yet adopted
At the date of authorisation of the financial statements, the following Standards and Interpretations listed below , which are relevant to the Consolidated Entity,
were on issue but not yet effective.
STANDARD/INTERPRETATION
– AASB 9 ‘Financial Instruments’ and the relevant amending standards
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
1 January 2017
EXPECTED TO BE
INITIALLY APPLIED IN THE
FINANCIAL YEAR ENDING
30 June 2018
The following Standard was issued by the International Accounting Standards Board but not yet effective. The Australian equivalent Standard has not yet been issued.
– IFRS 15 ‘Revenue from Contracts with Customers’
1 January 2017
30 June 2018
The potential impact of the initial application of the Standards above is yet to be determined.
(a) Basis of consolidation
Interest and distributions
The financial statements comprise the consolidation of APTIT and its respective
Interest and distributions are classified as expenses or as distributions of profit
subsidiaries (together “Consolidated Entity”).
consistent with the consolidated statement of financial position classification
All intragroup transactions and balances have been eliminated on consolidation.
Where necessary, adjustments are made to the assets, liabilities, and results of
of the related debt or equity instruments or component parts of compound
instruments.
subsidiaries, joint arrangements and associates to bring their accounting
(f) Goods and services tax
policies into line with those used by the Consolidated Entity.
Revenues, expenses and assets are recognised net of the amount of goods and
(i) Subsidiaries
Subsidiaries are entities controlled by APTIT. Control exists where APTIT has
power over the entities, i.e. existing rights that give them the current ability to
direct the relevant activities of the entities (those that significantly affect the
services tax (“GST”), except where the amount of GST incurred is not
recoverable from the taxation authority. Receivables and payables are
recognised inclusive of GST, except for accrued revenue and accrued expense
at balance dates which exclude GST.
returns); exposure, or rights, to variable returns from their involvement with the
The net amount of GST recoverable from, or payable to, the taxation authority
entities; and the ability to use their power to affect those returns.
is included as part of receivables or payables. GST receivable or GST payable is
(b) Cash and cash equivalents
only recognised once a tax invoice has been issued or received.
Cash comprises cash on hand and demand deposits. Cash equivalents are
Cash flows are included in the statement of cash flows on a gross basis. The
short‑term, highly liquid investments that are readily convertible to known
GST component of cash flows arising from investing and financing activities
amounts of cash, which are subject to insignificant risk of changes in values.
which is recoverable from, or payable to, the taxation authority is classified
(c) Trade and other payables
within operating cash flows.
Trade and other payables are recognised when the Consolidated Entity
(g) Impairment of assets
becomes obliged to make future payments resulting from the purchase of
Assets are reviewed for impairment at least annually or whenever events or
goods and services. Trade and other payables are stated at amortised cost.
changes in circumstances indicate that the carrying amount may not be
(d) Acquisition of assets
Assets acquired are recorded at the cost of acquisition, being the purchase
consideration determined as at the date of acquisition. Cost includes expenditure
that is directly attributable to the acquisition or construction of the asset.
recoverable. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell, and value in use.
For the purpose of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are largely
In the event that settlement of all or part of the cash consideration given in the
independent of the cash inflows from other assets or groups of assets (cash‑
acquisition of an asset is deferred, the fair value of the purchase consideration
generating units). Assets other than goodwill that have previously suffered an
is determined by discounting the amounts payable in the future to their present
impairment are reviewed for possible reversal of the impairment at the end of
values as at the date of acquisition.
each reporting period.
(e) Financial instruments issued by the Consolidated Entity
(h) Income tax
Debt and equity instruments
Income tax expense is not brought to account in respect of APTIT as, pursuant
Debt and equity instruments are classified as either liabilities or equity in
to the Australian taxation laws APTIT is not liable for income tax provided that
accordance with the substance of the contractual arrangement. An equity
its realised taxable income (including any assessable realised capital gains) is
instrument is any contract that evidences a residual interest in the assets of an
fully distributed to its securityholders each year.
entity after deducting all of its liabilities. Equity instruments issued by the
Consolidated Entity are recorded at the proceeds received, net of direct issue costs.
(i) Financial assets and liabilities
Financial assets are classified into the following specified categories: financial
Transaction costs arising on the issue of equity instruments
assets ‘held‑to‑maturity investments’, ‘available‑for‑sale’ financial assets, and
Transaction costs arising on the issue of equity instruments are recognised
‘loans and receivables’.
directly in equity as a reduction of the proceeds of the equity instruments to
which the costs relate. Transaction costs are the costs that are incurred directly
in connection with the issue of those equity instruments and which would not
have been incurred had those instruments not been issued.
The classification depends on the nature and purpose of the financial assets
and is determined at the time of initial recognition.
105
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Financial assets and liabilities (continued)
(l) Segment information
Effective interest method
The Consolidated Entity has one reportable segment being energy
The effective interest method is a method of calculating the amortised cost of
infrastructure investment and operation.
a financial asset and of allocating interest income over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset, or where appropriate,
a shorter period.
Fair value through profit or loss
Financial assets at fair value through profit or loss are stated at fair value, with
any resultant gain or loss recognised in profit or loss. The net gain or loss
recognised in profit or loss incorporates any dividend or interest earned on the
financial asset.
Available-for-sale financial assets
The Consolidated Entity is an investing entity within the Australian Pipeline
Trust stapled group. As the Trust only operates in one segment, it has not
disclosed segment information separately.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
In the application of the Consolidated Entity’s accounting policies, management
is required to make judgements, estimates and assumptions about the carrying
values of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ
Financial assets classified as being available‑for‑sale are stated at fair value.
from estimates.
Gains and losses arising from changes in fair value are recognised directly in
the available‑for‑sale investment revaluation reserve.
Receivables and loans
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period of the
Trade receivables, loans, and other receivables that have fixed or determinable
revision and future periods if the revision affects both current and future
payments that are not quoted in an active market are classified as ‘loans and
periods.
receivables’. Trade and other receivables are stated at their amortised cost less
impairment.
Impairment of financial assets
Impairment of assets
Determining whether property, plant and equipment, identifiable intangible
assets and goodwill are impaired requires an estimation of the value‑in‑use or
Financial assets are assessed for indicators of impairment at each balance
fair value of the cash‑generating units. The calculations require the Consolidated
sheet date. Financial assets are impaired where there is objective evidence that
Entity to estimate the future cash flows expected to arise from cash‑generating
as a result of one or more events that occurred after initial recognition of the
units and suitable discount rates in order to calculate the present value of cash‑
financial asset, the estimated future cash flows of the investment have been
generating units.
adversely impacted.
(j) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Consolidated Entity and the revenue can be reliably
measured. Amounts disclosed as revenue are net of duties and taxes paid.
Revenue is recognised for the major business activities as follows:
Interest revenue
Interest is recognised by applying the effective interest method.
Distribution revenue
Distribution revenue is recognised when the right to receive a distribution has
been established.
Dividend revenue
Dividend revenue is recognised when the right to receive a dividend has been
established.
Finance lease income
Estimates and assumptions used are reviewed on an ongoing basis.
Determining whether available‑for‑sale investments are impaired requires an
assessment as to whether declines in value are significant or prolonged.
Management has taken into account a number of qualitative and quantitative
factors in making this assessment. Any assessment of whether a decline in
value represents an impairment would result in the transfer of the decrement
from reserves to the statement of comprehensive income.
Useful lives of non-current assets
The Consolidated Entity reviews the estimated useful lives of property, plant
and equipment at the end of each annual reporting period. Any reassessment
of useful lives in a particular year will affect the depreciation or amortisation
expense.
Fair value of financial instruments
The Consolidated Entity has financial instruments that are carried at fair value
in the statement of financial position. The best evidence of fair value is quoted
prices in an active market. If the market for a financial instrument is not active,
Finance lease income is recognised when receivable.
the Consolidated Entity determines fair value by using various valuation
(k) Leased assets
Leases are classified as finance leases when the terms of the lease transfer
substantially all the risks and rewards incidental to the ownership of the leased
asset to the lessee. All other leases are classified as operating leases.
models. The objective of using a valuation technique is to establish the price
that would be received to sell an asset or paid to transfer a liability between
market participants. The chosen valuation models make maximum use of
market inputs and rely as little as possible on entity specific inputs. The fair
values of all positions include assumptions made on the recoverability based on
Consolidated Entity as lessor
the counterparty’s and the Consolidated Entity’s credit risk.
Details of the inputs to the fair value of financial instruments are included in
Note 15.
Amounts due from a lessee under a finance lease are recorded as receivables.
Finance lease receivables are initially recognised at the amount equal to the
present value of the minimum lease payments receivable plus the present value
of any unguaranteed residual value expected to accrue at the end of the lease
term. Finance lease receipts are allocated between interest revenue and reduction
of the lease receivable over the term of the lease in order to reflect a constant
periodic rate of return on the net investment outstanding in respect of the lease.
106
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 4. PROFIT FROM OPERATIONS
Profit before income tax includes the following items of income and expense:
REVENUE
Distributions
Trust distribution – related party
Other entities
FINANCE INCOME
Interest – related parties
Loss on financial asset held at fair value through profit and loss
Finance lease income – related party
OTHER REVENUE
Other
Total revenue
EXPENSES
Audit fees
Total expenses
5. DISTRIBUTIONS
RECOGNISED AMOUNTS
Final distribution paid on 11 September 2013 (2013: 14 September 2012)
Profit distribution (a)
Capital distribution
Interim distribution paid on 12 March 2014 (2013: 13 March 2013)
Profit distribution (a)
Capital distribution
Total distributions recognised
Profit distributions (a)
Capital distributions
UNRECOGNISED AMOUNTS
Final distribution payable on 10 September 2014 (b) (2013: 11 September 2013)
Profit distribution (a)
Capital distribution
(a) Profit distributions unfranked (2013: unfranked).
(b) Record date 30 June 2014.
2014
CENTS PER
SECURITY
2014
TOTAL
$000
2013
CENTS PER
SECURITY
2.32
0.16
2.48
2.30
0.15
2.45
4.62
0.31
2.33
–
2.33
19,424
1,313
20,737
19,241
1,295
20,536
38,665
2,608
19,464
–
19,464
3.28
2.31
5.59
2.26
–
2.26
5.54
2.31
2.32
0.16
2.48
The final distribution in respect of the financial year has not been recognised in this financial report because the final distribution was not declared, determined or
publicly confirmed prior to the end of the financial year.
107
2014
$000
2013
$000
23,013
125
23,138
15,162
(342)
559
15,379
201
38,718
(12)
(12)
25,190
130
25,320
13,541
(1,460)
587
12,668
167
38,155
(12)
(12)
2013
TOTAL
$000
21,160
14,879
36,039
18,719
–
18,719
39,879
14,879
19,424
1,313
20,737
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 6. CURRENT RECEIVABLES
Other debtors
Finance lease receivable – related party (Note 14)
2014
$000
31
639
670
2013
$000
32
609
641
In determining the recoverability of a receivable, the Consolidated Entity considers any change in the credit quality of the receivable from the date the credit was
initially granted up to the reporting date. The directors believe that there is no credit provision required.
None of the above receivables is past due.
7. NON-CURRENT RECEIVABLES
Finance lease receivable – related party (Note 14)
8. NON-CURRENT OTHER FINANCIAL ASSETS
Advance to related party
Investments carried at cost:
Investment in related party (a)
Financial assets carried at fair value:
Redeemable ordinary shares (b)
Available‑for‑sale investments carried at fair value (c)
10,623
11,260
440,633
442,225
107,379
548,012
34,427
1,522
583,961
107,379
549,604
34,807
2,383
586,794
(a) The investment in related party reflects GasNet Australia Investments Trust’s (“GAIT”) investment in 100% of the B Class units in GasNet A Trust. The B Class units give GAIT perferred
rights to the income and capital of GasNet A Trust, but hold no voting rights. The A Class unitholder may however suspend for a period or terminate all of the B Class unitholder rights
to income and capiltal. As such, GAIT neither controls nor has a significant influence over GasNet A Trust. GasNet Australia Trust, a related party wholly owned by APT Group, owns 100%
of the A Class units in GasNet A Trust and, accordingly, GasNet A Trust is included in the consolidation of the APT Group. The investment has not been measured at fair value as the units
of GasNet A Trust are not available for trade on an active market and as such, the fair value of the units cannot be reliably determined. The Consolidated Entity does not intend to dispose
of its interest in GasNet A Trust.
(b) Financial assets carried at fair value relate to APA Group’s 19.9% investment in Energy Infrastructure Investments Pty Ltd where APL, as Responsible Entity for APTIT, acquired the
redeemable ordinary shares.
(c) Available‑for‑sale investments reflect a 6% unitholding in Ethane Pipeline Income Fund.
9. TRADE AND OTHER PAYABLES
Other payables
10. ISSUED CAPITAL
11
24
835,751,807 securities, fully paid (2013: 835,751,807 securities, fully paid) (a)
576,172
578,780
2014
NO. OF UNITS
000
2014
$000
2013
NO. OF UNITS
000
MOVEMENTS
Balance at beginning of financial year
835,752
578,780
Issue of securities under Distribution Reinvestment Plan
Issue of securities as consideration for related party acquisition (b)
Issue cost of securities
Capital distributions paid (Note 5)
Balance at end of financial year
–
–
–
–
835,752
–
–
–
(2,608)
576,172
644,486
15,548
175,718
–
–
835,752
(a) Fully paid securities carry one vote per security and carry the right to distributions.
(b) APTIT issued securities as part consideration for APT Pipelines Ltd’s acquisition of the Hastings Diversified Utilities Fund.
2013
$000
364,066
19,663
212,035
(2,105)
(14,879)
578,780
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to issued capital from 1 July 1998. Therefore, the Trust
does not have a limited amount of authorised capital and issued securities do not have a par value.
108
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 11. RESERVES
Available-for-sale investment revaluation reserve
Balance at beginning of financial year
Valuation loss recognised
Balance at end of financial year
2014
$000
467
(861)
(394)
2013
$000
1,624
(1,157)
467
The available‑for‑sale investment revaluation reserve arises on the revaluation of available‑for‑sale financial assets. When a revalued financial asset is sold, the
portion of the reserve which relates to that financial asset is effectively realised, and is recognised in profit or loss. When a revalued financial asset is impaired, the
portion of the reserve which relates to that financial asset is recognised in profit or loss.
12. EARNINGS PER SECURITY
Basic and diluted earnings per security (cents)
2014
4.6
2013
4.9
The earnings and weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security are as follows:
Net profit attributable to securityholders for calculating basic and diluted earnings per security ($’000)
38,706
38,143
Weighted average number of ordinary securities on issue used in the calculation (’000)
13. REMUNERATION OF EXTERNAL AUDITOR
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
Auditing the financial report
14. LEASES
FINANCE LEASES
Leasing arrangements – receivables
Finance lease receivables relate to the lease of a pipeline lateral.
There are no contingent rental payments due.
Finance lease receivables
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Minimum future lease payments receivable (a)
Gross finance lease receivables
Less: unearned finance lease receivables
Present value of lease receivables
Included in the financial statements as part of:
Current receivables (Note 6)
Non‑current receivables (Note 7)
(a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual.
NO. OF SECURITIES
835,751
772,314
2014
$
2013
$
12,322
11,958
2014
$000
2013
$000
1,167
4,669
9,338
15,174
15,174
(3,912)
11,262
639
10,623
11,262
1,167
4,669
10,506
16,342
16,342
(4,473)
11,869
609
11,260
11,869
109
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 15. FINANCIAL INSTRUMENTS
(a) Financial risk management objectives
APA’s Corporate Treasury function provides services to the business, co‑
ordinates access to domestic and international financial markets, and monitors
(e) Fair value of financial instruments
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are
and manages the financial risks relating to the operations of the Consolidated
measured subsequent to initial recognition at fair value, grouped into Levels 1
Entity. These risks include market risk (including currency risk, interest rate risk
to 3 based on the degree to which the fair value is observable.
and price risk), credit risk and liquidity risk.
The Consolidated Entity seeks to minimise the effects of these risks through
natural hedges and by using derivative instruments to directly hedge the
exposures. The use of financial derivatives is governed by the Consolidated
Entity’s Board approved Treasury Risk Management Policy, which provides
written principles on foreign exchange risk, interest rate risk, credit risk, the use of
financial derivatives and non‑derivative financial instruments, and the investment
of excess liquidity. The Consolidated Entity does not enter into or trade financial
instruments, including derivative financial instruments, for speculative purposes.
The Corporate Treasury function reports monthly to the Consolidated Entity’s
Board of Directors, which monitors risks and policies implemented to mitigate
risk exposures.
(b) Market risk management
The Consolidated Entity’s activities exposure is primarily to the financial risk of
changes in interest rates. There has been no change to the Consolidated
Entity’s exposure to market risk or the manner in which it manages and
measures the risk from the previous period. The Consolidated Entity is also
exposed to price risk from its investments in listed equities. The shareholding
rests with one entity, Ethane Pipeline Income Financing Trust, that is publicly
traded in the major financial markets.
Equity price sensitivity
The sensitivity analysis below has been determined based on the exposure to
equity price risks at the reporting date. At the reporting date, if the prices of the
Consolidated Entity’s equity investments had been 5% p.a. higher or lower:
– net profit would have been unaffected as the equity investments are
classified as available‑for‑sale and no material investments were disposed
of or impaired (2013: $nil); and
– equity reserves would decrease/increase by $32,000 (2013: $71,000), due
to the changes in the fair value of available‑for‑sale shares.
There has been no change to the nature of the Consolidated Entity’s exposure
to market risks or the manner to which it manages and measures the risks from
the previous period.
– Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities.
– Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
– Level 3 fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
There have been no transfers between the levels during 2014 (2013: none).
Transfers between levels of the fair value hierarchy occur at the end of the
reporting period. Transfers between level 1 and level 2 are triggered when there
are quoted prices available in active markets. Transfers into level 3 are triggered
when the observable inputs become no longer observable, or vice versa for
transfer out of level 3.
Fair value of the Consolidated Entity’s financial assets and liabilities that are
measured at fair value on a recurring basis
The fair values of financial assets and financial liabilities are measured at the
end of each reporting period and determined as follows:
Available-for-sale listed equity securities
– the fair values of available‑for‑sale financial assets and financial liabilities
with standard terms and conditions and traded on active liquid markets are
determined with reference to quoted market prices; and
– these instruments are classified in the fair value hierarchy at level 1.
Unlisted Redeemable ordinary shares
The financial statements include redeemable ordinary shares (“ROS”) held in an
unlisted entity which are measured at fair value (Note 8). The fair market value of
the ROS is derived from a binomial tree model, which includes some assumptions
that are not able to be supported by observable market prices or rates. The
model maps different possible valuation paths of three distinct components:
– value of the debt component;
– value of the ROS discretionary dividends; and
– value of the option to convert to ordinary shares.
In determining the fair value, the following assumptions were used:
(c) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual
– the risk adjusted rate for the ROS is estimated as the required rate of return
based on projected cash flows to equity at issuance assuming the ROS price
obligations resulting in financial loss to the Consolidated Entity. The Consolidated
at issuance ($0.99) and the ordinary price at issuance ($0.01) are at their
Entity has adopted the policy of only dealing with creditworthy counterparties
fair value;
and obtaining sufficient collateral or bank guarantees where appropriate as a
means of mitigating any risk of loss. For financial investments or market risk
– the risk free rate of return is 2.93% (2013: 3.19%) per annum and is based
upon an interpolation of the three and five year Government bond rates at
hedging, the Consolidated Entity’s policy is to deal with highly rated counterparties.
the valuation date;
The carrying amount of financial assets recorded in the financial statements,
net of any allowances, represents the Consolidated Entity’s maximum exposure
to credit risk in relation to those assets.
(d) Liquidity risk management
The Consolidated Entity has a policy dealing with liquidity risk which requires
an appropriate liquidity risk management framework for the management of
the Consolidated Entity’s short, medium and long‑term funding and liquidity
management requirements. Liquidity risk is managed by maintaining adequate
cash reserves and banking facilities, by monitoring and forecasting cash flow
and where possible arranging liabilities with longer maturities to more closely
match the underlying assets and revenue streams of the Consolidated Entity.
– a credit margin of 7% is added to the risk free rate. The credit margin is
reviewed and adjusted (where required) annually;
– the ROS discretionary dividends are estimated based on an internal
forecasted cash flow model;
– the value of the option to convert is deemed to be zero (2013: zero). For
conversion to occur, a number of conditions must be met. At the reporting
date, it was deemed highly unlikely these conditions would occur based on
an internal forecasting model; and
– These instruments are classified in the fair value hierarchy at level 3.
The fair value is impacted by the following unobservable inputs:
– An increase in the discount rate will result in a decrease in the fair value;
– An increase in discretionary dividends will result in a increase in the fair
value; and
– Meeting conditions to trigger the conversion of the option would result in an
increase in the fair value.
110
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 15. FINANCIAL INSTRUMENTS (CONTINUED)
(e) Fair value of financial instruments (continued)
Fair value hierarchy
2014
Financial assets measured at fair value
Available‑for‑sale listed equity securities
Ethane Pipeline Income Fund
Unlisted Redeemable Ordinary Shares
Energy Infrastructure Investments
2013
Financial assets measured at fair value
Available‑for‑sale listed equity securities
Ethane Pipeline Income Fund
Unlisted Redeemable Ordinary Shares
Energy Infrastructure Investments
LEVEL 1
$000
LEVEL 2
$000
LEVEL 3
$000
TOTAL
$000
1,523
–
1,523
2,383
–
2,383
–
–
–
–
–
–
–
1,523
34,427
34,427
34,427
35,950
–
2,383
34,807
34,807
34,807
37,190
FAIR VALUE THROUGH
PROFIT OR LOSS
2014
$000
34,807
4,245
(342)
(4,283)
34,427
2013
$000
36,614
3,949
(1,460)
(4,296)
34,807
Reconciliation of Level 3 fair value measurements of financial assets
Opening balance
Total gains or losses:
– in profit or loss: Interest – related parties
– in profit or loss: (Loss)/gain on financial asset held at fair value through profit and loss
Distributions
Closing balance
(f) Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates on loans with related parties. A 100 basis points increase or decrease
is used and represents management’s assessment of the greatest possible change in interest rates. At reporting date, if interest rates had been 100 basis points
higher or lower and all other variables were constant, the Consolidated Entity’s net profit would increase by $1,145,000 or decrease by $1,090,000 (2013: increase
by $485,000 or decrease by $412,000 respectively). This is mainly attributable to the Consolidated Entity’s exposure to interest rates on its variable rate inter‑
entity balances and the fair value movement on the ROS. The sensitivity has increased due to higher inter‑entity balances resulting in interest income sensitivity
which is greater than the ROS sensitivity.
16. SUBSIDIARIES
NAME OF ENTITY
Parent entity
APT Investment Trust
Controlled entity
COUNTRY OF
REGISTRATION
2014
%
2013
%
OWNERSHIP INTEREST
GasNet Australia Investments Trust
Australia
100
100
111
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 17. DIRECTOR AND KEY MANAGEMENT PERSONNEL COMPENSATION
(a) Director compensation
The aggregate compensation made to Directors of the Consolidated Entity and the Trust is set out below:
Short‑term employment benefits
Post‑employment benefits
Total Remuneration for Non-Executive Directors
Short‑term employment benefits
Post‑employment benefits
Cash settled share‑based payments
Total Remuneration for Executive Director (a)
Total Remuneration for Directors
(b) Key management personnel compensation (a)
The aggregate compensation made to key management personnel of the Consolidated Entity and the Trust is set out below:
Short‑term employment benefits
Post‑employment benefits
Cash settled share‑based payments
Retention award
Termination payments
2014
$
1,181,281
119,735
1,301,016
2,868,962
25,000
1,301,316
4,195,278
2013
$
1,131,449
99,280
1,230,729
2,299,813
25,000
1,165,290
3,490,103
5,496,294
4,720,832
9,060,314
192,775
3,410,484
550,667
–
8,377,184
203,207
3,302,138
720,667
245,000
13,214,240
12,848,196
(a) The remuneration for the Chief Executive Officer and Managing Director, Michael McCormack, is also included in the remuneration disclosure for key management personnel.
18. RELATED PARTY TRANSACTIONS
(a) Equity interest in related parties
(d) Transactions with other related parties
Details of the percentage of ordinary securities held in subsidiaries are
APTIT and its controlled entity have a number of loan receivable balances with
disclosed in Note 16.
(b) Responsible Entity – Australian Pipeline Limited
The Responsible Entity is wholly owned by APT Pipelines Limited (2013: 100%
owned by APT Pipelines Limited).
(c) Transactions with related parties within the Consolidated Entity
During the financial year, the following transactions occurred between the Trust
and its other related parties:
– loans advanced and payments received on long‑term inter‑entity loans; and
– payments of distributions.
other entities in APA. These loans have various terms; however, they can be
repayable on agreement of the parties. Interest is recognised by applying the
effective interest method, agreed between the parties at the end of each
month and is determined by reference to market rates.
The following balances arising from transactions between APTIT and its other
related parties are outstanding at reporting date:
– current receivables totalling $670,000 are owing from a subsidiary of APT
for amounts due under a finance lease arrangement (2013: $609,000);
– non‑current receivables totalling $10,623,000 are owing from a subsidiary
of APT for amounts due under a finance lease arrangement (2013:
All transactions between the entities that comprise the Consolidated Entity
$11,260,000); and
have been eliminated on consolidation.
– non‑current receivables totalling $440,633,000 (2013: $442,225,000) are
Refer to Note 16 for details of the entities that comprise the Consolidated Entity.
owing from a subsidiary of APT.
Australian Pipeline Limited
Management fees of $753,000 (2013: $671,000) were paid to the Responsible
Entity as reimbursement of costs incurred on behalf of APTIT. No amounts were
paid directly by APTIT to the Directors of the Responsible Entity.
Australian Pipeline Trust
Management fees of $753,000 (2013: $671,000) were reimbursed by APT.
112
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014APA GROUP / ANNUAL REPORT 2014 19. PARENT ENTITY INFORMATION
The accounting policies of the parent entity, which have been applied in determining the financial information below, are the same as those applied in the
consolidated financial statements. Refer to Note 2 for a summary of significant accounting policies relating to the Consolidated Entity.
FINANCIAL POSITION
Assets
Current assets
Non‑current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Reserves
Available‑for‑sale investment revaluation reserve
Total equity
FINANCIAL PERFORMANCE
Profit for the year
Other comprehensive income
Total comprehensive income
2014
$000
2013
$000
670
594,584
595,254
11
11
641
598,054
598,695
24
24
595,243
598,671
576,172
19,465
(394)
595,243
38,706
(861)
37,845
578,780
19,424
467
598,671
38,143
(1,157)
36,986
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
No guarantees have been entered into by the parent entity in relation to the debts of its subsidiaries.
Contingent liabilities of the parent entity
No contingent liabilities have been identified in relation to the parent entity.
20. CONTINGENCIES
At 30 June 2014, there are no material contingent liabilities or contingent assets (2013: $nil).
21. EVENTS OCCURRING AFTER REPORTING DATE
On 7 August 2014, APA Group announced that it will accept the Cheung Kong Group consortium’s offer for Envestra Limited as detailed in the bidder’s statement
dated 20 June 2014. The offer consideration is $1.32 per Envestra share amounting to $783.8 million in gross proceeds and will realise an estimated pre‑tax profit
of $430 million which will be reported in the consolidated results of APA Group in the 2015 year. On the 25 July 2014, APA Group received $20.8 million being the
final dividend of 3.5 cents per share paid by Envestra on that date. APA Group will use the consideration received to fund ongoing growth and investment projects
over the coming 12 to 18 months. APA Group retains its Operations and Management Agreement on the Envestra assets, which runs to 2027.
On 20 August 2014, the Directors declared a final distribution for the 2014 financial year of 2.33 cents per security ($19.5 million). The distribution represents a 2.33
cents per security unfranked profit distribution and nil cents per security capital distribution. The distribution will be paid on 10 September 2014.
Other than the events disclosed above, there have not been any events or transactions that have occurred subsequent to year end that would require adjustment
to or disclosure in the accounts.
113
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED For the financial year ended 30 June 2014 APT INVEST MEN T T RUST AN D ITS CO NTRO LLE D ENTI TI E S
DECLARATION BY THE DIRECTORS
OF AUSTRALIAN PIPELINE LIMITED
For the financial year ended 30 June 2014
The Directors declare that:
(a) in the Directors’ opinion, there are reasonable grounds to believe that APT Investment Trust will be able to pay its debts as and when they become due and
payable;
(b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with
Accounting Standards and giving a true and fair view of the financial position and performance of the Consolidated Entity;
(c)
in the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards as stated in Note 2 to
the financial statements; and
(d) the Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the Directors
Leonard Bleasel AM
Chairman
SYDNEY, 20 August 2014
Robert Wright
Director
114
APA GROUP / ANNUAL REPORT 2014 A PT IN VEST ME NT TRUST AND I TS CO N TR O LLED ENT I TIES
AUDITOR’S INDEPENDENCE DECLARATION
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX: 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
For the financial year ended 30 June 2014
The Directors
Australian Pipeline Limited as responsible entity for
APT Investment Trust
HSBC Building
Level 19, 580 George Street
Sydney NSW 2000
20 August 2014
Dear Directors
Auditor’s Independence Declaration to Australian Pipeline Limited as responsible entity for
APT Investment Trust
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Australian Pipeline Limited as responsible entity for
APT Investment Trust.
As lead audit partner for the audit of the financial statements of APT Investment Trust for the
financial year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
G Couttas
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
115
APT INVEST MEN T T RUST AN D ITS CO NTRO LLE D ENTI TI E S
INDEPENDENT AUDITOR’S REPORT
For the financial year ended 30 June 2014
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX: 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Unitholders of APT Investment Trust
We have audited the accompanying financial report of APT Investment Trust, which comprises the
statement of financial position as at 30 June 2014, the statement of profit or loss and other
comprehensive income, the statement of cash flows and the statement of changes in equity for the year
ended on that date, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity, comprising the Trust
and the entities it controlled at the year’s end or from time to time during the financial year as set out
on pages 102 to 114.
Directors’ Responsibility for the Financial Report
The directors of Australian Pipeline Limited are responsible for the preparation of the financial report
that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to enable
the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements
comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the entity’s
preparation of the financial report that gives a true and fair view, in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
116
APA GROUP / ANNUAL REPORT 2014
A PT IN VESTM ENT TRUST AN D ITS CO NTRO LLE D ENTI T IES
INDEPENDENT AUDITOR’S REPORT
CONTINUED
For the financial year ended 30 June 2014
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of Australian Pipeline Limited, would be in the same terms if
given to the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of APT Investment Trust is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial statements also comply with International Financial Reporting Standards as disclosed
in Note 2.
DELOITTE TOUCHE TOHMATSU
G Couttas
Partner
Chartered Accountants
Sydney, 20 August 2014
117
ADDITIONAL INFORMATION
Additional information required by the Listing Rules of the Autralian Securities Exchange Limited and not provided elsewhere in this report (the information is
applicable as at 29 August 2014).
TWENTY LARGEST HOLDERS
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Custodial Services Limited
Australian Foundation Investment Company Limited
BNP Paribas Noms Pty Ltd
Argo Investments Limited
AMP Life Limited
Bond Street Custodians Limited
BKI Investment Company Limited
UBS Wealth Management Australia Nominees Pty Ltd
Questor Financial Services Limited
Djerriwarrh Investments Limited
Milton Corporation Limited
Navigator Australia Limited
Invia Custodian Pty Limited
Nulis Nominees (Australia) Limited
QIC Limited
BT Portfolio Services Limited
Total for top 20
DISTRIBUTION OF HOLDERS
RANGES
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
NO. OF SECURITIES
136,325,223
134,72 1,166
80,950,830
46,082,166
17,604,599
11,643,32 1
7,959,470
7,358,455
7,073,7 1 9
3,1 86,1 89
2,854,452
2,258,03 1
1,800,928
1,765,000
1,7 19,254
1,704,109
1,286,982
1,230,624
1,208,61 6
1,1 99,238
%
16. 3 1
16. 1 2
9.69
5.5 1
2. 1 1
1 .39
0.95
0.88
0.85
0.38
0.34
0.27
0.22
0.2 1
0.2 1
0.20
0. 15
0. 15
0. 14
0. 14
469,932,372
56.23
NO. OF HOLDERS
%
NO. OF SECURITIES
1 6 1
8,076
1 1,649
31 ,928
28,290
80,104
0.20
10.08
14.54
39.86
35.32
496,254,385
159,1 63,99 1
84, 1 78,700
85,036,280
1 1, 1 1 7,4 5 1
%
59.38
19.04
10.07
10.1 8
1.33
100.00
835,750,807
100.00
2,310 holders hold less than a marketable parcel of securities (market value less than $500 or 65 securities based on a market price on 29 August 2014 of $7.75).
SUBSTANTIAL HOLDERS
By notice dated 11 August 2014, National Nominees as Custodian for Unisuper Limited advised that it had an interest in 67,731,922 ordinary securities.
VOTING RIGHTS
On a show of hands, each holder has one vote.
On a poll, each holder has one vote for each dollar of the value of the total interests they have in the scheme.
ON-MARKET BUY-BACK
There is no current on‑market buy‑back.
118
APA GROUP / ANNUAL REPORT 2014 ADDITIONAL INFORMATION
CONTINUED
CALENDAR OF EVENTS
SECURITYHOLDER DETAILS
Final distribution FY2014 record date
30 June 2014
Final distribution FY2014 payment date
10 September 2014
Annual meeting
Interim result announcement
24 October 2014
25 February 2015*
It is important that Securityholders notify the APA Group registry immediately
if there is a change to their address or banking arrangements. Securityholders
with enquiries should also contact the APA Group registry.
DISTRIBUTION PAYMENTS
Interim distribution FY2015 record date
31 December 2014*
Distributions will be paid semi‑annually
in March and September.
Interim distribution FY2015 payment date
18 March 2015*
Securityholders will receive annual tax statements with the final distribution in
*Subject to change
ANNUAL MEETING DETAILS
Date:
Friday, 24 October 2014
Venue: City Recital Hall
2 Angel Place, Sydney NSW
Time:
10.30am. Registration commences at 10.00am
ASX LISTING
An APA Group security comprises a unit in Australian Pipeline Trust and a unit
in APT Investment Trust. These units are stapled together to form a stapled
security which is listed on the ASX (ASX Code: APA). Australian Pipeline
Limited is the Responsible Entity of those trusts.
September.
Payment to Securityholders residing in Australia and New Zealand will be made
only by direct credit into an Australian or New Zealand bank account.
Securityholders with enquiries should contact the APA Group registry.
ONLINE INTERACTIVE REPORTS
APA Group’s 2014 Annual Report, Annual Review and Sustainability Report are
available in an easy to view interactive format at apa.com.au.
ONLINE INFORMATION
Further information on APA is available at apa.com.au, including:
– Results, market releases and news
– Asset and business information
– Corporate responsibility and sustainability reporting
– Securityholder information such as the current APA security price,
APA GROUP RESPONSIBLE ENTITY AND REGISTERED OFFICE
distribution and tax information.
ELECTRONIC COMMUNICATION
Securityholders can elect to receive communication from APA electronically by
registering their email address with the APA Group registry.
Electing to receive annual reports electronically will reduce the adverse impact
we have on the environment.
Australian Pipeline Limited
ACN 091 344 704
Level 19, 580 George Street
Sydney NSW 2000
PO Box R41
Royal Exchange NSW 1225
Telephone: +61 2 9693 0000
Facsimile: +61 2 9693 0093
Website: apa.com.au
APA GROUP REGISTRY
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Locked Bag A14
Sydney South NSW 1235
Telephone: +61 1800 992 312
Facsimile: +61 2 9287 0303
Email: apagroup@linkmarketservices.com.au
Website: linkmarketservices.com.au
DISCLAIMER APA Group comprises two registered investment schemes, Australian Pipeline Trust (ARSN 091 678 778) and APT Investment Trust (ARSN 115 585 441), the securities of which are
stapled together. Australian Pipeline Limited (ACN 091 344 704) is the responsible entity of Australian Pipeline Trust and APT Investment Trust.
Please note that Australian Pipeline Limited is not licensed to provide financial product advice in relation to securities in the APA Group. This publication does not constitute financial product advice
and has been prepared without taking into account your objectives, financial situation or particular needs. Before relying on any statements contained in this publication, you should consider the
appropriateness of the information, having regard to your own objectives, financial situations and needs and consult an investment adviser if necessary.
Whilst due care and attention have been used in preparing this publication, certain forward looking statements (including forecasts or projections) are made in this publication which are not based
on historical fact and necessarily involve assumptions as to future events and analysis, which may or may not be correct. These forward looking statements should not be relied upon as an indication
or guarantee of future performance.
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