apa group
annual report.
2017
energy. connected.
our vision.
to connect Australia to
Maintain APA’s
financial strength
our strategy.
Growth focus to enhance
our portfolio of:
gas transmissions pipelines
power generation:
gas-fired and renewables
mid-stream energy infrastructure
assets, including gas storage and
gas processing
and by exploring opportunities
in North America
Continue to
strengthen asset
management,
development
and operational
capabilities
APA Group Annual Report 2017
its energy future.
APA is a business that is committed to delivering connected and sustainable
energy solutions that are safe, reliable, innovative and cost-effective so that all our
stakeholders are better off as we work together with our customers to create a
better energy future for Australia.
During FY2017, we announced in excess of $1.2 billion of committed projects in areas
of pipeline extensions and expansions, renewables and midstream assets.
We have been investing in energy infrastructure for 17 years and will continue to
do so as our energy infrastructure assets will play an important role in reducing
Australia’s carbon footprint, as energy consumption shifts from carbon-intensive
fuels such as coal, to more carbon-efficient fuels such as natural gas and renewables.
contents.
FY2017 IN REVIEW
Chairman’s Report
Managing Director’s Report
APA Leadership
Highlights
AUSTRALIAN PIPELINE TRUST
Directors’ Report
Remuneration Report
Consolidated Financial Statements
APT INVESTMENT TRUST
Directors’ Report
Consolidated Financial Statements
ADDITIONAL INFORMATION
FIVE YEAR SUMMARY
INVESTOR INFORMATION
SUSTAINABILITY REPORT
2
4
6
8
10
36
50
106
110
131
132
133
S1
Information contained in this document is current as at 23 August 2017.
11
APA Group Annual Report 2017 chairman’s report.
APA is a business that is committed to investing in and connecting
to Australia’s energy future.
From humble beginnings in 2000, APA has grown into
a top 50 Australian listed company. We began as a
$1 billion company (by total assets) owning the Moomba
Sydney Pipeline and interests in several other pipelines.
Today, APA owns and/or operates over $20 billion worth
of assets across gas pipelines, storage, processing, network
distribution, gas-fired and renewable energy and electricity
interconnectors. We have achieved this through execution
of a consistent and prudent strategy – building on our core
capabilities and financial strength to grow our portfolio of
energy infrastructure assets, whilst increasing the value of
our Securityholders’ investment. This strategy of long term
growth has served APA and our Securityholders well for
almost two decades.
Financial results
For FY2017, APA delivered another solid financial
performance. Revenue increased by 14.0 per cent to
$1,888.3 million 1. Earnings before interest, tax, depreciation
and amortisation (EBITDA) increased by 10.5 per cent to
$1,470.1 million. Net profit after tax increased by 32.0 per
cent to $236.8 million.
Our business model delivers highly predictable results in
all market conditions. Given the continued challenge in
FY2017 of low commodity prices for many of our customers,
APA has again demonstrated the resilience of our prudent
approach to growth. We are in business to meet the needs
of our customers, working with them to deliver innovative
and cost effective solutions. This in turn generates returns
for our investors.
The total distributions for FY2017 of 43.5 cents per security
represent a 4.8 per cent or 2.0 cents per security increase
over FY2016. Securityholders also benefitted from a total of
4.0 cents per security of franking credits attached to those
distributions. As per our distribution policy, distributions
have been fully covered by operating cash flows with an
appropriate amount of those cash flows retained within
the business to support ongoing growth.
And we continue to grow. What has also been as pleasing
as our sound results, is the fact that we have announced
$1.2 billion worth of committed growth projects during
the year, which will add to APA’s cash flow in future years.
Operating cash flow for FY2017, increased by 12.9 per
cent to $973.9 million. Given there were no new securities
issued during the year, operating cash flow per security also
increased by 12.9 per cent to 87.4 cents. We continue to do
what we say we will do and that is to grow the business for
the benefit of all stakeholders.
Another busy year
APA’s Energy Infrastructure segment contributed 94.6
per cent of group EBITDA (before corporate costs) in
FY2017. This segment includes the interconnected energy
infrastructure footprint including gas transmission, gas
compression, processing and storage assets, renewable
energy power generation and gas-fired power generation.
The increase in FY2017 earnings for this segment was
primarily due to the full year contribution from the Eastern
Goldfields Pipeline in Western Australia, the Diamantina
and Leichhardt Power Stations in Queensland and the
2
1) Total revenue, excluding pass-through.
APA Group Annual Report 2017 Ethane Pipeline in New South Wales. The benefit of our
diverse asset and geographical footprint is clearly evident
in our results.
Add to this the committed projects announced during
the year, including three renewable energy projects, gas
processing facilities, a gas-fired power station and two
greenfield pipelines - and indeed it has been a busy year.
Working with stakeholders
Maintaining our existing operations and developing new
projects not only requires capital and technical skills, but
also investment in relationships. Our achievements during
the year around community stakeholder engagement are
detailed in APA’s FY2017 Sustainability Report. Within the
Directors’ Report are also examples of our engagement
with other stakeholders during the year including customers
and other businesses, federal and state entities, emergency
response bodies and other utility teams and local council
and economic development organisations.
We recognise that as a business, we have an impact on a
broad range of stakeholders. And we work collaboratively to
continue to create value and maintain our reputation as a
company that does what it says it’s going to do.
Energy policy
Energy policy continued to be a hotly debated topic
during the year, with a number of reports finalised over
the last two years. A number of the regulatory reform
initiatives around gas markets are being developed and
implemented by the Gas Market Reform Group led by Dr
Michael Vertigan. One of these initiatives is the Information
Disclosure and Commercial Arbitration regime.
APA continues to be actively engaged in these reform
initiatives. Amendments to the National Gas Rules giving
effect to the new Information Disclosure and Commercial
Arbitration Regime came into effect on 1 August. The new
regime is intended to facilitate more balanced commercial
negotiations through additional information disclosure
with commercial arbitration as a back stop in the event
negotiations are unsuccessful. APA has, and will continue to
work with our customers to ensure commercial outcomes
are sustainable and mutually beneficial for both parties.
To-date, APA has invested over $13 billion in building
and developing a network of over 15,000 kilometres of
interconnected gas pipelines across mainland Australia to
give customers the flexible seamless services they require,
enabling the industry to grow. But more investment is still
required to bring additional gas supply into the market. This
will put downward pressure on gas prices and ultimately
energy prices in the market.
Dr Finkel’s Independent Review into the Future Security
of the National Electricity Market called for increased
system security and future reliability of the National
Electricity Market as well as lower emissions for Australia
and rewarding consumers. APA continues to believe that
gas is critical to future energy security and affordability
in this country. Gas emits half as much emissions as coal
and moreover, gas-fired electricity generation can respond
quickly to meet peak demand.
APA agrees that climate change is a real and current issue
before the Australian energy sector. As international and
domestic carbon policies and markets mature, APA’s energy
infrastructure assets will play an important role in reducing
Australia’s carbon footprint.
Given the global challenges ahead as we transition to
a lower carbon economy, we understand the need for
investors to have access to objective disclosure of the
climate change risks, opportunities and management
strategies before APA. To achieve this, we have elected
to follow as far as practicable, the framework recently
released by the Task Force on Climate-related Financial
Disclosure by reporting on governance, strategy and risk
management measures to address risks posed by climate
change. You can read more about APA’s approach on our
website as well as within the Directors’ and Sustainability
Reports.
Good governance
Given the structure of APA, there are certain governance
and remuneration related obligations under the
Corporations Act 2001 and the ASX Listing Rules that do
not normally apply to APA, but which would ordinarily apply
to ASX listed public companies. The Board is committed
to the highest standards of corporate governance, and
on 1 July 2017 APA adopted a corporate governance
framework which is designed to be as consistent, as far as
is practicable, with the best practice procedures of public
listed companies.
The new APA Corporate Governance Framework gives
Securityholders a number of additional entitlements
in relation to governance and remuneration matters.
This includes giving Securityholders the right to remove
Directors from the Board, and to also vote on APA’s
annual Remuneration Report. If at two consecutive
Annual Meetings at least 25% of the votes cast on the
Remuneration Report are voted against its adoption, then
the ‘two strikes’ mechanism under the Corporations Act
would be triggered, giving Securityholders the opportunity
to spill the Board. A summary of the Corporate Governance
Framework and those additional entitlements is available
on APA’s website.
The Annual Meeting this year will be held at the ASX
Auditorium, 18 Bridge Street, Sydney on Friday, 27 October
2017. This is a change of venue from last year. Full details
will be included in the Notice of Meeting, which will be sent
to Securityholders in September.
Outlook
The Board is confident that APA remains well placed to
continue delivering sustainable and profitable growth for
you, our Securityholders.
Prospects for growth are strong, with over $1.2 billion of
committed projects announced during FY2017, of which
$800 million is expected to be spent during FY2018. These
projects will commence generating revenue from FY2019.
With this in mind, our guidance for FY2018 is for EBITDA
of $1,475 million to $1,510 million and net interest costs of
$525 million to $535 million. Total distributions per security
are expected to be in the order of 45.0 cents per security,
prior to the benefit of any franking credits that may arise as
a result of the filing of the FY2017 tax return.
On behalf of the Board, I would like to thank our Managing
Director Mick McCormack, his leadership team and APA’s
people for their contributions this year.
I also thank you, our Securityholders, for your continued
support.
Len Bleasel AM
Chairman
3
APA Group Annual Report 2017
managing director’s report.
I am pleased to report another solid financial result for APA, and with the
$1.2 billion of growth projects committed during FY2017, we can expect
this to continue.
Working with our customers to meet their needs has grown
both our business and Australia’s energy market over the
last 17 years. We pride ourselves on APA’s growth strategy
that not only generates stable and predictable returns for
our Securityholders, but allows us to continue to do what
we say we will do. That is, to invest in Australia’s energy
future for the benefit of both customers and consumers.
FY2017 has seen energy policy dominating the headlines.
We all want energy to be affordable, reliable and lower in
carbon emissions and we understand the government’s
desire to reduce energy prices overall. We have had
numerous regulatory interventions thrust upon the industry
in quick succession with minimal industry consultation.
While we understand the government’s objectives, such
measures cannot work effectively without appropriate
industry input and consultation. They also need to be left to
work, so rolling out successive reform upon reform simply
does not provide the breathing space to determine whether
the initiatives have worked. APA will continue to work with
all relevant stakeholders, including customers, industry
and government to realise immediate as well as longer
term solutions so that the domestic market benefits from
cheaper gas.
One such reform initiative that came into effect from
1 August 2017 is the new Information Disclosure and
Commercial Arbitration Regime. This regime is intended
to facilitate more balanced commercial negotiations with
a back stop of commercial arbitration. While the regime
is new, we will do what we have always done, and that is
enter into commercial arrangements with our customers
that benefit both parties and that sustainably grow the
gas market.
As Australia’s leading energy infrastructure business, APA
is well positioned to facilitate connecting Australia to its
energy future in the dynamic energy environment. Given
our asset footprint, diverse skills and the reach of our
stakeholder relationships, we recognise and take seriously
our obligation to be part of the solution for all Australians.
We have been doing just that. In recent months, we
have progressed and completed agreements that will
facilitate more gas for domestic users. These include
enabling flexibility in existing contracts on the South West
Queensland Pipeline and the Moomba Sydney Pipeline
that will deliver gas to southern markets; a new contract
on the Roma Brisbane Pipeline that will support gas being
delivered more than 2,500 kilometres away in South
Australia to the Pelican Point Power Station; contracts on
the Victorian-Northern Interconnect to deliver gas from
Longford to Sydney for two industrial customers; and a
number of other short term contracts at a discount to our
published tariff.
Gas is a critical fuel to provide back-up generation as
Australia moves to greater reliance on renewables. Making
gas more affordable so it can play this critical role is key.
And the solution to gas affordability is quite simple, we
need more gas supplies to be developed. The execution
is more challenging. Australia is rich with natural gas
supplies however, gas production moratoria and approval
restrictions in certain States have restricted gas supplies
putting upward pressure on prices. At APA, we are doing
all we can, working with our customers, to get more gas
to market. Our efforts include progressing the pipeline
development in New South Wales connecting the proposed
Narrabri gas supplies to ease the domestic market shortage
and working with producers in Queensland to develop
resources that could potentially satisfy east coast gas
demand for many years.
Robust strategy
The FY2017 results demonstrate the soundness of APA’s
strategy. All key financial metrics - revenue, EBITDA, net
profit after tax and operating cash flow – increased,
whilst pleasingly, our corporate costs reduced. The results
continue to reflect the benefit of our investments and
innovation from past years. In FY2017, we enjoyed full
year contributions from three assets that commenced as
investments before being fully acquired by APA in FY2016
– the Diamantina and Leichhardt Power Stations and
the Ethane Pipeline. The results also reflect a full year
contribution from APA’s latest new build pipeline, the
Eastern Goldfields Pipeline in Western Australia which is an
extension to three other existing connected pipelines now
servicing many customers.
APA’s capital and investment expenditure for FY2017
totalled $377.5 million. During the year, we completed
the latest stage of the Victorian-Northern Interconnect
expansion project which has expanded the bi-directional
capacity between Victoria and New South Wales; improved
efficiency of the East Coast Grid by completing the
Moomba Interconnect project; and commenced work on the
multitude of growth projects announced during the period.
Growth continues
At APA’s FY2016 results, we indicated $1.5 billion of organic
growth opportunities had been identified as potential
projects over the following three years. I am very pleased
to say that one year on, we have committed to $1.2 billion
of these projects. These will require $800 million of growth
capital investment over the next 12 months. We estimate
that we will see long term revenue uplift from FY2019, with
FY2020 seeing up to a $200 million increase in revenue
from these growth projects.
FY2018 and into early FY2019 will be a hive of construction
activity for APA as we progress the seven major projects –
the 50km Reedy Creek Wallumbilla Pipeline in Queensland;
20MW Emu Downs Solar Farm and 130MW Badgingarra
Wind Farm in Western Australia; the 110MW Darling Downs
Solar Farm in Queensland; 198km new build Yamarna Gas
Pipeline and 45MW gas-fired Yamarna Power Station in
Western Australia; and finally refurbishment of the Orbost
Gas Processing Facility in Victoria. A necessary part of the
solution to Australia’s current energy woes is to bring on
more gas supply.
4
APA Group Annual Report 2017 Long term thinking
APA acknowledges that climate change is a real risk and we
support Australia’s commitment under the Paris Agreement
to reduce emissions by between 26 and 28 per cent on
2005 levels by 2030. However, achieving these emissions
reductions will require major changes to Australia’s energy
mix for power generation.
Gas currently accounts for approximately 40 per cent
of registered mid merit and peaking power generation
capacity in the National Electricity Market. Renewables will
certainly be part of the future energy mix, hence why APA
began its investment in renewable power generation almost
10 years ago – but the technology simply isn’t where it
needs to be to enable renewables to be our primary source
of reliable, cost effective energy. Similarly, today’s battery
technology is just not capable of delivering the scale and
reliability Australia needs and at a cost we can afford. With
coal increasingly unattractive to users and most politicians
– gas has well and truly come to the fore as the energy
source this country needs and from a practical perspective,
Australia has sufficient reserves and the infrastructure to
get it to where it is needed.
Our infrastructure is built for the long term. This meets our
customers’ needs for long term supply. APA incorporates
sustainable processes into the way we approach our
business with other stakeholders – whether it is sustainable
returns for our investors; safe and engaging work practices
and facilities for our employees; or ensuring we only leave a
positive community experience and minimal environmental
footprint.
I am pleased to report an improvement in our safety
statistics in FY2017. These continue the downward trend
over the past five years. The Sustainability Report is
contained in this report and provides further details on our
FY2017 performance and approach to risk management.
What’s ahead
APA’s focus is on delivering smart energy solutions for our
customers. We also generate energy from gas, wind and
as mentioned earlier, solar energy will soon be added to
our core capabilities of energy infrastructure operation
and ownership. Additionally, we facilitate the distribution
of energy to over 1.3 million consumers. We have grown
rapidly in the nearly two decades of operating, increasing
our skillset and asset portfolio to meet our customers’
growing requirements to supply Australia’s energy needs.
And there is still more to do, with plenty of growth
opportunities ahead.
It’s been an exciting and challenging year, but our results
demonstrate the resilience of our business and the benefit
of strong foundations. I thank APA’s 1,600 employees for
their significant contribution and continued enthusiasm
to grow our business.
Mick McCormack
Chief Executive Officer and Managing Director
5
APA Group Annual Report 2017 apa group board.
1
2
3
4
5
6
7
8
1
Leonard Bleasel AM
FAICD FAIM
Independent Chairman
APPOINTED: 28 August 2007
APPOINTED CHAIRMAN:
30 October 2007
Leonard (Len) 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 to 2001.
Len’s past appointments have
included lead non-executive Director
of QBE Insurance Group Limited and
Chairman of Foodland Associated
Limited, ABN AMRO Australia
Holdings Pty Limited, Solaris Power,
Natural Gas Corporation Holdings
Ltd (New Zealand), Elgas Ltd,
East Australian Pipeline Ltd, the
Advisory Council for CIMB Securities
International (Australia) Pty Ltd and
the Taronga Conservation Society
Australia. He was also a Director of
St George Bank Limited, O’Connell
Street Associates Pty Limited and
Gas Valpo (Chile).
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.
5
Michael Fraser
BCom FCPA FTI MAICD
Independent Director
(since 19 July 2016)
APPOINTED: 1 September 2015
Michael has more than 30 years’
experience in the Australian energy
industry. He has held various executive
positions at AGL Energy culminating
in his role as Managing Director and
Chief Executive Officer for the period
of seven years until February 2015.
Michael is a Director of Aurizon
Holdings Limited. He is also a former
Chairman of the Clean Energy
Council, Elgas Limited, ActewAGL
and the NEMMCo Participants
Advisory Committee, as well as a
former Director of Queensland Gas
Company Limited, the Australian Gas
Association and the Energy Retailers
Association of Australia.
Michael is a member of the People
and Remuneration Committee,
a member of the Audit and Risk
Management Committee and
a member of the Nomination
Committee.
6
2
Michael McCormack
BSurv GradDipEng
MBA FAICD
Chief Executive Officer and
Managing Director
APPOINTED CEO: 1 July 2005
APPOINTED MD: 1 July 2006
Michael (Mick) has over 30 years’
experience in the energy 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 Australia’s
natural gas pipelines and gas
distribution systems. His experience
extends to gas-fired and renewable
energy power generation.
Mick is a former Director of Envestra
(now Australian Gas Networks), the
Australian Pipeline Industry Association
(now Australian Pipelines and Gas
Association) and the Australian
Brandenburg Orchestra.
6
Debra Goodin
BEc FCA MAICD
Independent Director
APPOINTED: 1 September 2015
Debra (Debbie) has considerable
experience as a non-executive director,
including as a member and Chair of
Board Audit and Risk Committees.
She is currently a Director of ASX-
listed companies Ten Network
Holdings Limited, Senex Energy
Limited and oOh!media Limited, and
chairs the Audit and Risk Committees
of each of those Boards.
Debbie also has extensive executive
experience in operations and
corporate development, including with
engineering and professional services
firms, and is a Fellow of Chartered
Accountants Australia and New
Zealand.
Debbie is a member of the Audit
and Risk Management Committee,
a member of the Health Safety
and Environment Committee
and a member of the Nomination
Committee
3
Steven Crane
BComm FAICD SF Fin
Independent Director
4
John Fletcher
BSc MBA FAICD
Independent Director
APPOINTED: 1 January 2011
APPOINTED: 27 February 2008
John has over 35 years’ experience
in the energy industry, having held a
number of executive positions in AGL
(including Chief Financial Officer)
prior to his retirement in 2003. John is
a Director of Essential Energy and has
previously been a Director of Integral
Energy, Natural Gas Corporation
Holdings Ltd (New Zealand), Foodland
Associated Limited, Sydney Water
Corporation and Alinta Energy 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 People
and Remuneration Committee,
a member of the Audit and Risk
Management Committee and
a member of the Nomination
Committee.
8
Patricia McKenzie
LLB FAICD
Independent Director
APPOINTED: 1 January 2011
Patricia has considerable expertise
and experience in energy market
regulation and, as a qualified solicitor,
extensive corporate legal experience.
She is currently Chair of Essential
Energy and Healthdirect Australia.
Patricia was formerly a Director of
Macquarie Generation, TransGrid
and the Australian Energy Market
Operator Limited (AEMO), the
national energy market operator
for electricity and gas, and formerly
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, a member of the People
and Remuneration Committee
and a member of the Nomination
Committee.
Steven (Steve) 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 and the Taronga
Conservation Society Australia.
He was formerly Chairman of Adelaide
Managed Funds Limited and Investa
Property Group Limited, a Director
of Bank of Queensland Limited,
Transfield Services Limited, 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 for CIMB Securities
International (Australia) Pty Ltd.
Steve is the Chairman of the Audit
and Risk Management Committee,
a member of the People and
Remuneration Committee and a
member of the Nomination Committee.
7
Russell Higgins AO
BEc FAICD
Independent Director
APPOINTED: 7 December 2004
Russell 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 and Argo
Investments Limited. He is a former
Chairman of the Global Carbon
Capture and Storage Institute, the
CSIRO Energy Transformed Flagship
Advisory Committee and Snowy
Hydro, as well as a former Director
of Leighton Holdings Limited,
Ricegrowers Limited (trading as
SunRice), St James Ethics Foundation,
Australian Biodiesel Group Limited,
EFIC and the CSIRO. He was also
previously a member of the
Prime Ministerial Task Group on
Emissions Trading.
Russell is Chairman of the Health
Safety and Environment Committee,
a member of the Audit and Risk
Management Committee and
a member of the Nomination
Committee.
APA Group Annual Report 2017
apa group senior management.
9
10
11
12
13
14
15
10
Peter Fredricson
BCom CA GAICD
Chief Financial Officer
Peter is responsible for all financial
aspects of APA Group, including
accounting and financial reporting,
financial compliance and governance,
taxation, treasury, balance sheet
management, capital strategy,
insurance, Investor Relations and
Information Technology.
Peter joined APA Group in June 2009.
He has considerable expertise in the
listed energy infrastructure sector and
over 30 years’ experience in
senior financial roles in financial
services and investment banking
organisations across Australia, New
Zealand and Asia.
13
Elise Manns
BBus CAHRI
Group Executive
Human Resources
Elise is responsible for managing APA
Group’s Human Resources division,
which covers APA’s people strategy,
safety and environment performance
and governance and all activities
relating to APA’s people, their
development, health, wellbeing and
employment arrangements.
Elise joined APA Group in May 2012 as
General Manager Human Resources
and in October 2015 joined the
Executive team becoming Group
Executive Human Resources. Elise has
a strong background in employment
relations and workplace change,
organisational restructuring and
business improvement. Elise has over
25 years’ human resources experience
in Australia’s heavy manufacturing,
engineering, steel and utilities sectors.
11
Ross Gersbach
BBus MAICD
Chief Executive
Strategy & Development
Ross is responsible for APA Group’s,
strategy, energy investments,
regulatory and government affairs,
environmental development, and
mergers and acquisitions.
He has responsibility for further
enhancing APA Group’s portfolio of
assets that complement the value
of its infrastructure, including APA
Group’s investments in midstream gas
infrastructure, and the operation and
development of these assets.
Ross was previously a Director of APA
Group from 2004 to 2008 joining
the management team in April 2008
where he was responsible for all
commercial aspects of APA Group. He
has over 20 years’ experience in senior
positions across a range of energy
related sectors, covering areas such as
infrastructure investments, mergers
and acquisitions and strategic
developments. Additionally, Ross
has extensive commercial experience
and has managed a portfolio of
infrastructure assets in the natural
gas and electricity distribution
network sector.
14
Sam Pearce
BSc LLB MBA
Group Executive
Networks and Power
Sam is responsible for the operation
and management of APA Group’s fully
and minority owned gas distribution
and power generation and electricity
transmission assets, as well as for
Australian Gas Networks’ assets.
Sam joined APA Group in July
2008 and was formerly General
Manager Corporate Development
and Investments. Sam has over 20
years’ experience in the energy sector,
covering mergers and acquisitions,
investment management, commercial
and business development, greenfields
project development, strategy and
operations.
9
Nevenka Codevelle
BCom LLM GAICD
Company Secretary and General
Counsel
Nevenka is responsible for APA
Group’s Secretariat and Legal division.
The division comprises the company
secretarial, legal, and group risk and
compliance functions.
Nevenka joined APA Group in February
2008 and held the role of General
Counsel since June 2012. In October
2015, she also assumed the role of
Company Secretary and joined the
Executive team. Nevenka is a lawyer
with over 20 years’ experience in energy
and other infrastructure industries,
with particular focus on project
development, mergers and acquisitions,
competition and industry regulation.
12
Kevin Lester
BEng(Civil) MIEAust
GAICD
Group Executive
Infrastructure Development
Kevin is responsible for the
project development, engineering,
procurement and delivery of APA
Group’s infrastructure expansion
projects. This division also has
responsibility for providing asset
engineering services, the technical
regulation of all pipeline related assets,
procurement, engineering services and
the provision of land, approvals and
asset protection services across APA.
Kevin joined APA Group in August 2012
continuing a career in the management
of major infrastructure projects,
including energy infrastructure. Kevin is
a Director and a Past President of the
Australian Pipelines and Gas Association.
15
Rob Wheals
BCom CA GAICD
Group Executive
Transmission
Rob is responsible for the
management of APA Group’s
transmission and gas storage assets
including all aspects of commercial
and operational performance.
Rob joined APA Group in September
2008 and is responsible for managing
APA’s customers and revenue
contracts, as well as growing APA’s
gas transmission revenues. Rob is
also responsible for managing all
operational aspects of APA’s 15,000
kilometres of owned and operated
gas transmission pipelines and gas
storage facilities. Prior to joining APA,
Rob had over 15 years of experience
in Australia and internationally,
predominantly in telecommunications,
including roles in finance, commercial,
strategy, infrastructure investments
and M&A, as well as regulatory.
7
APA Group Annual Report 2017
highlights FY2017.
$1,470.1 m
earnings before interest, tax,
depreciation and amortisation
(EBITDA)
+10.5% on FY2016
$1.2 b
committed projects
announced in FY2017
10.2 market capitalisation
. b
$
as at 30 June 2017
$377.5 m
total capital and investment
expenditure in FY2017
~$800m expected in FY2018
$973.9 m
operating cash flow
+12.9% on FY2016
+260 MW
announced projects to be
added to APA’s renewables
portfolio
43.5c
FY2017 total distribution
per security
+4.8% on FY2016 plus total
franking credits of 4.0 cents
per security
+248 km
of committed greenfield
pipelines under construction
8
APA Group Annual Report 2017
highlights FY2017. continued.
normalised 1 business performance
EBITDA
($m)
Operating
cash flow 2
($m)
Revenue
excluding
pass-through 3
($m)
Operating cash
flow per security 4
(cents)
Distributions
per security
(cents)
Total
assets
($b)
4
7
9
2
6
8
8
8
8
,
1
6
5
6
,
1
4
.
7
4 8
7
7
.
.
7
4
1
.
8
4
1
.
0
5
1
10.2
. b
$
0
7
4
,
1
1
3
3
,
1
2
2
7 8
4
7
2
6
6
.
0
6
5
5
4
5
3
3
4
0
4
4
9
1
1
,
1
3
9
0 9
2
9
.
8
4
8 5
0
5
.
.
5
3
5 4
.
1
4
.
0
8
3
.
5
5
3
.
3
6
3
0
7 8
7
.
.
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
financial results
$ million
Revenue
Revenue excluding pass-through 3
EBITDA
Profit after tax
Operating cash flow 2
Financial position
Total assets
Total drawn debt 5
Total equity
Financial ratios
Operating cash flow per security 4 (cents)
Earnings per security (cents)
Distribution per security (cents)
Distribution payout ratio (%)
Gearing 6 (%)
Interest cover ratio (times)
30 June 2017
30 June 2016
Changes
2,326.4
1,888.3
1,470.1
236.8
973.9
15,046.0
9,249.7
3,978.2
87.4
21.3
43.5
49.8
67.4
2.8
2,094.3
1,656.0
1,330.5
179.5
862.4
14,842.7
9,037.3
4,029.1
77.4
16.1
41.5
53.6
66.4
2.6
11.1%
14.0%
10.5%
32.0%
12.9%
1.4%
2.4%
(1.3%)
12.9%
32.3%
4.8%
nm
nm
nm
1) Normalised financial results exclude significant items.
2) Operating cash flow = net cash from operations after interest and tax payments.
3) 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 and passed on
to Australian Gas Networks Limited (AGN) and GDI in respect of the operation of the AGN and GDI assets respectively.
4) Between 23 December 2014 and 28 January 2015, APA issued a total of 278,556,562 new ordinary securities, resulting in total securities on issue of 1,114,307,369. The
weighted average number of securities for FY2015 has been adjusted in accordance with the accounting principles of AASB133: ‘Earnings per Share’, for the rights issue.
5) APA’s liability to repay debt at relevant due dates of the drawn facilities. This amount represents current and non-current borrowings as per balance sheet and is adjusted
for deferred borrowing costs, the effect of unwinding of discount, unrealised foreign exchange differences reported in equity and deducting other financial liabilities that are
reported as part of borrowings in the balance sheet.
6) Gearing = net debt divided by net debt plus equity.
9
APA Group Annual Report 2017
directors’ report.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
Australian Pipeline Trust and its Controlled Entities (ARSN 091 678 778)
Directors’ Report for the year ended 30 June 2017
The Directors of Australian Pipeline Limited (Responsible Entity) submit their financial report of Australian Pipeline Trust
(APT) and its controlled entities (together APA or Consolidated Entity) for the year ended 30 June 2017. This report refers to
the consolidated results of APT and APT Investment Trust (APTIT).
1. Directors
The names of the Directors of the Responsible Entity during the year and since the year end are:
Leonard Bleasel AM
Chairman
Michael (Mick) McCormack
Chief Executive Officer and Managing Director
Steven (Steve) Crane
John Fletcher
Michael Fraser
Debra (Debbie) Goodin
Russell Higgins AO
Patricia McKenzie
The Company Secretary of the Responsible Entity during and since the current period is:
Nevenka Codevelle
2. 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:
– energy infrastructure, comprising gas transmission, gas storage and processing, gas-fired and renewable energy power
generation businesses located across Australia;
– asset management services for the majority of APA’s energy investments and for third parties; and
– energy investments in unlisted entities.
3. State of Affairs
No significant change in the state of affairs of APA occurred during the financial year.
4. 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 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.
5. About APA
5.1 APA overview
APA is Australia’s leading energy infrastructure business. It owns and/or operates in excess of $20 billion of energy infrastructure
assets across Australia, and operates these with a skilled workforce of in excess of 1,600 people.
APA has a diverse portfolio of over 15,000 kilometres 1 of gas transmission pipelines that spans every state and territory
on mainland Australia and delivers about half the nation’s natural gas. It also owns or has interests in other related energy
infrastructure assets such as gas storage facilities, gas processing facilities, gas compression facilities and renewable and gas
fired power generation assets.
APA has ownership interests in, and/or operates, GDI (EII) Pty Ltd (GDI) and Australian Gas Networks Limited gas distribution
networks, which together own approximately 28,400 kilometres of gas mains and pipelines, and approximately 1.3 million gas
consumer connections.
APA also has interests in, and operates, other energy infrastructure assets and businesses, including SEA Gas Pipeline,
Mortlake Gas Pipeline, Energy Infrastructure Investments (EII) and EII2.
APA is listed on the Australian Securities Exchange (ASX) and is included in the S&P ASX 50 Index. Since listing in June 2000,
APA’s market capitalisation has increased more than 19-fold to $9.37 billion (as at 22 August 2017), and it has achieved
securityholder returns of 17.4% 2 per annum on a compounded basis since listing on 13 June 2000 through to 18 August 2017.
1) Owned and or operated by APA.
2) Total securityholder return is the capital appreciation of APA’s security price, adjusted for capital management actions (such as security splits and consolidations)
and assuming reinvestment of distributions at the declared distribution rate per security. Figures quoted are sourced from IRESS.
10
APA Group Annual Report 2017
5.2 APA objectives and strategies
APA will continue to be a leading energy infrastructure business, developing, owning and operating energy infrastructure. We are
committed to delivering connected and sustainable energy solutions that are safe, reliable, innovative and cost-effective so that all of
our stakeholders are better off as we work together to create a connected and sustainable energy future. Our strategy is as follows:
– Our growth focus is to enhance our portfolio:
– of gas transmission pipelines;
– of power generation: gas-fired and renewable;
– of midstream energy infrastructure assets, including gas storage and gas processing; and
– by exploring opportunities in North America.
– Continue to strengthen asset management, development and operational capabilities.
– Maintain APA’s financial strength.
These strategies are underpinned by our values (‘STARS’) that guide our decision-making and how we go about our business:
– Safe – We will maintain a safe environment and a professional workplace where staff work collaboratively, are valued and
treated with respect.
– Trustworthy – We act with honesty and integrity and accept individual and collective responsibility for the delivery of all
business outcomes. We do what we say we are going to do.
– Adaptable – We continually respond and adapt to our changing environment by innovating, modifying our behaviour and
continually improving our processes and systems to take advantage of opportunities to enhance, improve and grow our business.
– Results – We consistently meet our commitments and deliver excellent results to the benefit of our employees, customers,
investors and the community through tenacity and perseverance.
– Service – We are committed to high quality service delivery achieved through listening, understanding, anticipating and
responding to our customer needs.
5.3 APA assets and operations
APA is a major participant in developing, owning and operating natural gas transportation and energy infrastructure assets
across Australia.
APA’s assets and operations are reported in three principal business segments:
– Energy Infrastructure, which includes all of APA’s wholly or majority owned pipelines, gas storage assets, gas compression
and processing assets and gas-fired and renewable energy power generation assets;
– Asset Management, which provides commercial, operating services and/or asset maintenance services to its energy
investments and third parties 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.
APA GROUP ASSETS AND OPERATIONS
31
NT
17
31
8
33
SA
QLD
2
4
9
10
5
6
3
1
7
NSW
12
11
33
31
33
IOC
28
31
31
34
18
2631
19
WA
21
23
20
22
24
26
27
25
APA Group assets
Wind farm
APA Group investments
Solar farm
APA managed
(not owned by APA)
Integrated Operations
Centre
Gas storage facility
Gas processing plant
Gas power station
32
33
31
VIC
13
30
29
16
33
15
14
TAS
11
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES Energy Infrastructure assets (numbers correspond with those on the map on page 11)
Reedy Creek Wallumbilla Pipeline*
Darling Downs Solar Farm*
Diamantina and Leichhardt Power Stations
Roma Brisbane Pipeline (including Peat Lateral)
Carpentaria Gas Pipeline
Berwyndale Wallumbilla Pipeline
South West Queensland Pipeline
East Coast and Northern Territory assets
1)
2)
3)
4)
5) Wallumbilla Gladstone Pipeline (including Laterals)
6)
7)
8)
9) Moomba Sydney Pipeline
10) Ethane Pipeline
11) Central West Pipeline
12) Central Ranges Pipeline
13) Victorian Transmission System
14) Dandenong LNG Storage Facility
15) Orbost Gas Processing Plant**
16) SESA Pipeline
17) Amadeus Gas Pipeline (including Laterals)
West Australian assets
18) Pilbara Pipeline System
19) Goldfields Gas Pipeline (88.2%)
20) Eastern Goldfields Pipeline
21)
Yamarna Gas Pipeline*
22) Yamarna Power Station*
23) Kalgoorlie Kambalda Pipeline
24) Mid West Pipeline (50%)
25) Parmelia Gas Pipeline
26) Mondarra Gas Storage and Processing Facility
27) Emu Downs Wind Farm
27) Emu Downs Solar Farm*
27) Badgingarra Wind Farm**
Length/Capacity
583 km / 233 TJ/d
944 km / 119 TJ/d
112 km
936 km / 384 TJ/d
556 km / 1,510 TJ/d
50 km / 300 TJ/d
110 MW
242 MW / 60 MW
2,029 km / 489 TJ/d
1,375 km
255 km
295 km
1,847 km
12,000 tonnes
12 km / ~70 TJ/d
45 km
1,661 km
249 km / 166 TJ/d
1,546 km / 202 TJ/d
293 km
198 km / 8 TJ/d
45 MW
44 km
362 km / 11 TJ/d
448 km / 50 TJ/d
18 PJ
80 MW
20 MW
130 MW
Note:
* Assets under construction.
** Project subject to satisfaction of conditions precedent.
Energy Investments and Asset Management (numbers correspond with those on the map on page 11)
Energy Investment
Ownership
interest
Detail
(28) GDI (EII)
20%
(29) South East Australia
50%
Gas Pty Ltd
Gas distribution: Allgas Gas Network – 3,476 km of gas mains, 104,589 gas
consumer connections in Qld
Gas pipeline: 687 km SEA Gas Pipeline
(30) SEA Gas (Mortlake)
50%
Gas pipeline: 83 km Mortlake Gas Pipeline
Partnership
(31) Energy Infrastructure
19.9%
Investments
(32) EII2
(33) Australian Gas
Networks
(34) Tamworth Gas
Network
20.2%
Nil
100%
Gas pipelines: Telfer/Nifty Gas Pipelines and lateral (488 km); Bonaparte Gas
Pipeline (286 km); Wickham Point Pipeline (12 km)
Electricity transmission cables: Murraylink (180 km) and Directlink (64 km)
Gas-fired power stations: Daandine Power Station (30MW) and X41 Power Station
(41 MW)
Gas processing facilities: Kogan North (12 TJ/d); Tipton West (29 TJ/d)
Wind generation: North Brown Hill Wind Farm (132MW), SA
Gas distribution: 24,670 km of gas mains and pipelines, 1.26 million gas consumer
connections, 1,124 km of transmission gas pipelines in SA, Vic, NSW, Qld & NT
Gas distribution: 241 km of gas mains, 3,351 gas consumer connections
12
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6. Financial Overview
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 therefore these are described in this report as ‘normalised’ measures.
For the financial year to 30 June 2017 APA reported EBITDA of $1,470.1 million, an increase of 10.5% or $139.6 million on the
previous corresponding period EBITDA of $1,330.5 million.
Total revenue (excluding pass-through revenue) increased by $232.3 million to $1,888.3 million, an increase of 14.0% on the
previous corresponding period (FY2016: $1,656.0 million).
Increased revenues and EBITDA were primarily attributable to:
– a full year contribution from the Eastern Goldfields Pipeline, Ethane Pipeline and the Diamantina and Leichhardt Power
Stations (DPS);
– contributions from various new contracts that commenced on the East Coast Grid; and
– a decrease in corporate costs, where the FY2016 results included certain one-off items.
Most significantly, during FY2017, APA announced in excess of $1.2 billion of new growth projects to be commissioned over the
next 2 years. Timing of these projects is detailed in sections 7 and 8 below.
All of these projects will contribute to future operating cash flow, which in FY2017 was $973.9 million. This represents an
increase of 12.9% or $111.5 million over the previous year (FY2016: $862.4 million), with operating cash flow per security
increasing by 12.9%, or 10 cents, to 87.4 cents per security (FY2016: 77.4 cents per security).
On 22 August 2017, the directors announced a final distribution of 23.0 cents per security, which will take APA’s distributions
in respect of the financial year to a total of 43.5 cents per security. This represents an increase of 4.8%, or 2.0 cents, over
FY2016 distributions of 41.5 cents. Franking credits of 2.0 cents per security will be allocated to the final distribution, resulting
in the FY2017 franking credits totalling 4.0 cents per security. APA maintains a sustainable distribution policy to ensure its
ability to fully fund its distributions out of operating cash flows whilst also retaining appropriate levels of cash in the business
to support ongoing growth. APA’s ongoing execution of its growth strategy requires the Board to strike a prudent balance
between increasing distributions for Securityholders and retaining funds in the business to fund that growth, for the future
benefit of Securityholders.
The following table provides a summary of key financial data for FY2017.
Total revenue
Pass-through revenue 1
Total revenue excluding pass-through
EBITDA
30 June 2017
$000
30 June 2016
$000
2,326,420
2,094,304
438,140
1,888,280
1,470,122
438,330
1,655,974
1,330,543
Depreciation and amortisation expenses
(570,021)
(520,890)
EBIT
Finance costs and interest income
Profit before income tax
Income tax (expense) / benefit
PROFIT AFTER INCOME TAX
Operating cash flow 2
Operating cash flow per security (cents)
Earnings per security (cents)
Distribution per security (cents)
Distribution payout ratio 3
Weighted average number of securities (000)
900,101
(513,767)
386,334
(149,488)
236,846
973,936
87.4
21.3
43.5
809,653
(507,658)
301,995
(122,524)
179,471
862,435
77.4
16.1
41.5
49.8%
1,114,307
53.6%
1,114,307
Changes
$000
232,116
(190)
232,306
139,579
(49,131)
90,448
(6,109)
84,339
%
11.1%
–
14.0%
10.5%
(9.4%)
11.2%
(1.2%)
27.9%
(26,964)
(22.0%)
57,375
111,501
10.0
5.2
2.0
(3.8%)
–
32.0%
12.9%
12.9%
32.3%
4.8%
(7.1%)
–
Notes: Numbers in the table may not add up due to rounding.
1) 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 Australian Gas Networks Limited (AGN) and GDI in respect of the operation of the AGN and GDI assets respectively.
2) Operating cash flow = net cash from operations after interest and tax payments.
3) Distribution payout ratio = total distribution applicable to the financial year as a percentage of operating cash flow.
13
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 7. Business Segment Performances and Operational Review
Statutory reported revenue and EBITDA performance of APA’s business segments is set out in the table below.
30 Jun 2017
$000
30 Jun 2016
$000
Changes
$000
%
Revenue
Energy Infrastructure
East Coast: Queensland
East Coast: NSW
East Coast: Victoria
East Coast: South Australia
Northern Territory
Western Australia
1,114,428
176,000
156,946
2,958
30,932
291,728
939,963
143,427
152,991
2,871
28,843
260,481
174,465
32,573
3,955
87
2,089
31,247
Energy Infrastructure total
1,772,992
1,528,576
244,416
Asset Management
Energy Investments
Total segment revenue
Pass-through revenue
Unallocated revenue 1
Total revenue
EBITDA
Energy Infrastructure
East Coast: Queensland
East Coast: NSW
East Coast: Victoria
East Coast: South Australia
Northern Territory
Western Australia
86,424
24,382
95,430
28,271
(9,006)
(3,889)
1,883,798
1,652,277
231,521
438,140
438,330
4,482
3,697
(190)
785
2,326,420
2,094,304
232,116
925,366
149,484
123,008
2,319
18,771
234,724
855,753
121,709
120,583
2,536
17,460
217,558
69,613
27,775
2,425
(217)
1,311
17,166
Energy Infrastructure total
1,453,672
1,335,599
118,073
Asset Management
Energy Investments
Corporate costs
Total EBITDA
58,719
24,382
(66,651)
53,858
27,796
(86,710)
1,470,122
1,330,543
4,861
(3,414)
20,059
139,579
18.6%
22.7%
2.6%
3.0%
7.2%
12.0%
16.0%
(9.4%)
(13.8%)
14.0%
–
21.2%
11.1%
8.1%
22.8%
2.0%
(8.6%)
7.5%
7.9%
8.8%
9.0%
(12.3%)
23.1%
10.5%
Notes: Numbers in the table may not add up due to rounding.
1) Interest income is not included in calculation of EBITDA, but nets off against interest expense in calculating net interest cost.
APA’s financial performance during the financial year reflects solid operations and continued investment in our assets.
Total segment EBITDA increased by $139.6 million, or 10.5%, to $1,470.1 million, over the FY2016 result of $1,330.5 million.
APA derives its revenue through a mix of regulated revenue, long-term negotiated revenue contracts, asset management fees
and investment earnings. Earnings are underpinned by solid cash flows generated from high quality, geographically diversified
assets and a portfolio of highly creditworthy customers.
14
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 7.1 Energy Infrastructure
The Energy Infrastructure segment includes the interconnected energy infrastructure footprint across the mainland of
Australia and includes gas transmission, gas compression, processing and storage assets, renewable energy power generation,
and gas-fired power generation.
This segment contributed 94.1% of group revenue (excluding pass-through) and 94.6% of group EBITDA (before corporate
costs) during the financial year. Revenue (excluding pass-through revenue) was $1,773.0 million, an increase of 16% on the
previous year (FY2016: $1,528.6 million). EBITDA (before corporate costs) increased by 8.8% on the previous year to $1,453.7
million (FY2016: $1,335.6 million).
The increase in FY2017 earnings for Energy Infrastructure was primarily due to the full year contribution from the Eastern
Goldfields Pipeline, the Diamantina and Leichhardt Power Stations (DPS) and the Ethane Pipeline.
ENERGY INFRASTRUCTURE REVENUE BY STATE
ENERGY INFRASTRUCTURE EBITDA BY STATE
A$m
1,600
1,200
800
400
0
90%
A$m
80%
1,400
70%
60%
1,200
1,000
800
600
400
200
50%
0
FY13
NT
WA
FY14
FY15
FY16
FY17
SA
VIC
NSW
QLD
EBITDA margin
(RHS)
FY13
NT
SA
FY14
VIC
WA
FY15
FY16
FY17
NSW
QLD
ENERGY INFRASTRUCTURE EBITDA BY ASSET
Note: The charts above exclude discontinued operations previously accounted for within Energy Infrastructure, including earnings from Allgas Networks and
Moomba to Adelaide Pipeline.
15
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESFY17FY16FY15FY14FY13A$m0200400600800100012001400Wallumbilla Gladstone Pipeline South West Queensland Pipeline Roma Brisbane Pipeline Carpentaria Gas Pipeline Other Qld assets Diamantina Power StationMoomba Sydney Pipeline Victorian Transmission System SESA Pipeline Amadeus Gas Pipeline Goldfields Gas Pipeline Eastern Goldfields Pipeline Emu Downs Wind Farm Pilbara Pipeline System Mondarra Gas Storage Other WA
The majority of revenues in the Energy Infrastructure segment are derived from either regulatory arrangements or long term
capacity-based contracts. Regulatory arrangements on regulated assets are usually reviewed every five years. A national
regulatory regime includes mechanisms for regulatory pricing and 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 (“reference”)
services as part of an access arrangement process, such that the 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 dispute resolution by the regulator in the absence of agreement.
During FY2017, the COAG Energy Council accepted the recommendations from Dr Michael Vertigan to increase information
disclosure and implement a commercial arbitration framework for unregulated pipelines. These and other gas market
regulatory reform initiatives have now moved to further development and implementation. Please refer to Section 10
(Regulatory Matters) of this report for further details.
Contracted revenues are sourced from unregulated assets and assets under light regulation as well as assets under full
regulation. Contracts generally entitle customers to capacity reservation, with the majority of the revenue fixed over the term
of the relevant contract. There is typically a small portion of the contract subject to throughput volume. The split between
capacity charge and throughput charge differs between contracts and generally ranges from 85%/15% to 100%/0%.
During the financial year, 74.2% of Energy Infrastructure revenue (excluding pass-through) was from capacity reservation
charges from term contracts, 4.6% from other contracted fixed revenues and 9.9% from throughput charges and other variable
components. Given the dynamic east coast gas market, there were additional revenues from provision of flexible short term
services, accounting for around 1.7%. The portion of APA’s regulated revenue is 9.4% of FY2017 Energy Infrastructure revenue.
FY2017 ENERGY INFRASTRUCTURE
BY REVENUE TYPE
APA* PIPELINES BY REGULATION TYPE
Full regulation pipelines
Light regulation pipelines
Not regulated pipelines
* Owned and/or operated by APA
Capacity charge revenue: 76.2%
Regulated revenue: 9.4%
Throughput charge & other
variable revenue: 7.8%
Contracted fixed revenue: 4.7%
Flexible short term services: 1.7%
Other: 0.2%
APA manages its counterparty risk in a variety of ways. One aspect is to consider customers’ credit ratings. During FY2017,
more than 92% of Energy Infrastructure revenue was received from investment grade counterparties. Diversification
of customer base is another strength of APA’s business, with our customers split across the energy, utility, resources and
industrial sectors, as shown in the chart below.
FY2017 ENERGY INFRASTRUCTURE REVENUES
BY COUNTERPARTY CREDIT RATING
FY2017 ENERGY INFRASTRUCTURE REVENUES
BY CUSTOMER INDUSTRY SEGMENT
A- rated or better: 41.7%
BBB & BBB+ rated: 31.6%
Investment grade: 19.4%
Not rated: 3.6%
Sub-investment grade: 3.7%
Energy: 47.4%
Utility: 23.9%
Resources: 23.7%
Industrial & others: 5.0%
APA’s Integrated Operations Centre in Brisbane has continued to generate operational, safety and financial benefits
from having real-time visibility across transmission assets throughout Australia. Integrating the elements of engineering,
commercial and system operation in daily decision making has enabled better outcomes for our customers under both
normal operating conditions as well as unplanned plant, market or customer disruption periods. Knowledge around individual
customer requirements and nuances are captured to improve and customise services to APA’s customers, as well as to
enhance operational risk management across the national platform.
16
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES East Coast and Northern Territory
APA’s 7,500 plus kilometre integrated pipeline grid on the east coast of Australia has the ability to transport gas seamlessly
from multiple gas production facilities to gas users across four states and the ACT, as well as to the export LNG market which
has developed out of Gladstone.
EBITDA from APA’s assets on the eastern states increased by 9% during the year.
A Symbiotic Relationship – working with customers to
meet their needs
APA continues to offer products and services to meet the
needs of our customers in a very dynamic gas market. By
working closely with our customers and understanding
their gas portfolio management needs, APA is able to
utilise its unique gas grid to provide bespoke services that
ensure gas security.
”APA responded to a request for proposal from Australia
Pacific LNG
for construction and a 20-year transportation
services for a new pipeline. The proposed pipeline would
connect Australia Pacific LNG’s high pressure pipeline
network at Reedy Creek to Wallumbilla Hub. A key aspect of
APA’s successful bid response was its understanding of how
requirements
Australia Pacific LNG’s supply and demand
would be
the
Wallumbilla Hub. The entire RFP process, negotiations, and
the agreement
corporate and shareholder approvals
took less than eight months.” Comment from Australia
Pacific LNG.
integrated with existing commitments at
for
Pipe stockpile at the new Reedy Creek Wallumbilla Pipeline project
During FY2017, NSW earnings were boosted by a full year contribution from the Ethane Pipeline. The Victorian–Northern
Interconnect expansion was also completed, and new contracts progressively contributed to additional earnings across both
Victorian and NSW pipeline systems, including the multi-services contract with AGL that commenced on 1 January 2017.
Victoria’s EBITDA also benefited from a colder winter and spring, earlier in the financial year.
In Queensland, FY2017 saw the first full year contribution from DPS, the remaining 50% of which was acquired during FY2016.
Whilst the Queensland results also benefited from a number of multi-asset contracts which commenced during the period,
this was partially offset by a reduction in short term revenues seen during LNG projects ramping up in FY2016.
Working with our stakeholders – Badgingarra Wind Farm
Badgingarra Wind Farm site (Emu Downs Wind Farm in the background)
APA will commence construction in late 2017 of our 130MW Badgingarra Wind Farm in Western Australia. This is the
culmination of APA working with a number of stakeholders including our customer Alinta Energy, the Western Australian
Government, Australian Energy Market Operator (AEMO) and Western Power since purchasing the site in 2011. The
greenfield site is adjacent to APA’s operating 80MW Emu Downs Wind Farm, also acquired in 2011 as part of the same
transaction. APA is also constructing a 20MW solar farm at Emu Downs to be commissioned by 2018.
The Badgingarra Wind Farm’s biggest challenge was access to the transmission network and APA has worked closely with the
local transmission operator Western Power over the last six years to bring the Badgingarra project to commercial fruition.
The motivation to keep the project moving forward was derived from our analysis that the Badgingarra Wind Farm
project was commercially attractive enough to fit into the Federal Government’s Renewable Energy Target of 33,000
GWh by 2020.
After negotiations with State Government, AEMO, Western Power, the Public Utilities Office of Western Australia and
Alinta Energy, APA was able to find a solution that satisfied all stakeholders.
The Badgingarra Wind Farm is expected to be commissioned in early 2019, contributing to APA’s renewable energy
precinct in Western Australia, which will total 230MW.
17
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES APA continues to develop new opportunities for its assets on the east coast of Australia. Growth projects announced during
the year were:
– the Reedy Creek Wallumbilla Pipeline, which will connect Australia Pacific LNG’s coal seam gas fields directly to APA’s
East Coast Grid. Construction is on track and commissioning is expected mid-2018, at which time, APLNG will have the
capability to move up to 300TJ per day of gas into and out of the East Coast Grid, helping to balance domestic gas supply
and demand.
– the Orbost Gas Processing Plant, for which works have also commenced late in FY2017. The plant will be connected to
Cooper Energy’s Sole gas field and bring in much needed additional gas supply to the eastern markets.
– the 110MW Darling Downs Solar Farm project, which APA purchased from Origin Energy. It has a 12 year offtake contract
with Origin Energy and is expected to start producing electricity by late 2018.
During the financial year, APA’s assets in the Northern Territory continued to perform to expectations.
Western Australia
In Western Australia, APA’s assets serve a variety of customers in the resources, industrial and utility sectors, mainly in the
Perth, Pilbara and Goldfields regions.
EBITDA from APA’s Western Australian assets for the financial year was up by 7.9% compared with FY2016.
Full year earnings from the Eastern Goldfields Pipeline contributed to the increased earnings for APA’s Western Australian
assets. The additional transaction announced during the year to connect the Gruyere Gold Project to reliable energy across
1,500 km using APA’s Goldfields Gas Pipeline, Murrin Murrin Lateral, Eastern Goldfields Pipeline and the to be constructed
Yamarna Gas Pipeline further underwrites the value of our interconnected gas infrastructure into the minerals rich region of
Goldfields and Pilbara. Both the pipeline and the power station have commenced construction with a target commissioning
date of late 2018.
In APA’s energy precinct north of Perth, earnings from the Mondarra Gas Storage and Processing Facility increased year on
year, due to a well enhancement project in FY2016. The Emu Downs Wind Farm benefited from better wind resource. This site
will be further enhanced as APA is erecting solar panels with a capacity of 20MW (Emu Downs Solar Farm) and expanding
its wind farm footprint to an adjacent site at Badgingarra with the construction of a 130MW wind farm (Badgingarra Wind
Farm). All three renewable energy power generation assets will share existing infrastructure and on-the-ground resources,
and generate additional revenues for APA once completed.
The increase in revenue from Mondarra Gas Storage and Processing Facility were partially offset by a reduction in revenue
from the Goldfields Gas Pipeline for the current period, reflecting tariff reductions contained in the new access arrangement
that came into effect during the period.
7.2 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 Australian Gas Networks Limited (AGN)3, Energy Infrastructure Investments and GDI (EII).
Asset management services are provided to these customers under long-term contracts.
Revenue (excluding pass-through revenue) from asset management services decreased by $9.0 million or 9.4% to $86.4
million (FY2016: $95.4 million) and EBITDA (excluding corporate costs) increased by $4.9 million or 9.0% to $58.7 million
(FY2016: $53.9 million).
ASSET MANAGEMENT REVENUE
ASSET MANAGEMENT EBITDA
A$m
100
80
60
40
20
0
A$m
75
60
45
30
15
0
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
One-off Customer Contributions
Underlying Asset Management Revenue
One-off Customer Contributions
Underlying Asset Management EBITDA
Note: Fees from DPS and the Ethane Pipeline were no longer received in FY17 due to these assets being fully owned and managed within the Energy Infrastructure segment.
3) APA sold its 33.05% stake in AGN in August 2014, however, the operating and maintenance agreements remain on foot until 2027.
18
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
CUSTOMER CONTRIBUTIONS
APA OPERATED GAS NETWORKS STATISTICS
A$m
20
10
0
Average ~$10m p.a.
1.4 million
1.3
1.2
29,000
Kilometres
28,000
27,000
FY13
FY14
FY15
FY16
FY17
FY14
FY15
FY16
FY17
Gas Consumer Connections (LHS)
Networks Managed (RHS)
Cyclone Debbie
– maintaining safe and reliable gas supply
Cyclone Debbie (March 2017) caused significant damage and flooding in the populous areas of south east Queensland
and Northern Rivers. Major damage to the John Muntz causeway on the Coomera River occurred as a result of a section
of the bridge being washed away resulting in approximately 20 metres of GDI (EII) high pressure steel mains on each side
of the river being exposed. No serious damage was done to the pipe, which is used to supply gas to 20,000 customers,
however, the situation of the exposed pipe with further strong currents and water debris expected over the following
weeks required action to ensure safe and reliable supply to users.
APA’s Networks team promptly undertook remedial action including a pipeline integrity check; building of a temporary groyne
to protect the pipe from floating debris; and organising the relocation of an at risk power pole away from the damaged
embankment. In the months since Cyclone Debbie, the exposed section has been replaced with a new length of pipe that has
been directionally drilled 10 metres under the river bed from a starting point of around 20 metres back on each side of the
embankment. Importantly, supply at full pressure was maintained throughout the entire event and repair period.
John Muntz causeway remedial works underway
Customer contributions, which are payments received from a third party for APA to undertake work on the assets it manages
to accommodate that third party’s project, remains in-line with the long term average of approximately $10 million per
annum. APA continues to expect annual swings in customer contributions, as these are driven by customers’ requirements.
Excluding customer contributions, both revenue and EBITDA decreased slightly for the Asset Management business. Whilst a
colder winter contributed to higher network volumes this was offset by lower tariffs on AGN’s South Australian distribution
network, given the new access arrangement that took effect from the beginning of FY2017, as well as the transfer of the
Ethane Pipeline and Diamantina and Leichhardt Power Stations to full ownership by APA, and now included under Energy
Infrastructure. The Australian Energy Regulator is expected to hand down its final decision on the Access Arrangement for
AGN’s Victorian distribution network during 1H FY2018, with the new tariffs applying from January 2018.
The gas distribution businesses of AGN and GDI have seen solid connection growth through continued investment in new
housing estates and high rise apartment developments as natural gas continues to be a fuel of choice for cooking, hot water
and heating in these markets.
19
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 7.3 Energy Investments
APA has interests in a number of complementary energy investments across Australia.
Asset and ownership interests
Mortlake Gas Pipeline
SEA Gas Pipeline
Asset details and APA services
Partners
50%
SEA Gas
(Mortlake)
Partnership
83 km gas pipeline
connecting the Otway
Gas Plant to the Mortlake
Power Station
Retail Employees
Superannuation Trust
– REST
MAINTENANCE
50%
South East
Australia
Gas Pty Ltd
687 km gas pipeline from
Iona and Port Campbell
in Victoria to Adelaide
Retail Employees
Superannuation Trust
– REST
MAINTENANCE
North Brown Hill
Wind Farm
20.2%
EII2
132 MW wind farm in
South Australia
Infrastructure Capital Group
Osaka Gas
Allgas Gas
Distribution Network
20%
GDI (EII)
CORPORATE SUPPORT
3,476 km Allgas gas
distribution network
in Queensland with
104,589 connections
Marubeni Corporation
State Super
Daandine and X41
Power Stations
Kogan North and Tipton
West Processing Plants
Directlink and Murraylink
Electricity Interconnectors
Nifty and Telfer Gas Pipelines
Wickham Point and
Bonaparte Gas Pipelines
CORPORATE SUPPORT
OPERATIONAL MANAGEMENT
19.9%
Energy
Infrastructure
Investments
Gas-fired power generation
71 MW
Gas processing facilities
41 TJ/day
Electricity transmission
cables 244 km
Gas pipelines totaling 786 km
Marubeni Corporation
Osaka Gas
CORPORATE SUPPORT
OPERATIONAL MANAGEMENT
APA’s ability to manage these
investments and provide
operational and/or corporate support services gives it flexibility in
the way it grows the business and harnesses expertise in-house.
EBITDA from Energy Investments was $24.4 million (FY2016:
$27.8 million). The reduction is due to DPS and the Ethane
Pipeline being transferred to the Energy Infrastructure
segment from Energy Investments segment, partly offset by
increased income from our investment in GDI(EII).
7.4 Corporate Costs
Corporate costs for the financial year decreased by
$20.0 million over the previous corresponding period to
$66.7 million (FY2016: $86.7 million). This reflects the one-off
nature of certain costs incurred in the previous corresponding
period (around $13 million) and ongoing cost control within
the business.
ENERGY INVESTMENT REVENUE & EBITDA
CORPORATE COSTS
A$m
80
60
40
20
0
A$m
80
60
40
20
0
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
Divested & transferred investments
Continuing investments
Note: “Divested & transferred investments” relate mainly to AGN sold in FY2014.
DPS and EPX earnings are classified as divested & transferred investments within
Energy Investments up until financial close for the purpose of the segment reporting.
20
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 8. Capital and Investment Expenditure
Capital and investment expenditure for FY2017 totalled
$377.5 million.
Total capital expenditure (including stay-in-business capital
expenditure but excluding acquisitions and other investing
cash flows) for FY2017 was $340.7 million compared with
$333.7 million last year. Growth project expenditure of $271.9
million (FY2016: $281.0 million) was related to the following
projects during the year:
– completion of the latest stage of the Victorian–Northern
Interconnect expansion project, which has expanded the
bi-directional interconnect;
– Moomba Interconnect project, which, for minimal capital
spend, has increased the efficiency of the operation of
APA’s East Coast Grid, facilitating gas flows through
Moomba; and
– commencement of growth projects announced during
the year, including Reedy Creek Wallumbilla Pipeline, Emu
Downs Solar Farm, Badgingarra Wind Farm, Darling
Downs Solar Farm and the Orbost Gas Processing Plant.
APA’s growth capital expenditure continues to be fully
underwritten through long-term contractual arrangements
or to have regulatory approval through a relevant access
arrangement. Capital and investment expenditure for the
financial year is detailed in the table below.
Working together to keep gas infrastructure safe
APA’s Networks and Transmission businesses have
jointly signed a Memorandum of Understanding with
Queensland’s Department of Transport and Main Roads
(DTMR) which will reduce the likelihood of damage to
APA-managed infrastructure in Queensland.
The MoU provides a mechanism to share information
and enhance operational and communication processes
to reduce the likelihood of un-notified or uncontrolled
excavation. Third party and uncontrolled excavation is a
common threat to gas infrastructure.
Networks and Transmission are now participating in
quarterly Joint Working Group meetings with DTMR to
pursue continuous improvement benefits.
Capital and investment
expenditure 1
Growth expenditure
Regulated
Non-regulated
Queensland
New South Wales
Western Australia
Other
Sub-total unregulated capex
Total growth capex
Stay-in business capex
Total capital expenditure
Investment and acquisitions 2
APA and DTMR working together
Description of major projects
30 Jun
2017
($ million)
30 Jun
2016
($ million)
Victorian–Northern Interconnect expansion
106.1
130.9
Darling Downs Solar Farm, Reedy Creek Wallumbilla Pipeline
Badgingarra Wind Farm, Emu Downs Solar Farm,
Yamarna Pipeline & Power Station
78.3
0.4
30.6
56.5
165.8
271.9
68.8
340.7
36.8
377.5
14.0
4.8
97.6
33.7
150.1
281.0
52.7
333.7
339.9
673.6
Total capital and investment expenditure
Notes: Numbers in the table may not add up due to rounding.
1) The capital expenditure shown in this table represents net cash used in investing activities as disclosed in the cash flow statement, and excludes accruals brought
forward from the prior period and carried forward to next period.
2) Investments & acquisitions capital expenditure is net of gains on disposals.
21
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES APA announced at its FY2016 annual results presentation
last August that it had identified around $1.5 billion of
organic opportunities in the near term.
During the course of FY2017, APA announced in excess of
$1.2 billion of projects in the areas of pipeline extensions
and expansions, renewables and mid-stream assets that
will require in the order of $800 million of growth capital
investment in FY2018, with revenues to be received from
early FY2019.
Beyond FY2018 APA expects $300 to $400 million per
annum over the next two to three years in growth projects
coming to fruition across all of those sectors, as we continue
to engage with our customers on what their needs are within
that timeframe. These projects are underwritten by long
term contracts with our customers and will increase APA’s
earnings base as they are commissioned.
CAPITAL AND INVESTMENT EXPENDITURE
6,284.4
728.2
572.8
673.6
377.5
A$m
1,000
800
600
400
200
0
FY13
FY14
FY15
FY16
FY17
Acquisitions & other investment cash flows
Growth capex
SIB capex
Note: FY13 HDUF acquisition represents only cash outflow, given scrip based
acquisition.
GROWTH PROJECTS ANNOUNCED DURING FY17
Capex
Pipeline projects
Renewable projects
Midstream Projects
Projects
FY 17
1H FY 18
2H FY 18
1H FY 19
2H FY 19
1H FY 20
2H FY 20
Customer
FY17 (incl. VNIE, excl.
projects listed below)
$213.7m
Reedy Creek Wallumbilla
Pipeline
$80m project
Emu Downs Solar Farm
(incl. $5.5m ARENA funding)
$50m project
Badgingarra Wind Farm
$315m project
20-year contract
13-year contract
12-year contract
Orbost Gas Processing Plant
Darling Downs Solar Farm
(incl. $20m ARENA funding)
Yamarna Pipeline & Power
Station
$270m project
Multi year contract
$200m project
12-year contract
$180m project
15-year contract
Gold Road/
Gold Fields JV
various
APLNG
Synergy
Alinta
Cooper
Origin
Total growth capex
(‘in-flight’ to date)
FY17:
$271.9m
Total revenue contribution
FY18:
~$800m
FY18:
<$5m
FY19:
~$150m
FY19:
~$70m
FY20:
~$200m
Note: Above diagram is illustrative only.
22
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
As have been detailed in Section 7 above, major projects announced to date are:
– The Reedy Creek Wallumbilla Pipeline is a 50km, 300TJ per day, bi-directional pipeline connected to APA’s East Coast Grid
that will provide a key link to the Wallumbilla Gas Hub for Australia Pacific LNG Marketing Pty Limited, at an estimated cost
of $80 million and scheduled to complete around the middle of 2018. APA has entered into a 20-year contract with APLNG.
– The Emu Downs Solar Farm is a 20MW solar farm, being built next to the Emu Downs Wind Farm site. Synergy, the
Western Australian energy provider has entered into a 13-year offtake agreement for both the energy and the Large-scale
Renewable Generation Certificates (LGCs), commencing January 2018. The estimated $50 million project will be partially
funded with a $5.5 million grant from the Australian Renewable Energy Agency (ARENA).
– The Badgingarra Wind Farm is a 130MW wind farm, to be built at an estimated cost of $315 million, on the site adjacent
to the existing Emu Downs Wind Farm (final condition precedent expected to be met in August 2017). Alinta Energy has
entered into a 12-year offtake agreement for both the energy and the LGCs, commencing January 2019.
– The Orbost Gas Processing Plant is (subject to conditions precedent) being acquired and upgraded by APA for an estimated
cost of $270 million and upon completion of the refurbishment, will process raw natural gas from Cooper Energy’s offshore
Sole gas field under a multi-year Gas Processing Agreement from mid-2019.
– The Darling Downs Solar Farm is a 110MW solar farm, to be built at an estimated cost of $200 million (partially funded
with a $20 million grant from ARENA). Origin Energy has entered into a 12-year offtake agreement for both the energy and
the LGCs from late 2018.
– The Yamarna Gas Pipeline (YGP) and the Yamarna Power Station (YPS) which will deliver energy to the Gruyere Gold
Project in Western Australia. The YGP is a 198km pipeline that will deliver gas to the 45MW YPS across 1,500km, connecting
through the Goldfields Gas Pipeline, Murrin Murrin Lateral and the Eastern Goldfields Pipeline. A 15-year gas transportation
agreement and a 15-year electricity supply agreement have been entered into with the Gruyere Gold Project, a 50:50 joint
venture between ASX listed Gold Road Resources Ltd and the global miner Gold Fields Limited. Commissioning is expected
in late 2018, and total project cost is estimated to be $180 million.
In addition to these committed projects, APA continues to develop opportunities with our customers to deliver more energy
to users, including the Western Slopes Pipeline, which, subject to Santos’ FID, will connect the proposed Narrabri Gas Project
to APA’s Moomba Sydney Pipeline and feasibility study to connect Northern Queensland gas basins to APA’s East Coast Grid.
APA’s growth strategy will continue to be considered using the same principles and criteria that APA has always adhered to,
which are to:
– maintain an appropriate risk and return structure;
– ensure an appropriate funding and capital structure;
– enter into contracts with highly creditworthy counterparties; and
– leverage in-house operational expertise.
Stay-in business capex increased from $52.7 million in FY2016 to $68.8 million during this financial year. This was in line with
both the long term asset management planning cycle across our assets and the increasing scale of the business.
9. Financing Activities
9.1 Capital Management
As at 30 June 2017, APA had 1,114,307,369 securities on issue. This was unchanged from 30 June 2016.
During the financial year, APA issued A$200 million of 7-year fixed-rate Australian dollar Medium Term Notes in October 2016
and US$850 million (A$1,109 million) of 10.3-year senior guaranteed notes into the US 144A market in March 2017. APA repaid
$85.8 million (US$65.0 million) and $295.0 million (US$154.0 million and A$104.2 million) of US Private Placement Notes
when they matured in July 2016 and May 2017 respectively.
APA’s debt portfolio has a broad spread of maturities extending out to FY2035, with an average maturity of drawn debt of
7.5 years at 30 June 2017. APA’s gearing 4 of 67.4% at 30 June 2017 was marginally higher than the 66.4% at 30 June 2016.
APA remains well positioned to fund its planned growth activities with over $1,460 million in cash and committed undrawn
facilities, as well as ongoing access to a broad range of debt capital markets available as at 30 June 2017.
4) For the purpose of the calculation, drawn debt that has been kept in USD (rather than AUD) has been nominally exchanged at AUD/USD exchange rates of
0.7772 for Euro and GBP MTN issuances and 0.7879 for US144A notes at respective inception dates.
23
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES APA DEBT MATURITY PROFILE AND DIVERSITY OF FUNDING SOURCES
Notes:
1) USD denominated obligations translated to AUD at the prevailing rate at inception (USD144A – AUD/USD=0.7879, EMTN & Sterling AUD/USD=0.7772).
2) Subordinated Notes first call date of 31 March 2018. Contractual maturity date is 30 September 2072.
APA has a prudent treasury policy which requires conservative levels of hedging of interest rate exposures to minimise the
potential impacts from adverse movements in interest rates. Other than noted below, all interest rate and foreign currency
exposures on debt raised in foreign currencies have been hedged.
The majority of the revenues to be received over the remaining 18.5 years of the foundation contracts on the Wallumbilla
Gladstone Pipeline will be in USD. The US$3.7 billion of debt raised to fund that acquisition is being managed as a “designated
hedge” for these revenues and therefore has been retained in USD. Net USD cash flow (after servicing the USD interest costs)
that is not part of that “designated relationship” will continue to be hedged into AUD on a rolling basis for an appropriate
period of time, in-line with APA’s treasury policy. To date, the following net USD cash flow hedging has been undertaken:
Period
FY2017
FY2018
1H FY2019 (to Dec 2018)
Average forward USD/AUD exchange rate
0.7381
0.7282
0.6716
A large portion of the net revenue from March 2019 is in that designated hedge relationship with the USD debt and as such,
when that revenue is receivable, will be recognised in the P&L at an average rate of around 0.78.
APA also enters into hedges to manage its interest rate exposure on its floating rate and other non-Australian dollar
borrowings. As at 30 June 2017, 94.5% (30 June 2016: 86.5%) of interest obligations on gross borrowings was either hedged
into or issued at fixed interest rates for varying periods extending out to March 2035.
9.2 Borrowings and finance costs
As at 30 June 2017, APA had borrowings of $9,249.7 million ($9,037.3 million at 30 June 2016) from a mix of US Private
Placement Notes, Medium Term Notes in several currencies, United States 144A Notes and APA Group Subordinated Notes.
APA also had $1,068.8 million of undrawn committed syndicated and bilateral bank facilities.
Net finance costs increased by $6.1 million, or 1.2%, to $513.8 million (FY2016: $507.7 million). The increase is primarily due to
having a higher level of drawn debt in FY17 relative to FY16. The average interest rate (including credit margins) 5 applying to
drawn debt was 5.56% for the current period (FY2016: 5.78%).
APA’s interest cover ratio for the current period was 2.8 times (June 2016: 2.6 times). This remains well in excess of its debt
covenant default ratio of 1.1 times and distribution lock up ratio of 1.3 times.
9.3 Credit ratings
APT Pipelines Limited, the borrowing entity of APA, maintained the following two investment grade credit ratings during this
financial year:
– BBB long-term corporate credit rating (outlook Stable) assigned by Standard & Poor’s (S&P) in June 2009, and last
confirmed on 5 December 2016; and
– Baa2 long-term corporate credit rating (outlook Stable) assigned by Moody’s Investors Service (Moody’s) in April 2010, and
last confirmed on 3 March 2017.
5) For the purpose of the calculation, drawn debt that has been kept in USD (rather than AUD) has been nominally exchanged at AUD/USD exchange rates of
0.7772 for Euro and GBP MTN issuances and 0.7879 for US144A notes at respective inception dates.
24
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIESFY18FY19FY20FY21FY22FY23FY24FY25FY26FY27FY28FY29FY30FY31FY32FY33FY34FY35$0m$200m$400m$600m$800m$1,000m$1,200m$1,400m$1,600mSterling MTN(2)First Call Date – 60 year Sub NotesUS 144A NotesCanadian MTNEuro MTNUS Private Placement NotesJapanese MTNAustralian MTNUSD denominated obligations1
9.4 Income tax
Income tax expense for the financial year of $149.5 million results in an effective income tax rate of 38.7%, compared to
40.6% for the previous corresponding period. The high effective rate is due to the significant amortisation charges relating to
contract intangibles acquired with the Wallumbilla to Gladstone Pipeline which are not deductible for tax purposes.
After utilisation of available tax losses and franking and research and development tax offsets, income tax of $32.1 million will
be payable in respect of the year ended 30 June 2017. With PAYG instalments of $3.2 million having already been paid, a tax
provision of $28.9 million has been recognised. APA has provided a Tax Transparency Report which includes a reconciliation of
profit to income tax payable on APA’s website at https://www.apa.com.au/investors/my-securities/tax-information/.
9.5 Distributions
Distributions paid to securityholders during the financial year were:
APT franked profit distribution
APT unfranked profit distribution
APT capital distribution
APTIT profit distribution
APTIT capital distribution
Total
Franking credits allocated
Final FY2016 distribution
paid 16 September 2016
Interim FY2017 distribution
paid 15 March 2017
Cents per
security
Total
distribution
$000
Cents per
security
Total
distribution
$000
–
16.34
1.78
3.75
0.63
22.50
–
–
182,063
19,869
41,811
6,976
250,719
–
4.67
4.92
5.47
3.48
1.96
20.50
2.00
52,001
54,889
60,959
38,770
21,814
228,433
22,286
On 22 August 2017, the Directors declared a final distribution for APA for the financial year of 23.0 cents per security which is
payable on 13 September 2017. Franking credits of 2.0 cents per security will be allocated to the APT franked profit distribution.
The FY2017 final distribution will comprise the following components:
APT franked profit distribution
APT unfranked profit distribution
APT capital distribution
APTIT profit distribution
APTIT capital distribution
Total
Franking credits allocated
Final FY2017 distribution
payable 13 September 2017
Cents per
security
Total
distribution
$000
4.67
0.79
10.78
3.07
3.69
23.00
2.00
52,001
8,802
120,183
34,198
41,107
256,291
22,286
As a result, the total distribution applicable to the year ended 30 June 2017 is 43.5 cents per security, a 4.8% increase over the
total distribution of 41.5 cents per security applicable to the year ended 30 June 2016. Franking credits allocated for the year
ended 30 June 2017 distribution totalled 4.0 cents per security.
The Distribution Reinvestment Plan remains suspended.
25
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 9.6 Total securityholder return
APA’s total securityholder return for the financial year, which accounts for distributions paid plus the capital appreciation of
APA’s security price and assumes the reinvestment of distributions at the declared time, was 4.1%6.
APA’s total securityholder return since listing in June 2000 on the ASX, is 1,5727, a compound annual growth rate of 17.4%.
APA TOTAL SECURITYHOLDER RETURNS SINCE LISTING (JUNE 2000) TO 18 AUGUST 2017
2,000
1,600
1,200
800
400
0
JUN 00
JUN 01
JUN 02
JUN 03
JUN 04
JUN 05
JUN 06
JUN 07
JUN 08
JUN 09
JUN 10
JUN 11
JUN 12
JUN 13
JUN 14
JUN 15
JUN 16
JUN 17
APA total securityholder return
Utilities Accumulation Index
S&P/ASX 200 Accumulation Index
9.7 Guidance for 2018 financial year
Based on current operating plans and available information, APA expects EBITDA for the full year to 30 June 2018 to be in a
range of $1,475 million to $1,510 million.
APA has entered into forward exchange contracts for FY2018, for the net USD cash flow from the gas transportation
agreements for the Wallumbilla Gladstone Pipeline (WGP), after servicing USD denominated debt. In forecasting the AUD
equivalent EBITDA contribution from WGP, the forward exchange rates for these hedged revenues have been used.
Net interest cost is expected to be in a range of $525 million to $535 million.
Distributions per security for the 2018 financial year are expected to be in the order of 45.0 cents per security, with franking
credits which may be allocated to those distributions enhancing that cash payout.
As per current APA distribution policies, all distributions will be fully covered by operating cash flows.
EBITDA ($ millions)
Net interest cost ($ millions)
FY2018
guidance
1,475 to 1,510
525 to 535
FY2017
actual
1,470.1
513.8
Total distribution (cents per security)
In the order of 45 cents
43.5 cents
10. Regulatory Matters
Regulatory resets
The diagram below outlines the scheduled regulatory reset dates for pipelines owned and operated by APA. During FY2017,
approximately 9.4% of APA’s Energy Infrastructure revenues were revenues that are subject to regulated outcomes.
REGULATORY RESET SCHEDULE
2017
2018
2019
2020
2021
2022
Roma Brisbane Pipeline
Victorian Transmission System
Central Ranges Pipeline
Central Ranges Network
Goldfields Gas Pipeline
Amadeus Gas Pipeline
Current regulatory period
Next regulatory period
6) Figures quoted are sourced from IRESS and measured as at 30 June 2017.
7) Indexed from 13 June 2000, the date of APA’s listing on the ASX.
26
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
Key regulatory matters addressed during the year included:
Victorian Transmission System access arrangement
The process to revise the access arrangement applying to the Victorian Transmission System (VTS) is currently underway, with
the Australian Energy Regulator (AER) issuing its draft decision on APA’s access arrangement revision proposal on 6 July 2017.
The AER’s draft decision sets aggregate forecast revenue for the next 5-year period (2018-22) at 12.9% higher than its
approved forecast revenue for the previous period, largely driven by the significant increase in the capital base due to APA’s
capital expenditure to enhance system capacity through the Victorian–Northern Interconnect Expansion (VNIE) project and
the proposed Wester Outer Ring Main (WORM) project.
APA does not agree with the rate of return that the AER provided in the draft decision and has responded with strong counter
arguments.
Roma Brisbane Pipeline access arrangement
The process to revise the access arrangement for the Roma Brisbane Pipeline is underway and a draft decision by the AER
was released on 6 July 2017. The AER is currently 4 months behind expected timeframes. The AER has advised this delay will
be taken into account when reaching its final determination.
The AER’s draft decision provides for a tariff relatively equivalent to the existing tariff. Currently the majority of shipper’s pay
individually negotiated tariffs.
Limited Merits Review
Currently, economic regulatory decisions of the AER in relation to gas and electricity transmission and distribution assets,
may be reviewed by the Australian Competition Tribunal. This system is called the Limited Merits Review (LMR).
In August 2016, the COAG Energy Council tasked the Council’s Senior Committee of Officials (SCO) with undertaking
a review of the LMR. In June 2017, the Prime Minister and the Minister for Environment and Energy announced that the
Commonwealth would abolish LMR. A Bill abolishing LMR in relation to decisions of the AER was introduced into Parliament
in August 2017. If the Bill is passed, LMR would no longer be available for regulatory decisions of the AER, including decisions
on access arrangements applying to gas transmission and distribution pipelines. Judicial review of the AER’s decisions would
however, continue to be available.
Gas Policy developments
The eastern Australian gas market has been subject to unprecedented change following commencement of production at the
three LNG facilities at Gladstone from 2014. Numerous governmental reviews and inquiries have considered changes to gas
market regulatory and policy settings. Development and implementation of a number of the regulatory reform initiatives are
being undertaken by the Gas Market Reform Group (GMRG), led by Dr Michael Vertigan.
APA continues to be an active participant in these processes, highlighting the significant contribution that APA has made
through its portfolio of pipeline assets and responsive customer services to the development of the gas market, and seeking
to ensure that changes to the market do not undermine the elements of success in relation to investment, innovation and
service provision.
In December 2016, the GMRG recommended development and implementation of an Information Disclosure and Commercial
Arbitration regime to apply to unregulated pipelines. This recommendation was adopted by the COAG Energy Council and
National Gas Rules giving effect to the new regime came into effect 1 August 2017.
The Information Disclosure and Commercial Arbitration Framework involves requirements for information on unregulated
pipelines to be published on each pipeline operator’s website, including details of available services, prices, pricing methodologies,
costs of service and average prices paid by current shippers. Included in this will be detailed financial reporting, which will also
be made public, the details of which are yet to be determined.
In addition to these new disclosure requirements, a commercial arbitration regime has been implemented as a back stop,
where parties fail to reach agreement on the terms of pipeline access. If an arbitration is activated, the arbitrator must
determine the price to reflect cost including a commercial rate of return commensurate with prevailing market conditions
and the risks in providing the service. In determining the value of the assets used to provide the service, the arbitrator must
apply a methodology that achieves price outcomes that reflect those of a workably competitive market.
Further GMRG developments include the establishment of a secondary pipeline capacity trading platform, to be operated
by the Australian Energy Market Operator. The trading platform is intended to assist contracted shippers to trade capacity
between themselves, and in doing so increase the liquidity of the gas trading market. The platform design builds on the
innovative capacity trading products developed by APA for its shippers to readily trade capacity.
The GMRG is also implementing the earlier decision by the COAG Energy Council to put in place an auction process for
contracted but un-nominated capacity. APA is providing input into the GMRG’s development of the auction design and
process, to ensure incentives to invest are maintained while maximising pipeline utilisation.
Since early 2015 the Australian Energy Market Commission (AEMC) has been undertaking a review of the Victorian
Declared Wholesale Gas Market. In July the final report by the AEMC was provided to the Victorian Government. The final
recommendation is to undertake refinements to the existing market design in the short term to increase consistency across
the east coast market. The AEMC recommends a further review in 2020 to consider further, the transition from the current
structure where pipeline capacity is allocated through the wholesale gas market to an entry-exit structure, where there are
separate firm capacity rights to use the Victorian Transmission System. APA will actively participate in the consultation.
27
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 11. Health, Safety and Environment
11.1 Health and safety reporting
This financial year was the first year of our new three-year HSE Strategic Plan that aims to further develop APA’s HSE
framework, systems and initiatives to prevent harm to our people, contractors and the broader community and to deliver a
sustainable future. We made significant progress with a number of the HSE strategic initiatives including:
– a thorough review of our Fatal Risk Protocols, which cover high risk activities such as excavation and trenching, confined
spaces and driving. The review has resulted in further improvements to APA’s Fatal Risk Protocols, including the need to
develop better targeted training and the identification of a new Fatal Risk Protocol for gas safety;
– training over seventy five of our managers in Incident Causation Analysis Methodology8 resulting in improved investigation
outcomes and improved corrective actions to prevent reoccurrences; and
– continuing the development of our Safedrive+ program including the production of two new Safedrive videos on In Vehicle
Monitoring System and Speeding. APA also received the Australian Pipeline Gas Association’s Health and Safety Excellence
award for its SafeDrive+ Arrive Alive program.
We also continued to improve our Health and Safety Management Systems with further refinements made to our reporting
systems and improved analytics to identify specific Health and Safety data trends. The new incident reporting platform
introduced in FY2016, Safeguard+, has resulted in a significant improvement in both the quality of incident data and the
timeliness of incident reporting. Benefit has also come from the ability to undertake further in-depth analytics to better
understand APA’s incident and injury trends.
The Lost Time Injury Frequency Rate (LTIFR) at the financial year end was 0.52 (for employees and contractors), down from
1.01 in the last financial year. There was one employee and two contractor lost time injuries during the financial year. The
Total Reportable Injury Frequency Rate (TRIFR) for FY2017 was 7.50 (for employees and contractors combined), a significant
decrease of 2.89 from 10.41 in FY2016. Importantly, there were no fatalities of employees or contractors for FY2017.
TOTAL REPORTABLE INJURY FREQUENCY RATE (TRIFR)
LOST TIME INJURY FREQUENCY RATE (LTIFR)
65.8
34.3
80
60
40
20
0
3.0
2.1
2.0
1.0
0.0
0.8
8.11
10.41
7.5
FY13
FY14
FY15
FY16
FY17
FY13
FY14
1.06
FY16
0.64
FY15
0.52
FY17
Note: TRIFR is measured as the number of lost time and medically treated
injuries sustained per million hours worked. Data includes both employees and
contractors.
Note: LTIFR is measured as the number of lost time injuries per million hours
worked. FY14 includes both employees and contractors. Prior to that, employee
data only.
APA continues to target being a zero harm workplace for its employees, contractors and the broader communities in which it
operates. Our injury performance this year continues to show a downward trend over the past five years that is supported by
the strong focus we place on Health and Safety throughout APA.
The Strategic Improvement Plan and the planned initiatives for FY2017 have been achieved during the year with further
details contained in the Sustainability Report. Focus continues to ensure we foster a positive Health and Safety Culture
at APA. This has been demonstrated with the large response received from our employees in relation to Health and Safety
Excellence Awards. This year we received over 52 nominations from our employees with three finalists selected from the
categories of Health and Safety Initiative of the Year, Best Individual Contribution to Health and Safety and Incident Learning
of the Year.
During the year, an independent Health and Safety Audit of our Contractor Management processes was conducted. The
audit, which targeted all of our business divisions, found no major non-conformances and confirmed APA’s sound processes
to manage our Contractor’s Health and Safety performance.
The Safety and Operating Plan for the distribution networks in NSW that APA operates has been audited during the financial
year, in accordance with technical regulatory requirements.
8) The Incident Causation Analysis Methodology (ICAM) is an internationally recognised methodology to the causes of accidents and incidents and supports the notion
that most incidents and accidents are caused rarely by a single act or condition, but rather by a number of factors working together. It looks at the different factors
that might have contributed to an incident, including organisational factors, task and environmental conditions, individual actions and absent failed defences.
28
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES In Vehicle Monitoring System
– keeping our people safe and managing operational risk
APA’s 750 motor vehicles cover more than 17 million
kilometres per annum, hence driving is one of APA’s
operational risks. Last year, we
In Vehicle
Monitoring Systems (IVMS) throughout APA’s vehicle fleet,
as part of 12 initiatives under SafeDrive+.
installed
A year on, such a small gadget has had a huge impact in
our business, helping to ensure our people are safe on the
road whilst continually improving driver behaviour through
data and monitoring via our Integrated Operations Centre
(IOC) in Brisbane.
The IVMS has already demonstrated its worth during
FY2017. A lifesaver alert was triggered in a vehicle which
sent an email alert to APA’s IOC of a possible vehicle
crash. An IOC controller made contact with the driver
within 2 minutes and was informed that the vehicle had
been forced off the road from a blown tyre. The driver
was shaken but uninjured. However, the vehicle was un-
driveable. The driver’s manager and HSE manager were
notified and promptly managed the incident response.
The system detects accidents through inertial changes
in monitored vehicles. Drivers can also manually trigger
alerts via a dash-mounted button or a duress pendant
when they are working away from the vehicle. The alerts
are instantaneous and provide the driver’s precise location,
a big improvement on the previous system where it could
take up to two hours for an alert to be raised if a driver
failed to make their regular call-in and their location was
not specified.
Not only is APA better managing its operational risk, but
our employees’ families have expressed their increased
level of comfort knowing that someone is keeping an eye
on their loved ones whilst working remotely.
For further information on APA’s health and safety initiatives,
please refer to the Sustainability Report (page S10 to S11),
which forms part of this report.
11.2 Environmental Strategy
During FY2017, APA successfully completed the delivery of
its two year Environmental Strategy and Improvement Plan.
This consisted of 12 initiatives that were aimed at enhancing
APA’s environmental management and was delivered on time
and on budget, as approved by the Board HSE Committee.
The initiatives have delivered an improved framework that
standardises environmental management across APA, and
is also integrated with our Safeguard HSE Management
System to ensure consistency and ease of managing
environmental risk at APA.
initiatives
One of the
involved the development and
implementation of the Environmental Training and
Awareness package. On-line training was completed by all
employees and additional face-to-face training sessions
for over 600 operational employees were conducted during
FY2017. In FY2018, an online package will be available as
part of an updated HSE induction programme. The success
of the Environmental Training and Awareness package was
recognised at the 2017 LearnX Impact Awards with the
program winning Platinum in the Best Learning Transfer
category and Gold in the Best Behavioural Change category.
understanding
increased awareness and
The
of
environmental risks across APA is already evident through
increases in APA environmental risk identification metrics
in Safeguard+. The refreshed environmental
captured
corporate governance framework is now part of APA’s
risk management practices and compliance systems will
facilitate our FY2018 activities. One of the key activities will
be the review of APA’s Environmental Management Plans to
continue to improve how environmental risks are managed.
For further information on APA’s environmental management
initiatives, please refer to the Sustainability Report (page S4
to S6), which forms part of this report.
11.3 Environmental regulations
All pipeline, distribution and gas processing assets owned
and/or operated by APA are designed, constructed, tested,
operated and maintained
in accordance with pipeline
and distribution licences issued by the relevant state and
territory technical regulators. All licences require compliance
with relevant federal, state and territory environmental
legislation and Australian Standards.
The pipeline licences also require compliance with the
Australian Standard AS 2885 “Pipelines – Gas and Liquid
Petroleum”, which has specific requirements for the
management of environmental matters associated with all
aspects of the high pressure pipeline industry.
Major project construction activities are audited or
inspected in accordance with Environmental Management
Plan requirements. In accordance with AS 2885 and the
Australian Pipeline and Gas Association (APGA) Code
of Environmental Practice, Environmental Management
Plans are in place for applicable operating pipelines and are
managed in accordance with APA’s contracts and the terms
and conditions of the licences that APA has been issued.
Regulatory compliance internal audits were completed
across the Transmission and Networks business divisions
during FY2017. Senior management review audit report
findings and any material breaches and incidents are
communicated to the Board.
During the financial year, the NSW Department of Planning
and Environment issued two penalty notices to the Victorian–
Northern Interconnect Expansion project in relation to
erosion and sediment controls. The project was impacted
by unprecedented rainfall in the region during the period of
looping construction. APA remediated the impacted area
and importantly completed an investigation resulting in
amending our procedures in relation to soil management to
prevent this type of event in the future.
11.4 Environmental reporting
In October 2016, APA reported its Scope 1 and 2 greenhouse
gas emissions to the Clean Energy Regulator under the
National Greenhouse and Energy Reporting Act (NGER Act).
29
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES APA’s main sources of GHG emissions are from the combustion of natural gas in compressor stations, fugitive emissions
associated with natural gas pipelines and from gas fired power stations. NGER Act compliance reporting applies to assets
under APA’s operational control, which includes gas transmission/distribution pipelines, power generation facilities (including
wind farms), gas storage, gas processing, cogeneration, electricity transmission interconnectors and corporate offices. Energy
reporting for FY2017 will be submitted to the Clean Energy Regulator by 31 October 2017.
APA’s summary of Scope 1 and 2 greenhouse gas emissions, energy consumption and energy produced for the 2016 financial
year and previous years is set out in the following table:
Scope 1 1 CO2 emissions (tonnes)
Scope 2 2 CO2 emissions (tonnes)
Energy consumption 3 (GJ)
FY2016
FY2015
Change
1,084,236
26,555
350,922
26,857
19,510,937
4,633,613
209.0%
(1.1%)
321.1%
Notes:
1) Scope 1: emissions associated directly with APA facilities, such as company vehicles, ‘fuel combustion’ and fugitive emissions from gas pipelines.
2) Scope 2: are indirect emissions that are emitted by sources owned by another company, but result from the facilities activities such as consumption of purchased
electricity/fuel not generated by the facility but used under its operations.
3) Energy Consumption is referring to the total calculation of all energy consumed and produced by the APA facilities i.e. it’s the calculation of net energy consumption
and energy production. Scope 1 and energy consumption figures are correlated as the more gas that goes through APA’s system, more gas is consumed as energy
consumption to drive the compressors to transport gas through the pipelines, thereby increasing Scope 1 emissions as well as energy consumption.
The variations compared to the previous corresponding period are due to the addition of the Diamantina and Leichhardt
Power Stations (DPS), as well as an increase of gas transported across APA pipeline assets. APA moved to full ownership of
DPS during FY2016.
12. Risk Overview
APA identifies risks to its business and puts in place mitigation strategies to remove or minimise the negative effect and
maximise opportunities in respect of those risks. Material risks are reviewed on an ongoing basis by APA’s Executive Risk
Management Committee and the Board Audit and Risk Management Committee, together with the relevant business units
and both internal and where appropriate, external, experts.
The Enterprise Risk Management Framework governs the management of risk across APA and is based on the international
risk standard ISO 31000. All other functional risk frameworks align to this framework to provide consistency and a common
language for risk which is integral to key business decisions.
Further information on this process is provided in APA’s Corporate Governance Statement (refer to Principle 7), the
Sustainability Report (contained in this report) and APA’s website at https://www.apa.com.au/about-apa/our-organisation/
corporate-governance/.
Risk assessments consider a combination of the probability and consequence of identified risks. Listed below are a number of
key risks that could materially affect APA negatively. However, the risks listed may not include all risks associated with APA’s
ongoing operations. The materiality of risks may change and previously unidentified risks may emerge.
APA RISK MANAGEMENT
APA Group Board
– Review current and emerging material
risks and actions
– Review insurance arrangements
– Review of risk strategy and framework
– Approve crisis management plan
– Promote a risk aware culture
APA Group Audit &
Risk Management Committee
Executive Risk Management
Committee
– Approve risk strategy, policy and
framework
– Approve risk appetite
– Approve key risk and compliance policies
– Review and monitor current and
emerging material risks and actions
Group Risk & Compliance /
Group Insurance
– Enterprise Risk Management /
Compliance Frameworks, systems
and guidance
– Business Continuity and Crisis
Management framework
– Asset, project and corporate
insurance program
Functional risk frameworks
Aligned to Enterprise Risk
Management Framework including
– IT Security
– Safety & Environment
– Treasury Risk
– Project Risk
30
APA Divisions
– Implement Risk Frameworks
– Own risks, controls and actions
– Support provided from
Functional risk specialists
– Review and report risk
exposures
– Consider risk in decisions
Independent Review
– Internal Audit
– External Audit
– Third party reviews
Divisional Review
– Functional risk review
– Divisional audits and testing
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
Key risks
Economic regulation
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 Australian Energy Regulator or Economic
Regulation Authority (for Western Australia) under an access arrangement process for a full regulation asset may adversely
affect APA’s revenue in respect of that asset.
A number of APA’s assets are subject to light regulation which, while not a price regulation regime, does enable the regulator
to determine any disputes with customers on price and other terms of access. In addition, under the National Gas Law, any
person may make an application that an unregulated pipeline becomes “covered” and subject to economic regulation, which
may adversely affect APA’s economic position.
During the year, COAG established the GMRG to implement domestic gas market changes, following industry reviews
by the ACCC and the AEMC. The GMRG has an extensive work program to undertake detailed design, consultation and
implementation of the agreed market interventions over the next two years. The most significant elements of the changes
are the introduction of an information disclosure and binding arbitration regime for access to unregulated pipelines, and the
proposed introduction of day ahead auctions for contracted but un-nominated pipeline capacity.
The information disclosure and commercial arbitration regime came into effect on 1 August 2017. There is uncertainty as to
the impact on our business of the regime. There is a risk that prices for pipeline services and therefore revenues, will reduce as
a result of implementation of the regime adversely affecting APA’s business.
The final design of the capacity auction reform initiative has not yet been finalised but there is a risk that the final design may
adversely affect APA’s business. Auctions of capacity may reduce the volumes of ancillary services sold by APA. In addition,
to the extent that auction prices are less than the price of the ancillary services, APA’s revenue may be adversely affected.
The Australian Energy Market Commission has released its final report on the review of the Victorian Declared Wholesale
Market. The report contains recommended changes to the structure of the Victorian wholesale gas market, which will require
amendment to the National Gas Rules. These amendments may change the business risk profile of the Victorian Transmission
System.
Bypass and competition risk
Bypass and competition risk occurs when a new transmission pipeline offers gas transportation services to the same end
market serviced by existing pipelines. If a bypass risk eventuates, APA’s future earnings may be reduced if customers purchase
gas transportation services from new pipelines rather than from APA’s existing pipelines. Competitive pressures including
changes in market conditions, new market entrants and increased competitive cost pressure, could impact our customer
relationships and have a unfavourable effect on APA’s financial performance.
Gas demand risk
Reduced demand for gas and increased use of gas swap contracts by customers may reduce the future demand for pipeline
capacity and transportation services and may adversely affect APA’s future revenue, profits and financial position.
Gas supply risk
A long-term shortage of competitively priced gas, either as a result of gas reserve depletion, allocation of gas to other
markets, or the unwillingness or inability of gas production companies to produce gas, may adversely affect APA’s contracted
revenue and the carrying value of APA’s assets.
Counterparty risk
The failure of a counterparty to meet its contractual commitments to APA, whether in whole or in part, could reduce future
anticipated revenue, unless and until APA is able to secure an alternative customer. Counterparty risk also arises when
deposits of surplus cash are placed, and hedge contracts entered into, with financial institutions.
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 2035. Access to financing sources to extend and/or refinance debt facilities is
important. An inability to secure new debt facilities at a similar quantum and cost to existing debt facilities may adversely
affect APA’s operations and/or financial position and performance.
Foreign exchange risks
APA is exposed to movements in foreign exchange rates and there is a risk that AUD/USD exchange rate movements may
adversely affect APA’s earnings (through reduced AUD proceeds received from the exchange of USD denominated revenues)
and debt levels (through translation of USD denominated debt).
31
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES Investment risk
APA may acquire infrastructure and related assets, undertake additional or incremental investment in its existing assets and
develop new assets. There is a risk that assumptions and forecasts used in making investment decisions may ultimately not
be realised, unanticipated costs occur, new skillsets or capabilities that APA is not familiar with are required together with new
types of regulatory approvals needed where APA has limited experience. If these risks materialise, this may adversely affect
APA’s operations, financial performance and reputation.
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 gas demand risk, gas supply risk, counterparty risk, shorter term contracts, and bypass and competition
risk, APA may not be successful in recontracting the available pipeline or power generation capacity when it comes due
for contract renewal. Contract renewal risk also arises under long term contracts where costs to perform the contracted
services could equal or exceed revenues over periods of years. This may adversely affect APA’s future financial position and
performance.
Operational risk
APA is exposed to a number of operational risks including those resulting in equipment failures or breakdowns, pipeline ruptures,
employee or equipment shortages, workplace safety incidents, environmental damage, contractor defaults, damage by third
parties, integration incidents from acquired or newly constructed assets and damage from natural hazards, sabotage or
terrorist attacks. Operational disruption, together with the cost of repairing or replacing damaged assets, may adversely
affect APA’s financial position and reputation.
Information technology risk
APA is reliant on information systems and technology (IT) to support its business operations. This exposes APA to a number
of typical IT operational risks which can result in system corruption or failure, technology breakdown, and cyber incidents or
attacks. Operational disruption together with the cost of remediating damaged or compromised systems and data, may
adversely affect APA’s financial performance and reputation.
Compliance, operating licences and authorisations
All pipeline, distribution, gas processing, storage and electricity generation assets owned and/or operated by APA require
compliance with relevant laws, regulations, approved standards and relevant licence requirements. Any changes may have an
impact on APA’s pricing, costs or compliance regimes, which may adversely affect APA’s operations and/or financial position
and performance. APA is also subject to health, safety and environmental laws and regulations. Certain licences, permits or
regulatory consents may not be renewed, granted, continued or such renewal, grant or continuation may be on more onerous
terms or subject to loss or forfeiture, which may adversely affect APA’s operations and/or financial position and performance.
Construction and development risk
APA develops new assets and undertakes expansion of its existing assets. This involves a number of typical construction
risks, including the failure to obtain necessary approvals, employee or equipment shortages, third party contractor failure,
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 may adversely affect APA’s financial position and performance.
Credit rating risks
There is no assurance that any credit rating will remain in effect for a given period of time or that any credit rating will not be
revised or withdrawn entirely by a credit rating agency in the future if, in the credit rating agency’s judgement, circumstances
warrant. Withdrawal or review of APA’s credit ratings may adversely affect APA’s financial position and performance.
32
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 13. Directors
13.1 Information on Directors and Company Secretary
See pages 6 to 7 for information relating to qualifications and experience on Directors and the Company Secretary.
13.2 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
Leonard Bleasel AM
Michael McCormack
Steven Crane
John Fletcher
Michael Fraser
Debra Goodin
Russell Higgins AO
Company
–
Period of directorship
–
Envestra Limited
July 2007 to September 2014
nib holdings limited
Transfield Services Limited
Bank of Queensland Limited
Since September 2010
February 2008 to February 2015
December 2008 to January 2015
–
–
Aurizon Holdings Limited
AGL Energy Limited
Senex Energy Limited
oOh!media Limited
Ten Network Holdings Limited
Telstra Corporation Limited
Argo Investments Limited
Leighton Holdings Limited
Since February 2016
October 2007 to February 2015
Since May 2014
Since November 2014
Since August 2016
Since September 2009
Since September 2011
June 2013 to May 2014
–
Patricia McKenzie
–
13.3 Directors’ meetings
During the financial year, 12 Board meetings, four Audit and Risk Management Committee meetings, four People and
Remuneration Committee meetings, five Health Safety and Environment Committee meetings and two Nomination
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
Michael Fraser 2
Debra Goodin
Russell Higgins AO
Patricia McKenzie
People &
Remuneration
Committee
Audit & Risk
Management
Committee
Health Safety
& Environment
Committee
Nomination
Committee
Board
A
12
12
12
12
12
12
12
12
B
12
12
11
12
12
11
12
12
A
–
–
4
4
4
–
–
4
B
–
–
4
4
4
–
–
4
A
–
–
4
4
2
4
4
–
B
–
–
4
4
1
4
3
–
A
–
–
–
–
3
5
5
5
B
–
–
–
–
3
5
5
5
A
2
–
2
2
2
2
2
2
B
2
–
2
2
2
2
2
2
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 of Audit & Risk Management and Health, People & Remuneration, Safety & Environment ex officio.
2) Michael Fraser was appointed to the Audit & Risk Management Committee and retired from the Health Safety & Environment Committee during the period.
33
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 13.4 Directors’ securityholdings
The aggregate number of APA securities held directly, indirectly or beneficially by Directors or their related entities at 30 June
2017 is 1,365,674 (2016: 1,322,074).
The following table sets out Directors’ relevant interests in APA securities as at 30 June 2017:
Directors
Leonard Bleasel AM
Michael McCormack
Steven Crane
John Fletcher
Michael Fraser
Debra Goodin
Russell Higgins AO
Patricia McKenzie
Fully paid
securities as at
1 July 2016
614,216
300,000
130,000
88,250
25,000
19,000
122,719
22,889
Securities
acquired
23,400
20,000
–
–
–
200
–
–
1,322,074
43,600
Securities
disposed
Fully paid
securities as at
30 June 2017
–
–
–
–
–
–
–
–
–
637,616
320,000
130,000
88,250
25,000
19,200
122,719
22,889
1,365,674
Leonard Bleasel AM holds 10,000 subordinated notes that were issued by APT Pipelines Limited, a subsidiary of APT.
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.
14. Options Granted
In this report, the term “APA securities” refers to stapled securities each comprising a unit in Australian Pipeline Trust stapled
to a unit in APT Investment Trust and traded on the Australian Securities Exchange (ASX) under the code “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 of the financial year
as a result of the exercise of an option over unissued APA securities.
15. Indemnification of Officers and External Auditor
During the financial year, the Responsible Entity paid a premium in respect of a contract insuring the Directors and Officers
of the Responsible Entity and any 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.
Australian Pipeline Limited, in its own capacity and as Responsible Entity of Australian Pipeline Trust and APT Investment
Trust, indemnifies each Director and Company Secretary, and certain other executives, former executives and officers 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. 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.
16. Remuneration Report
The remuneration report is attached to and forms part of this report.
34
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 17. Auditor
17.1 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 100.
17.2 Non-audit services
Non-audit services have been provided during the financial year by the Auditor. A description of those services and the
amounts paid or payable to the Auditor for the services are set out in Note 28 to the financial statements.
The Board has considered those non-audit services provided by the Auditor and, in accordance with written advice from
the Audit and Risk Management Committee (Committee), is satisfied that the provision of those services by 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 of the Auditor;
– 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 Auditor’s independence and the Auditor’s
independence declaration referred to above.
18. 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 29 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 on issue at the end of the
financial year, are disclosed in Note 22 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 disclosed in the notes to the financial statements.
19. Rounding of Amounts
APA is an entity of the kind referred to in ASIC Corporations Instrument 2016/191 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.
20. Corporate Governance Statement
Corporate Governance Statement for the financial year is available at APA’s website on https://www.apa.com.au/about-
apa/our-organisation/corporate-governance/.
21. Authorisation
The Directors’ report is signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to
section 298(2) of the Corporations Act 2001.
On behalf of the Directors
Leonard Bleasel AM
Chairman
Sydney, 23 August 2017
Steven Crane
Director
35
APA Group Annual Report 2017directors’ report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
remuneration report.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Letter from the Chairman of the People and Remuneration Committee
Dear Securityholders,
As mentioned in the Director’s Report, APA has had a successful year. I am pleased to present APA Group’s Financial Year 2017
(FY2017) Remuneration Report (Report).
Governance changes
As part of the Board’s commitment to accountability and transparency, APA Group (APA) has changed its governance
framework to allow Securityholders to vote on the adoption of the Report each year, commencing at the 2017 Annual Meeting.
While the vote is advisory and does not bind the Directors or APA, in accordance with the Corporate Governance Framework,
if at least 25% of the votes cast are voted against the adoption of the Report at the Annual Meeting in two consecutive
years, then the ‘two strikes’ mechanism will be triggered as per the Corporations Act 2001. Further, Directors will consider the
outcome of the vote and feedback from Securityholders on the Report when reviewing APA Group’s remuneration policies.
2017 Remuneration outcomes
The Board considers a number of factors in determining remuneration outcomes for its executives. Whilst the key aspects for
consideration are in the achievement of financial objectives, the Board also assesses qualitative elements including health,
safety and environmental objectives as well as the effectiveness of delivering strategic initiatives designed to create value for
Securityholders over the longer term.
APA’s financial performance in FY2017 was solid, with improved cash flow providing a sound foundation for sustained growth
and asset expansion. It is against these outcomes that the short term (STI) and long term (LTI) incentives awards were
determined. Specifically:
– STI – STI awards are subject to the performance gateway of Operating Cash Flow per Security (OCFPS). The Board
believes that the use of the OCFPS ‘gate opener’ provides one of the most effective means in aligning executive short term
reward outcomes with the creation of value for Securityholders. In FY2017, OCFPS performance was assessed at 128.7%
out of a maximum of 150%. This then sets the total opportunity to which the individual executive performance outcomes
are applied. For FY2017 the individual outcomes ranged from 76.4% to 84.1% of the maximum entitlement; and
– LTI – LTI awards are subject to the dual performance hurdles of relative Total Shareholder Return (TSR) and EBITDA
(Earnings before Interest Tax Depreciation and Amortisation) divided by Funds Employed (FE). The terms and outcomes
of the LTI are described in more detail in the Report, however for the FY2017 grant, executives received 117.4% out of a
maximum of 150% of their LTI opportunity.
Remuneration frameworks
The People and Remuneration Committee (the Committee) regularly assesses the effectiveness of APA’s remuneration
framework in balancing and aligning the interests of its customers, executives and Securityholders.
During FY2017, the Board agreed that the current remuneration strategy continued to achieve its objectives. The only change
made was to the timing in calculating the Volume Weighted Average Price (VWAP) to determine the number of reference
units awarded to executives. Full details of this change are provided within the Report.
Executive and remuneration changes
One change to the Executive Committee was made with the appointment of Sam Pearce to the position of Group Executive
Networks and Power, replacing John Ferguson, Group Executive Networks who retired in December 2016.
Fixed pay changes in FY2017 reflected the change in the size and complexity of APA’s operations and the skills, experience and
capabilities required by our executives to meet the challenges of a growth orientated business.
The Board will continue to critically evaluate its remuneration framework against market practice and to ensure it supports
the alignment to and implementation of our business strategy to deliver long term sustainable value for our Securityholders.
John Fletcher
Chairman – People and Remuneration Committee
23 August 2017
36
APA Group Annual Report 2017 1. Executive Summary
1.1 FY2017 Remuneration highlights
The table below provides a snapshot of the key changes and outcomes under the relevant remuneration frameworks through
FY2017 for both Directors and Executive KMP.
The Executive KMP, who are members of the Executive Committee, have the responsibility for making management decisions
under the authority delegated to it by the Board.
Element
Highlights for FY2017
Fixed pay
STI
LTI
A number of fixed pay adjustments were made to reflect the increased size, scope and complexity
of executive roles. These roles were benchmarked against external positions of a comparable nature
and size.
For most of the Executive KMP, increases averaged 7% from the previous financial year. 1
The methodology remained unchanged from previous years. OCFPS performance achieved was
87.4 cents per security which equated to 128.7% out of the maximum 150% opportunity. Individual
outcomes for executives are provided in Section 6.
The methodology remained unchanged from previous years. Annual vesting under the previous years’
grants continued.
The following performance outcomes determined the amount of reference units granted:
1. Relative TSR (50% of measure) – based on the performance period of the three years preceding the
grant, APA achieved a relative percentile rating of 69.5, which equated to a grant of 110.1% of eligible
reference units under the performance scale; and
2. EBITDA/FE (50% of measure) – based on the performance period of the three years preceding the
award, APA achieved an outcome which equated to 124.8% of eligible reference units under the
performance scale.
These performance outcomes meant that executives received 117.4% out of a maximum of 150% of
their LTI opportunity.
Non-executive
director fees
During the year, the Board resolved to increase Non-executive Director and Committee fees. These
increases ranged from 3.3% for Directors to 6.1% for the Chairman. The increases were based on the
outcomes of external benchmarking for Directors roles within companies of a comparable market
capitalisation.
Minimum security
holding requirement
The Directors and Chief Executive Officer/Managing Director (CEO/MD) met the minimum security
holding requirement, while Executive KMP continued to progress towards the required level.
1.2 Looking ahead to Financial Year 2018 (FY2018)
The table below provides an overview of the activities concerning remuneration strategies and frameworks planned for
FY2018.
Element
Highlights For FY2018
Fixed pay
We will continue to base our fixed pay levels with references to comparable external benchmarks.
STI
LTI
Balanced scorecards will to be established for each Executive KMP, similar in structure to previous
years, covering key performance indicators across financial, business growth, strategic initiatives and
health, safety and environment with measures for target and stretch outcomes.
For the FY2017 LTI grant (awarded in September 2017), a change in the timing of the VWAP was
agreed for calculating the number of cash-settled reference units awarded to eligible Executives KMP.
This was previously based on APA’s share price for the 30 trading days two days immediately prior to
APA’s annual financial results release.
To allow the Board to more fully consider the impact of APA’s financial performance on executive
remuneration, the VWAP calculation period has been changed to be for the 30 trading days up to
and including the seven working days immediately prior to the Board Audit and Risk Management
Committee meeting to consider APA’s annual financial results.
1) These average increases excluded the Company Secretary and General Counsel, and Group Executive, Human Resources. See Table 8.1 for detail.
37
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 2. Remuneration Governance
2.1 Role of People and Remuneration Committee
The Committee has been established by the Board to oversee Executive KMP and Non-executive Director (NED) remuneration.
The role of the Committee is to ensure the provision of a robust remuneration and reward system that aligns employee and
investor interests while facilitating the attraction, retention and development of employees. The Committee’s activities are
governed by its Charter (a copy of which is available on APA’s website: https://www.apa.com.au/about-apa/our-organisation/
corporate-governance/).
In addition to making recommendations regarding APA’s remuneration strategy and policy, people and diversity and inclusion
matters, the Committee is specifically responsible for:
– Recommending the CEO/MD’s performance objectives, remuneration and appointment, retention and termination policy
to the Board;
– Reviewing and approving remuneration for Executive KMP (based on recommendations from the CEO/MD);
– Reviewing and recommending the Remuneration Report to the Board; and
– Reviewing senior executive succession plans and talent.
2.2 Composition of the Committee
The members of the Committee, all of whom are independent NEDs, are:
– John Fletcher (Chairman);
– Steven Crane;
– Michael Fraser; and
– Patricia McKenzie.
The Chairman of the Board attends all meetings of the Committee and the CEO/MD and nominated senior executives
attend by invitation where management input is required. The Committee met four times during the year.
2.3 Use of external advisors
The Committee seeks external professional advice from time to time on matters within its terms of reference. Remuneration
advisors are engaged by the Committee and report directly to the Committee. During FY2017, the following remuneration
information was obtained and considered by the Committee:
– Ernst & Young provided remuneration benchmarking information and assisted with remuneration governance;
– Egan & Associates provided fee and remuneration benchmarking information for NED fees and members of the Executive
Committee, respectively; and
– Orient Capital (part of the Link Group) provided Relative TSR benchmarking analysis.
No recommendations were made by these external advisors regarding remuneration arrangements. APA employs internal
remuneration professionals who continually review and interrogate the market practices, providing appropriate analysis to
the Committee/Board. This advice is used as a guide, but does not serve as a substitute for the thorough consideration of the
issues by each Director.
2.4 Minimum securityholding ownership requirement
The minimum security ownership requirement helps to ensure that the interests of Directors, executives and investors are
aligned. The CEO/MD and Executive KMP are expected to grow their holding to the minimum security ownership requirement
within five years from the first date of their LTI grant. These security holdings have to be acquired from post-tax income as
APA does not have a traditional equity-settled LTI. As at 30 June 2017:
– The minimum securityholding requirement for the CEO/MD is equal to his annual gross fixed pay; and
– The minimum securityholding requirement for Executive KMP is 50% of their annual gross fixed pay.
NEDs are expected to hold securities to a value which is not less than the annual base Board fee (before tax and excluding
fees applicable to membership of Committees). This level of securityholding is to be held throughout their tenure as Directors
and is a requirement of their employment agreement. As at 30 June 2017 all NEDs met this requirement.
Leonard Bleasel AM holds 10,000 subordinated notes that were issued by APT Pipelines Limited, a subsidiary of APT. Other
than NED fees, executive compensation and note holdings disclosed in this Report, there are no other transactions with the
KMP of APA and the Responsible Entity.
2.5 Clawback policy
APA has an Executive Remuneration Clawback Policy which provides the Board the discretion to require that some or all of
an executives STI and/or LTI awards be forfeited in the event of misconduct or of a material misstatement in the year-end
financial statements in the preceding three years.
38
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 3.
Individuals Covered By This Remuneration Report
This Remuneration Report for APA for FY2017 has been prepared in accordance with Section 300A of the Corporations Act
2001. The information provided in this Report has been audited as required by Section 308(3C) of the Corporations Act 2001,
unless indicated otherwise, and forms part of the Directors’ Report.
This Report includes the following KMP:
– NEDs; and
– Executive KMP (current and former).
Name
Role
Term as KMP in 2017
Non-executive Directors
Leonard Bleasel AM
Chairman
Steven Crane
John Fletcher
Michael Fraser
Debra (Debbie) Goodin
Russell Higgins AO
Patricia McKenzie
Executive KMP – Current
Director
Director
Director
Director
Director
Director
Michael (Mick) McCormack
CEO/MD
Nevenka Codevelle
Peter Fredricson
Ross Gersbach
Kevin Lester
Elise Manns
Company Secretary & General Counsel
Chief Financial Officer (CFO)
Chief Executive Strategy and Development
Group Executive Infrastructure Development
Group Executive Human Resources
Robert (Sam) Pearce 2
Group Executive Networks and Power
Robert Wheals
Group Executive Transmission
Executive KMP – Former
John Ferguson 3
Group Executive Networks
4. Remuneration Principles and its Components
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year
Full year
Part year
The Board recognises that remuneration plays an important role in both supporting and implementing the achievement of
APA’s operational strategy over both the short and longer terms. The key principles of the remuneration policy are to:
– Ensure that the remuneration model is aligned with APA’s business strategy and its execution;
– Provide competitive rewards to attract, motivate and retain highly skilled executives; and
– Ensure that an appropriate component of remuneration is linked to the creation of value for our investors.
4.1 Remuneration overview for FY2017
The following timeline illustrates the time frame for assessment of fixed pay, as well as the delivery and anticipated vesting
of both LTI and STI components relating to FY2017.
LTI
STI
Fixed pay
Performance measured
1 Jul 2014 to 30 Jun 2017
Performance assessed
Award granted
Vesting
Paid/effective
Aug 2017
Sep 2017
1st tranche (1/3) – Aug 2018
2nd tranche (1/3) – Aug 2019
3rd tranche (1/3) – Aug 2020
1st tranche (1/3) – Sep 2018
FY2017
Aug 2017
Sep 2017
FY2017
Aug 2017
Sep 2017
2) Sam Pearce, Group Executive Networks and Power, was appointed to the position effective 1 December 2016.
3) John Ferguson, Group Executive Networks, retired 16 December 2016.
39
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 4.2 Remuneration structure
The table below provides an overview of the remuneration structure (pay mix) for Executive KMP. Each remuneration element
is expressed as a percentage of the total reward opportunity.
CEO/MD
Executive KMP
Fixed pay
40%
50%
STI
30%
25%
LTI
30%
25%
Fixed pay
Fixed pay is expressed as a total dollar amount comprised of a base salary, superannuation and any benefits nominated. The
level of fixed pay is based on a consideration of factors, including individual skills and experience, external market positioning
and the size and complexity of the role. A number of benchmarks appropriate for each Executive KMP role are used to obtain
a comprehensive view of all elements of executive remuneration, utilising companies with comparable market capitalisation,
similar industries and key competitors.
Variable reward
Annual performance assessment
Individual performance is assessed against a combination of APA, Business Unit and individual measures based on a scorecard
of objectives.
Objectives for each Executive KMP are developed with reference to APA’s strategic objectives over the shorter and longer
terms. For the STI, the specific objectives cover the following areas:
– Financial measures account for at least 50% of the total objectives. These measures include cost control/savings, revenue
and cash generation (including stretch targets), capital expenditure management, credit ratings, and debt/equity
management; and
– Remaining strategic initiatives include objectives such as strategy delivery, managing the regulatory environment and
material, long-term programs of work; health, safety and environment measures; risk management; project delivery,
efficiency/improvement initiatives and talent development and leadership succession.
Performance is assessed against these objectives at the end of the financial year based on the actual performance of APA.
This is followed by the review and endorsement by the Committee, with final approval by the Board upon the completion
and audit of the financial statements. The Board reviews performance outcomes against each objective, combined with an
assessment of each outcome relative to overall business performance.
STI
Plan element
Description
STI opportunity
STI opportunity as a percentage of the total reward opportunity is provided in the table below.
CEO/MD
Executive KMP
Target STI
Stretch STI
30%
25%
45%
37.5%
Performance
gateway
Plan funding
Normalised OCFPS acts as a gateway for awards under the STI plan. STI opportunity is only realisable
if the OCFPS threshold level of performance set by the Board is met (i.e., the “gate opens”).
Provided the OCFPS threshold is met, the STI opportunity available may be modified based on the
level of OCFPS performance achieved.
The level of adjustment is based on a sliding scale and the STI is either positively or negatively modified
depending on the financial result. For example, where extraordinary performance is achieved, an STI
opportunity of up to 150% could be achieved, conversely where less than 33% of agreed financial
metric is met, then a zero STI outcome is likely.
Timing and
delivery
Clawback
All STI awards are paid in cash, usually in September of the new financial year, following completion
and audit of the annual financial statements.
The Board, in its discretion, may determine that some, or all, of an executive’s STI award is forfeited
in the event of misconduct or of a material misstatement in the annual financial statements in the
preceding three years.
Cessation of
employment
If a participant resigns or is dismissed (with or without notice), any unpaid STI awards are forfeited. If
an employee leaves for any other reason, an STI award may be paid out based on the proportion of the
period that has passed and performance at the time of cessation (subject to Board discretion).
Change of control
Subject to Board discretion, if a change of control occurs, an STI award will be paid out based on the
proportion of the period that has passed at the time of change of control.
40
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 LTI
Plan element
Description
Award vehicle
APA operates a shadow security scheme known as a reference unit incentive plan to create alignment
with Securityholders. Reference units reflect the unit price performance of APA securities (with no
entitlements to distributions) and are cash settled.
Reference units are valued at allocation using the APA Group VWAP for the 30 day period up to and
including seven working days immediately prior to the Board Audit and Risk Management Committee
meeting to consider APA’s annual financial results.
Participants in the cash settled security-based LTI do not participate in any Employee Security Plan.
The LTI performance hurdles of Relative TSR and EBITDA/FE provide the link between APA performance
(and hence the creation of securityholder value) and the potential level of reward delivered to the executive.
LTI opportunity
The value of the LTI at the time of grant as a percentage of the total reward opportunity is provided in
the table below. The maximum LTI granted is 150% of the target LTI.
LTI allocation
Performance
measures and
targets
CEO/MD
Executive KMP
Target LTI
Maximum LTI
30%
25%
45%
37.5%
The number of reference units awarded is determined at the completion of the financial year based
on APA performance against the dual performance hurdles of relative TSR and EBITDA/FE for the
preceding three years.
Relative TSR
– Relative TSR measures the percentage change in security price, plus the value of dividends or
distributions received during the period, assuming all dividends and distributions are re-invested into
new securities at the time of payment;
– APA’s Relative TSR is measured relative to a peer group comprising of S&P/ASX 100 constituents
and over the three financial years preceding the grant of reference units. For the FY2017 LTI grant,
the performance period was from 1 July 2014 to 30 June 2017;
– Relative TSR has been selected as a LTI performance measure given it provides the most direct
measure of Securityholder return and therefore alignment between the interests of Securityholders
and Executive KMP; and
– A sliding scale is set each year to deliver between 0% and 150% of eligible reference units, where the
performance gateway is the achievement of the 50th percentile.
EBITDA /FE
– EBITDA/FE is measured over the three financial years preceding the grant of reference units.
Adjustments are made to funds employed for tax and work-in-progress capital expenditure. The
Board determines the EBITDA/FE target each year through the setting of financial metrics to
improve the capital efficiency of the organisation. For the FY2017 LTI grant, the performance period
was from 1 July 2014 to 30 June 2017;
– EBITDA/FE has been selected as an LTI performance measure given it helps determine the operating
cash flow leverage being achieved based on the operating assets available to the business. It is a longer
term performance measure based on the integrity of earnings performance against funds employed;
– Like relative TSR, a sliding scale is applied to determine the number of eligible reference units. This
sliding scale also ranges between 0% and 150%. The sliding scale becomes progressively more
challenging with the maximum amount of 150% only eligible to be granted where EBITDA/FE
performance is significantly above the agreed financial metrics.
Retesting
There is no retesting of the allocation.
Timing and delivery The LTI grant vests in three equal instalments over the three financial years following the allocation,
Restrictions
Clawback
with the initial one-third vesting at the end of the first financial year following the first award, one-
third at the end of the second financial year, and one-third at the end of the third financial year
following grant. For example, the first tranche of the FY2017 award will vest in August 2018.
LTI allocations of reference units do not entitle participants to vote at Securityholders meetings nor to
be paid distributions. No securities, options or other equity instruments are issued to APA employees
under the LTI plan.
The Board in its discretion may determine that some, or all, of an Executive KMP’s current year LTI
allocation is forfeited in the event of misconduct or of a material misstatement in the annual financial
statements in the preceding three years.
Cessation of
employment
If a participant resigns or is dismissed (with or without notice), all unvested reference units are
forfeited. If an employee leaves for any other reason, the Board determines the number of reference
units which will lapse or are retained, subject to vesting on the original schedule.
Change of control
Subject to Board discretion, if a change of control occurs, all previously allocated reference units will vest. A
further number of reference units will be allocated based on the proportion of the period that has passed
in the current financial year at the time of change of control and will also vest on change of control.
41
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 5. Other Remuneration Elements
5.1 Contractual arrangements
Remuneration arrangements for Executive KMP are formalised in individual employment agreements, summarised in the
table below.
Contract type
Notice period
Redundancy
CEO/MD
Permanent
12 months
Executive KMP other
than CEO/MD
Permanent
Six months
52 weeks
fixed pay
13 weeks
fixed pay
Termination
with cause
Immediate without
notice period
Immediate without
notice period
5.2 Sign-on /loans/ termination payments provided to executives
APA did not pay any sign-on payments to Executive KMP during FY2017. No loans have been made to any Executive KMP and/
or related parties.
APA made the following termination payments to Executive KMP during FY2017.
Executive KMP
Position Held
Retirement
Payments at time of termination
On-going payments
J Ferguson
Group Executive
Networks
16 Dec 2016
Statutory entitlements plus five
and one half months fixed pay in
lieu of notice and prorata STI.
Unvested reference units will vest
in accordance with the vesting
schedule.
6. Linking Remuneration To Performance
6.1 APA’s financial performance 2013 to 2017
Normalised financial results 4
FY2013 5
FY2014
FY2015
EBITDA ($m)
Profit after tax ($m)
Operating cash flow per security (cents)
Distribution per security (cents) 6
Closing security price at 30 June ($)
661.9
172.3
56.0
35.5
5.99
747.3
199.6
50.8
36.3
6.89
822.3
203.9
54.8
38.0
8.24
FY2016
1,330.5
179.5
77.4
41.5
9.24
FY2017
1,470.1
236.8
87.4
43.5
9.17
6.2 Five year cumulative total shareholder return performance and ASX100 Ranking
180.0%
160.0%
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
(20.0%)
0
20
40
60
80
APA Group
JUN 13
S&P/ASX 200 Utilities
JUN 14
JUN 15
JUN 16
JUN 17
S&P/ASX 100
APA Market Cap Ranking in ASX100
4) Normalised financial results are the statutory financial results excluding significant items. The Board considers these measures to best reflect the core earnings
of APA.
5) The balances for FY2013 have been restated to reflect the application of accounting standard AASB 119: Employee Benefits.
6) Represents the total distribution applicable to the financial year.
42
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 6.3 Variable reward outcomes
The Board continues to focus the alignment of executive reward and the creation of investor wealth over the shorter and
longer terms.
STI outcomes
The table below provides an overview of the STI outcomes for FY2017. This table represents the combination of both individual
performance outcomes (against agreed objectives) and the application of the STI Plan gateway and modifier, i.e. company
performance against the OCFPS performance level.
STI earned
STI forfeited
% of maximium
opportunity
$ paid
% of maximium
opportunity
$ foregone
Executive KMP – current
M McCormack
N Codevelle
P Fredricson
R Gersbach
K Lester
E Manns
S Pearce 7
R Wheals
Executive KMP – former
J Ferguson 8
80.7
80.7
82.4
76.4
77.7
81.8
83.3
84.1
1,724,472
332,793
541,944
512,739
361,180
337,395
162,427
461,765
100
135,900
19.3
19.3
17.6
23.6
22.3
18.2
16.7
15.9
413,028
79,707
115,806
158,511
103,820
75,105
32,676
87,235
LTI outcomes
Eligible executives received cash-settled reference units with a grant date of September 2017. The table below provides a
summary of both the historical and FY2017 LTI awards based on assessment against the performance hurdles in the three
years preceding the grant.
Year of grant
FY2014
FY2015
FY2016
FY2017
Performance assessment
Relative TSR %
(i.e. 50% of grant)
EBITDA/FE%
(i.e. 50% of grant)
LTI awarded
% maximum
grant
53.2
100.0
85.3
73.4
66.7
90.8
62.9
83.2
59.9
95.4
74.1
78.3
7) S Pearce’s STI was pro-rated to reflect his period as an Executive KMP only.
8) J Ferguson’s STI was pro-rated to reflect his time with the Group during the performance period.
43
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Detailed below is a summary of LTI grants relating to FY2017 based on an assessment against the performance hurdles at
the time of grant.
Executive KMP – current
M McCormack
N Codevelle
P Fredricson
R Gersbach
K Lester
E Manns
S Pearce 10
R Wheals
Executive KMP – former
J Ferguson 11
7. Non-Executive Directors
Number
of reference
units granted
Potential value
of grant
yet to vest ($)9
188,424
1,673,167
36,363
57,981
59,172
40,989
36,363
17,199
48,396
322,896
514,860
525,436
363,974
322,896
152,724
429,747
17,862
158,611
7.1 Determination of Non-executive Director fees
The Board seeks to attract and retain high calibre Non-executive Directors (NED) who are equipped with diverse skills to
oversee all functions of APA in an increasingly complex environment. NED fees comprise:
– A Board fee;
– An additional fee for serving on a committee of the Board; and
– Statutory superannuation contributions.
NEDs do not receive incentive payments nor participate in incentive plans 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 or the prior
reporting period. Superannuation is provided in accordance with the statutory requirements under with the Superannuation
Guarantee Act. The Board Chairman does not receive additional fees for attending committee meetings.
7.2 Aggregate fee pool
The aggregate fee pool for NED remuneration is currently $2,500,000 (inclusive of the applicable superannuation guarantee levy).
7.3 Director fees
Following external benchmarking and a review of APA’s performance relative to other companies, Board fees and committee
fees were increased effective 1 January 2017. These changes were based on a review of external fees paid to Directors in
companies of a similar market capitalisation.
Fees12
Board
Audit and Risk Management Committee
Health Safety and Environment Committee
People and Remuneration Committee
Effective 1 January 2017
Effective 1 January 2016
Chairman
$000
Member
$000
Chairman
$000
Member
$000
467
43.7
36.4
36.4
159
21.8
18.2
18.2
440
42
35
35
154
21
17.5
17.5
No fees are paid to Directors for participation in the Nomination Committee.
9) The maximum value of the grant has been estimated based on the cash award valuations at the grant date.
10) S Pearce’s STI was pro-rated to reflect his period as an Executive KMP only.
11) J Ferguson’s STI was pro-rated to reflect his time with the Group during the performance period.
12) Excluding superannuation.
44
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 7.4 NED Statutory Remuneration Disclosure – NED Remuneration for FY2016 and FY2017
Financial Year 13
L Bleasel AM
FY2017
FY2016
S Crane
FY2017
FY2016
J Fletcher
FY2017
FY2016
M Fraser 14
FY2017
FY2016
D Goodin 15
FY2017
FY2016
R Higgins AO
FY2017
FY2016
P McKenzie
FY2017
FY2016
Total
FY2017
FY2016
Short-term
employment
benefits
Post-
employment
benefits
Fees
$
Superannuation
$
Total
$
453,500
420,000
217,200
194,250
213,600
186,500
196,227
151,833
195,750
154,583
213,600
200,500
192,200
180,500
1,682,077
1,488,166
43,100
39,900
20,650
18,462
20,300
33,073
18,854
14,447
18,600
14,692
20,300
19,073
18,300
17,170
160,104
156,817
496,600
459,900
237,850
212,712
233,900
219,573
215,081
166,280
214,350
169,275
233,900
219,573
210,500
197,670
1,842,181
1,644,983
13) R Wright retired as a NED 22 October 2015. Following changes in superannuation regulations in 2003, the Board terminated the Non-executive Directors’
retirement benefit plan. Benefits to participating NEDs accruing up to the termination date were quantified and preserved for payment on retirement of the
NEDs. Robert Wright was the only NED entitled to a preserved benefit under the plan and this was paid on his retirement. In FY2016, total fees paid to Robert
Wright totalled $120,482.
14) M Fraser commenced 01 September 2015.
15) D Goodin commenced 01 September 2015.
45
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 8. Statutory Tables
8.1 Total remuneration earned and received by Executive KMP
The following table outlines the total remuneration earned by Executive KMP 16.
Short-Term Employment Benefits $
Employment $ LTI Plans $
Post-
Salary 17
Awarded
STI 18
Non-
Monetary 19
Super-
annuation
Security-
Based
Payments 20
Other
Payments
Total
$
Executive KMP – current
M McCormack
2017
2016
N Codevelle 21
2017
2016
P Fredricson
2017
2016
R Gersbach
2017
2016
K Lester
2017
2016
E Manns 22
2017
2016
S Pearce 23
2017
R Wheals
2017
2016
1,865,000
1,724,472
1,730,000
1,814,861
526,000
332,793
388,367
270,489
842,000
800,000
541,944
604,331
860,000
512,739
817,000
584,685
585,000
516,000
361,180
360,767
35,000
1,485,242
35,000
1,581,283
24,000
128,970
24,708
51,404
35,000
35,000
485,756
543,124
35,000
35,000
504,246
576,019
35,000
309,490
35,000
309,242
520,000
357,640
337,395
247,427
30,000
30,000
127,438
49,772
5,109,714
5,161,144
1,011,763
734,968
1,904,700
1,982,455
1,911,985
2,012,704
1,290,670
1,221,009
1,014,833
684,839
239,726
162,427
22,774
38,183
463,110
702,000
461,765
648,000
469,854
30,000
374,026
30,000
384,858
1,567,791
1,532,712
Disclosed executive – Former
J Ferguson
2017
2016
Total Remuneration
2017
201625
398,383
135,900
552,000
411,194
35,291
276,697
269,042 24
1,115,313
35,000
345,605
1,343,799
6,538,109
4,570,615
5,809,007
4,763,608
282,065
3,730,048
269,042
15,389,879
259,708
3,841,307
14,673,630
16) This table outlines the total remuneration earned by Executive KMP during FY2016 and FY2017, calculated in accordance with the appropriate accounting
standard, AASB 2: Share-based Payment. With regards to the LTI, this requires three equal instalments to be amortised over a four year period, that is the year
of service to which the LTI allocation is awarded plus the following three year period in which the reference units vest.
17) Salary includes both fixed pay and any salary sacrificed items, such as motor vehicles or car parking (including any applicable fringe benefits tax). It is exclusive
of superannuation contributions.
18) Awarded STI relates to that element of remuneration which is earned by the Executive KMP in respect of performance during each financial year (or for the
relevant period that they were KMP as set out in the Report).
19) Non-monetary benefits include the value of any car parking or allowances where costs are paid for by APA. R Gersbach salary sacrifices parking benefits
(FY2016: $11,922) which has been reclassified as Salary.
20) This refers to cash settled reference units which were awarded during FY2017, based on an estimated VWAP of $8.8798.
21) N Codevelle was appointed Company Secretary and General Counsel from 31 October 2015 and her pay was adjusted in 2017 in line with market benchmarking.
22) E Manns was appointed to the position of Group Executive Human Resources from 02 October 2015 and her pay was adjusted in 2017 in line with market benchmarking.
23) S Pearce was not an Executive KMP during FY2016. His remuneration for FY2017 has been pro-rated to reflect his time as an Executive KMP only.
24) J Ferguson payment relates to his termination, including payment in lieu of notice.
25) The total remuneration for FY2016 excludes the former executives, Mark Knapman (Company Secretary and General Counsel to 30 October 2015) and Peter
Wallace (Group Executive, Human Resources to 02 October 2015) who served as Executive KMP during FY2016.
46
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 0
2
0
2
g
u
A
9
1
0
2
g
u
A
8
1
0
2
g
u
A
7
1
0
2
g
u
A
7
1
0
2
g
u
A
n
i
d
r
a
o
B
e
h
t
y
b
t
a
e
c
n
a
a
b
l
7
1
0
2
n
u
J
0
3
t
s
e
v
l
l
i
w
y
e
h
t
h
c
h
w
n
i
i
s
h
t
n
o
m
e
h
t
d
n
a
d
a
p
i
n
o
i
t
a
c
o
l
l
a
o
t
i
g
n
s
o
C
l
n
e
e
b
r
o
d
e
t
s
e
v
t
e
y
t
o
n
e
v
a
h
t
a
h
t
d
e
t
a
c
o
l
l
a
s
t
i
n
u
e
c
n
e
r
e
f
e
R
j
t
c
e
b
u
s
s
t
i
n
U
s
t
i
n
U
.
t
s
e
v
l
l
i
w
y
e
h
t
h
c
h
w
n
i
i
d
e
t
s
e
v
t
e
y
t
o
n
e
v
a
h
t
u
b
s
e
v
i
t
u
c
e
x
e
o
t
d
e
t
a
c
o
l
l
a
n
e
e
b
e
v
a
h
t
a
h
t
s
t
i
n
u
e
c
n
e
r
e
f
e
r
I
T
L
f
o
r
e
b
m
u
n
e
h
t
d
n
a
s
t
i
n
u
e
c
n
e
r
e
f
e
r
I
T
L
f
o
r
e
b
m
u
n
e
h
t
n
i
s
t
n
e
m
e
v
o
m
e
h
t
l
t
u
o
s
t
e
s
e
b
a
t
g
n
w
o
i
l
l
o
f
e
h
T
.
d
e
u
n
i
t
n
o
c
.
t
r
o
p
e
r
n
o
i
t
a
r
e
n
u
m
e
r
I
I
S
E
T
T
N
E
D
E
L
L
O
R
T
N
O
C
S
T
I
I
D
N
A
T
S
U
R
T
E
N
L
E
P
P
N
A
L
A
R
T
S
U
A
I
I
7
1
0
2
E
N
U
J
0
3
D
E
D
N
E
R
A
E
Y
L
A
C
N
A
N
F
E
H
T
R
O
F
I
I
s
d
r
a
w
a
I
i
T
L
g
n
d
n
a
t
s
t
u
O
2
8
.
8
0
8
2
6
,
8
0
8
2
6
,
1
2
1
,
2
1
1
2
1
,
2
1
7
2
3
9
1
,
7
2
3
9
1
,
4
2
7
9
1
,
4
2
7
9
1
,
8
4
8
,
1
5
8
0
8
2
6
,
6
5
6
4
1
1
,
4
4
2
7
,
1
2
1
,
2
1
5
6
3
9
1
,
2
5
3
6
1
,
7
2
3
9
1
,
9
7
6
5
3
,
5
8
6
6
1
,
4
2
7
9
1
,
9
0
4
6
3
,
5
6
7
2
6
,
8
4
8
,
1
5
8
0
8
2
6
,
1
2
4
7
7
1
,
4
4
2
7
,
1
2
1
,
2
1
5
6
3
9
1
,
8
1
3
,
1
2
2
5
3
6
1
,
7
2
3
9
1
,
7
9
9
6
5
,
3
9
4
2
2
,
5
8
6
6
1
,
4
2
7
9
1
,
2
0
9
8
5
,
7
4
0
5
4
,
5
6
7
2
6
,
8
4
8
,
1
5
4
4
2
7
,
0
6
6
9
5
1
,
4
4
2
7
,
0
5
7
5
1
,
8
1
3
,
1
2
2
5
3
6
1
,
0
2
4
3
5
,
1
1
6
6
1
,
3
9
4
2
2
,
5
8
6
6
1
,
9
8
7
5
5
,
4
2
4
8
8
1
,
3
6
3
6
3
,
1
8
9
7
5
,
2
7
1
,
9
5
7
4
0
5
4
,
0
3
5
5
2
1
,
4
4
5
5
5
1
,
)
9
3
6
,
1
6
(
)
7
4
0
5
4
(
,
)
5
6
7
2
6
(
,
e
c
n
e
r
e
f
e
r
i
d
a
p
s
t
i
n
u
d
e
l
t
t
e
s
h
s
a
C
d
e
t
a
c
o
l
l
a
r
e
d
n
u
t
n
a
r
g
7
1
0
2
4
4
5
5
5
1
,
2
3
7
,
1
2
2
3
7
,
1
2
0
5
7
5
1
,
6
3
6
2
4
,
6
5
0
9
4
,
1
1
6
6
1
,
6
8
9
4
4
,
5
5
0
0
5
,
)
7
6
5
2
2
(
,
)
0
5
7
5
1
(
,
)
8
1
3
,
1
2
(
)
0
9
7
4
2
(
,
)
1
1
6
6
1
(
,
)
3
9
4
2
2
(
,
6
5
0
9
4
,
5
5
0
0
5
,
i
g
n
n
e
p
O
6
1
0
2
l
u
J
1
t
a
e
c
n
a
a
b
l
e
t
a
D
t
n
a
r
G
9
3
6
,
1
6
4
9
0
0
9
,
5
9
2
8
8
1
,
7
6
5
2
2
,
0
0
5
,
1
3
4
5
9
3
6
,
0
9
7
4
2
,
2
2
2
3
3
,
9
7
4
7
6
,
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
l
a
t
o
T
6
1
0
2
7
1
0
2
l
a
t
o
T
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
l
a
t
o
T
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
l
a
t
o
T
s
r
a
e
y
e
h
t
d
n
a
,
i
d
a
p
n
e
e
b
r
o
t
n
e
r
r
u
c
–
P
M
K
e
v
i
t
u
c
e
x
E
k
c
a
m
r
o
C
c
M
M
e
l
l
e
v
e
d
o
C
N
n
o
s
c
i
r
d
e
r
F
P
h
c
a
b
s
r
e
G
R
47
APA Group Annual Report 2017
3
6
6
3
1
,
3
6
6
3
1
,
1
2
1
,
2
1
1
2
1
,
2
1
3
3
7
5
,
3
3
7
5
,
2
3
1
,
6
1
2
3
1
,
6
1
4
5
9
5
,
4
5
9
5
,
0
9
7
0
1
,
3
6
6
3
1
,
3
5
4
4
2
,
4
1
0
7
,
1
2
1
,
2
1
5
3
1
,
9
1
3
3
7
5
,
3
3
7
5
,
7
7
2
3
1
,
2
3
1
,
6
1
9
0
4
9
2
,
5
9
4
,
1
1
4
5
9
5
,
9
4
4
7
1
,
1
9
0
3
1
,
0
9
7
0
1
,
3
6
6
3
1
,
4
4
5
7
3
,
4
1
0
7
,
1
2
1
,
2
1
5
3
1
,
9
1
3
3
7
5
,
3
3
7
5
,
5
2
1
,
6
1
7
7
2
3
1
,
2
3
1
,
6
1
4
3
5
5
4
,
1
2
3
4
1
,
5
9
4
,
1
1
4
5
9
5
,
0
7
7
,
1
3
0
2
8
8
,
1
9
0
3
1
,
0
9
7
0
1
,
4
1
0
7
,
1
0
7
2
3
,
4
1
0
7
,
0
0
5
0
1
,
5
2
1
,
6
1
7
7
2
3
1
,
2
0
9
9
3
,
0
6
6
9
,
1
2
3
4
1
,
5
9
4
,
1
1
6
7
4
5
3
,
9
8
9
0
4
,
3
6
3
6
3
,
9
9
1
,
7
1
6
9
3
8
4
,
2
6
8
7
1
,
0
2
8
8
,
2
8
1
,
6
2
0
7
3
2
3
,
)
5
9
5
0
1
(
,
)
0
2
8
8
(
,
)
1
9
0
3
1
(
,
e
c
n
e
r
e
f
e
r
i
d
a
p
s
t
i
n
u
d
e
l
t
t
e
s
h
s
a
C
d
e
t
a
c
o
l
l
a
r
e
d
n
u
t
n
a
r
g
7
1
0
2
0
7
3
2
3
,
5
9
5
0
1
,
0
4
6
7
1
,
3
7
2
9
3
,
i
g
n
n
e
p
O
6
1
0
2
l
u
J
1
t
a
e
c
n
a
a
b
l
2
4
0
,
1
2
2
4
0
,
1
2
0
0
5
0
1
,
0
5
2
2
3
,
1
3
8
9
3
,
0
6
6
9
,
2
4
6
8
2
,
5
8
4
4
3
,
)
7
7
9
3
1
(
,
)
0
0
5
0
1
(
,
)
5
2
1
,
6
1
(
)
0
0
9
2
1
(
,
)
0
6
6
9
(
,
)
1
2
3
4
1
(
,
1
3
8
9
3
,
5
8
4
4
3
,
7
7
9
3
1
,
0
0
0
,
1
2
5
7
3
8
4
,
0
0
9
2
1
,
0
2
3
9
1
,
3
6
9
2
4
,
e
t
a
D
t
n
a
r
G
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
l
a
t
o
T
6
1
0
2
7
1
0
2
l
a
t
o
T
7
1
0
2
l
a
t
o
T
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
l
a
t
o
T
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
l
a
t
o
T
r
e
t
s
e
L
K
s
n
n
a
M
E
e
c
r
a
e
P
S
s
l
a
e
h
W
R
r
e
m
r
o
f
–
P
M
K
e
v
i
t
u
c
e
x
E
n
o
s
u
g
r
e
F
J
0
2
0
2
g
u
A
9
1
0
2
g
u
A
8
1
0
2
g
u
A
7
1
0
2
g
u
A
7
1
0
2
g
u
A
n
i
d
r
a
o
B
e
h
t
y
b
t
a
e
c
n
a
a
b
l
7
1
0
2
n
u
J
0
3
t
s
e
v
l
l
i
w
y
e
h
t
h
c
h
w
n
i
i
s
h
t
n
o
m
e
h
t
d
n
a
d
a
p
i
n
o
i
t
a
c
o
l
l
a
o
t
i
g
n
s
o
C
l
n
e
e
b
r
o
d
e
t
s
e
v
t
e
y
t
o
n
e
v
a
h
t
a
h
t
d
e
t
a
c
o
l
l
a
s
t
i
n
u
e
c
n
e
r
e
f
e
R
j
t
c
e
b
u
s
s
t
i
n
U
s
t
i
n
U
s
d
r
a
w
a
I
i
T
L
g
n
d
n
a
t
s
t
u
O
2
8
.
7
1
0
2
E
N
U
J
0
3
D
E
D
N
E
R
A
E
Y
L
A
C
N
A
N
F
E
H
T
R
O
F
I
I
.
d
e
u
n
i
t
n
o
c
.
t
r
o
p
e
r
n
o
i
t
a
r
e
n
u
m
e
r
48
I
I
S
E
T
T
N
E
D
E
L
L
O
R
T
N
O
C
S
T
I
I
D
N
A
T
S
U
R
T
E
N
L
E
P
P
N
A
L
A
R
T
S
U
A
I
I
APA Group Annual Report 2017
8.3 Securityholdings
The following table sets out the relevant interests of NEDs and Executive KMP in APA securities:
Year ended 30 June 2017
Non-executive Directors
L Bleasel AM
S Crane
M Fraser
J Fletcher
D Goodin
R Higgins AO
P McKenzie
Executive KMP
M McCormack
N Codevelle
P Fredricson
R Gersbach
K Lester
E Manns
S Pearce
R Wheals
Opening Balance
at 1 July 2016
Securities
Acquired
Securities
Disposed
Closing Balance
at 30 June 2017
614,216
130,000
25,000
88,250
19,000
122,719
22,889
300,000
800
23,000
10,485
19,369
5,900
6,438
17,000
23,400
200
20,000
9,063
17,000
10,000
8,000
6,862
5,000
15,000
637,616 26
130,000
25,000
88,250
19,200
122,719
22,889
320,000
9,863
40,000
20,485
27,369
12,762
11,438
32,000
Executive KMP are subject to 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.
26) Excludes holdings of subordinated notes that were issued by APT Pipelines Limited.
49
APA Group Annual Report 2017remuneration report. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 consolidated statement of profit or loss
and other comprehensive income.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Continuing operations
Revenue
Share of net profits of associates and joint ventures using the equity method
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 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/(loss) 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:
Gain on available-for-sale investments taken to equity
Transfer of gain on cash flow hedges to profit or loss
Gain/(loss) on cash flow hedges taken to equity
Gain/(loss) on associate hedges taken to equity
Recycling of reserves on disposal of available-for-sale-investments/associate
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:
Unitholders of the parent
Non-controlling interest – APT Investment Trust unitholders
APA stapled securityholders
Non-controlling interest – other
Total comprehensive income attributable to:
Unitholders of the parent
Non-controlling interest – APT Investment Trust unitholders
APA stapled securityholders
Non-controlling interest – other
Note
2017
$000
2016
$000
4
4
5
5
5
5
6
2,304,627
2,077,327
21,793
16,977
2,326,420
2,094,304
(207,329)
(129,534)
(570,021)
(520,890)
(438,140)
(438,330)
(518,249)
(197,747)
(8,600)
386,334
(511,355)
(180,103)
(12,097)
301,995
(149,488)
(122,524)
236,846
179,471
5,452
(1,636)
3,816
–
92,459
164,536
10,921
–
(80,354)
187,562
191,378
428,224
163,879
72,967
236,846
–
(8,148)
2,444
(5,704)
1,027
121,922
(249,150)
(9,429)
11,356
37,136
(87,138)
(92,842)
86,629
94,520
85,102
179,622
(151)
236,846
179,471
355,257
72,967
428,224
–
428,224
2017
21.3
2,273
84,507
86,780
(151)
86,629
2016
16.1
Earnings per security
Basic and diluted (cents per security)
7
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
50
APA Group Annual Report 2017 consolidated statement of financial position.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
AS AT 30 JUNE 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other
Current assets
Non-current assets
Cash on deposit
Trade and other receivables
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
Goodwill
Other Intangible assets
Other
Non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Provisions
Unearned revenue
Current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Deferred tax liabilities
Provisions
Unearned revenue
Non-current liabilities
Total liabilities
Net assets
Equity
Australian Pipeline Trust equity:
Issued capital
Reserves
Retained earnings
Equity attributable to unitholders of the parent
Non-controlling interests:
APT Investment Trust:
Issued capital
Retained earnings
Note
2017
$000
2016
$000
18
9
21
18
9
21
24
11
12
12
15
10
19
21
14
10
19
21
6
14
22
394,501
289,709
52,334
25,260
10,527
772,331
–
15,496
458,773
259,882
9,150,165
1,183,604
3,174,282
31,415
84,506
263,232
35,140
24,891
13,023
420,792
2,149
17,283
447,070
197,185
9,189,087
1,184,588
3,355,707
28,814
14,273,617
14,421,883
15,045,948
14,842,675
312,611
126,858
145,768
93,773
19,225
698,235
4,984
9,573,907
182,087
502,265
69,051
37,236
252,661
409,829
114,674
93,033
13,735
883,932
3,007
9,314,373
194,591
304,849
70,917
41,895
10,369,530
9,929,632
11,067,765
10,813,564
3,978,183
4,029,111
3,114,617
(207,773)
60,804
2,967,648
3,195,445
(395,335)
182,062
2,982,172
976,284
34,198
1,005,074
41,812
Equity attributable to unitholders of APT Investment Trust
23
1,010,482
1,046,886
Other non-controlling interest
Total non-controlling interests
Total equity
53
53
1,010,535
1,046,939
3,978,183
4,029,111
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
51
APA Group Annual Report 2017 l
a
t
o
T
0
0
0
$
,
0
5
6
2
8
3
4
,
2
5
0
0
0
$
t
s
e
r
e
t
n
I
)
2
2
4
2
3
1
(
,
–
1
7
4
9
7
1
,
)
1
5
1
(
0
8
5
9
3
,
–
g
n
i
l
l
o
r
t
n
o
c
7
4
)
1
5
1
(
–
–
9
2
6
6
8
,
)
1
5
1
(
)
1
5
1
(
–
–
)
8
1
(
2
)
2
5
1
,
0
4
4
(
1
1
1
,
9
2
0
4
,
1
1
1
,
9
2
0
4
,
6
4
8
6
3
2
,
8
6
3
3
7
2
,
)
0
9
9
,
1
8
(
,
4
2
2
8
2
4
–
–
)
2
5
1
,
9
7
4
(
2
5
1
2
5
1
–
–
–
–
3
5
3
5
–
–
–
–
–
–
–
–
–
–
–
8
4
8
4
–
–
–
–
–
–
–
3
8
1
,
8
7
9
3
,
3
5
8
4
-
n
o
n
r
e
h
t
O
t
s
e
r
e
t
n
i
1
–
–
–
–
–
–
–
–
–
1
1
–
–
–
–
–
–
–
1
4
–
–
–
–
–
–
–
–
–
4
4
–
–
–
–
–
–
–
4
2
0
1
,
5
8
2
0
1
,
5
8
–
)
5
9
5
(
–
–
–
)
5
9
5
(
–
7
0
5
4
8
,
2
0
1
,
5
8
)
5
9
5
(
–
–
–
–
)
8
7
7
9
6
(
,
)
8
7
7
9
6
(
,
)
2
1
(
–
–
–
,
6
8
8
6
4
0
,
1
2
1
8
,
1
4
,
6
8
8
6
4
0
,
1
2
1
8
,
1
4
7
6
9
2
7
,
7
6
9
2
7
,
–
–
–
–
–
–
–
–
7
6
9
2
7
,
7
6
9
2
7
,
,
)
1
7
3
9
0
1
(
)
1
8
5
0
8
(
,
,
2
8
4
0
1
0
,
1
8
9
1
,
4
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
2
5
4
9
,
0
2
5
4
9
,
)
7
2
8
,
1
3
1
(
)
8
4
1
,
8
(
0
8
5
9
3
,
4
4
4
2
,
3
7
2
2
,
6
1
8
8
8
,
)
2
5
1
(
–
)
2
5
1
(
–
)
2
5
1
(
2
5
1
)
2
1
(
–
)
6
(
2
–
–
,
4
7
0
5
0
0
,
1
2
7
1
,
2
8
9
2
,
2
6
0
2
8
1
,
,
4
7
0
5
0
0
,
1
2
7
1
,
2
8
9
2
,
2
6
0
2
8
1
,
–
–
–
–
–
–
8
6
3
3
7
2
,
2
5
4
5
,
9
7
8
3
6
1
,
9
7
8
3
6
1
,
–
–
–
–
)
0
9
9
,
1
8
(
)
6
3
6
,
1
(
,
7
5
2
5
5
3
5
9
6
7
6
1
,
)
0
9
7
8
2
(
,
,
)
1
8
7
9
6
3
(
,
)
3
5
9
8
8
2
(
4
8
2
6
7
9
,
,
8
4
6
7
6
9
2
,
4
0
8
0
6
,
,
)
4
7
3
0
7
3
(
,
)
4
7
3
0
7
3
(
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
)
5
4
9
8
1
3
(
,
4
8
4
,
1
9
6
6
8
,
,
9
4
4
5
9
1
,
3
l
5
1
0
2
y
u
J
1
t
a
e
c
n
a
a
B
l
–
–
)
8
5
5
,
1
2
1
(
)
1
2
1
,
2
(
9
9
4
6
3
,
7
3
6
)
9
5
0
5
8
(
,
)
4
8
4
,
1
(
–
–
–
–
–
–
)
4
0
0
4
0
4
(
,
)
4
0
0
4
0
4
(
,
,
6
1
9
7
6
2
)
4
5
3
0
8
(
,
2
6
5
7
8
1
,
–
–
–
)
2
4
4
6
1
2
(
,
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
6
6
8
,
9
6
6
8
,
–
–
–
–
–
–
–
)
6
(
2
i
e
v
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
r
a
e
y
e
h
t
r
o
f
t
i
f
o
r
P
e
m
o
c
n
i
l
o
t
g
n
i
t
a
e
r
x
a
t
e
m
o
c
n
I
e
m
o
c
n
i
i
e
v
s
n
e
h
e
r
p
m
o
c
r
e
h
t
o
f
o
s
t
n
e
n
o
p
m
o
c
i
e
v
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
r
a
e
y
e
h
t
r
o
f
e
m
o
c
n
i
-
n
o
n
f
o
n
o
i
t
i
s
u
q
c
A
i
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
i
d
e
n
a
t
e
r
o
t
r
e
f
s
n
a
r
T
f
o
t
n
e
m
y
a
P
i
s
g
n
n
r
a
e
)
8
e
t
o
N
(
s
n
o
i
t
u
b
i
r
t
s
d
i
s
e
i
t
i
r
u
c
e
s
f
o
t
s
o
c
e
u
s
s
I
y
t
i
r
u
c
e
s
o
t
g
n
i
t
a
e
r
x
a
T
l
s
t
s
o
c
e
u
s
s
i
,
5
4
4
5
9
1
,
3
6
1
0
2
e
n
u
J
0
3
t
a
e
c
n
a
a
B
l
–
–
–
–
–
–
,
5
4
4
5
9
1
,
3
l
6
1
0
2
y
u
J
1
t
a
e
c
n
a
a
B
l
i
e
v
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
r
a
e
y
e
h
t
r
o
f
t
i
f
o
r
P
e
m
o
c
n
i
l
o
t
g
n
i
t
a
e
r
x
a
t
e
m
o
c
n
I
e
m
o
c
n
i
i
e
v
s
n
e
h
e
r
p
m
o
c
r
e
h
t
o
f
o
s
t
n
e
n
o
p
m
o
c
i
e
v
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
r
a
e
y
e
h
t
r
o
f
e
m
o
c
n
i
-
n
o
n
f
o
n
o
i
t
i
s
u
q
c
A
i
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
i
d
e
n
a
t
e
r
o
t
r
e
f
s
n
a
r
T
f
o
t
n
e
m
y
a
P
i
s
g
n
n
r
a
e
)
8
2
8
0
8
(
,
)
8
e
t
o
N
(
s
n
o
i
t
u
b
i
r
t
s
d
i
9
6
6
8
,
,
7
1
6
4
1
1
,
3
7
1
0
2
e
n
u
J
0
3
t
a
e
c
n
a
a
B
l
i
.
s
e
t
o
n
g
n
y
n
a
p
m
o
c
c
a
e
h
t
h
t
i
w
n
o
i
t
c
n
u
n
o
c
n
j
i
l
d
a
e
r
e
b
d
u
o
h
s
y
t
i
u
q
e
n
i
s
e
g
n
a
h
c
f
o
t
n
e
m
e
t
a
t
s
d
e
t
a
d
i
l
o
s
n
o
c
e
v
o
b
a
e
h
T
0
0
0
$
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
r
e
h
t
O
0
0
0
$
d
e
u
s
s
I
l
a
t
i
p
a
C
0
0
0
$
l
-
e
b
a
l
i
a
v
A
t
s
u
r
T
0
0
0
$
T
P
A
t
n
e
m
t
s
e
v
n
I
0
0
0
$
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
n
o
i
t
a
u
a
v
e
R
l
d
e
u
s
s
I
0
0
0
$
e
v
r
e
s
e
R
0
0
0
$
l
a
t
i
p
a
C
l
e
a
s
-
r
o
f
t
n
e
m
t
s
e
v
n
I
e
h
t
f
o
t
n
e
r
a
p
0
0
0
$
s
r
e
n
w
o
o
t
l
e
b
a
t
u
b
i
r
t
t
A
9
6
1
,
2
3
0
,
1
8
8
4
6
2
,
5
9
5
,
6
8
0
5
0
0
,
1
,
9
2
4
0
5
3
3
,
0
0
0
$
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
e
,
2
7
7
3
6
4
r
e
h
t
O
0
0
0
$
e
v
r
e
s
e
R
0
0
0
$
i
g
n
g
d
e
H
e
v
r
e
s
e
R
n
o
i
t
a
u
a
v
e
R
l
n
o
i
t
a
u
a
v
e
R
l
d
e
u
s
s
I
0
0
0
$
e
v
r
e
s
e
R
0
0
0
$
e
v
r
e
s
e
R
0
0
0
$
l
a
t
i
p
a
C
l
e
a
s
-
r
o
f
t
n
e
m
t
s
e
v
n
I
t
e
s
s
A
l
-
e
b
a
l
i
a
v
A
g
n
i
l
l
o
r
t
n
o
c
-
n
o
n
r
e
h
t
O
t
s
u
r
T
t
n
e
m
t
s
e
v
n
I
T
P
A
t
s
u
r
T
e
n
i
l
i
e
p
P
n
a
i
l
a
r
t
s
u
A
.
y
t
i
u
q
e
n
i
s
e
g
n
a
h
c
f
o
t
n
e
m
e
t
a
t
s
d
e
t
a
d
i
l
o
s
n
o
c
I
I
S
E
T
T
N
E
D
E
L
L
O
R
T
N
O
C
S
T
I
I
D
N
A
T
S
U
R
T
E
N
L
E
P
P
N
A
L
A
R
T
S
U
A
I
I
7
1
0
2
E
N
U
J
0
3
D
E
D
N
E
R
A
E
Y
L
A
C
N
A
N
F
E
H
T
R
O
F
I
I
52
APA Group Annual Report 2017
consolidated statement of cash flows.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received from associates and joint ventures
Proceeds from repayment of finance leases
Interest received
Interest and other costs of finance paid
Income tax 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
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Payment of debt issue costs
Payments of security issue costs
Release of restricted cash
Distributions paid to:
Unitholders of APT
Unitholders of non-controlling interests – APTIT
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Unrealised exchange (losses)/gains on cash held
Note
2017
$000
2016
$000
2,508,269
2,286,248
(1,065,473)
(964,879)
22,411
2,290
5,755
22,186
3,399
9,660
(481,427)
(493,586)
(17,889)
973,936
(593)
862,435
(340,753)
(455,975)
693
(35,250)
(760)
(1,456)
386
–
(217,340)
(705)
(377,526)
(673,634)
2,144,576
1,110,153
(1,944,932)
(1,176,899)
(8,446)
(9,623)
–
2,149
(77)
20
(369,781)
(109,371)
(370,374)
(69,778)
(285,805)
(516,578)
310,605
84,506
(610)
(327,777)
411,921
362
Cash and cash equivalents at end of financial year
18
394,501
84,506
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
53
APA Group Annual Report 2017 consolidated statement of cash flows. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Reconciliation of profit for the year to the net cash provided by operating activities
Profit for the year
Loss on previously held interest on obtaining control
Acquisition costs from business combinations
(Profit)/loss on disposal of property, plant and equipment
Loss on write-off of inventories
Share of net profits of joint ventures and associates using the equity method
Dividends/distributions received from equity accounted investments
2017
$000
2016
$000
236,846
179,471
–
(101)
(311)
–
(21,793)
22,411
476
3,387
447
127
(16,977)
21,537
Depreciation and amortisation expense
570,021
520,890
Finance costs
Unrealised foreign exchange loss/(gain)
Realised hedging loss
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
13,926
28
7,514
(16,766)
(371)
266
27,286
(562)
3,943
131,599
973,936
12,225
(938)
7,540
(15,742)
(3,605)
3,195
(8,456)
4,524
32,403
121,931
862,435
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.
54
APA Group Annual Report 2017
notes to the consolidated financial statements.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Basis of Preparation
1. About this report
In the following financial statements, note disclosures are grouped into six sections being: Basis of Preparation; Financial
Performance; Operating Assets and Liabilities; Capital Management; Group Structure; and Other. Each note sets out the
accounting policies applied in producing the results along with any key judgements and estimates used.
Basis of Preparation
1. About this report
2. General information
Financial Performance
Operating Assets and Liabilities
3. Segment information
4. Revenue
5. Expenses
6.
Income tax
9. Receivables
10. Payables
11. Property, plant and equipment
12. Goodwill and intangibles
7. Earnings per security
13.
Impairment of non-financial assets
8. Distributions
14. Provisions
15. Other non-current assets
16. Employee superannuation plans
17. Leases
Capital Management
Group Structure
Other
18. Cash balances
19. Borrowings
23. Non-controlling interests
26. Commitments and contingencies
24. Joint arrangements and associates
27. Director and senior executive
20. Financial risk management
25. Subsidiaries
21. Other financial instruments
22. Issued capital
remuneration
28. Remuneration of external auditor
29. Related party transactions
30. Parent entity information
31. Adoption of new and revised
Accounting Standards
32. Events occurring after
reporting date
55
APA Group Annual Report 2017 Basis of Preparation
2. 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 Securities
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 (together the “Trusts”), their
respective subsidiaries and their 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.
Total comprehensive income attributable to non-controlling interests is reported as disclosed in the separate financial
statements of APTIT. Comprehensive income arising from transactions between the parent (APT) group entities and the
non-controlling interest (APTIT) have not been eliminated in the reporting of total comprehensive income attributable to
non-controlling interests.
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.
APT’s registered office and principal place of business is as follows:
Level 19
HSBC Building
580 George Street
SYDNEY NSW 2000
Tel: (02) 9693 0000
The consolidated general purpose financial report for the year ended 30 June 2017 was authorised for issue in accordance
with a resolution of the directors on 23 August 2017.
This general purpose financial report has been prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board
(AASB) and also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
The financial report has been prepared on the basis of historical cost, except for the revaluation of financial instruments.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) in
accordance with ASIC Corporations Instrument 2016/191, unless otherwise stated.
Foreign currency transactions
Both the functional and presentation currency of APA Group and APT is Australian dollars (A$). All foreign currency
transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction.
Foreign currency monetary items at reporting date are translated at the exchange rate existing at that date and resulting
exchange differences are recognised in profit or loss in the period in which they arise, unless they qualify for hedge accounting.
56
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
3. Segment information
APA Group operates in one geographical segment, being Australia and the revenue from major products and services is
shown by the reportable segments.
APA Group comprises the following reportable segments:
– Energy Infrastructure, which includes all wholly or majority owned pipelines, gas storage and processing assets, and power
generation assets;
– Asset Management, which provides commercial services, operating services and/or asset maintenance services to APA
Group’s energy investments and Australian Gas Networks Limited for appropriate fees; and
– Energy Investments, which includes APA Group’s strategic stakes in a number of investment entities that house energy
infrastructure assets, generally characterised by long term secure cashflows, with low capital expenditure requirements.
Energy
Infrastructure
$000
Asset
Management
$000
Energy
Investments
$000
Other
$000
Consolidated
$000
Reportable segments
2017
Segment revenue a
External sales revenue
Equity accounted net profits
–
–
21,793
Pass-through revenue
48,646
389,494
–
1,771,349
86,424
–
Finance lease and investment
interest income
Total segment revenue
Other interest income
Consolidated revenue
Segment result
Earnings before interest, tax, depreciation
and amortisation (“EBITDA”)
Share of net profits of joint ventures and
associates using the equity method
Finance lease and investment
interest income
Corporate costs
Total EBITDA
1,643
–
1,821,638
475,918
2,589
24,382
1,452,029
58,719
–
–
1,643
–
–
–
–
21,793
2,589
–
–
–
–
–
–
–
–
1,857,773
21,793
438,140
4,232
2,321,938
4,482
2,326,420
1,510,748
21,793
4,232
1,453,672
58,719
24,382
(66,651)
1,470,122
–
(66,651)
(66,651)
Depreciation and amortisation
(559,033)
(10,988)
–
–
(570,021)
Earnings before interest and tax (“EBIT”)
894,639
47,731
24,382
(66,651)
900,101
Net finance costs b
Profit before tax
Income tax expense
Profit for the year
(513,767)
386,334
(149,488)
236,846
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.
57
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
3. Segment information (continued)
Reportable segments (continued)
2017
Segment assets and liabilities
Segment assets
Energy
Infrastructure
$000
Asset
Management
$000
Energy
Investments
$000
Consolidated
$000
13,670,034
210,449
10,662
13,891,145
Carrying value of investments using the equity method
–
–
259,882
259,882
Unallocated assets a
Total assets
Segment liabilities
Unallocated liabilities b
Total liabilities
894,921
15,045,948
376,220
55,626
–
431,846
10,635,919
11,067,765
a) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts and equity forwards.
b) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts.
Energy
Infrastructure
$000
Asset
Management
$000
Energy
Investments
$000
Other
$000
Consolidated
$000
2016
Segment revenue a
External sales revenue
Equity accounted net profits
–
–
16,977
Pass-through revenue
29,586
408,744
1,526,658
95,430
–
1,917
–
–
–
–
10,783
512
1,558,161
504,174
28,272
a) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial.
–
–
–
–
–
–
–
–
–
1,622,088
16,977
438,330
12,700
512
2,090,607
3,697
2,094,304
1,387,576
16,977
12,700
Finance lease and investment interest income
Dividends – other entities
Total segment revenue
Other interest income
Consolidated revenue
Segment result
Earnings before interest, tax, depreciation
and amortisation (“EBITDA”)
Share of net profits of joint ventures and
associates using the equity method
Finance lease and investment interest income
Corporate costs
Total EBITDA
Depreciation and amortisation
Earnings before interest and tax (“EBIT”)
826,889
Net finance costs a
Profit before tax
Income tax expense
Profit for the year
1,333,682
53,858
36
–
1,917
–
1,335,599
(508,710)
–
–
–
53,858
(12,180)
41,678
16,977
10,783
–
(86,710)
(86,710)
27,796
(86,710)
1,330,543
–
–
(520,890)
27,796
(86,710)
809,653
(507,658)
301,995
(122,524)
179,471
a) 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.
58
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
3. Segment information (continued)
Reportable segments (continued)
2016
Segment assets and liabilities
Segment assets
Energy
Infrastructure
$000
Asset
Management
$000
Energy
Investments
$000
Consolidated
$000
13,873,683
213,973
17,499
14,105,155
Carrying value of investments using the equity method
–
–
197,185
Unallocated assets a
Total assets
Segment liabilities
Unallocated liabilities b
Total liabilities
197,185
540,335
14,842,675
319,995
63,574
–
383,569
10,429,995
10,813,564
a) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts and equity forwards.
b) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts.
Information about major customers
Included in revenues arising from energy infrastructure of $1,771.3 million (2016: $1,526.7 million) are revenues of approximately
$704.8 million (2016: $652.0 million) which arose from sales to APA Group’s top three customers.
4. Revenue
An analysis of APA Group’s revenue for the year is as follows:
Energy infrastructure revenue
Pass-through revenue
Energy infrastructure revenue
Asset management revenue
Pass-through revenue
Asset management revenue
Operating revenue
Interest
Interest income on redeemable ordinary shares (EII) and redeemable preference shares (GDI) a
Finance lease income
Finance income
Dividends
Rental income
Total revenue
2017
$000
2016
$000
1,770,794
1,526,050
48,646
29,586
1,819,440
1,555,636
86,424
389,494
475,918
95,430
408,744
504,174
2,295,358
2,059,810
4,482
2,589
1,643
8,714
–
555
3,697
10,783
1,917
16,397
512
608
2,304,627
2,077,327
Share of net profits of joint ventures and associates using the equity method
21,793
16,977
2,326,420
2,094,304
a) 2016 includes interest on loans to related parties (DPS).
59
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
4. Revenue (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to APA Group and 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:
– Operating revenue, which is earned from the transportation, processing and storage of gas, generation of electricity and
other related services and is recognised when the services are provided net of goods and services tax (“GST”), except where
the amount of GST incurred is not recoverable from the taxation authority;
– Pass-through revenue, for which no margin is earned, is recognised when the services are provided and offset by
corresponding pass-through costs;
– Interest revenue, which is recognised as it accrues and is determined using the effective interest method;
– Dividend revenue, which is recognised when the right to receive the payment has been established; and
– Finance lease income, which 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.
5. Expenses
Depreciation of non-current assets
Amortisation of non-current assets
Depreciation and amortisation expense
Energy infrastructure costs – pass-through
Asset management costs – pass-through
Other operating costs – pass-through
Interest on bank overdrafts and borrowings a
Amortisation of deferred borrowing costs
Other finance costs
Less: amounts included in the cost of qualifying assets
Gain on derivatives
Unwinding of discount on non-current liabilities
Finance costs
Defined contribution plans
Defined benefit plans (Note 16)
Post-employment benefits
Termination benefits
Cash settled security-based payments b
Other employee benefits
Employee benefit expense
2017
$000
387,140
182,881
570,021
48,646
389,494
438,140
506,124
9,578
5,742
521,444
(7,099)
514,345
(152)
4,056
2016
$000
337,426
183,464
520,890
29,586
408,744
438,330
500,588
9,227
5,084
514,899
(6,157)
508,742
(698)
3,311
518,249
511,355
11,308
3,033
14,341
2,295
25,993
155,118
197,747
11,406
2,741
14,147
2,995
27,585
135,376
180,103
a) The average interest rate applying to drawn debt is 5.56% p.a. (2016: 5.78% p.a.) excluding amortisation of borrowing costs and other finance costs.
b) APA Group provides benefits to certain employees in the form of cash settled security-based payments. For cash settled security-based payments, a liability
equal to the portion of services received is recognised at the current fair value determined at each reporting date.
60
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
Income tax
6.
The major components of tax expense are:
Income statement (continuing operations)
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 expense
Tax reconciliation (continuing operations)
Profit before tax
Income tax expense calculated at 30%
Non-assessable trust distribution
Non deductible expenses
Non assessable income
Franking credits received
Previously unbooked losses now recognised
Adjustment recognised in the current year in relation to the current tax of prior years
R&D tax incentive a
2017
$000
2016
$000
(34,518)
456
(115,426)
(149,488)
(9,076)
2,216
(115,664)
(122,524)
386,334
301,995
(115,900)
21,891
(59,263)
319
(90,599)
25,530
(65,048)
2,984
(152,953)
(127,133)
708
533
456
1,768
2,164
229
1,037
1,179
(149,488)
(122,524)
a) 2016 includes $1.2 million in relation to adjustments recoginsed in relation to current tax of the prior year.
Income tax expense comprises of current and deferred tax. Income tax is recognised in profit or loss except to the extent
that it relates to items recognised directly in other comprehensive income, in which case it is recognised in equity. Current tax
represents the expected taxable income at the applicable tax rate for the financial year, and any adjustment to tax payable
in respect of previous financial years.
Income tax expense for the year is $149.5 million (2016: $122.5 million). An income tax provision of $28.9 million (2016: $13.8
million) has been recognised after utilisation of all available group tax losses and partial utilisation of available transferred
tax losses (refer to Note 10).
61
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
Income tax (continued)
6.
Deferred tax balances
Deferred tax (liabilities)/assets arise from the following:
2017
Gross deferred tax liabilities
Opening
balance
$000
Charged to
income
$000
Charged to
equity
$000
Acquired/
Disposed
$000
Closing
balance
$000
Property, plant and equipment
(724,525)
(85,596)
Deferred expenses
Defined benefit obligation
Other
(54,563)
1,383
(730)
(1,917)
185
(324)
–
–
(1,636)
–
(778,435)
(87,652)
(1,636)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(810,121)
(56,480)
(68)
(1,054)
(867,723)
45,891
87,819
3,624
4,406
2,441
221,277
365,458
(502,265)
–
(36,011)
(724,525)
128
(54,563)
–
–
(730)
–
(35,883)
(779,818)
–
–
–
–
–
–
1,808
45,723
165,027
5,443
5,811
6,445
1,383
245,137
474,969
(34,075)
(304,849)
–
(76,903)
–
–
(3,451)
–
(80,354)
(81,990)
–
–
–
–
639
639
38,266
2
–
(1,769)
2,444
–
38,943
39,582
–
1,808
Gross deferred tax assets
Provisions
Cash flow hedges
Security issue costs
Deferred revenue
Investments equity accounted
Tax losses
Net deferred tax liability
2016
Gross deferred tax liabilities
45,723
165,027
5,443
5,811
6,445
245,137
473,586
(304,849)
168
(305)
(1,819)
(1,405)
(553)
(23,860)
(27,774)
(115,426)
Intangible assets
(2,668)
2,668
Property, plant and equipment
(586,107)
(102,407)
Deferred expenses
Other
Available for sale investments
Gross deferred tax assets
Provisions
Cash flow hedges
Security issue costs
Deferred revenue
Investments equity accounted
Defined benefit obligation
Tax losses
Net deferred tax liability
(51,669)
1,421
(639)
(3,022)
(2,151)
–
(639,662)
(104,912)
45,051
127,474
7,261
6,729
10,192
(1,007)
249,270
444,970
(194,692)
(1,136)
(713)
(1,820)
(918)
(1,978)
(54)
(4,133)
(10,752)
(115,664)
62
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
Income tax (continued)
6.
Unrecognised deferred tax assets
The following deferred tax assets have not been brought to account as assets:
Tax losses – capital
2017
$000
2016
$000
1,641
1,641
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for:
i) initial recognition of goodwill;
ii) initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
iii) differences relating to investments in wholly-owned entities to the extent that they will probably not reverse in the
foreseeable future.
Deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities,
using the appropriate tax rates at the end of the reporting period.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which
the asset can be utilised and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Tax consolidation
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 25.
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.
Any current tax liabilities (or assets) and deferred tax assets arising from 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.
The head entity recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that
it is probable that future taxable profits of the tax-consolidated group will be available against which the assets can be utilised.
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, 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.
7. Earnings per security
Basic and diluted earnings per security
2017
cents
21.3
2016
cents
16.1
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
236,846
179,622
2017
$000
2016
$000
Adjusted weighted average number of ordinary securities used in the calculation of basic
and diluted earnings per security
1,114,307
1,114,307
63
2017
No. of
securities
000
2016
No. of
securities
000
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Financial Performance
8. Distributions
Recognised amounts
Final distribution paid on 16 September 2016
(2016: 16 September 2015)
Profit distribution – APT a
Capital distribution – APT
Profit distribution – APTIT a
Capital distribution – APTIT
Interim distribution paid on 15 March 2017
(2016: 16 March 2016)
Profit distribution – APT b
Capital distribution – APT
Profit distribution – APTIT a
Capital distribution – APTIT
Total distributions recognised
Profit distributions
Capital distributions
Unrecognised amounts
Final distribution payable on 13 September 2017 c
(2016: 16 September 2016)
Profit distribution – APT d
Capital distribution – APT
Profit distribution – APTIT a
Capital distribution – APTIT
2017
cents per
security
2017
Total
$000
2016
cents per
security
2016
Total
$000
16.34
1.78
3.75
0.63
22.50
9.59
5.47
3.48
1.96
182,063
19,869
41,811
6,976
18.12
–
2.38
–
201,945
–
26,488
–
250,719
20.50
228,433
106,890
60,959
38,770
21,814
15.12
–
3.88
–
168,429
–
43,290
–
20.50
228,433
19.00
211,719
33.16
9.84
43.00
369,534
109,618
479,152
5.46
10.78
3.07
3.69
23.00
60,803
120,183
34,198
41,107
256,291
39.50
–
39.50
16.34
1.78
3.75
0.63
22.50
440,152
–
440,152
182,063
19,869
41,811
6,976
250,719
a) Profit distributions were unfranked (2016: unfranked).
b) Interim profit distributions are 4.67 cents per security franked and 4.92 cents per security unfranked (2016: unfranked)
c) Record date 30 June 2017.
d) Final profit distributions are 4.67 cents per security franked and 0.79 cents per security unfranked (2016: unfranked)
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)
2017
$000
4,413
2016
$000
8,210
64
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
9. Receivables
Trade receivables
Allowance for doubtful debts
Trade receivables
Receivables from associates and related parties
Finance lease receivables (Note 17)
Interest receivable
Other debtors
Current
Finance lease receivables (Note 17)
Non-current
2017
$000
2016
$000
275,331
250,875
(2,120)
273,211
13,028
1,787
1,605
78
(2,658)
248,217
12,447
2,290
91
187
289,709
263,232
15,496
15,496
17,283
17,283
Trade receivables are non-interest bearing and are generally on 30 day terms. There are no material trade receivables past
due and not provided for.
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as loans and receivables. Trade and other receivables are initially recognised at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, they are stated at amortised cost less impairment.
10. Payables
Trade payables a
Income tax payable
Other payables
Current
Other payables
Non-current
40,827
28,914
242,870
312,611
4,984
4,984
27,310
13,848
211,503
252,661
3,007
3,007
a) Trade payables are non-interest bearing and are normally settled on 15 – 30 day terms.
Trade and other payables are recognised when APA Group becomes obliged to make future payments resulting from the
purchase of goods and services. 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.
Payables are recognised inclusive of GST, except for accrued revenue and accrued expense 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 only recognised once a tax invoice has been issued or received.
65
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
11. Property, plant and equipment
Gross carrying amount
Balance at 1 July 2015
Additions
Acquisitions through business
combinations
Disposals
Transfers
Freehold land
and buildings
– at cost
$000
Leasehold
improvements
– at cost
$000
Plant and
equipment
– at cost
$000
Work in
progress
– at cost
$000
Total
$000
229,051
4,444
8,937,221
–
3,234
(651)
3,204
–
–
(285)
913
21,735
852,485
(15,323)
263,524
168,074
283,242
9,338,790
304,977
11,457
–
(267,641)
867,176
(16,259)
–
Balance at 30 June 2016
234,838
5,072
10,059,642
195,132
10,494,684
Additions
Disposals
Transfers
Balance at 30 June 2017
Accumulated depreciation
2,280
(24)
5,639
242,733
–
–
5,095
10,167
5,150
(9,089)
340,309
347,739
295,300
(306,034)
–
(9,113)
–
10,351,003
229,407
10,833,310
Balance at 1 July 2015
(25,036)
(2,203)
(956,358)
Disposals
Depreciation expense (Note 5)
Transfers
Balance at 30 June 2016
Disposals
Depreciation expense (Note 5)
Transfers
Reclassification to inventories
434
(7,324)
(89)
(32,015)
24
(7,430)
260
–
285
(357)
(4)
14,707
(329,745)
93
(2,279)
(1,271,303)
–
8,707
(750)
(378,960)
–
–
(260)
861
Balance at 30 June 2017
(39,161)
(3,029)
(1,640,955)
–
–
–
–
–
–
–
–
–
–
(983,597)
15,426
(337,426)
–
(1,305,597)
8,731
(387,140)
–
861
(1,683,145)
Net book value
As at 30 June 2016
As at 30 June 2017
202,823
203,572
2,793
7,138
8,788,339
195,132
9,189,087
8,710,048
229,407
9,150,165
Property, plant and equipment is 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 item.
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.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (i.e. assets that take
a substantial period of time to get ready for their intended use or sale) are added to the cost of those assets until such time
as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
66
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
11. Property, plant and equipment (continued)
Critical accounting judgements and key sources of estimation uncertainty – 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 expense.
The following estimated useful lives are used in the calculation of depreciation:
– buildings
– compressors
30 – 50 years;
10 – 50 years;
– gas transportation systems
10 – 80 years;
– meters
20 – 30 years;
– power generation facilities
3 – 25 years; and
– other plant and equipment
3 – 20 years.
12. Goodwill and intangibles
Goodwill
Balance at beginning of financial year
Acquisitions
Finalisation of provisional purchase price accounting
Balance at end of financial year
2017
$000
2016
$000
1,184,588
1,140,500
–
(984)
44,088
–
1,183,604
1,184,588
Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes to individual cash-generating units.
The East Coast Grid is an interconnected pipeline network that includes, inter alia, the Wallumbilla Gladstone, Moomba
Sydney, Roma Brisbane, Carpentaria Gas and South West Queensland pipelines and the Victorian Transmission System.
Since the acquisition of the South West Queensland Pipeline to complete the formation of APA’s East Coast Grid in December
2012, APA has installed facilities to enable bi-directional transportation of gas to meet the demand of our major customers
who now typically operate portfolios of gas supply and demand. Through the provision of multi-asset services, bi-directional
transportation, capacity trading and gas storage and parking facilities, APA’s East Coast Grid delivers options for customers
to choose from, and move gas between, more than 40 receipt points and over 100 delivery points on the east coast of
Australia. The East Coast Grid is categorised as an individual cash-generating unit.
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
East Cost Grid
Diamantina Power Station
Other energy infrastructure a
21,456
21,456
1,060,681
1,060,681
43,104
58,363
44,088
58,363
1,183,604
1,184,588
a) Primarily represents goodwill relating to the Pilbara Pipeline System ($32.6m) and the Goldfields Gas Pipeline ($18.5m).
Goodwill acquired in a business combination is initially measured at cost and subsequently at cost less accumulated impairment.
67
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Operating Assets and Liabilities
12. Goodwill and intangibles (continued)
Contract and other intangibles
Gross carrying amount
Balance at beginning of financial year
Acquisitions / additions
Write-offs
Balance at end of financial year
Accumulated amortisation and impairment
Balance at beginning of financial year
Amortisation expense (Note 5)
Impairment
Write-offs
Balance at end of financial year
2017
$000
2016
$000
3,604,143
3,623,011
1,456
(15,800)
705
(19,573)
3,589,799
3,604,143
(248,436)
(66,765)
(182,881)
(183,464)
–
15,800
(8,897)
10,690
(415,517)
(248,436)
3,174,282
3,355,707
APA Group holds various third party operating and maintenance contracts. The combined gross carrying amount of
$3,589.8 million amortises over terms ranging from one to 20 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 not a cash item, and is included in the line item of depreciation and amortisation expense in the statement of profit
or loss and other comprehensive income.
Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated impairment
losses. Intangible assets acquired in a business combination are identified and recognised separately from goodwill and are
initially recognised at their fair value at the acquisition date and subsequently at cost less accumulated amortisation and
accumulated impairment losses.
Amortisation is recognised on a straight-line basis over the estimated useful life of each asset. The estimated useful life and
amortisation method are reviewed at the end of each annual reporting period, with the effects of any changes in estimate
being accounted for on a prospective basis.
13. Impairment of non-financial assets
APA Group tests property, plant and equipment, intangibles and goodwill for impairment at least annually or whenever there
is an indication that the asset may be impaired. Assets other than goodwill that have previously reported an impairment are
reviewed for possible reversal of the impairment at each reporting period.
If the asset does not generate independent cash inflows and its value in use cannot be estimated to be close to its fair value,
the asset is tested for impairment as part of the cash-generating unit (CGU) to which it belongs.
Assets are impaired if their carrying value exceeds their recoverable amount. The recoverable amount of an asset or CGU is
determined as the higher of its fair value less costs of disposal or value-in-use.
Determining whether identifiable intangible assets and goodwill are impaired requires an estimation of the value-in-use or
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.
These estimates and assumptions are reviewed on an ongoing basis.
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 APA Group’s forecasting and planning processes which represents the underlying long term nature of associated
customer contracts on these assets.
In accordance with the requirements of AASB 136 Impairment of Assets, APA Group reviewed its CGUs for indicators of
impairment at the end of the reporting period. No such indicators were identified and no impairment recognised.
68
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
13. Impairment of non-financial assets (continued)
Critical accounting judgements and key sources of estimation uncertainty – impairment of assets
For fully regulated assets, cash flows have been extrapolated on the basis of existing transportation contracts and government
policy settings, and expected contract renewals with a resulting average annual growth rate of 1.1% p.a. (2016: 1.7% p.a.).
These expected cash flows are factored into the regulated asset base and do not exceed management’s expectations of the
long-term average growth rate for the market in which the cash generating unit operates.
For non-regulated assets, APA has assumed no capacity expansion beyond installed and committed levels; utilisation of
capacity is based on existing contracts, government policy settings and expected market outcomes.
As contracts mature, given ongoing demand for capacity, it is assumed that the majority of the capacity is resold at similar
pricing levels.
Asset Management cash flow projections reflect long term agreements with assumptions of renewal on similar terms and
conditions based on management’s expectations.
Cash flow projections are estimated for a period of up to 20 years, with a terminal value, recognising the long term nature of
the assets. The pre-tax discount rates used are 8.25% p.a. (2016: 8.25% p.a.) for Energy Infrastructure assets and 8.25% p.a.
(2016: 8.25% p.a.) for Asset Management.
These assumptions have been determined with reference to historic information, current performance and expected changes
taking into account external information.
14. Provisions
Employee benefits
Other
Current
Employee benefits
Other
Non-current
Employee benefits
Incentives
Cash settled security-based payments
Leave balances
Termination benefits
Current
Cash settled security-based payments
Defined benefit liability (Note 16)
Leave balances
Non-current
2017
$000
83,787
9,986
93,773
33,598
35,453
69,051
29,357
8,857
39,976
5,597
83,787
18,939
4,645
10,014
33,598
2016
$000
83,240
9,793
93,033
36,903
34,014
70,917
28,401
9,477
39,587
5,775
83,240
19,467
7,017
10,419
36,903
A provision is recognised when there is a legal or constructive obligation as a result of a past event, it is probable that future
economic benefits will be required to settle the obligation and the amount of 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 into account the risks and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those
cash flows.
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.
Provision is made for benefits accruing to employees in respect of wages and salaries, incentives, annual leave and long
service leave when it is probable that settlement will be required. Provisions made in respect of employee benefits expected
to be settled within 12 months, are recognised for employee services up to reporting date at the amounts expected to be
paid when the liability is settled. Provisions made in respect of employee benefits which are not expected to be wholly settled
within 12 months are measured as the present value of the estimated future cash outflows using a discount rate based on
the corporate bond yields in respect of services provided by employees up to reporting date.
69
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
15. Other non-current assets
Line pack gas
Gas held in storage
Defined benefit asset (Note 16)
Other assets
2017
$000
2016
$000
20,343
20,208
6,010
4,870
192
31,415
6,010
2,404
192
28,814
16. Employee superannuation plans
All employees of APA Group are entitled to benefits on retirement, disability or death from an industry sponsored fund, or an
alternative fund of their choice. APA Group has three plans with defined benefit sections (due to the acquisition of businesses)
and a number of other plans with defined contribution sections. The defined benefit sections provide lump sum benefits upon
retirement based on years of service. The defined contribution sections receive fixed contributions from APA Group and APA
Group’s legal and constructive obligations are limited to these amounts.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligations were determined
at 30 June 2017. The present value of the defined benefit obligations, and the related current service cost and past service
cost, were measured using the projected unit credit method.
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 (Note 5)
Amounts recognised in the statement of financial position
Fair value of plan assets
Present value of benefit obligation
Defined benefit asset – non-current (Note 15)
Defined benefit liability – non-current (Note 14)
Opening defined benefit obligation
Current service cost
Interest cost
Contributions from plan participants
Actuarial gains
Benefits paid
Administrative expenses, taxes and premiums paid
Closing defined benefit obligation
2,842
191
3,033
135,029
(134,804)
4,870
(4,645)
143,101
2,842
4,599
1,001
1,550
(17,665)
(624)
2,783
(42)
2,741
138,488
(143,101)
2,404
(7,017)
137,141
2,783
5,807
1,332
3,893
(7,855)
–
134,804
143,101
70
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
16. 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
Administrative expenses, taxes and premiums paid
Closing fair value of plan assets
2017
$000
2016
$000
138,488
140,500
4,408
7,002
2,419
1,001
(17,665)
(624)
5,849
(4,255)
2,917
1,332
(7,855)
–
135,029
138,488
Defined contribution plans
Contributions to defined contribution plans are expensed when incurred.
Defined benefit plans
Actuarial gains and losses and the return on plan assets (excluding interest) are recognised immediately in the statement
of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur.
Remeasurement, comprising of actuarial gains and losses and the return on plan assets (excluding interest), is recognised
in other comprehensive income and immediately reflected in retained earnings 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.
The defined benefit obligation recognised in the consolidated statement of financial position represents the actual deficit
or surplus in APA Group’s 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.
Key actuarial assumptions used in the determination of the defined obligation is a discount rate of 4.1%, based on the corporate
bond yield curve published by Milliman, and an expected salary increase rate of 3.0%. 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 $5,466,000 (increase
by $6,043,000); and
– If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $2,133,000
(decrease by $1,999,000).
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 $2.3 million in contributions to be paid to the defined benefit plans during the year ending 30 June 2018.
71
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
17. Leases
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.
Finance lease receivables relate to the lease of a metering station, natural gas vehicle refuelling facilities 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 9)
Non-current receivables (Note 9)
2017
$000
2016
$000
3,227
9,655
14,715
27,597
27,597
(10,314)
17,283
1,787
15,496
17,283
3,933
10,646
16,951
31,530
31,530
(11,957)
19,573
2,290
17,283
19,573
a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual.
APA Group as a lessor
Amounts due from a lessee under finance leases are recorded as receivables. Finance lease receivables are initially recognised
at amounts 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 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.
APA Group as a lessee
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value
of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is
included in the consolidated statement of financial position as a finance lease obligation. Lease payments are allocated
between finance charges and reduction of the lease obligation so as to achieve a constant rate 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.
Non-cancellable operating leases
Operating lease obligations are primarily related to commercial office leases and motor vehicles.
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
12,970
41,660
26,462
81,092
12,138
35,282
25,189
72,609
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time patterns in which economic benefits from the leased asset are consumed.
Operating lease incentives are recognised as a liability when received and released to the statement of profit or loss on a
straight line basis over the lease term.
72
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
APA Group’s objectives when managing capital are to safeguard its ability to continue as a going concern while maximising
the return to securityholders through the optimisation of the debt to equity structure.
APA Group’s overall capital management strategy is to continue to target 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 APA Group consists of cash and cash equivalents, borrowings and equity attributable to securityholders
of APA. APA Group’s policy is to maintain balanced and diverse funding sources through borrowing locally and from overseas,
using a variety of capital markets and bank loan facilities, to meet anticipated funding requirements.
Operating cash flows are used to maintain and expand APA Group’s assets, make distributions to securityholders and to
repay maturing debt.
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 APA Group, and were adhered to for the entirety of the
2017 and 2016 periods.
APA Group’s capital management strategy remains unchanged from the previous year.
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 determined as
the proportion of net debt to net debt plus equity. APA Group balances its overall capital structure through equity issuances,
new debt or the redemption of existing debt and through a disciplined distribution payment policy.
18. Cash balances
Cash and cash equivalents comprise of cash on hand, at call bank deposits and investments in money market instruments
that are readily convertible to known amounts for cash. Cash and cash equivalents at the end of the financial year as shown
in the statement of cash flows are reconciled to the related items in the statement of financial position as follows:
Cash and cash equivalents
Cash at bank and on hand
Short-term deposits
Non-current cash on deposit
Cash on deposit a
2017
$000
2016
$000
43,087
351,414
394,501
83,389
1,117
84,506
–
2,149
a) As at 30 June 2016 Gorodok Pty Limited held $2.1 million cash on deposit to support bank guarantees in relation to various contractual arrangements. APA Group
had no restricted cash as at 30 June 2017.
73
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
19. Borrowings
Borrowings are recorded initially at fair value less attributable transaction costs and subsequently stated at amortised cost.
Any difference between the initial recognised cost and the redemption value is recognised in the statement of profit or loss
and other comprehensive income over the period of the borrowing using the effective interest method.
Unsecured – at amortised cost
Guaranteed senior notes a
Other financial liabilities
Current
Guaranteed senior notes a
Bank borrowings b
Subordinated notes c
Other financial liabilities
Less: unamortised borrowing costs
Non-current
Financing facilities available
Total facilities
Guaranteed senior notes a
Bank borrowings b
Subordinated notes c
Facilities used at balance date
Guaranteed senior notes a
Bank borrowings b
Subordinated notes c
Facilities unused at balance date
Guaranteed senior notes a
Bank borrowings b
Subordinated notes c
2017
$000
2016
$000
115,738
11,120
126,858
398,058
11,771
409,829
9,022,710
8,043,377
–
515,000
82,059
(45,862)
707,501
515,000
95,155
(46,660)
9,573,907
9,314,373
9,700,765
9,724,202
9,138,448
8,441,435
1,068,750
1,380,000
515,000
515,000
10,722,198
10,336,435
9,138,448
8,441,435
–
515,000
707,501
515,000
9,653,448
9,663,936
–
–
1,068,750
672,499
–
–
1,068,750
672,499
a) Represents USD denominated private placement notes of US$384 million, CAD medium term notes (MTN) of C$300 million, JPY MTN of ¥10,000 million, GBP
MTNs of £950 million, EUR MTN of €1,350 million and USD denominated 144a notes of US$3,000 million measured at the exchange rate at reporting date, and
A$211 million of AUD denominated private placement notes and AUD MTN of A$500 million. Refer to Note 20 for details of interest rates and maturity profiles.
b) Refer to Note 20 for details of interest rates and maturity profiles.
c) Represents AUD denominated subordinated notes. Refer to Note 20 for details of interest rates and maturity profiles.
74
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management
APA Group’s corporate Treasury department is responsible for the overall management of APA Group’s capital raising
activities, liquidity, lender relationships and engagement, debt portfolio management, interest rate and foreign exchange
hedging, credit rating maintenance and third party indemnities (bank guarantees) within risk management parameters
reviewed by the Board. The Audit and Risk Management Committee (“ARMC”) approves written principles for overall risk
management, as well as policies covering specific areas such as liquidity and funding risk, foreign currency risk, interest
rate risk, credit risk, contract and legal risk and operational risk. APA Group’s ARMC ensures there is an appropriate Risk
Management Policy for the management of treasury risk and compliance with the policy through monthly reporting to the
Board from the Treasury department.
APA Group’s activities generate financial instruments comprising of cash, receivables, payables and interest bearing liabilities
which expose it to various risks as summarised below:
(a) Market risk including currency risk, interest rate risk and price risk;
(b) Credit risk; and
(c) Liquidity risk.
Treasury as a centralised function provides APA Group with the benefits of efficient cash utilisation, control of funding and its
associated costs, efficient and effective management of aggregated financial risk and concentration of financial expertise,
at an acceptable cost and manages risks through the use of natural hedges and derivative instruments. APA Group does
not engage in speculative trading. All derivatives have been transacted to hedge underlying or existing exposures and have
adhered to the ARMC approved Treasury Risk Management Policy.
(a) Market risk
APA Group’s market risk exposure is primarily due to changes in market prices such as interest and foreign exchange rates.
APA Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign
currency risk, including:
– forward exchange contracts to hedge the exchange rate risk arising from foreign currency cash flows, mainly US dollars,
derived from revenues, interest payments and capital equipment purchases;
– cross currency interest rate swaps to manage the currency risk associated with foreign currency denominated borrowings;
– foreign currency denominated borrowings to manage the currency risk associated with foreign currency denominated
revenue and receivables; and
– interest rate swaps to mitigate interest rate risk.
APA Group is also exposed to price risk arising from its forward purchase contracts over listed equities.
Foreign currency risk
APA Group’s foreign exchange risk arises from future commercial transactions (including revenue, interest payments and
principal debt repayments on long-term borrowings and the purchases of capital equipment), and the recognition of
assets and liabilities (including foreign receivables and borrowings). Exchange rate exposures are managed within approved
policy parameters utilising forward exchange contracts, cross currency swap contracts and foreign currency denominated
borrowings. All foreign currency exposure was managed in accordance with the Treasury Risk Management Policy in both
2017 and 2016.
75
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(a) Market risk (continued)
Foreign currency risk (continued)
The carrying amount of APA Group’s foreign currency denominated monetary assets, monetary liabilities and derivative
notional amounts at the reporting date is as follows:
2017
US Dollar
Japanese Yen
Canadian Dollar
British Pound
Euro
Swedish Krona
Danish Krona
2016
US Dollar
Japanese Yen
Canadian Dollar
British Pound
Euro
Swedish Krona
Cash & cash
equivalents
$000
Receivables
$000
Total
borrowings
$000
Cross
currency
swaps
$000
Foreign
exchange
contract
$000
Net foreign
currency
position
$000
3,393
40,002
(4,406,537)
(417,663)
(347,362)
(5,128,167)
–
–
–
–
–
–
–
–
–
–
–
–
(115,738)
(301,230)
115,738
301,230
(1,610,280)
1,610,280
(2,007,377)
2,007,377
–
–
–
–
–
–
–
–
–
–
45,024
61,196
45,024
61,196
104,038
104,038
3,393
40,002
(8,441,162)
3,616,962
(137,104)
(4,917,909)
1,068
30,691
(3,694,558)
(1,277,253)
(703,317)
(5,643,369)
–
–
–
–
–
–
–
–
–
–
(129,964)
(310,555)
129,964
310,555
(1,688,747)
1,688,747
(2,008,378)
2,008,378
–
–
–
–
–
–
–
–
1,392
29,606
1,392
29,606
1,068
30,691
(7,832,202)
2,860,391
(672,319)
(5,612,371)
76
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(a) Market risk (continued)
Forward foreign exchange contracts
To manage foreign exchange risk arising from future commercial transactions such as forecast capital purchases, revenue
and interest payments, APA Group uses forward foreign exchange contracts. Gains and losses recognised in the cash
flow hedge reserve (statement of comprehensive income) on these derivatives will be released to profit or loss when the
underlying anticipated transaction affects the statement of profit or loss or will be included in the carrying value of the asset
or liability acquired.
It is the policy of APA Group to hedge 100% of all foreign exchange capital purchases in excess of US$1 million equivalent
that are certain. Forecast foreign currency denominated revenues and interest payments will be hedged by forward exchange
contracts on a rolling basis with the objective being to lock in the AUD gross cash flows and manage liquidity.
The following table details the forward foreign exchange currency contracts outstanding at reporting date:
Cash flow hedges
2017
Pay USD / receive AUD
Forecast revenue and
associated receivable
Pay AUD / receive USD
Average
exchange
rate
$
Foreign
currency
US$000
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
0.7082
(320,885)
306,474
146,605
–
33,119
Forecast capital purchases
0.7507
79,359
(92,269)
(13,308)
(241,526)
214,205
133,297
(140)
(140)
(2,113)
31,006
Cash flow hedges
Pay AUD / receive EUR
Average
exchange
rate
$
Foreign
currency
EUR000
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
Forecast capital purchases
0.6884
30,994
(26,461)
(16,691)
30,994
(26,461)
(16,691)
(1,872)
(1,872)
2,153
2,153
Cash flow hedges
Pay AUD / receive SEK
Average
exchange
rate
$
Foreign
currency
SEK000
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
Forecast capital purchases
5.8684
359,124
(18,108)
359,124
(18,108)
(1,831)
(1,831)
(41,257)
(41,257)
(2,129)
(2,129)
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
Cash flow hedges
Pay AUD / receive DKK
Average
exchange
rate
$
Foreign
currency
DKK000
Forecast capital purchases
5.2308
544,203
(99,936)
544,203
(99,936)
(4,102)
(4,102)
–
–
6,543
6,543
77
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(a) Market risk (continued)
Forward foreign exchange contracts (continued)
Cash flow hedges
2016
Pay USD / receive AUD
Forecast revenue and
associated receivable
Pay AUD / receive USD
Average
exchange
rate
$
Foreign
currency
US$000
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
0.7200
(507,689)
292,570
265,907
146,605
12,849
Forecast capital purchases
0.7666
1,353
(995)
(313)
(457)
71
(506,336)
291,575
265,594
146,148
12,920
Cash flow hedges
Average
exchange
rate
$
Foreign
currency
EUR000
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
Pay AUD / receive EUR
Forecast capital purchases
0.6703
933
933
(334)
(334)
(910)
(910)
(148)
(148)
48
48
Cash flow hedges
Pay AUD / receive SEK
Average
exchange
rate
$
Foreign
currency
SEK000
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
Forecast capital purchases
6.0727
179,795
(16,308)
(8,009)
179,795
(16,308)
(8,009)
(5,289)
(5,289)
(164)
(164)
As at reporting date, APA Group has entered into forward contracts to hedge net US exchange rate risk arising from
anticipated future transactions with an aggregate notional principal amount of $453.1 million (2016: $705.1 million) which are
designated in cash flow hedge relationships. The hedged anticipated transactions denominated in US dollars are expected to
occur at various dates between one month to three years from reporting date.
78
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(a) Market risk (continued)
Cross currency swap contracts
APA Group enters into cross currency swap contracts to mitigate the risk of adverse movements in foreign exchange rates
in relation to principal and interest payments arising from foreign currency borrowings. APA Group receives fixed amounts
in the various foreign currencies and pays both variable interest rates (based on Australian BBSW) and fixed interest rates
based on agreed swap rates for the full term of the underlying borrowings. In certain circumstances borrowings are retained
in the foreign currency, or hedged from one foreign currency to another to match payments of interest and principal against
expected future business cash flows in that foreign currency.
The following table details the cross currency swap contract principal payments due as at the reporting date:
Cash flow hedges
2017
Foreign
currency
Exchange
rate
$
Less than
1 year
$000
1 – 2 years
$000
2 – 5 years
$000
More than
5 years
$000
Pay AUD / receive foreign currency
2003 USPP Notes
2007 USPP Notes
2009 USPP Notes
AUD/USD
AUD/USD
AUD/USD
0.6573
0.8068
0.7576
–
–
–
2012 JPY Medium Term Notes
AUD/JPY
79.4502
(125,865)
2012 CAD Medium Term Notes
2012 US144A
2012 GBP Medium Term Notes
2017 US144A
Pay USD / receive foreign currency
AUD/CAD
AUD/USD
AUD/GBP
AUD/USD
1.0363
1.0198
0.6530
0.7668
2015 EUR Medium Term Notes
2015 GBP Medium Term Notes
USD/EUR
USD/GBP
0.9514
0.6773
–
–
–
–
–
–
(95,847)
–
(151,215)
(153,694)
(98,997)
–
(289,494)
–
–
–
(735,438)
(535,988)
(1,108,503)
(957,914)
(889,661)
–
(1,153,591)
(125,865)
(247,062)
(1,500,099)
(4,423,181)
2016
Pay AUD / receive foreign currency
2003 USPP Notes
2007 USPP Notes
2009 USPP Notes
AUD/USD
0.6573
–
AUD/USD
0.8068
(190,878)
AUD/USD
0.7576
(85,787)
–
–
–
2012 JPY Medium Term Notes
AUD/JPY
79.4502
2012 CAD Medium Term Notes
2012 US144A
AUD/CAD
AUD/USD
1.0363
1.0198
2012 GBP Medium Term Notes
AUD/GBP
0.6530
Pay USD / receive foreign currency
2015 EUR Medium Term Notes
2015 GBP Medium Term Notes
USD/EUR
USD/GBP
0.9514
0.6773
–
–
–
–
–
–
(95,847)
–
(151,215)
(153,694)
(125,865)
–
(98,997)
(289,494)
–
–
–
–
(735,438)
(535,988)
(1,904,107)
(1,188,888)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(276,665)
(125,865)
(635,553)
(4,518,115)
79
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(a) Market risk (continued)
Foreign currency denominated borrowings
APA Group maintains a level of borrowings in foreign currency, or swapped from one foreign currency to another to match
payments of interest and principal against expected future business cash flows in that foreign currency. This mitigates the
risk of adverse movements in foreign exchange rates in relation to principal and interest payments arising from these foreign
currency borrowings as well as future revenues.
Foreign currency sensitivity analysis
The analysis below shows the effect on profit and total equity of retranslating cash, receivables, payables and interest-
bearing liabilities denominated in USD, JPY, CAD, GBP and EUR into AUD, had the rates been 20 percent higher or lower than
the relevant year end rate, with all other variables held constant, and taking into account all underlying exposures and related
hedges. A sensitivity of 20 percent has been selected and represents management’s assessment of the possible change in
rates taking into account the current level of exchange rates and the volatility observed both on an historical basis and on
market expectations for possible future movements.
– There would be no impact on net profit as all foreign currency exposures are fully hedged (2016: nil); and
– Equity reserves would decrease by $1,255.0 million with a 20 percent depreciation of the A$ or increase by $839.8 million
with a 20 percent increase in foreign exchange rates (2016: decrease by $1,410.2 million or increase by $940.5 million
respectively). The decrease in sensitivity is due to the decrease in the notional value of forward exchange contracts that are
in a hedging relationship with highly probable forecast transactions.
Interest rate risk
APA Group’s interest rate risk is derived predominately from borrowings subject to 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.
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 $394.5 million as at 30 June 2017
(2016: $84.5 million).
Cross currency swap and interest rate swap contracts
Cross currency swap and interest rate swap contracts have the economic effect of converting borrowings from floating to
fixed rates and/or fixed rate foreign currency to fixed or floating AUD rates on agreed notional principal amounts enabling
APA Group to mitigate the risk of cash flow exposures on 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:
Cash flow hedges – Pay fixed AUD interest –
receive floating AUD or fixed foreign currency
Less than 1 year
1 year to 2 years
2 years to 5 years a
5 years and more a
Weighted average
interest rate
Notional
principal amount
Fair value
2017
% p.a.
2016
% p.a.
2017
$000
2016
$000
2017
$000
2016
$000
6.80
7.30
5.18
5.38
8.58
6.80
125,865
276,665
(14,249)
247,062
125,865
(9,706)
17,700
(2,403)
7.76
1,500,099
635,553
85,006
10,284
5.08
4,423,181
4,518,115
81,206
116,089
6,296,207
5,556,198
142,257
141,670
a) This amount includes a notional amount of USD 2.3 billion (2016: USD 2.3 billion) which is subject to USD interest rate risk.
The cross currency swap and interest rate swap contracts 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 cross currency swap and 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 on borrowings.
80
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(a) Market risk (continued)
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-
derivative instruments held. A 100 basis point 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 held constant, APA Group’s:
– net profit would decrease by $5,150,000 or increase by $5,150,000 (2016: decrease by $12,225,000 or increase by
$12,225,000). This is mainly attributable to APA Group’s exposure to interest rates on its variable rate borrowings, including
its Australian Dollar subordinated notes; and
– equity reserves would increase by $31,379,000 with a 100 basis point decrease in interest rates or decrease by $27,772,000
with a 100 basis point increase in interest rates (2016: increase by $25,722,000 or decrease by $28,287,000 respectively).
This is due to the changes in the fair value of derivative interest instruments.
APA Group’s profit sensitivity to interest rates has decreased during the current year due to the overall decrease in the level of
APA Group’s unhedged floating 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 increase in sensitivity in equity is due to the increase in the
notional value of interest rate and cross currency swaps.
Price risk
APA Group is exposed to price risk arising from its forward purchase contracts over listed equities. The forward purchase
contracts are held to meet hedging objectives rather than for trading purposes. APA Group does not actively trade these
holdings.
Price risk sensitivity
The sensitivity analysis below has been determined based on the exposure to price risks at the reporting date. At the reporting
date, if the prices of APA Group’s forward purchase contracts over listed equities had been 5 percent p.a. higher or lower:
– net profit would have been unaffected as there is no effect from the forwards as the corresponding exposure will offset in
full (2016: $nil); and
– there is no effect on equity reserves as APA Group holds no available-for-sale investments (2016: $nil).
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to APA
Group. APA Group has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral
or bank guarantees where appropriate as a means of mitigating any risk of loss. For financial investments or market risk
hedging, APA Group’s policy is to only transact with counterparties that have a credit rating of A- (Standard & Poor’s)/
A3 (Moody’s) or higher unless specifically approved by the Board. Where a counterparty’s rating falls below this threshold
following a transaction, no other transactions can be executed with that counterparty until the exposure is sufficiently reduced
or their credit rating is upgraded above APA Group’s minimum threshold. 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 ARMC. These limits are regularly reviewed by the Board.
Trade receivables consist of mainly corporate customers which are diverse and geographically spread. Most significant
customers have an investment grade rating from either Standard & Poor’s or Moody’s. Ongoing credit monitoring of the
financial position of customers is maintained.
The carrying amount of financial assets recorded in the financial statements, net of any allowances, represents APA Group’s
maximum exposure to credit risk in relation to those assets.
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 fair value of the financial guarantee as at 30 June 2017 has been
determined to be immaterial and no liability has been recorded (2016: $nil).
(c) Liquidity risk
APA Group has a policy of dealing with liquidity risk which requires an appropriate liquidity risk management framework for
the management of APA Group’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 of APA Group.
Detailed in the table following are APA Group’s remaining contractual maturities for its non-derivative financial liabilities. The
table is presented based on the undiscounted cash flows of financial liabilities taking account of the earliest date on which
APA Group can be required to pay. The table includes both interest and principal cash flows.
81
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(c) Liquidity risk (continued)
The table below shows the undiscounted Australian dollar cash flows associated with the AUD and foreign currency
denominated notes, cross currency interest rate swaps and fixed interest rate swaps in aggregate.
2017
Maturity
Average
interest rate
% p.a.
Less than
1 year
$000
1 – 5 years
$000
More than
5 years
$000
Unsecured financial liabilities
Trade and other payables
Unsecured bank borrowings a
–
–
312,611
–
–
–
–
–
2012 Subordinated Notes b
1–Oct–72
6.30
32,221
142,361
2,567,692
Denominated in A$
Other financial liabilities c
Guaranteed Senior Notes d
Denominated in A$
2007 Series E
2007 Series G
2007 Series H
2010 AUD Medium Term Notes
2016 AUD Medium Term Note
Denominated in US$
2003 Series D
2007 Series D
2007 Series F
2009 Series B
2012 US 144A
2015 US 144A c
2015 US 144A c
2017 US 144A
15–May–19
15–May–22
15–May–22
22–Jul–20
20–Oct–23
9–Sep–18
15–May–19
15–May–22
1–Jul–19
11–Oct–22
23–Mar–25
23–Mar–35
15–Jul–27
Denominated in stated foreign currency
2012 JPY Medium Term Notes
2012 CAD Medium Term Notes
22–Jun–18
24–Jul–19
2012 GBP Medium Term Notes
26–Nov–24
2015 GBP Medium Term Notes c
22–Mar–30
2015 EUR Medium Term Notes c
2015 EUR Medium Term Notes c
22–Mar–22
22–Mar–27
7,609
30,436
33,927
5,045
6,002
4,617
23,250
7,500
6,930
11,111
11,354
5,897
49,123
60,160
19,533
48,046
134,424
19,529
39,783
51,729
34,990
39,105
73,214
104,590
80,454
358,125
30,000
99,360
162,324
199,141
116,558
196,627
–
–
–
–
211,250
–
–
–
–
760,068
240,641
1,613,033
78,130
644,790
235,087
1,430,522
–
318,708
157,619
207,013
1,097,872
–
–
634,905
1,567,617
–
156,419
1,085,184
930,569
4,084,679
10,548,988
7.40
7.45
7.45
7.75
3.75
6.02
5.99
6.14
8.86
3.88
4.20
5.00
4.25
1.23
4.25
4.25
3.50
1.38
2.00
a) Undrawn bank facilities mature on 18 May 2018 ($100 million limit), 19 September 2018 ($311.25 million limit), 18 May 2019 ($50 million limit), 19 December
2019 ($100 million limit), 18 May 2020 ($50 million limit), 19 September 2020 ($207.5 million limit), 19 December 2020 ($100 million limit) and 18 May 2021
($150 million limit).
b) The first call date is 31 March 2018.
c) Facilities are denominated in or fully swapped by way of CCIRS into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at 30
June 2017. These amounts are fully hedged by forward exchange contracts or future US$ revenues.
d) Rates shown are the coupon rate.
82
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
(c) Liquidity risk (continued)
2016
Maturity
Average
interest rate
% p.a.
Less than
1 year
$000
1 – 5 years
$000
More than
5 years
$000
Unsecured financial liabilities
Trade and other payables
Unsecured bank borrowings a
2012 Subordinated Notes
1–Oct–72
Denominated in A$
Other financial liabilities b
Guaranteed Senior Notes c
Denominated in A$
2007 Series A
2007 Series C
2007 Series E
2007 Series G
2007 Series H
2010 AUD Medium Term Notes
Denominated in US$
2003 Series D
2007 Series B
2007 Series D
2007 Series F
2009 Series A
2009 Series B
2012 US 144A
2015 US 144A b
2015 US 144A b
15–May–17
15–May–17
15–May–19
15–May–22
15–May–22
22–Jul–20
9–Sep–18
15–May–17
15–May–19
15–May–22
1–Jul–16
1–Jul–19
11–Oct–22
23–Mar–25
23–Mar–35
Denominated in stated foreign currency
2012 JPY Medium Term Notes
2012 CAD Medium Term Notes
22–Jun–18
24–Jul–19
2012 GBP Medium Term Notes
26–Nov–24
2015 GBP Medium Term Notes b
22–Mar–30
2015 EUR Medium Term Notes b
2015 EUR Medium Term Notes b
22–Mar–22
22–Mar–27
–
2.82
6.78
252,661
19,610
33,267
–
726,228
–
–
130,200
2,381,395
7,841
31,367
42,806
7.33
7.38
7.40
7.45
7.45
7.75
6.02
5.89
5.99
6.14
8.35
8.86
3.88
4.20
5.00
1.23
4.25
4.25
3.50
1.38
2.00
5,367
106,475
5,045
6,002
4,617
23,250
–
–
78,259
24,008
18,468
381,375
6,930
106,290
–
173,435
45,416
–
128,286
196,762
–
–
–
86,584
66,603
–
–
–
–
165,079
–
–
809,056
248,004
1,724,389
80,521
684,650
134,424
338,237
157,943
213,349
–
–
674,364
1,668,898
144,240
1,023,284
161,205
1,158,689
204,864
11,111
11,354
90,569
11,761
49,123
62,001
20,130
8,559
19,529
39,459
53,312
36,060
40,301
a) Facilities mature on 19 September 2017 ($311.25 million limit), 18 May 2018 ($100 million limit), 19 September 2018 ($311.25 million limit), 18 May 2019 ($50 million
limit), 19 December 2019 ($100 million limit), 18 May 2020 ($50 million limit), 19 September 2020 ($207.5 million limit), 19 December 2020 ($100 million limit)
and 18 May 2021 ($150 million limit).
b) Facilities are denominated in or fully swapped by way of CCIRS into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at
30 June 2016. These amounts are fully hedged by forward exchange contracts or future US$ revenues.
c) Rates shown are the coupon rate.
1,129,198
3,518,017
10,485,797
83
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
Critical accounting judgements and key sources of estimation uncertainty – 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 Group determines
fair value by using various valuation 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 as to recoverability based on the counterparty’s and APA Group’s credit risk.
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair
value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
– 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).
Transfers between levels of the fair value hierarchy occur at the end of the reporting period. There have been no transfers
between the levels during 2017 (2016: none). Transfers between level 1 and level 2 are triggered when there are changes to
the availiability of quoted prices 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 Group’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:
– 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. These instruments are classified in the fair
value hierarchy at level 1;
– the fair values of forward foreign exchange contracts included in hedging assets and liabilities are calculated using discounted
cash flow analysis based on observable forward exchange rates at the end of the reporting period and contract forward
rates discounted at a rate that reflects the credit risk of the various counterparties. These instruments are classified in the
fair value hierarchy at level 2;
– the fair values of interest rate swaps, cross currency swaps, equity forwards and other derivative instruments included in
hedging assets and liabilities are calculated using discounted cash flow analysis using observable yield curves at the end
of the reporting period and contract rates discounted at a rate that reflects the credit risk of the various counterparties.
These instruments are classified in the fair value hierarchy at level 2;
– the fair values of other financial assets and financial liabilities (excluding derivative instruments) are 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. These instruments are
classified in the fair value hierarchy at level 2;
– the fair value of financial guarantee contracts is determined based upon the probability of default by the specified
counterparty extrapolated from market-based credit information and the amount of loss, given the default. These
instruments are classified in the fair value hierarchy at level 2; and
– the carrying value of financial assets and liabilities recorded at amortised cost in the financial statements approximate
their fair value having regard to the specific terms of the agreements underlying those assets and liabilities.
84
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
Fair value hierarchy
2017
Financial assets measured at fair value
Equity forwards designated as fair value through
profit or 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
Forward foreign exchange contracts used for hedging
2016
Financial assets measured at fair value
Equity forwards designated as fair value through
profit or 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
Forward foreign exchange contracts used for hedging
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,673
416,256
65,485
484,414
4,977
269,019
27,912
301,908
2,566
417,949
22,941
443,456
8,993
267,287
10,137
286,417
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,673
416,256
65,485
484,414
4,977
269,019
27,912
301,908
2,566
417,949
22,941
443,456
8,993
267,287
10,137
286,417
85
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
20. Financial risk management (continued)
Fair value measurements of financial instruments measured at amortised cost
The financial liabilities included in the following table are fixed rate borrowings. Other debts held by APA Group are floating
rate borrowings and amortised cost as recorded in the financial statements approximate their fair values.
Carrying amount
Fair value (level 2) a
2017
$000
2016
$000
2017
$000
2016
$000
Financial liabilities
Unsecured long term Private Placement Notes
710,742
1,124,099
774,803
1,246,720
Unsecured Australian Dollar Medium Term Notes
500,000
300,000
534,030
Unsecured Japanese Yen Medium Term Notes
Unsecured Canadian Dollar Medium Term Notes
115,738
301,230
129,964
310,555
116,681
308,490
346,153
132,575
317,912
Unsecured US Dollar 144A Medium Term Notes
3,906,504
2,885,325
4,008,505
3,015,771
Unsecured British Pound Medium Term Notes
1,610,281
1,688,747
1,721,799
1,822,352
Unsecured Euro Medium Term Notes
2,007,377
2,008,378
1,976,924
1,958,596
9,151,872
8,447,068
9,441,232
8,840,079
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. These instruments are classified in the fair value
hierarchy at level 2.
21. Other financial instruments
Derivatives at fair value:
Equity forward contracts
Derivatives at fair value designated as
hedging instruments:
Assets
2017
$000
Liabilities
2016
$000
2017
$000
2016
$000
1,484
1,864
–
–
Foreign exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
32,991
–
1,389
–
14,267
4,214
1,421
3,925
Cross currency interest rate swaps – cash flow hedges
17,574
31,602
127,287
109,328
Financial item carried at amortised cost:
Redeemable preference share interest
Current
Financial items carried at amortised cost:
Redeemable ordinary shares
Redeemable preference shares
Derivatives at fair value:
Equity forward contracts
Derivatives at fair value designated as
hedging instruments:
285
52,334
–
10,400
285
35,140
15,699
10,400
1,189
702
–
–
145,768
114,674
–
–
–
–
–
–
Foreign currency contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Cross currency interest rate swaps – cash flow hedges
Non-current
32,494
–
414,690
458,773
21,552
–
398,717
447,070
13,645
2,072
166,370
182,087
8,716
6,246
179,629
194,591
86
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Capital Management
21. Other financial instruments (continued)
Redeemable ordinary shares related 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 included a debt component. The redeemable
ordinary shares were redeemed for ordinary shares in Energy Infrastructure Investments Pty Ltd on 23 December 2016.
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 entity, 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.
Recognition and measurement
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. There are no fair value hedges in the current
or prior year, hedges of foreign exchange and interest rate risk are accounted for as cash flow hedges.
At the inception of the hedge relationship, APA Group formally designates and documents the hedge relationship, including
the risk management strategy for undertaking the hedge. This includes identification of the hedging instrument, hedged item
or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness.
Hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and they are regularly
assessed to ensure they continue to be effective.
Note 20 contains details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging
reserve in equity are detailed in the Consolidated Statement of Changes in Equity.
Derivatives are initially recognised at fair value at the date a derivatives contract is entered into and subsequently remeasured
to 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. 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
discounted cash flows of the instrument. Cash flows due within 12 months of the reporting date are classified as current and
cash flows due after 12 months of the reporting date are classified as non-current.
Cash flow hedges
For cash flow hedges, the portion of the gain or loss on the hedging instrument that is effective is recognised directly in equity,
while the ineffective portion is recognised in profit or loss.
Amounts recognised in equity are transferred to the profit or loss when the hedged transaction affects profit or loss, such as
when the hedged income or expenses are recognised or when a forecast sale occurs. When the hedged item is the cost of a
non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial
asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the
profit or loss. If the hedging instrument expires or is sold, terminated or exercised, or if its designation as a hedge is revoked,
amounts previously recognised in equity remain in equity until the forecast transaction occurs.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of
each reporting period. Financial assets are impaired where, as a result of one or more events that occurred after the initial
recognition of the financial asset, there is objective evidence that 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.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment
at the date the impairment is reversed, does not exceed what the amortised cost would have been had the impairment not
been recognised. In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment
loss is recognised in other comprehensive income.
87
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
22. Issued capital
Units
2017
$000
2016
$000
1,114,307,369 units, fully paid (2016: 1,114,307,369 units, fully paid) a
3,114,617
3,195,445
2017
No. of
units
000
2017
$000
2016
No. of
units
000
2016
$000
Movements
Balance at beginning of financial year
1,114,307
3,195,445
1,114,307
3,195,449
Capital distributions paid (Note 8)
Issue costs of securities
Deferred tax on issue costs of securities
–
–
–
(80,828)
–
–
–
–
–
–
(6)
2
Balance at end of financial year
1,114,307
3,114,617
1,114,307
3,195,445
a) Fully paid securities carry one vote per security and carry the right to distributions.
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.
88
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Group Structure
23. Non-controlling interests
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
2017
$000
2016
$000
738
704
1,009,757
1,046,193
1,010,495
1,046,897
13
13
11
11
1,010,482
1,046,886
1,010,482
1,046,886
72,979
(12)
72,967
–
72,967
75,570
33,801
(109,371)
(109,371)
85,483
(381)
85,102
(595)
84,507
86,451
(16,647)
(69,778)
(69,804)
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.
89
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Group Structure
23. Non-controlling interests (continued)
APT Investment Trust
Other non-controlling interest
APT Investment Trust
Issued capital:
Balance at beginning of financial year
Distribution – capital return (Note 8)
Issue costs of units
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 unitholders
Distributions paid (Note 8)
Other non-controlling interest
Issued capital
Reserves
Retained earnings
2017
$000
2016
$000
1,010,482
1,046,886
53
53
1,010,535
1,046,939
1,005,074
1,005,086
(28,790)
–
–
(12)
976,284
1,005,074
–
–
–
41,812
72,967
(80,581)
34,198
4
1
48
53
595
(595)
–
26,488
85,102
(69,778)
41,812
4
1
48
53
24. Joint arrangements and associates
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 these entities.
Principal activity
Country of
incorporation
Ownership interest %
2017
2016
Energy Infrastructure Investments
Energy infrastructure
Australia
Power generation (wind)
Australia
Gas transmission
Australia
Gas transmission
Australia
50.00
50.00
19.90
20.20
50.00
–
19.90
20.20
Gas distribution
Australia
20.00
20.00
Name of entity
Joint ventures:
SEA Gas
SEA Gas (Mortlake)
EII 2
Associates:
GDI (EII)
90
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Group Structure
24. Joint arrangements and associates (continued)
Investment in joint ventures and associates using the equity method
259,882
197,185
Joint Ventures
Aggregate carrying amount of investment
229,693
170,408
2017
$000
2016
$000
APA Group’s aggregated share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Associates
17,175
8,007
25,182
13,640
(8,103)
5,537
Aggregate carrying amount of investment
30,189
26,777
APA Group’s aggregated share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
4,618
2,914
7,532
3,337
(1,327)
2,010
Investment in associates
An associate is an entity over which APA Group has significant influence and that is neither a subsidiary nor a joint arrangement.
Investments in associates are accounted for using the equity accounting method.
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
retained post-acquisition profit or loss and other comprehensive income, less any impairment.
Losses of an associate or joint venture in excess of APA Group’s interests (which includes any long-term interests, that in
substance, form part of the net 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.
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 26.
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
Output interest
2017
%
88.2 a
50.0 b
2016
%
88.2 a
50.0 b
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.
Interest in joint arrangements
A joint arrangement is an arrangement whereby two or more parties have joint control. Joint control is the contractually
agreed sharing of control such that decisions about the relevant activities of the arrangement (those that significantly affect
the returns) require the unanimous consent of the parties sharing control. APA Group has two types of joint arrangements:
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 for using the equity accounting method; and
Joint operations: A joint arrangement in which the parties that share joint control have rights to the assets, and obligations
for the liabilities, relating to the arrangement. In relation to its interest in a joint operation, APA Group recognises its share of
assets and liabilities, revenue from the sale of its share of the output and its share of any revenue generated from the sale
of the output by the joint operation and its share of expenses. These are incorporated into APA Group’s financial statements
under the appropriate headings.
91
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Group Structure
25. Subsidiaries
Subsidiaries are entities controlled by APT. Control exists where APT has power over the entities, i.e. existing rights that give
it the current ability to direct the relevant activities of the entities (those that significantly affect the returns); exposure, or
rights, to variable returns from its involvement with the entities; and the ability to use its power to affect those returns.
Name of entity
Parent entity
Australian Pipeline Trust a
Subsidiaries
Agex Pty. Ltd. b, c
Amadeus Gas Trust g
APA (BWF Holdco) Pty Ltd b, c
APA (EDWF Holdco) Pty Ltd b, c
APA (EPX) Pty Limited b, c
APA (NBH) Pty Limited b, c
APA (Pilbara Pipeline) Pty Ltd b, c
APA (SWQP) Pty Limited b, c
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 AM (Allgas) Pty Limited b, c
APA BIDCO Pty Limited b, c
APA Biobond Pty Limited b, c
APA Country Pipelines Pty Limited b, c
APA DPS Holdings Pty Limited b, c
APA DPS2 Pty Limited b, c
APA East Pipelines 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
APA EE Pty Limited b, c
APA Ethane Pty Limited b, c, f
APA Facilities Management Pty Limited b, c
APA Midstream Holdings Pty Limited b, c, d
APA Operations (EII) Pty Limited b, c
APA Operations Pty Limited b, c
APA Pipelines Investments (BWP) Pty Limited b, c
APA Power Holdings Pty Limited b, c
APA Power PF Pty Limited b, c
APA Reedy Creek Wallumbilla Pty Limited b, c, e
APA SEA Gas (Mortlake) Holdings Pty Ltd b, c
APA SEA Gas (Mortlake) Pty Ltd b
APA Services (Int) Inc. d
APA Sub Trust No 1 b, g
APA Sub Trust No 2 b, g
92
Country of
registration/
incorporation
Ownership interest
2017
%
2016
%
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
United States
–
–
100
96
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
96
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
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Group Structure
25. Subsidiaries (continued)
Name of entity
APA Sub Trust No 3 b, g
APA Transmission Pty Limited b, c
APA VTS A Pty Limited b, c
APA VTS Australia (Holdings) Pty Limited b, c
APA VTS Australia (NSW) Pty Limited b, c
APA VTS Australia (Operations) Pty Limited b, c
APA VTS Australia Pty Limited b, c
APA VTS B Pty Limited b, c
APA Western Slopes Pipeline Pty Limited b, c, d
APA WGP Pty Ltd b, c
APT (MIT) Services Pty Limited b, c
APT AM (Stratus) Pty Limited b, c
APT AM Employment Pty Limited b, c
APT AM Holdings Pty Limited b, c
APT Facility Management Pty Limited b, c
APT Goldfields Pty Ltd b, c
APT Management Services Pty Limited b, c
APT O&M Holdings Pty Ltd b, c
APT O&M Services (QLD) Pty Ltd b, c
APT O&M Services Pty Ltd b, c
APT Parmelia Holdings Pty Ltd b, c
APT Parmelia Pty Ltd b, c
APT Parmelia Trust b, g
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 (SA) 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
APT Pipelines Limited b, c
APT Sea Gas Holdings Pty Limited b, c
APT SPV2 Pty Ltd b
APT SPV3 Pty Ltd b
Australian Pipeline Limited b
Central Ranges Pipeline Pty Ltd b, c
Darling Downs Solar Farm Pty Ltd b, c, d
Diamantina Holding Company Pty Limited b, c
Diamantina Power Station Pty Limited b, c
East Australian Pipeline Pty Limited b, c
EDWF Holdings 1 Pty Ltd b, c
Country of
registration/
incorporation
–
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
Ownership interest
2017
%
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
2016
%
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
93
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Group Structure
25. Subsidiaries (continued)
Name of entity
EDWF Holdings 2 Pty Ltd b, c
EDWF Manager Pty Ltd b, c
Epic Energy East Pipelines Trust b, g
EPX Holdco Pty Limited b, c
EPX Member Pty Limited b, c
EPX Trust b, g
Ethane Pipeline Income Financing Trust b, g
Ethane Pipeline Income Trust b, g
Gasinvest Australia Pty Ltd b, c
GasNet A Trust g
GasNet Australia Investments Trust g
GasNet Australia Trust b, g
GasNet B Trust b, g
Goldfields Gas Transmission Pty Ltd b
Gorodok Pty. Ltd. b, c
Griffin Windfarm 2 Pty Ltd b
Moomba to Sydney Ethane Pipeline Trust b, g
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
Votraint No. 1606 Pty Ltd b
Votraint No. 1613 Pty Ltd b
Western Australian Gas Transmission Company 1 Pty Ltd b, c
Wind Portfolio Pty Ltd b, c
Country of
registration/
incorporation
Australia
Australia
–
Australia
Australia
–
–
–
Australia
–
–
–
–
Australia
Australia
Australia
–
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2017
%
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
2016
%
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
a) Australian Pipeline Trust is the head entity within the APA tax-consolidated group.
b) These entities are members of the APA tax-consolidated group.
c) These wholly-owned subsidiaries have entered into a deed of cross guarantee with APT Pipelines Limited pursuant to ASIC Corporations Instrument 2016/785
and are relieved from the requirement to prepare and lodge an audited financial report.
d) Entity was acquired or registered during the 2017 year.
e) Entity previously known as “APA Newco Pty Limited” during the 2016 year.
f) Entity changed its company type from Limited to Pty. Limited during the 2017 year.
g) These trusts are unincorporated and not required to be registered. In respect of APT Parmelia Trust, the governing law of the trust deed was changed from
Cayman Islands to New South Wales, Australia on 7 August 2017.
94
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
26. Commitments and contingencies
Capital expenditure commitments
APA Group – plant and equipment
APA Group’s share of jointly controlled operations – plant and equipment
Contingent liabilities
Bank guarantees
APA Group had no contingent assets as at 30 June 2017 and 30 June 2016.
27. Director and senior executive remuneration
Remuneration of Directors
The aggregate remuneration of Directors of APA Group is set out below:
Short-term employment benefits
Post-employment benefits
Total remuneration: Non-Executive Directors
Short-term employment benefits
Post-employment benefits
Cash settled security-based payments
Total remuneration: Executive Director a
Total remuneration: Directors
Remuneration of senior executives a
The aggregate remuneration of senior executives of APA Group is set out below:
Short-term employment benefits
Post-employment benefits
Cash settled security-based payments
Total remuneration: senior executives
2017
$000
2016
$000
583,387
2,698
586,085
151,710
4,402
156,112
43,034
42,027
2017
$
2016
$
1,682,077
1,548,424
160,104
217,041
1,842,181
1,765,465
3,589,472
3,544,861
35,000
1,485,242
5,109,714
35,000
1,579,531
5,159,392
6,951,895
6,924,857
11,108,724
10,992,475
551,107
856,636
3,730,048
4,429,999
15,389,879
16,279,110
a) The remuneration for the Chief Executive Officer and Managing Director, Michael (Mick) McCormack, is included in both the remuneration disclosure for Directors
and senior executives.
28. Remuneration of external auditor
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
Auditing the financial report
Compliance plan audit
Other assurance services a
654,900
643,000
18,900
263,700
937,500
18,500
75,000
736,500
a) Services provided were in accordance with the external auditor independence policy. Other assurance services mainly comprise assurance services in relation to
the 2017 144A debt issuance and procedures in relation to ASIC Regulatory Guide 231 requirements.
95
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
29. Related party transactions
(a) Equity interest in related parties
Details of the percentage of ordinary securities held in subsidiaries are disclosed in Note 25 and the details of the percentage
held in joint operations, joint ventures and associates are disclosed in Note 24.
(b) Responsible Entity – Australian Pipeline Limited
The Responsible Entity is wholly owned by APT Pipelines Limited.
(c) Transactions with related parties within APA Group
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; 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 25 for details of the entities that comprise APA Group.
Australian Pipeline Limited
Management fees of $3,967,352 (2016: $3,999,694) were paid to the Responsible Entity as reimbursement of costs incurred
on behalf of APA Group. No amounts were paid directly by APA Group to the Directors of the Responsible Entity, except as
disclosed at Note 27.
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.
(d) Transactions with other associates and joint ventures
The following transactions occurred with APA Group’s associates and joint ventures on normal market terms and conditions:
2017
SEA Gas
Energy Infrastructure Investments
EII 2
GDI (EII)
2016
SEA Gas
Energy Infrastructure Investments
EII 2
APA Ethane Ltd
Diamantina Power Station a
GDI (EII)
Dividends
from
related
parties
$000
10,357
4,689
3,244
4,121
22,411
10,523
3,810
3,102
–
–
4,102
21,537
Sales to
related
parties
$000
3,717
26,553
752
51,711
82,733
3,371
35,114
725
192
950
55,775
96,127
Purchases
from
related
parties
$000
–
–
–
99
99
–
157
–
–
–
54
211
Amount
owed by
related
parties
$000
96
5,792
46
7,094
13,028
10
4,344
45
–
–
7,830
12,229
Amount
owed to
related
parties
$000
–
–
–
–
–
–
–
–
–
–
–
–
a) Following APA Group’s acquisition of the remaining 50% of Diamantina Power Station on 31 March 2016, transactions with Diamantina Power Station now form
part of inter entity balances and are eliminated on consolidation.
96
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
30. 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.
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Total equity
Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
2017
$000
2016
$000
2,497,220
2,573,646
757,947
752,939
3,255,167
3,326,585
127,269
127,269
112,169
112,169
3,127,898
3,214,416
3,114,616
3,195,445
13,282
18,971
3,127,898
3,214,416
283,264
–
283,264
186,014
2,258
188,272
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
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.
Due to the contingent nature of these financial guarantees no liability has been recorded (2016: $nil).
Contingent liabilities of the parent entity
No contingent liabilities have been identified in relation to the parent entity.
97
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
31. Adoption of new and revised Accounting Standards
Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)
There have not been any new or revised Standards and Interpretations issued by the AASB that are relevant to the consolidated
entity’s operations that would be effective for the current reporting period.
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.
Standard/Interpretation
Effective for
annual
reporting periods
beginning on
or after
Expected to
be initially
applied in the
financial year
ending
– AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
30 June 2019
– AASB 15 ‘Revenue from Contracts with Customers’, and AASB 2015-8
‘Amendments to Australian Accounting Standards – Effective date of AASB 15’
1 January 2018
30 June 2019
– AASB 16 ‘Leases’
1 January 2019
30 June 2020
The potential impacts of the initial application of the Standards above are yet to be fully quantified.
32. Events occurring after reporting date
On 22 August 2017, the Directors declared a final distribution of 23.00 cents per security ($256.3 million) for APA Group. This
is comprised of a distribution of 16.24 cents per unit from APT and a distribution of 6.76 cents per unit from APTIT. The APT
distribution represents a 4.67 cents per unit franked profit distribution, a 0.79 cents per unit unfranked profit distribution and
10.78 cents per unit capital distribution. The APTIT distribution represents a 3.07 cent per unit profit distribution and a 3.69
cents per unit capital distribution. Franking credits of 2.0 cents per security will be allocated to the franked profit distribution.
The distribution will be paid on 13 September 2017.
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 financial statements.
98
APA Group Annual Report 2017notes to the consolidated financial statements. continued.AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 directors’ declaration.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
For the financial year ended 30 June 2017
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 issued by the International Accounting Standards Board;
(d) the Directors have been given the declarations by the Chief Executive Officer 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, 23 August 2017
Steven Crane
Director
99
APA Group Annual Report 2017
auditor’s independence declaration.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO AUSTRALIAN PIPELINE LIMITED AS RESPONSIBLE ENTITY FOR AUSTRALIAN PIPELINE TRUST
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
23 August 2017
The Directors
Australian Pipeline Limited as responsible entity for
Australian Pipeline Trust
HSBC Building
Level 19, 580 George Street
Sydney NSW 2000
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 2017, 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.
DELOITTE TOUCHE TOHMATSU
A V Griffiths
Partner
Chartered Accountants
Sydney, 23 August 2017
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
126
100
APA Group Annual Report 2017
independent auditor’s report.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST
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
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Australian Pipeline Trust (the “Trust”) and its subsidiaries
(the “Group”), which comprises the consolidated statement of financial position as at 30 June
2017, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, notes to the financial statements, including a summary of significant accounting
policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the
auditor independence requirements of the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
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 of Australian Pipeline
Trust, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
127
101
APA Group Annual Report 2017 independent auditor’s report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter
Carrying Value of Property, Plant and
Equipment, Goodwill and Other
Intangible Assets
As disclosed in Note 11 and 12, at 30 June
2017 the Group’s balance sheet includes
property, plant and equipment of $9.2
billion, goodwill of $1.2 billion and other
intangible assets of $3.2 billion, which are
allocated across several cash generating
units (CGUs).
The assessment of the recoverable amount
of the Group’s property, plant and
equipment, goodwill and other intangible
asset balances requires the exercise of
significant judgement in respect of factors
such as discount rates, future contract
renewals, contracting of spare capacity, as
well as economic assumptions such as
inflation.
The outcome of this assessment could vary
significantly if different assumptions were
applied and as a result the evaluation of
the carrying value of property, plant and
equipment, goodwill and other intangible
assets is a key audit matter.
How the scope of our audit responded to the Key
Audit Matter
Our procedures included, amongst others:
Assessing management’s determination of the
Group’s CGUs based on our understanding of the
business. We also analysed the internal
reporting to assess how earning streams are
monitored and reported
Understanding the appropriateness of
management’s controls over the evaluation of
the carrying value of the Group’s property, plant
and equipment, goodwill and other intangible
assets to determine any asset impairments
In conjunction with our corporate finance
specialists, challenging the Group’s assumptions
and estimates used to determine the
recoverable amount of a sample of CGUs,
including those relating to:
o
o
o
forecast revenue by reference to:
future contract renewals
contracting of spare capacity
operating and maintenance expenses with
reference to actual costs incurred in the
current period and approved budgets for
forecast periods
discount rates with reference to:
Deloitte developed discount rates.
external data
Assessing historical accuracy of budgeting and
forecasting of the Group
Testing, on a sample basis, the mathematical
accuracy of the cash flow models and agreeing
relevant data to approved budgets and latest
forecasts
Performing sensitivity analysis in relation to key
assumptions, with particular focus on the
discount rate and assumptions relating to
contract renewals and contracting of spare
capacity; and
Assessing the adequacy of the disclosures in the
financial statements.
128
102
APA Group Annual Report 2017 independent auditor’s report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST
How the scope of our audit responded to the Key
Audit Matter
In conjunction with our Treasury specialists, we
performed procedures including:
Understanding management’s controls over the
recording of derivative transactions and
application of hedge accounting
Testing the accuracy and completeness of
derivative transactions and balances by agreeing
to third-party confirmations
Evaluating the appropriateness of the valuation
methodologies applied and testing the valuation
of the derivative financial instruments on a
sample basis
Testing the application of hedge accounting on a
sample basis (including hedge effectiveness and
measurement of ineffectiveness), in particular
for WGP, and validating that the derivative
financial instruments qualified for hedge
accounting in accordance with AASB 139; and
Assessing the adequacy of the disclosures in
notes 19 and 20.
Key Audit Matter
Derivative transactions and balances
including the application of hedge
accounting
As disclosed in Note 19, the Group has
variable and fixed rate borrowings totalling
$9.7 billion extending through to 2035.
These borrowings are denominated in
Australian, US and Canadian dollars as well
as Japanese Yen, British Pounds and Euros.
As a result the Group is exposed to interest
rate and foreign exchange rate movements
and enters into the following types of
derivative financial instruments to manage
those exposures:
Interest rate swaps to mitigate the
risk of rising interest rates
Cross currency interest rate swaps to
manage the currency risk associated
with foreign currency denominated
borrowings.
In addition, as disclosed in Note 20,
revenue for the Wallumbilla Gladstone
Pipeline (WGP) is denominated in US
dollars. In order to manage the currency
risk the Group designates US dollar
borrowings (which acts as a natural hedge
of the forecast US dollar denominated
revenue) against a portion of the US dollar
revenue stream. The Group also uses
forward exchange contracts to hedge that
portion of the exchange rate risk not
covered by the US dollar borrowings. The
Group applies hedge accounting in respect
of these arrangements.
The Group’s hedging arrangements and
accounting for these arrangements are
complex.
Other Information
The directors of Australian Pipeline Limited (“the directors”) as responsible entity of Australian
Pipeline Trust are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2017, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material
129
103
APA Group Annual Report 2017 independent auditor’s report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST
misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of the directors for the Financial Report
The directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
130
104
APA Group Annual Report 2017 independent auditor’s report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report of Australian Pipeline Limited as responsible entity
of Australian Pipeline Trust included in pages 36 to 49 of the directors’ report of Australian
Pipeline Limited as responsible entity of Australian Pipeline Trust for the year ended 30 June 2017.
In our opinion, the Remuneration Report of Australian Pipeline Limited as responsible entity of
Australian Pipeline Trust for the year ended 30 June 2017, has been prepared in accordance with
section 300A of the Corporations Act 2001.
Responsibilities
The directors have voluntarily presented the Remuneration Report of Australian Pipeline Limited as
responsible entity of Australian Pipeline Trust in accordance with the requirements of section 300A
of the Corporations Act 2001. We conducted our audit in accordance with Australian Auditing
Standards.
DELOITTE TOUCHE TOHMATSU
A V Griffiths
Partner
Chartered Accountants
Sydney, 23 August 2017
131
105
APA Group Annual Report 2017 directors’ report.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
APT Investment Trust and its Controlled Entities (ARSN 115 585 441)
Directors’ Report for the year ended 30 June 2017
The Directors of Australian Pipeline Limited (“Responsible Entity”) submit their report and the annual financial report of APT
Investment Trust (“APTIT”) and its controlled entities (together “Consolidated Entity”) for the financial year ended 30 June
2017. 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”).
1. Directors
The names of the Directors of the Responsible Entity during the half year period and since the half year end are:
Leonard Bleasel AM
Chairman
Michael (Mick) McCormack
Chief Executive Officer and Managing Director
Steven (Steve) Crane
John Fletcher
Michael Fraser
Debra (Debbie) Goodin
Russell Higgins AO
Patricia McKenzie
The Company Secretary of the Responsible Entity during and since the current period is:
Nevenka Codevelle
2. Principal Activities
The Consolidated Entity operates as an investment and financing entity within the APA stapled group.
3. State of Affairs
No significant change in the state of affairs of the Consolidated Entity occurred during the year.
4. 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 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.
5. Review and Results of Operations
The Consolidated Entity reported net profit after tax of $73.0 million (FY2016: $85.1 million) for the year ended 30 June 2017
and total revenue of $73.0 million (FY2016: $85.5 million).
6. Distributions
Distributions paid to securityholders during the financial year were:
APTIT profit distribution
APTIT capital distribution
Total
Final FY 2016 distribution paid
16 September 2016
Interim FY 2017 distribution paid
15 March 2017
Cents per
security
Total
distribution
$000
Cents per
security
Total
distribution
$000
3.75
0.63
4.38
41,811
6,976
48,787
3.48
1.96
5.44
38,770
21,814
60,584
106
APA Group Annual Report 2017
On 22 August 2017, the Directors declared a final distribution for APTIT for the financial year of 6.76 cents per security which
is payable on 13 September 2017 and will comprise the following components:
APTIT profit distribution
APTIT capital distribution
Total
Final FY 2017 distribution payable
13 September 2017
Cents per
security
Total
distribution
$000
3.07
3.69
6.76
34,198
41,107
75,305
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 2017) will provide the classification of distribution components for the
purposes of preparation of securityholder income tax returns.
7. Directors
Information on Directors and Company Secretary
7.1
See pages 6 to 7 for information relating to qualifications and experience on Directors and the Company Secretary.
7.1 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
Leonard Bleasel AM
Michael McCormack
Steven Crane
John Fletcher
Michael Fraser
Debra Goodin
Russell Higgins AO
Patricia McKenzie
Company
–
Period of directorship
–
Envestra Limited
July 2007 to September 2014
nib holdings limited
Transfield Services Limited
Bank of Queensland Limited
Since September 2010
February 2008 to February 2015
December 2008 to January 2015
–
–
Aurizon Holdings Limited
AGL Energy Limited
Since February 2016
October 2007 to February 2015
Senex Energy Limited
oOh!media Limited
Ten Network Holdings Limited
Telstra Corporation Limited
Argo Investments Limited
Leighton Holdings Limited
–
Since May 2014
Since November 2014
Since August 2016
Since September 2009
Since September 2011
June 2013 to May 2014
–
107
APA Group Annual Report 2017directors’ report. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES 7.3 Directors’ meetings
During the financial year, 12 Board meetings, four Audit and Risk Management Committee meetings, four People and
Remuneration Committee meetings, five Health Safety and Environment Committee meetings and two Nomination
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
Michael Fraser 2
Debra Goodin
Russell Higgins AO
Patricia McKenzie
People and
Remuneration
Committee
Audit & Risk
Management
Committee
Health Safety
& Environment
Committee
Nomination
Committee
Board
A
12
12
12
12
12
12
12
12
B
12
12
11
12
12
11
12
12
A
–
–
4
4
4
–
–
4
B
–
–
4
4
4
–
–
4
A
–
–
4
4
2
4
4
–
B
–
–
4
4
1
4
3
–
A
–
–
–
–
3
5
5
5
B
–
–
–
–
3
5
5
5
A
2
–
2
2
2
2
2
2
B
2
–
2
2
2
2
2
2
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 of People and Remuneration, Audit & Risk Management and Health, Safety & Environment ex officio.
2) Michael Fraser was appointed to the Audit & Risk Management Committee and retired from the Health Safety & Environment Committee during the period.
7.4 Directors’ securityholdings
The aggregate number of APA securities held directly, indirectly or beneficially by Directors or their Director related entities at
30 June 2017 is 1,365,674 (2016: 1,322,074).
The following table sets out Directors’ relevant interests in APA securities as at 30 June 2017:
Directors
Leonard Bleasel AM
Michael McCormack
Steven Crane
John Fletcher
Michael Fraser
Debra Goodin
Russell Higgins AO
Patricia McKenzie
Fully paid
securities
as at
1 July 2016
614,216
300,000
130,000
88,250
25,000
19,000
122,719
22,889
Securities
acquired
23,400
20,000
–
–
–
200
–
–
1,322,074
43,600
Fully paid
securities
as at
30 June 2017
Securities
disposed
–
–
–
–
–
–
–
–
–
637,616
320,000
130,000
88,250
25,000
19,200
122,719
22,889
1,365,674
Leonard Bleasel AM holds 10,000 subordinated notes that were issued by APT Pipelines Limited, a subsidiary of APT.
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.
108
APA Group Annual Report 2017directors’ report. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES 8. Options Granted
In this report, the term “APA securities” refers to stapled securities each comprising a unit in Australian Pipeline Trust stapled
to a unit in APT Investment Trust and traded on the Australian Securities Exchange (ASX) under the code “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 of the financial year
as a result of the exercise of an option over unissued APA securities.
9.
Indemnification of Officers and External Auditor
During the financial year, the Responsible Entity paid a premium in respect of a contract insuring the Directors and Officers
of the Responsible Entity and any 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.
Australian Pipeline Limited, in its own capacity and as Responsible Entity of Australian Pipeline Trust and APT Investment
Trust, indemnifies each Director and Company Secretary, and certain other executives, former executives and officers 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. 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.
10. 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 18 to the financial statements.
Except as disclosed in this report, neither the Responsible Entity nor any of its associates holds any APTIT units.
The number of APTIT units issued during the financial year, and the number of APTIT units on issue at the end of the financial
year, are disclosed in Note 13 to the financial statements.
The value of the Consolidated Entity’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 disclosed in the notes to the financial statements.
11. 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 127.
12. Rounding of Amounts
The Consolidated Entity is an entity of the kind referred to in ASIC Corporations Instrument 2016/191 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.
13 Authorisation
The Directors’ report is signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to
section 298(2) of the Corporations Act 2001.
On behalf of the Directors
Leonard Bleasel AM
Chairman
Sydney, 23 August 2017
Steven Crane
Director
109
APA Group Annual Report 2017directors’ report. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
consolidated statement of profit or loss
and other comprehensive income.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Continuing operations
Revenue
Expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Loss on disposal of available-for-sale investments
Other comprehensive income for the year
Total comprehensive income for the year
Profit attributable to:
Unitholders of the parent
Total comprehensive income attributable to:
Unitholders of the parent
Earnings per unit
Basic and diluted (cents per unit)
Note
2017
$000
2016
$000
4
4
5
6
72,979
(12)
72,967
–
85,483
(381)
85,102
–
72,967
85,102
–
–
(595)
(595)
72,967
84,507
72,967
72,967
85,102
85,102
72,967
84,507
2017
6.5
2016
7.6
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
110
APA Group Annual Report 2017 consolidated statement of financial position.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Current assets
Receivables
Non-current assets
Receivables
Other financial assets
Non-current assets
Total assets
Current liabilities
Trade and other payables
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Total equity
Note
2017
$000
2016
$000
8
8
11
9
738
704
8,511
9,249
1,001,246
1,036,944
1,009,757
1,046,193
1,010,495
1,046,897
13
13
11
11
1,010,482
1,046,886
13
976,284
1,005,074
34,198
41,812
1,010,482
1,046,886
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
111
APA Group Annual Report 2017 consolidated statement of changes in equity.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Balance at 1 July 2015
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Issue of capital (net of issue costs)
Distributions to unitholders
Balance at 30 June 2016
Balance at 1 July 2016
Profit for the year
Total comprehensive income for the year
Distributions to unitholders
Balance at 30 June 2017
Note
Issued
capital
$000
1,005,086
–
–
–
(12)
–
1,005,074
1,005,074
–
–
(28,790)
976,284
13
7
7
Reserves
$000
595
–
(595)
(595)
–
–
–
–
–
–
–
–
Retained
earnings
$000
26,488
85,102
–
85,102
–
Total
$000
1,032,169
85,102
(595)
84,507
(12)
(69,778)
(69,778)
41,812
1,046,886
41,812
72,967
72,967
1,046,886
72,967
72,967
(80,581)
(109,371)
34,198
1,010,482
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
112
APA Group Annual Report 2017 consolidated statement of cash flows.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Trust distribution – related party
Dividends received
Interest received – related parties
Proceeds from repayment of finance leases
Receipts from customers
Payments to suppliers
Net cash provided by operating activities
Cash flows from investing activities
Proceeds from transfer of financial asset to related party
Receipts from/(advances to) related parties
Proceeds from disposal of available-for-sale investment
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Payment of unit issue costs
Distributions to unitholders
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
2017
$000
2016
$000
28,610
–
45,531
1,167
274
(12)
31,747
126
53,229
1,167
193
(11)
75,570
86,451
32,566
1,235
–
33,801
–
(109,371)
(109,371)
–
–
–
–
(18,192)
1,545
(16,647)
(26)
(69,778)
(69,804)
–
–
–
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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.
113
APA Group Annual Report 2017 notes to the consolidated financial statements.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Basis of Preparation
1. About this report
In the following financial statements, note disclosures are grouped into six sections being: Basis of Preparation; Financial
Performance; Operating Assets and Liabilities; Capital Management; Group Structure; and Other. Each note sets out the
accounting policies applied in producing the results along with any key judgements and estimates used.
Basis of Preparation
1. About this report
Financial Performance
Operating Assets and Liabilities
3. Segment information
8. Receivables
2. General information
4. Profit from operations
5.
Income tax
6. Earnings per unit
7. Distributions
9. Payables
10. Leases
Capital Management
Group Structure
Other
11. Other financial instruments
14. Subsidiaries
15. Commitments and contingencies
12. Financial risk management
13. Issued capital
16. Director and senior executive
remuneration
17. Remuneration of external auditor
18. Related party transactions
19. Parent entity information
20. Adoption of new and revised
Accounting Standards
21.
Events occurring after
reporting date
2. General information
APT Investment Trust ("APTIT" or "Trust") is one of the two stapled trusts of APA Group, the other stapled trust being
Australian Pipeline Trust ("APT"). Each of APT and APTIT are registered managed investment schemes regulated by the
Corporations Act 2001. APTIT units are "stapled" to APT units on a one-to-one basis so that one APTIT unit and one APT unit
form a single stapled security which trades on the Australian Securities Exchange under the code "APA".
This financial report represents the consolidated financial statements of APTIT 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.
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 and associates to bring their accounting policies into line
with those used by the Consolidated Entity.
APTIT's registered office and principal place of business is as follows:
Level 19
HSBC Building
580 George Street
SYDNEY NSW 2000
Tel: (02) 9693 0000
APTIT operates as an investment entity within APA Group.
The financial report for the year ended 30 June 2017 was authorised for issue in accordance with a resolution of the directors
on 23 August 2017.
This general purpose financial report has been prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board
(AASB), and also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
The financial report has been prepared on the basis of historical cost, except for the revaluation of financial instruments.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) in
accordance with ASIC Corporations Instrument 2016/191, unless otherwise stated.
114
APA Group Annual Report 2017 notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017
Financial Performance
3. Segment information
The Consolidated Entity has one reportable segment being Energy Infrastructure Investment.
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.
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 or loss
Finance lease income – related party
Other revenue
Other
Total revenue
Expenses
Audit fees
Loss on disposal of available-for-sale investment
Total expenses
2017
$000
2016
$000
28,610
–
28,610
31,747
95
31,842
44,141
53,684
(510)
464
(756)
497
44,095
53,425
274
72,979
216
85,483
(12)
–
(12)
(11)
(370)
(381)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and
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, which is recognised as it accrues and is determined using the effective interest method;
– Distribution revenue, which is recognised when the right to receive a distribution has been established;
– Finance lease income, which is recognised when receivable.
Income tax
5.
Income tax expense is not brought to account in respect of APTIT as, pursuant to Australian taxation laws, APTIT is not liable
for income tax provided that its realised taxable income (including any assessable realised capital gains) is fully distributed to
its unitholders each year.
115
APA Group Annual Report 2017 Financial Performance
6. Earnings per unit
Basic and diluted earnings per unit
2017
cents
6.5
2016
cents
7.6
The earnings and weighted average number of units used in the calculation of basic and diluted earnings per unit are as follows:
Net profit attributable to unitholders for calculating basic and diluted earnings per unit
72,967
85,102
2017
$000
2016
$000
Adjusted weighted average number of ordinary units used in the
calculation of basic and diluted earnings per unit
7. Distributions
2017
No. of
units
000
2016
No. of
units
000
1,114,307
1,114,307
Recognised amounts
Final distribution paid on 16 September 2016
(2016: 16 September 2015)
Profit distribution a
Capital distribution
Interim distribution paid on 15 March 2017
(2016: 16 March 2016)
Profit distribution a
Capital distribution
Total distributions recognised
Profit distributions a
Capital distributions
Unrecognised amounts
Final distribution payable on 13 September 2017 b
(2016: 16 September 2016)
Profit distribution a
Capital distribution
a) Profit distributions unfranked (2016: unfranked).
b) Record date 30 June 2017.
2017
cents per
unit
2017
Total
$000
2016
cents per
unit
2016
Total
$000
3.75
0.63
4.38
3.48
1.96
5.44
7.23
2.59
9.82
3.07
3.69
6.76
41,811
6,976
48,787
38,770
21,814
60,584
80,581
28,790
109,371
34,198
41,107
75,305
2.38
–
2.38
3.88
–
3.88
6.26
–
6.26
3.75
0.63
4.38
26,488
–
26,488
43,290
–
43,290
69,778
–
69,778
41,811
6,976
48,787
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.
116
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Operating Assets and Liabilities
8. Receivables
Finance lease receivable – related party (Note 10)
Current
Finance lease receivable – related party (Note 10)
Non-current
2017
$000
738
738
8,511
8,511
2016
$000
704
704
9,249
9,249
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.
9. Payables
Other payables
13
11
Trade and other payables are recognised when the Consolidated Entity becomes obliged to make future payments resulting
from the purchase of goods and services. Trade and other payables are stated at amortised cost.
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 only recognised once a tax invoice has been issued or received.
10. 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 8)
Non-current receivables (Note 8)
1,167
4,669
5,837
11,673
11,673
(2,424)
9,249
738
8,511
9,249
1,167
4,669
7,004
12,840
12,840
(2,887)
9,953
704
9,249
9,953
a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual.
Leases are classified as finance leases when the terms of the lease transfer substantially all of the risks and rewards incidental
to ownership of the leased asset to the lessee. All other leases are classified as operating leases.
Consolidated Entity as lessor
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.
117
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
11. Other financial instruments
Non-current
Advance to related party
Investments carried at cost:
Investment in related party a
Financial assets carried at fair value:
Redeemable ordinary shares b
2017
$000
2016
$000
893,867
895,102
107,379
107,379
1,001,246
1,002,481
–
34,463
1,001,246
1,036,944
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 preferred 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 capital. As such, GAIT neither controls nor has a significant influence over GasNet A Trust. GasNet
Australia Trust, a related party wholly owned by APA Group, owns 100% of the A Class units in GasNet A Trust and, accordingly, GasNet A Trust is included in
the consolidation of the APA 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 related to APA Group’s 19.9% investment in Energy Infrastructure Investments Pty Ltd where Australian Pipeline Limited
(APL), as Responsible Entity for APTIT, acquired the redeemable ordinary shares (“ROS”). This investment was classified at fair value through profit or loss. The
redeemable ordinary shares held in Energry Infrastructure Investments were disposed of by the Consolidated Entity on 22 December 2016, transferring the
investment to another entity within the APA Group via an inter-company loan.
Financial assets are classified into the following specified categories: ‘available-for-sale’ financial assets, ‘loans and receivables’
and ‘fair value through profit or loss’.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of 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.
Receivables and loans
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as ‘loans and receivables’. Trade and other receivables are stated at their amortised cost less impairment.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at the end of each reporting date. Financial assets are impaired
where, as a result of one or more events that occurred after initial recognition of the financial asset, there is objective evidence
that the estimated future cash flows of the investment have been adversely impacted.
12. Financial risk management
APA Group's corporate Treasury department is responsible for the overall management of the Consolidated Entity’s capital
raising activities, liquidity, lender relationships and engagement, debt portfolio management, interest rate and foreign
exchange hedging, credit rating maintenance and third party indemnities (bank guarantees) within risk management
parameters reviewed by the Board. The Audit and Risk Management Committee approves written principles for overall risk
management, as well as policies covering specific areas such as liquidity and funding risk, foreign currency risk, interest rate
risk, credit risk, contract and legal risk and operational risk. The Consolidated Entity's Board of Directors ensures there is an
appropriate Risk Management Policy for the management of treasury risk and compliance with the policy through monthly
reporting from the Treasury department.
The Consolidated Entity's activities generate financial instruments comprising of cash, receivables, payables and interest
bearing liabilities which expose it to various risks as summarised below:
a) Market risk including currency risk, interest rate risk and price risk;
b) Credit risk; and
c) Liquidity risk.
Treasury as a centralised function provides the Consolidated Entity with the benefits of efficient cash utilisation, control
of funding and its associated costs, efficient and effective management of aggregated financial risk and concentration
of financial expertise, at an acceptable cost, and minimises risks through the use of natural hedges and derivative
instruments. The Consolidated Entity does not engage in speculative trading. All derivatives have been transacted to hedge
underlying or existing exposures and have adhered to the Audit and Risk Management Committee approved Treasury Risk
Management Policy.
118
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
12. Financial risk management (continued)
(a) Market risk
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 year.
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 $6,431,000 or decrease by $6,372,000 (2016: increase by
$5,963,000 or decrease by $5,883,000 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.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Consolidated Entity. The Consolidated Entity has adopted the policy of only dealing with creditworthy counterparties and
obtaining sufficient collateral or bank guarantees where appropriate as a means of mitigating any risk of loss. For financial
investments or market risk hedging, the Consolidated Entity's policy is to only transact with counter parties that have a credit
rating of A- (Standard & Poors)/A3 (Moody's) or higher unless specifically approved by the Board. Where a counterparty's
rating falls below this threshold following a transaction, no other transactions can be executed with that counterparty until
the exposure is sufficiently reduced or their credit rating is upgraded above the Consolidated Entity's minimum threshold.
The Consolidated Entity'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.
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.
(c) Liquidity risk
The Consolidated Entity's exposure to liquidity risk is limited to trade payables of $13,000 (2016: $11,000), all of which are
due in less than 1 year (2016: less than 1 year).
(d) 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, the
Consolidated Entity determines fair value by using various valuation 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 as to recoverability based on the counterparty’s and the Consolidated
Entity’s credit risk.
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair
value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
– 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).
Transfers between levels of the fair value hierarchy occur at the end of the reporting period. There have been no transfers
between the levels during 2017 (2016: none). Transfers between level 1 and level 2 are triggered when there are changes to
the availability of quoted prices 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.
119
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
12. Financial risk management (continued)
(d) Fair value of financial instruments (continued)
Fair value of the Group’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:
Unlisted redeemable ordinary shares
The 2016 financial statements included redeemable ordinary shares ("ROS") held in an unlisted entity which were measured
at fair value (Note 11). The redeemable ordinary shares held in Energy Infrastructure Investments were disposed of by the
Consolidated Entity on 22 December 2016, transferring the investment to another entity within APA Group. In 2016 the fair
market value of the ROS was derived from a binomial tree model, which included some assumptions that were not able
to be supported by observable market prices or rates. The model mapped the 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 in 2016, the following assumptions were used:
– the risk adjusted rate for the ROS was estimated as the required rate of return based on projected cash flows to equity
at issuance assuming the ROS price at issuance ($0.99) and the ordinary price at issuance ($0.01) are at their fair value;
– the risk free rate of return was 1.57% per annum and was based upon an interpolation of the three and five year Government
bond rates at the valuation date;
– the ROS discretionary dividends were estimated based on an internal forecasted cash flow model;
– the value of the option to convert was deemed to be 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 were classified in the fair value hierarchy at level 3.
The fair value was impacted by the following unobservable inputs:
– an increase in the discount rate would have resulted in a decrease in the fair value;
– an increase in discretionary dividends would have resulted in an increase in the fair value; and
– meeting conditions to trigger the conversion of the option would result in an increase in the fair value.
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
Fair value hierarchy
2017
Financial assets measured at fair value
Unlisted redeemable ordinary shares
Energy Infrastructure Investments
2016
Financial assets measured at fair value
Unlisted redeemable ordinary shares
Energy Infrastructure Investments
–
–
–
–
–
–
–
–
–
–
–
–
34,463
34,463
34,463
34,463
Fair value through
Profit or Loss
2017
$000
2016
$000
34,463
34,765
1,071
(510)
(2,459)
(32,565)
4,264
(756)
(3,810)
–
–
34,463
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 on financial asset held at fair value through profit or loss
Distributions
Disposal a
Closing balance
a) The redeemable ordinary shares held in Energy Infrastructure Investments were disposed of by the Consolidated Entity on 22 December 2016, transferring the
investment to another entity within APA Group.
120
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Capital Management
13. Issued capital
Units
2017
$000
2016
$000
1,114,307,369 units, fully paid (2016: 1,114,307,369 units, fully paid) a
976,284
1,005,074
2017
No. of units
000
2017
$000
2016
No. of units
000
2016
$000
Movements
Balance at beginning of financial year
1,114,307
1,005,074
1,114,307
1,005,086
Capital distributions paid (Note 7)
Issue cost of units
–
–
(28,790)
–
–
–
–
(12)
Balance at end of financial year
1,114,307
976,284
1,114,307
1,005,074
a) Fully paid units carry one vote per unit and carry the right to distributions.
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.
Group Structure
14. Subsidiaries
Subsidiaries are entities controlled by APTIT. Control exists where APTIT has power over an entity, i.e. existing rights that give
APTIT the current ability to direct the relevant activities of the entity (those that significantly affect the returns); exposure, or
rights, to variable returns from its involvement with the entity; and the ability to use its power to affect those returns.
Name of entity
Parent entity
APT Investment Trust
Subsidiary
Ownership interest
Country of
registration
2017
%
2016
%
GasNet Australia Investments Trust
Australia
100
100
121
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
15. Commitments and contingencies
The Consolidated Entity had no material contingent assets, liabilities and commitments as at 30 June 2017 and 30 June 2016.
16. Director and senior executive remuneration
Remuneration of Directors
The aggregate remuneration of Directors of the Consolidated Entity is set out below:
Short-term employment benefits
Post-employment benefits
Total remuneration: Non-Executive Directors
Short-term employment benefits
Post-employment benefits
Cash settled security-based payments
Total remuneration: Executive Director a
Total Remuneration: Directors
Remuneration of senior executives a
The aggregate remuneration of senior executives of the Consolidated Entity is set out below:
Short-term employment benefits
Post-employment benefits
Cash settled security-based payments
Total remuneration: senior executives
2017
$
2016
$
1,682,077
1,548,424
160,104
217,041
1,842,181
1,765,465
3,589,472
3,544,861
35,000
1,485,242
5,109,714
35,000
1,579,531
5,159,392
6,951,895
6,924,857
11,108,724
10,992,475
551,107
856,636
3,730,048
4,429,999
15,389,879
16,279,110
a) The remuneration of the Chief Executive Officer and Managing Director, Michael (Mick) McCormack, is included in both the remuneration disclosure for Directors
and senior executives.
17. Remuneration of external auditor
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
Auditing the financial report
Compliance plan audit
5,900
5,600
11,500
5,800
5,500
11,300
122
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
18. Related party transactions
(a) Equity interest in related parties
Details of the percentage of ordinary securities held in subsidiaries are disclosed in Note 14.
(b) Responsible Entity – Australian Pipeline Limited
The Responsible Entity is wholly owned by APT Pipelines Limited (2016: 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;
– disposal of unlisted redeemable ordinary shares; and
– payments of distributions.
All transactions between the entities that comprise the Consolidated Entity have been eliminated on consolidation.
Refer to Note 14 for details of the entities that comprise the Consolidated Entity.
(d) Transactions with other related parties
APTIT and its controlled entities have a loan receivable balance with another entity in APA. This loan is repayable on agreement
between 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 $738,000 are owing from a subsidiary of APT for amounts due under a finance lease
arrangement (2016: $704,000);
– non-current receivables totalling $8,511,000 are owing from a subsidiary of APT for amounts due under a finance lease
arrangement (2016: $9,249,000); and
– non-current receivables totalling $893,867,000 (2016: $895,102,000) are owing from a subsidiary of APT for amounts due
under inter-entity loans.
Australian Pipeline Limited
Management fees of $943,000 (2016: $957,000) 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 $943,000 (2016: $957,000) were reimbursed by APT.
123
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
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.
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Reserves
Total equity
Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
2017
$000
2016
$000
738
704
1,009,757
1,046,193
1,010,495
1,046,897
13
13
11
11
1,010,482
1,046,886
976,284
1,005,074
34,198
–
41,812
–
1,010,482
1,046,886
72,967
–
72,967
85,102
(595)
84,507
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.
124
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 Other
20. Adoption of new and revised Accounting Standards
Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)
There have not been any new or revised Standards and Interpretations issued by the AASB that are relevant to the consolidated
entity’s operations that would be effective for the current reporting period.
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.
Standard/Interpretation
Effective for
annual
reporting periods
beginning on
or after
Expected to
be initially
applied in the
financial year
ending
– AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
30 June 2019
– AASB 15 'Revenue from Contracts with Customers', and AASB 2015-8
‘Amendments to Australian Accounting Standards – Effective date of AASB 15’
1 January 2018
30 June 2019
– AASB 16 'Leases'
1 January 2019
30 June 2020
The potential impacts of the initial application of the standards above are not expected to be material for the consolidated
entity.
21. Events occurring after reporting date
On 22 August 2017, the Directors declared a final distribution for the 2017 financial year of 6.76 cents per unit ($75.3 million).
The distribution represents a 3.07 cents per unit unfranked profit distribution and 3.69 cents per unit capital distribution. The
distribution will be paid on 13 September 2017.
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 financial statements.
125
APA Group Annual Report 2017notes to the consolidated financial statements. continued.APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2017 directors’ declaration.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
For the financial year ended 30 June 2017
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 issued by the International Accounting Standards Board; and
(d) the Directors have been given the declarations by the Chief Executive Officer 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, 23 August 2017
Steven Crane
Director
126
APA Group Annual Report 2017
auditor’s independence declaration.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
TO AUSTRALIAN PIPELINE LIMITED AS RESPONSIBLE ENTITY FOR APT INVESTMENT TRUST
h
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
23 August 2017
The Directors
Australian Pipeline Limited as responsible entity for
APT Investment Trust
HSBC Building
Level 19, 580 George Street
Sydney NSW 2000
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 2017, 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
A V Griffiths
Partner
Chartered Accountants
Sydney, 23 August 2017
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
156
127
APA Group Annual Report 2017
independent auditor’s report.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF APT INVESTMENT TRUST
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
Report on the Audit of the Financial Report
Opinion
We have audited the accompanying financial report of APT Investment Trust (the “consolidated
entity”), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then
ended, and notes to the financial statements comprising a summary of significant accounting
policies and other explanatory information and the directors’ declaration.
In our opinion the accompanying financial report of the consolidated entity 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 2017
and of its performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
The financial statements also comply with International Financial Reporting Standards as disclosed
in Note 2.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the consolidated entity in accordance
with the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
157
128
APA Group Annual Report 2017
independent auditor’s report. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF APT INVESTMENT TRUST
Other Information
The directors of Australian Pipeline Limited (“the directors”) as responsible entity for the
consolidated entity are responsible for the other information. The other information comprises the
information included in the consolidated entity’s annual report for the year ended 30 June 2017,
but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of the Directors for the Financial Report
The directors 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 preparing the financial report, the directors are responsible for assessing the ability of the
consolidated entity to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the consolidated entity or to cease operations, or have no realistic alternative but to do
so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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 consolidated entity’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
158
129
APA Group Annual Report 2017
independent auditor’s report. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF APT INVESTMENT TRUST
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the consolidated
entity’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in
the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the consolidated entity to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
DELOITTE TOUCHE TOHMATSU
A V Griffiths
Partner
Chartered Accountants
Sydney, 23 August 2017
159
130
APA Group Annual Report 2017
additional information.
Additional information required by the Listing Rules of the Australian Securities Exchange Limited and not provided elsewhere
in this report (the information is applicable as at 18 August 2017).
Twenty largest holders
HSBC Custody Nominees
BNP Paribas Nominees Pty Ltd
J P Morgan Nominees
Citicorp Nominees Pty Limited
Custodial Services Limited
National Nominees Limited
Argo Investments Limited
Australian Foundation Investment Company Limited
AMP Life Limited
BKI Investment Company Limited
Milton Corporation Limited
Bond Street Custodians Limited
Nulis Nominees (Australia)
National Nominees Limited
Invia Custodian Pty Limited
IOOF Investment Management Limited
Bond Street Custodians Limited
HSBC Custody Nominees (Australia) Limited
Navigator Australia Limited
Investment Custodial 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
268,539,284
196,746,463
107,253,921
89,082,402
21,388,772
20,156,813
10,277,940
5,075,000
4,586,205
3,659,452
2,023,727
1,897,775
1,334,027
1,319,500
1,315,487
1,301,658
1,212,588
1,162,487
1,096,608
1,069,424
%
24.10
17.66
9.63
7.99
1.92
1.81
0.92
0.46
0.41
0.33
0.18
0.17
0.12
0.12
0.12
0.12
0.11
0.10
0.10
0.10
740,499,533
66.47
No. of holders
% No. of securities
157
8,729
11,115
31,418
27,466
81,091
0.20
11.06
14.09
39.83
34.82
767,636,092
174,483,004
79,453,487
81,546,122
11,188,664
%
68.89
15.66
7.13
7.32
1.00
100.00
1,114,307,369
100.00
2,044 holders hold less than a marketable parcel of securities (market value less than $500 or 60 securities based on a
market price on 18 August 2017 of $8.39).
Substantial holders
By notice dated 17 July 2017, BNP Paribas Nominees Pty Limited as custodian for UniSuper Limited advised that it had an
interest in 170,059,308 stapled securities, as at 14 July 2017.
By notice dated 21 June 2017, BlackRock Group advised that it had an interest in 55,818,084 stapled securities, as at 14 June 2017.
By notice dated 4 January 2017, The Vanguard Group Inc. advised that it had an interest in 56,186,718 stapled securities, as at
30 December 2017.
Voting rights
On a show 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.
131
APA Group Annual Report 2017 five year summary.
Financial Performance (Statutory)
2017
2016
2015
2014
2013 6
Revenue
Revenue excluding pass-through 1
EBITDA
Depreciation and amortisation expense
EBIT
Interest expense
Tax (expense) / benefit
Profit after tax including significant items
Significant items – after income tax
Profit after tax excluding significant items
Financial Position
Total assets
Total drawn debt 2
Total equity
Operating Cash Flow
Operating cash flow 3
Key Financial Ratios
Earnings per security 4
Operating cash flow per security 4
Distribution per security
Gearing (net debt to net debt plus equity)
Interest cover ratio
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
2,326.4
2,094.3
1,553.6
1,396.0
1,272.3
1,888.3
1,470.1
1,656.0
1,330.5
1,119.2
1,269.5
992.5
747.3
919.5
763.6
(570.0)
(520.9)
(208.2)
(156.2)
(130.5)
900.1
(513.8)
(149.5)
236.8
–
236.8
809.7
1,061.3
591.1
633.2
(507.7)
(122.5)
179.5
–
179.5
(324.2)
(177.2)
559.9
356.0
203.9
(325.1)
(290.9)
77.7
343.7
144.1
199.6
(49.9)
295.1
120.0
172.3
15,045.9
14,842.7
14,652.9
9,249.7
3,978.2
9,037.3
8,642.8
4,029.1
4,382.7
7,972.5
4,789.4
2,496.5
7,698.9
4,412.0
2,513.9
$m
973.9
862.4
562.2
431.5
374.4
cents
cents
cents
%
times
21.3
87.4
43.5
67.4
2.8
16.1
77.4
41.5
66.4
2.6
56.3
56.5
38.0
63.4
2.6
39.7
49.8
36.3
64.2
2.3
38.2
48.5
35.5
62.8
2.3
Weighted average number of securities 4
m
1,114.3
1,114.3
995.2
866.0
772.3
EBITDA by Segment (Excluding Significant Items)
EBITDA (Continuing businesses)
Energy Infrastructure
East Coast:
Queensland
New South Wales
Victoria
South Australia
Northern Territory
Western Australia
Asset Management
Energy Investments
Corporate costs
Divested businesses 5
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
925.4
149.5
123.0
2.3
18.8
234.7
58.7
24.4
855.8
121.7
120.6
2.5
17.5
217.6
53.9
27.8
340.1
120.8
130.2
1.9
18.0
212.6
49.5
21.8
(66.7)
(86.7)
(73.6)
–
–
1.0
234.5
115.6
127.6
2.4
15.2
189.0
67.6
18.0
(72.5)
50.1
180.7
120.2
136.9
2.4
13.5
149.4
51.6
15.6
(64.5)
56.2
Notes:
1) 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 and
passed on to Australian Gas Networks Limited (AGN) and GDI in respect of the operation of the AGN and GDI assets respectively.
2) APA’s liability to repay debt at relevant due dates of the drawn facilities. This amount represents current and non-current borrowings as per balance sheet and
is adjusted for deferred borrowing costs, the effect of unwinding of discount, unrealised foreign exchange differences reported in equity and deducting other
financial liabilities that are reported as part of borrowings in the balance sheet.
3) Operating cash flow = net cash from operations after interest and tax payments.
4) Between 23 December 2014 and 28 January 2015, APA issued a total of 278,556,562 new ordinary securities, resulting in total securities on issue as at 30 June
2015 of 1,114,307,369. The issue was offered at $6.60 per security, a discount to APA’s closing market price of $7.67 per security on 9 December 2014, the last
trading day before the record date of the entitlement offer of 15 December 2014. The weighted average number of securities for FY2015 and FY2014 have been
adjusted in accordance with the accounting principles of AASB 133: ‘Earnings per Share’, for the discounted rights issue.
5) Australian Gas Networks Limited sold in August 2014, Moomba Adelaide Pipeline System sold in FY2013, APA Gas Network Queensland (Allgas) was sold into GDI
(EII) Pty Ltd in FY2012, with APA retaining a 20 per cent interest in GDI (EII) Pty Ltd and operates the assets under a long term asset management agreement.
6) The balances for June 2013 have been restated for the effect of applying AASB: 119 ‘Employee Benefits’.
132
APA Group Annual Report 2017
investor information.
Calendar of events
Final distribution FY2017 record date
Final distribution FY2017 payment date
Annual meeting
Interim results announcement
Interim distribution FY2018 record date
Interim distribution FY2018 payment date
1) Subject to change.
ANNUAL MEETING DETAILS
Date: Friday, 27 October 2017
Venue: ASX Auditorium,
Lower ground floor,
Exchange Square,
18 Bridge Street
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.
APA GROUP RESPONSIBLE ENTITY AND
REGISTERED OFFICE
Australian Pipeline Limited
ACN 091 344 704
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
30 June 2017
13 September 2017
27 October 2017
21 February 2018 1
29 December 2017 1
14 March 2018 1
SECURITYHOLDER DETAILS
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
Distributions will be paid semi-annually in March and
September. Securityholders will
tax
statements with the final distribution
in 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 enquires
should contact the APA Group registry.
receive annual
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, distribution and tax information.
ELECTRONIC COMMUNICATION
Securityholders can elect to
receive communication
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.
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 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, including forecasts and projections, you should consider the appropriateness of the information, having regard to your own objectives, financial situations
and needs and seek professional advice if necessary.
This publication contains forward looking information, including about APA Group, its financial results and other matters which are subject to risk factors. APA Group
believes that there are reasonable grounds for these statements and whilst due care and attention have been used in preparing this publication, certain forward looking
statements 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 on as an indication or guarantee of future performance.
All references to dollars, cents or ‘$’ in this presentation are to Australian currency, unless otherwise stated.
EBIT, EBITDA and other “normalised” measures are non-IFRS measures that are presented to provide an understanding of the performance of APA Group. Such
non-IFRS information is unaudited, however the numbers have been extracted from the audited financial statements.
133
APA Group Annual Report 2017
134
APA’s Mondarra Gas Storage and Processing Facility, Western Australia
135
apa group
sustainability report.
2017
sustainability. matters.
SA
APA Group Sustainability Report 2017 our sustainability
approach.
contents.
Message from the
Managing Director
Customers
Environment
Community
Employees
Investors
APA Group is one of Australia’s largest
companies – in fact we are Australia’s
number one gas infrastructure
business and as such are a leader
within the energy industry, playing
a key role in defining and delivering
the future of Australian energy.
Our infrastructure is built for long
term use and is underpinned by long
term contracts with creditworthy
counterparties. Our business practices
must be sustainable to reflect and
support these long term customer
and capital commitments.
Our vision is to connect Australia to
its energy future and to do this we
must connect with and respect our
stakeholders. We are committed to
delivering connected and long term
energy solutions that are safe, reliable,
innovative and cost-effective so that:
our customers can meet their business
objectives; our securityholders earn
secure and predictable returns; our
employees have a safe and stimulating
workplace; and we continue to add
value to the communities and the
environment that we operate in.
S1
S2
S4
S7
S10
S13
At APA we are guided by ‘Our Values’
which anchor how we act and how
we make decisions. We reach for the
STARS quite literally:
Service
We are
committed to
high quality
service delivery
achieved through
listening,
understanding,
anticipating and
responding to our
customers’ needs
Adaptable
We respond
and adapt to
our changing
environment
by innovating,
modifying our
behaviours and
improving our
processes and
systems
Safe
We will
maintain a safe
environment and
a professional
workplace
where we work
collaboratively,
and treat each
other with
respect
Trustworthy
We accept
individual
and collective
responsibility for
the delivery of all
business outcomes.
We do what we
say we’re going
to do
Results
We meet our
commitments
and deliver
excellent results
to the benefit of
our stakeholders
through
tenacity and
perseverance
APA’s Annual Report and Sustainability
Report are printed on ecoStar
uncoated 100% recycled paper.
ecoStar is an environmentally
responsible paper made Carbon
Neutral. The greenhouse gas
emissions of the manufacturing
process including transportation of
the finished product to BJ Ball Papers
Warehouses has been measured by the
Edinburgh Centre for Carbon Neutral
Company and the fibre source has
been independently certified by the
Forest Stewardship Council (FSC).
ecoStar is manufactured from 100%
Post Consumer Recycled paper in a
Process Chlorine Free environment
under the ISO 14001 environmental
management system.
APA Group Sustainability Report 2017 message from the managing director.
As Australia’s leading energy infrastructure company, we take
our leadership role and responsibility seriously, particularly our
approach to sustainable growth.
For our investors who back our
business, we understand their need
to have access to objective disclosure,
not only quantitative measures
of standard financial reporting as
contained in the Directors’ Report,
but also on the qualitative aspects
of APA’s strategy.
To all our stakeholders, I thank you
for working alongside APA as we
continue to connect Australia to its
energy future.
\
Mick McCormack
Chief Executive Officer and
Managing Director
At APA, we are focused on connecting
Australia to its energy future, investing
over $13 billion in energy infrastructure
across mainland Australia to-date.
Our infrastructure is built for the long
term to meet our customers’ needs for
reliable and sustainable energy supply.
We are committed to practices and
relationships with our stakeholders
that ensure we are all here for the
long run and that our impact on
communities and the environment
is a positive one for all concerned.
I am pleased to provide you with APA’s
2017 Sustainability Report as a record
of our performance and accountability
to our stakeholders.
Our customers are why we are in
business. In FY2017, we committed to
$1.2 billion of growth projects to meet
our customers’ energy needs. These
projects are diverse in infrastructure
and location but have the common
purpose of providing more energy for
Australia. In Western Australia we will
be constructing a wind farm; a solar
farm; a 198 kilometre pipeline and a
gas-fired power station. In Victoria,
APA will overhaul and refurbish a
moth-balled gas processing plant
that will enable our customer to
develop a new offshore gas field to
inject gas into the eastern Australian
market. In Queensland, not only will
we be developing a large scale solar
farm, but we have also commenced
construction of a pipeline that will
facilitate injection of much needed gas
supplies into the domestic market.
As part of the development process
for all these long–life projects, as well
as our business-as-usual practices,
our management frameworks and
systems must take a full life-cycle
approach. In planning we consider
the impact on communities and
surrounding environment not only
during construction, but also in the
years to follow as our infrastructure
becomes a permanent fixture of the
region that will need to be maintained.
Our people are also intrinsic to this
sustainable approach. Safety, diversity
and inclusion, encouraging innovation
and organisational development
are all key aspects of APA’s people
management framework. It is
essential for the success of our
projects, to have committed, skilled,
conscientious and motivated people
working across the life-cycle of
APA’s projects.
It is a dynamic world we live in and
our actions today will determine
the consequences of how we live
and operate tomorrow and the
years to come. APA has long held
the view that climate change is a
real, current and future issue for the
Australian energy sector as it is also
for the rest of the world. Our two
primary activities - natural gas and
renewable energy - are key enablers
of Australia’s transition to a lower
carbon sustainable economy. Our
foray into gas-fired power generation
and renewables around a decade ago
in addition to gas transmission was
with the future in mind. Ten years on,
we have developed the experience and
knowledge to be part of the solution
of Australia’s future energy needs, so
that Australia’s carbon and climate
goals support the need to maintain
both energy security and business
competitiveness.
S1
APA Group Sustainability Report 2017 customers.
FY2017 Performance
Actions For FY2018
Growth
– Progress construction of the various projects announced in FY2017 to
meet agreed commissioning schedules including the Darling Downs
Solar Farm; Badgingarra Wind Farm; Emu Downs Solar Farm;
Yamarna Gas Pipeline; Yamarna Power Station; and Orbost Gas
Processing Plant.
– Continue to identify and capture revenue growth opportunities that
deliver flexible, responsive and sustainable solutions for our customers.
– Continue to work with customers such as Santos and Blue Energy
to realise planned projects into committed projects.
Flexible Customer Solutions
– Continue to offer flexible transportation and storage services and
innovative solutions to meet our customers’ diverse requirements
across Australia.
– Continue to refine the Integrated Operations Centre (IOC), grid
operations and customer management system to deliver reliable
supply and enhanced services.
– Business implementation of Gas Market Reform Group (GMRG)
rules and ongoing proactive engagement with customers.
Growth
– Completed the latest stage of the Victorian Northern Interconnect
expansion project, increasing the bi-directional capacity between Victoria
and New South Wales.
– Won a competitive bid process to design, construct and operate the
50km greenfield Reedy Creek Wallumbilla Gas Pipeline that will connect
into APA’s East Coast Grid. APA entered into a 20 year GTA with APLNG
which underwrites the pipeline construction.
– Successful in winning the competitive tenders for both the 198 km
greenfield Yamarna Gas Pipeline and 45MW Yamarna gas-fired Power
Station in Western Australia. Gas will flow through four APA pipelines to
the new Yamarna Power Station which will supply reliable power
to the Gruyere JV gold mine project.
– Entered into a 13 year power purchase agreement with Synergy, an
existing customer in Western Australia, which underpins development
and construction of APA’s new 20MW Emu Downs Solar Farm. Synergy
already takes the wind generated power from APA’s Emu Downs Wind
Farm which is adjacent to the greenfield solar farm site. The two sites
will share infrastructure.
– Entered into a 12 year offtake agreement with existing customer
Alinta that will underpin construction of APA’s new 130MW Badgingarra
Wind Farm in Western Australia. The site is adjacent
to Emu Downs and will share operational synergies with the existing
wind farm and new solar farm.
– Acquired the 110MW Darling Downs Solar Farm greenfields project in
Queensland, including a long term offtake agreement until December
2030 with Origin Energy for all energy and the Large-scale Renewable
Generation Certificates generated.
– Contracted with Santos to commence development of the planned new
450km Western Slopes Pipeline to connect the proposed (subject to FID)
Narrabri Gas Project to APA’s East Coast Grid, bringing more gas supply
into the domestic market.
– Signed a Memorandum of Understanding with new customer Blue
Energy to explore the development of new pipeline and mid-stream
infrastructure to bring potential new gas sources online from the Bowen
Basin in Queensland.
Flexible Customer Solutions
– Entered into a new 3 year multi-asset, multi-service gas transportation
contract with AGL Energy to replace an expiring point-to-point contract.
– Worked with new customer Cooper Energy and entered into an
agreement with them to acquire, upgrade and operate the Orbost
Gas Processing Plant to increase gas supply into the tight east coast
gas market.
– Improved gas nomination and billing platforms as well as information
transparency to customers and the market. APA now provides details on
all its gas pipeline capacities and the expected flow on those pipelines as
part of the Bulletin Board information service. This allows the market to
determine what capacity may be available on a day.
S2
We will deliver value to our customers and create responsive solutions to meet their needs by:– Providing market-leading flexible solutions to meet our customers’ changing requirements.– Working with customers to provide optimal energy market solutions.– Ensuring the highest level of service reliability to enable customers to manage their operations.– Delivering value to customers by optimising the use of APA’s infrastructure assets.– Maximise use of existing assets and profitably continue to expand APA’s asset portfolio in order to meet customers’ needs.APA Group Sustainability Report 2017 Key Sustainability Risks
Risk Management
– Demand for gas – The volume of gas that is transported by
APA is dependent on end user demand. The relative price of
gas and its competitive position with other energy sources
(such as electricity, coals, fuel oil, renewable sources) may
change demand levels for services on APA’s assets.
– Long term agreements with strong counterparties
underpin assets.
– Flexible and innovative customer solutions.
– Complementary investments in gas storage and power
generation and continued evaluation of emerging
growth opportunities such as wind, solar farms and gas
processing plants.
– Ongoing monitoring and market intelligence of domestic
and global gas markets.
– Supply of gas – Availability of competitively priced gas is
essential for ongoing use of gas infrastructure assets.
– Long term agreements with strong counterparties
underpin assets.
– Connect more gas resources with more gas markets
such as:
– East Coast Grid provides flexibility for customers to
manage their gas portfolios.
– Working with new / emerging gas producers to bring
new gas supply to market.
– West Coast assets increasingly interconnected to
deliver energy for longer distances to remote mining
locations.
– Provide infrastructure connectivity / flexibility to existing
and emerging gas markets.
– Flexible and innovative customer solutions.
– Counterparty – If a counterparty is unable to meet its
– Creditworthiness test applied to new customers and
commitments to APA, there is risk that future anticipated
revenue would be reduced unless and until APA is able to
secure an alternative customer.
– Operations – APA and our asset management customers
are exposed to a number of operational risks which can
result in equipment failures or breakdowns, pipeline rupture,
technology failures including sabotage or terrorism attack
(including cyber-attack).
– Economic regulation – APA may be negatively impacted
as a result of a change in regulatory settings. There are
a number of pipeline sector regulatory reform initiatives
currently being developed by the Gas Market Reform
Group (GMRG) that could adversely impact the regulatory
environment that APA operates in.
projects, as well as ongoing monitoring.
– Regular updating of supply / demand studies, customer
information and market intelligence.
– Appropriate customer guarantees in place.
–•APA operates assets in accordance with all relevant
regulations and standards.
– An integrated approach to Emergency Response,
Business Continuity and Crisis Management.
– Participation in anti-terrorist exercises and testing to
provide effective and emergency response to cyber
attack.
– The current regulatory regime is well understood and
encapsulated in national law.
– The reset dates of APA’s price regulated assets are
staggered, with on average one review each year.
– Composition of asset portfolio is optimised to manage
exposure to regulator settings.
– Engagement with policymakers and other stakeholders.
– Business implementation of new GMRG rules and
proactive engagement with customers.
The capacity of APA's Victorian-Northern Interconnect has been expanded
several times over recent years in response to working with our customers
to connect their gas resources to their markets.
S3
APA Group Sustainability Report 2017 environment.
FY2017 Performance
Actions for FY2018
– Successfully awarded $25.5 million of funding from the Australian
Renewable Energy Agency (ARENA) in respect of the two solar projects -
Emu Downs and Darling Downs.
– Evaluate further wind and solar generation opportunities such as the
potential Beelbee Solar Farm Development site (adjacent to Darling
Downs Solar Farm).
– Continued to evaluate wind and solar generation opportunities.
– Contribute to climate policy discussions and recommendations
APA announced three new renewable energy projects during FY2017:
130MW Badgingarra Wind Farm; 20MW Emu Downs Solar Farm; and
the 110MW Darling Downs Solar Farm.
contained in the Finkel Report. Promote the role of renewables and
gas as important contributors to achieving meaningful emission
reduction targets.
– Participated directly and through industry bodies in policy discussions
– Continue to develop relationships with APA’s industry member bodies,
and promoted the role of gas as an important contribution to meeting
Australia’s 26 to 28% Paris COP21 carbon reduction commitment.
the Clean Energy Council and Business Council of Australia,
to promote effective climate change policy.
– Continued to apply control measures in line with APA’s environmental
– Continue to apply control measures in line with APA’s environmental
procedures, leading to compliance with license and regulatory
requirements.
– Review Environmental Management Plans to ensure that they are
fit for purpose.
– Redevelopment of the Dandenong office will include consolidation of
two servers into one reducing power and cooling requirements, as well
as installation of solar and battery backup.
procedures, leading to compliance with license and regulatory
requirements, with the exception of two breach notices issued by the
NSW Department of Planning and Environment for the Victorian
Northern Interconnect Expansion project in relation to erosion and
sediment controls. The site has been remediated and procedures
amended.
– Delivered the remaining objectives of the Environmental Strategy
leading to continual improvement of our Environmental
Management System.
– Restructured the environment team to a national service model to
ensure consistency across APA’s operations.
– Won the Golden Gecko Award recognising excellence and leadership in
Environmental Management.
– Awarded Platinum in the Best Learning Transfer category and Gold in
the Best Behavioural Change category for APA’s Environmental Training
and Awareness Package at the LearnX Impact Awards.
– Contributed to the drafting of the revised of the APGA Code of
Environmental Practice due to come into effect FY18.
– All old IT equipment is sent to an IT manufacturer for recycling.
– Replaced all office copiers, faxes, scanners and printers with multi-
function devices that allow for “follow-me/pull printing”. Jobs can only
be printed using a scan card and uncollected jobs are deleted without
printing. Default settings are set to double-sided grayscale, thereby
reducing unnecessary colour printing and machines default to power
saving mode. Paper savings of 20% have been realised as have power
savings, reduced printing costs and ink cartridge use.
– Throughout all APA offices, we have switched to using 100% recycled
paper from Muru Group which also supports indigenous communities.
– APA commenced a battery recycling facility at its offices in Sydney,
Adelaide, Melbourne and Brisbane to keep batteries and their hazardous
contents out of landfill.
Key Sustainability Risks
Risk Management
– Significant damage to the environment and breach of environmental
regulatory requirements has the potential to result in significant
penalties and affect operational activities.
– The Environmental Strategy and Improvement Plan seek to apply
robust controls to manage identified environmental risks such as
chemicals and contamination, cultural heritage disturbance and
vegetation and fauna impacts.
– Controls may include specific targeted procedures, Environmental
Management Plans, and training/awareness programs.
– APA operates assets in accordance with all relevant regulations and
standards.
– Update APA’s HSE Induction to better on-board contractors and new
starters in environmental risk management.
– Further integrate HSE with APA’s business systems to ensure
environmental risk information is implemented into the daily work
done on each asset.
– Asset based risk registers are to be refreshed or developed, which will
better inform the over-arching Environment risk register.
S4
We will continue to deliver an environmentally responsible, safe and essential service by: – Taking a systematic and risk-based approach to environmental risk management.– Maintaining compliance with environmental laws in all jurisdictions where we conduct our business, including our emissions reporting obligations.– Including environmental risk management in all investment and procurement decision-making.– Meeting or exceeding the Australian Pipelines and Gas Association (APGA) Code of Environmental Practice.– Contributing to policy and responding to climate change initiatives to promote the use of gas as essential to a cleaner energy mix.– Evaluating further renewable energy and low emission gas generation opportunities.APA Group Sustainability Report 2017 Environmental management at APA
Our Health, Safety and Environment (HSE) Policy
approved by APA’s Board HSE Committee sets outs APA’s
commitment to achieve our overall goal of zero harm. That’s
zero harm for all our employees, contractors and third party
stakeholders that either operates our assets or work near
them; community members who live within the vicinity
of our assets; and importantly avoiding and minimising
environmental harm where our assets are located. Every
employee, including contractors and sub-contractors has an
obligation to prevent or minimise any environmental harm
arising from APA’s operations and activities.
APA’s HSE Management System “Safeguard+” provides a
framework to manage our Health, Safety and Environment
risks and includes a planning element that results in the
development of a HSE Strategic Plan that outlines the key
initiatives for APA’s Environmental Management approach
as listed above.
In FY2017, we completed delivery of APA’s two-year
Environmental Strategy and Improvement Plan that
commenced in 2015. The Strategy has delivered a
corporate governance framework that standardises
how environmental management is conducted across
all business units in Australia. APA focuses on eight key
environment areas: Approvals and Planning; Vegetation
and Fauna; Emissions; Chemicals and Contamination;
Waste; Soil and Water; Heritage; and Data and Reporting.
Native vegetation management
APA’s extensive energy infrastructure assets mean we are
an intrinsic part of Australia’s diverse natural landscapes.
APA understands that our obligation to safely operate
and maintain our infrastructure also includes managing
native vegetation over and around our assets in accordance
with legal requirements. We are shared users of much of
the land we occupy so minimising and avoiding potential
impacts on native vegetation is one way we recognise the
value of vegetation to the community and environment.
We have a systematic approach for determining whether
native vegetation is cleared or can be retained. We
store environmental information in our Environmental
Management Plans and have a new Native Vegetation
Management Procedure that outlines the minimum
management measures to be applied in the absence of
site-specific documentation.
This approach allows us to comply with environmental
laws so that we can continue to play our critical role in
Australia’s energy mix whilst retaining environmental
value for future generations.
Soil and water management
APA understands that watercourses are sensitive
environmental features, which are important for ecosystem
function. Managing our activities and our contractors’
operations on land surrounding watercourses is a significant
focus area for APA because risks in these areas.
For projects that have potential to affect a watercourse, we
strive to manage our activities in order to maximise benefits
and minimise risks to the environment and community.
For instance, we factor the sensitivity of watercourses into
our risk assessments; avoid interaction with watercourses
whenever practicable and focus on installing and
maintaining sedimentation mitigation methods.
As a part of the Environmental Strategy, APA has
developed Soil and Water Procedures to drive national
environmental management consistency. These procedures
are being implemented across all applicable business areas
in FY2018.
S5
Operations and Environment go hand in handThe Toowoomba Second Range Crossing Project on the Roma Brisbane Pipeline (RBP) demonstrated APA’s in-house expertise and ability to successfully deliver a construction project whilst ensuring environmental impacts were minimised. The project involved the relocation of just over 1km of the RBP to facilitate the realignment of the Roma to Brisbane Road. Successful environmental management on the project was based on proactive communication between APA’s project team and our environment team, as well as the construction contractor including review and approval of the construction environmental management plan (CEMP) prepared by the construction contractor. The project was time critical, and sat within a much larger site, with a suite of environmental approvals, on top of the existing RBP Environmental Authority (Licence). It was therefore critical to ensure the CEMP and project documentation and processes adequately addressed all environmental requirements. This occurred through direct consultation between client and contractor dedicated environmental personnel. The Project went on to be delivered well, with no major incidents or environmental harm.APA Group Sustainability Report 2017 National greenhouse and energy reporting
Managing climate change issues
APA complies with the Commonwealth National
Greenhouse and Energy Reporting Act 2007 which
establishes a national framework for corporations to report
greenhouse emissions, energy consumption and production
should specific thresholds be met.
APA’s emissions are mainly the result of power generation
activities, the combustion of natural gas in compressor
stations and from fugitive emissions. In FY2016, APA
reported 1,084,236 tonnes of carbon dioxide equivalent
(scope 1 emissions). The increase in Scope 1 emissions
in FY2016 is predominantly due to the addition of the
Diamantina and Leichhardt Power Stations (DPS). APA
moved to full ownership of DPS during FY2016. Emissions
also increased as a result of the increase in the amount of
gas transported on the South West Queensland Pipeline
with all six Gladstone LNG trains now in operation, as well
as gas flowing west to the domestic market.
Carbon Disclosure Project
APA participated for the seventh time in the Carbon
Disclosure Project, a voluntary disclosure to investors on
carbon emissions, liability, reduction activities, strategies
and management. APA’s overall score of “B-” ranked highest
amongst its direct peers.
Clean energy policy
APA continues to support reducing carbon emissions as
a responsible risk mitigation response to climate change.
APA supports technology agnostic domestic carbon
abatement polices to meet Australia’s 26% to 28% Paris
COP21 carbon reduction commitment. APA is also broadly
supportive of the June 2017 Finkel Report concepts and
recommendations, with the key to any climate change policy
requiring bipartisan support to ensure investment certainty.
In the longer term, as international and domestic carbon
policy and markets mature, APA’s assets will play an
important role in meeting Australia’s long term emission
reduction targets as energy consumption shifts from
carbon intensive fuels, such as coal, to more carbon efficient
fuels, such as natural gas.
Investing in renewable energy
In 2017, APA announced three new renewable energy
projects totalling approximately $565 million; 130MW
Badgingarra Wind Farm, 110MW Darling Downs Solar
Farm and 20MW Emu Downs Solar Farm.
APA continues to evaluate further renewable energy and
low emission gas generation opportunities as Australia
moves to a low carbon economy.
For more information, refer to APA’s website:
https://www.apa.com.au/about-apa/sustainability/.
S6
Emu Downs Solar Farm – first panelsConstruction of APA’s first solar farm commenced in FY2017. The 20MW solar farm will form part of APA’s 230MW renewable energy precinct in Western Australia. The solar farm will share the transmission connection and facilities with APA’s existing 80MW Emu Downs Wind Farm, acquired in June 2011. The 130MW Badgingarra Wind Farm which is due to commence construction in early FY2018, will also leverage existing operational on the ground resources.APA Group Sustainability Report 2017 community.
FY2017 Performance
Actions for FY2018
– Maintain support of our community investment program, Building
– Maintain support of our community investment program, Building
Brighter Futures, by continuing our three headline partnerships and
promoting and supporting employee fundraising events across the
company.
Brighter Futures, by continuing our three headline partnerships and
promoting and supporting employee fundraising events across the
company.
– Extended the reach of Building Brighter Futures to include employee
volunteering, and support diversity and inclusion strategies.
– Continue Volunteering Program.
– Continue financial support for community events.
– Continue financial support for community events.
– Commenced stakeholder engagement in relation to proposed Western
– Progress the community and stakeholder consultation program
Slopes Pipeline project.
Key Sustainability Risks
of activities for the Western Slopes Pipeline.
Risk Management
– Community relations – Maintaining community support and goodwill for
– Remain in touch with community interests and issues.
– APA actively engages with its communities through sponsorships.
– Education and communication around APA’s activities.
– Construct and operate infrastructure using industry recognised
standards or better.
– Landowner liaison and community education and support of “Dial
Before You Dig” (DBYD) service. Increasing awareness of DBYD
through APA presentations.
– Pipeline easement monitoring and surveillance.
– Dedicated Infrastructure Protection and Planning department for
processes and assurance; urban planning; asset protection; and, access
and approvals.
– Participation in APGA Corridor Committee / pipeline operator groups.
– Liaise with council and planning authorities to effectively manage
potential encroachment issues.
APA employees from the Southbank office celebrate our support for
Orange Sky laundry.
APA’s activities.
– Encroachment – Urban encroachment around existing pipeline easements
can increase the potential for damage. A change in pipeline location class
may also increase compliance costs.
Community investment program
APA’s ‘Building Brighter Futures’ program continues to
provide an effective platform for delivering meaningful
support to the communities in which we operate, and
through which employees can contribute to causes
meaningful to them with support from APA. The program
establishes an effective foundation for further building
and developing our community relationships, enhancing
the APA brand and demonstrating APA’s support for the
communities in which we work.
APA expanded the ‘Building Brighter Futures’ community
investment program in FY2017. In addition to Headline
Partnerships with The Clontarf Foundation, The Fred
Hollows Foundation and the Darwin Literacy Centre,
and our Employee fundraising events, we added:
– Corporate support for three charities, each with a
Diversity and Inclusion (D&I) focus:
– Orange Sky Laundry
– Dressed for Success
– White Ribbon Australia
– A pilot employee volunteering program, encouraging
our employees to give back to our local communities
by donating our time and skills to registered Australian
charity organisations.
S7
Orange Sky Laundry was launched in Australia in 2014 as the world’s first free mobile laundry service for the homeless. Starting in the streets of Brisbane, Orange Sky has now grown to 13 services across Australia, in Brisbane, the Gold Coast, Melbourne, Sydney, the Sunshine Coast, Canberra, Perth, Adelaide, South East Melbourne and Hobart. Orange Sky Laundry now does over 6.9 tonnes of laundry every week and provides 1,300 hours of positive and genuine conversations every week. APA has sponsored Orange Sky to support this free service for the disadvantaged.We will positively engage with the communities within which we operate by:– Building long term strategic community relationships to maintain support and goodwill for APA’s activities.– Increasing employee connections with local communities through sponsorships, employee volunteering and giving programs targeting vulnerable communities.APA Group Sustainability Report 2017 The purpose of a Community Consultation Plan is to:
– Find opportunities to listen to what the community’s
issues and expectations are;
– Actively respond to identified issues and expectations;
– Be open and transparent about plans for the Project, –
addressing issues and informing the community about
key Project phases;
– Be consistent in messaging and provide opportunities
for the community to interact with APA in a variety of
forums; and
APA Sydney employees Jillian Summers (left) and Tracy Hutchinson
(right) delivering clothes to Dress for Success Sydney Operations
Manager Toni Purnell (centre).
– Respond efficiently to complaints as and when they arise
to reinforce APA’s commitment to responsiveness.
(left to right) Jens Schulz, Project Manager RCR Infrastructure,
Neil Weatherly APA’s Manager Access & Approvals, Paul McVeigh
Mayor, Western Downs Regional Council and Ross Larsen APA’s
IPP Senior Town Planner
Community and stakeholder engagement
APA values and respects its relationships with stakeholders
and communities in which we operate. We are committed
to building and maintaining long term relationships with our
stakeholders, as well as meeting all applicable regulatory
and legislative requirements.
APA’s approach to stakeholder engagement is guided by the
following principals:
– No surprises: Inform and engage community members
and key stakeholders early in the process, and ensure they
remain fully informed.
– Be inclusive: Ensure the community has easy access to
clear and concise information about projects, ensuring
all communications use language (e.g. non-technical)
appropriate for each audience.
– Be honest and act with integrity: Always use facts and
speak the truth. If the answer is not known then the
question will be taken on notice, the appropriate parties
spoken with and a response provided promptly.
– Be responsive: Respond to all stakeholder contact in a
timely manner and make every effort to resolve issues to
the satisfaction of all involved.
– Be a part of the community: Use projects to contribute
to stronger local communities and provide economic and
social benefit.
– Honour all obligations: Deliver on promises made to the
community and stakeholders.
Where Community Consultation is required, APA develops
a Community Consultation Plan to identify stakeholders
and their likely area of interest in the proposed Project,
along with whom in the Project team has responsibility
for engaging the stakeholder(s) and the timing and
mechanisms for these engagements.
The plans are not static documents, evolving as the project
progresses. They will require revision and flexibility to meet
changing needs and circumstances. Each project plan is
usually reviewed every three months or as required.
S8
Dress for Success is an international not-for-profit organisation that empowers women to achieve economic independence by providing a network of support, professional attire and the development tools to help women thrive in work and in life. In Australia, Dress for Success is represented by six affiliates, five of which APA is supporting through direct company donations as well as locally organised clothing drives and volunteering.Working togetherAPA, Western Downs Regional Council and RCR Infrastructure prepare for a Local Vendor Opportunities information session for the Darling Downs Solar Farm Project. Local businesses, suppliers and tradespeople were invited to the forum to discuss a range of packages and service opportunities during the construction of APA’s 110MW wind farm.APA Group Sustainability Report 2017 Western Slopes Pipeline
proposed route
Moomba Sydney Pipeline
Macquarie
Marshes
Nature Reserve
Narrabri
Pilliga Forest
Tamworth
Nyngan
Central Ranges Pipeline
Yathong
Nature Reserve
Dubbo
Central West Pipeline
Condobolin
Sydney
Canberra
Sponsorship and donations
APA continued to provide monetary and in-kind support to
a number of groups or causes that achieve one or more of
the following:
– Strengthen APA’s reputation in the local community.
– Enhance APA’s relationships with key community
stakeholders.
– Increase community awareness and understanding of
APA.
– Provide positive networking opportunities with
community stakeholders.
Of these, the two major sponsorships in FY2017 were for
Taronga Zoo Foundation and the Australian Brandenburg
Orchestra. As part of our support for the Australian
Brandenburg Orchestra we sponsored a concert in Brisbane
and a free community concert in Toowoomba where we
have substantial operations.
Business continuity / emergency response / crisis
management
APA’s approach to recovery is integral to our operations
and our values and seeks to protect our assets, property,
people, and IT systems as well considering the environment
and local communities we affect. Our integrated approach
provides for effective recovery whilst continuing to service
our customers and meet regulatory requirements:
– Emergency response for energy infrastructure assets
incidents;
– Business continuity response for premises, people,
IT systems and cyber type incidents; and
– Crisis management response involving the APA Executive
which focusses on high severity incidents.
We maintain programs of testing to ensure our approach
remains current and reflects changes in our business, our
customers and the communities we are part of.
S9
Western Slopes Community ConsultationAs part of our commitment to community engagement, APA has commenced a comprehensive program of community and stakeholder consultation for the Western Slopes Pipeline project. Specific activities either completed or proposed include:– Establishment of a project website, toll-free information line and project email address, including a mechanism for stakeholders to provide feedback regarding the project – Direct contact with landowners along the preliminary alignment followed by individual landowner briefings and regular ongoing contact– Advertisements and editorial in local newspapers regarding key announcements, project activities and upcoming events – Community information sessions– Consultation with relevant government agencies (Federal, State and Local)– Presentations to existing forums including Local Government Council meetings and special interest groups– Direct engagement with interested Aboriginal Parties in accordance with the applicable Government guidelines– Direct contact with a range of other stakeholders with a potential interest in the projectIn addition, the NSW Department of Planning and Environment’s Secretary’s Environmental Assessment Requirements (SEASs) for the project require APA to establish and operate a Community Consultative Committee (CCC). The CCC will be a key forum for discussion between APA and representatives of the community, a range of stakeholder groups and the local councils on issues directly relating to the Western Slopes Pipeline project.APA Group Sustainability Report 2017 employees.
FY2017 Performance
Safety
Actions for FY2018
Safety
– Strong improvement in safety performance with lead and lag indicators
– Target an LTIFR of less than 1 and a TRIFR target of no more than 8.
being met or exceeded; LTIFR1 of 0.52 and TRIFR2 of 7.50 have both
improved over 25%. Importantly, no fatalities occurred.
– Completed over 1,000 safety management interactions and over 5,000
permit reviews with employees and contractors - both key critical controls
to protect our people and assets.
– New three-year HSE Strategic plan rolled out with key themes that
resulted in the following achievements:
– Full review of APA’s Fatal Risk Protocols (FRP) with the establishment
of national FRP governance network;
– Incident investigation training delivered to over 80 leaders with visible
improvement in investigation quality and outcomes;
– Successful independent audit of APA’s contractor management system
(no non-compliances);
– Alcohol and Other Drugs education and awareness training delivered
to all employees;
– Completion of the establishment of the APA Environmental
Management system, including Environmental awareness training
for all employees; and
– Revised Contractor Management Assessment tool to include HSE
requirements.
Leading for growth and diversity
– Strong emphasis on improving HSE performance and cultural maturity
to continue through the HSE Strategic plan, specifically around:
– Continue to monitor the effectiveness of contractors HSE
performance through increased HSE audits;
– Introduce a revised Alcohol and Other Drugs policy, including
testing protocols;
– Launch of Health and Wellbeing platform;
– Continue to develop education and awareness initiatives through
our Safedrive+ program to manage the key risk of driving.
Leading for growth and diversity
– HR Systems Review Project to upgrade our people systems and
capability (employee and business processes, people analytics and
enhanced talent and planning capability).
– Review of Performance, Reward and Talent strategies to deliver on
organisational strategy.
– Continued work throughout organisation on Leadership Styles and
Climate and living the APA values and culture.
– Launch of new Diversity and Inclusion strategy with key focus areas
of gender, age and culture, with key initiatives such as:
– Strategy-into-Action workshops and Leadership Styles and Climate
programs, workshops, assessments and coaching delivered involving
around 150 leaders.
– Inaugural national APA Excellence Awards presented for Innovation,
Living the APA Values, Customer Service and HSE with positive feedback.
– Works towards achievement of 2022 female participation
targets; (see S11)
– Leverage partnerships to broaden workforce participation; and
– Ongoing education around unconscious bias, inclusive leadership
– Delivered key diversity and inclusion initiatives including an independent
and appropriate conduct.
Gender Pay Parity review, expanded the APA Graduate and Intern
Programs with further intakes, Diversity and Inclusion Workshops for
over 250 people managers, and Women in Leadership programs for
female talent.
– Continue to develop competency based frameworks or core
capabilities to improve technical and professional development.
– Conduct an Employee Engagement Survey and implement follow
– Develop and launch new Diversity and Inclusion strategy for launch in
up actions.
FY2018.
– Completion of detailed analysis of current HR system capability in
preparation for project to upgrade to new people systems technology.
1) LTFR Lost time Injury Frequency Rate is measured as the number of lost time injuries per million hours worked. APA’s figure includes employees and contractors.
2) TRIFR Total Reportable Injury Frequency Rate is measured as the number of lost time and medically treated injuries sustained per million hours worked. APA’s figure includes
employees and contractors.
S10
We are committed to providing an inclusive, rewarding and collaborative working environment where all our people can contribute, perform and succeed. We will do this by:– Continually improving our health, safety and environment performance to reduce risks, prevent harm and build a sustainable future.– Attracting, developing and enabling our people to build their own and the organisation’s capability for future growth and success.– Living and embedding the APA values so our culture is a key enabler of our success.APA Group Sustainability Report 2017
Key Sustainability Risks
Risk Management
– Failure to provide a safe workplace resulting in serious or fatal
– APA maintains a comprehensive workplace HSE Management System.
injuries (Safety).
– Potential for legal proceedings for failure to comply with Health, Safety
and Environmental legislative obligations.
It is predicated on the principles of hazard and risk identification,
control measures and a robust assurance framework.
– HSE training, education and awareness is a cornerstone of the HSE
Management System.
– As part of our assurance framework, Health and Safety audits are
undertaken across all parts of the business to ensure that health and
safety risks are effectively controlled.
– Maintain and monitor compliance to APA’s HSE Management System
including undertaking regular compliance monitoring through audits
and workplace inspections.
– Provide Health, Safety and Environment training to managers and
employees.
– Employee capability, recruitment and engagement - Failure to develop,
– APA maintains a number of initiatives to ensure there is a pool of
attract and retain talented employees.
talent and internal capability for now and in the future.
Leading for growth and diversity
To build and sustain core leadership capabilities within
APA, a foundational program, Strategy-into-Action, was
launched for all leaders that focuses on connecting our
leaders to the APA strategy and explores how to leverage
various leadership styles to lead for growth. Over 150
leaders have participated in our program to date with
another 270 scheduled to complete in FY2018. Our
leadership program:
– creates foundational understanding of our strategy with
all of our leaders;
– sets a standard for how we will achieve that strategy
through our people i.e. how we lead at APA; and
– creates an understanding of the impact that leadership
style has on the climate within our teams.
Leaders completing the program are skilled to:
– share a vision and long term focus with their team
which can be translated into short term deliverables;
– develop a more collaborative, enterprise-wide mindset;
and
– provide effective coaching and feedback to team
members.
In addition to this, Diversity and Inclusion training has been
rolled out to all people leaders in APA. These workshops
are aimed at increasing awareness of APA’s Diversity and
Inclusion strategy and covering key topics like why diversity
matters, the impact of unconscious bias, the benefits of
flexible work and the skills to lead and create an inclusive
workplace.
– These include formal succession and talent management, a diversity
and inclusion strategy, as well as technical, functional, business and
leadership development.
– The business has introduced a strong internal recruitment capability to
ensure we identify and secure external resources as and when needed.
Diversity and inclusion
In July 2017 we launched our new 3 year Diversity and
Inclusion strategy with key focus areas ahead being Gender,
Age and Culture (ethnicity) underpinned by the principles
encouraging diversity of thought and an inclusive work
culture. The objective of this Strategy is for APA to be
known as a workplace that is:
– Inclusive
– An Employer of Choice
– Flexible
– Cross-generational
Gender diversity
The following table provides an overview of the percentage
of women at APA, as reported to the Workplace Gender
Equality Agency (WGEA) in 2017 (for the period 1 April 2016
- 31 March 2017):
APA Workforce Gender Profile – Women 2017
2016
Non-Executive Directors
Workforce
Leadership roles 3
(defined as all roles with management or leadership
responsibilities)
29.0% 29.0%
27.0% 26.5%
19.0% 20.0%
Trade and Technical roles
4.0% 4.0%
APA recognises that without deliberate action, attention
and new thinking in this area, change will not occur. It is
also recognised that leadership is key – setting the right
examples, providing opportunities and having clear role
models (male and female) who embody the behaviours
and attitudes of a diverse and inclusive workplace.
3) Leadership roles are defined in accordance with the Workplace Gender Equality Agency (“WGEA”, Australia and New Zealand Standard Classification
of Occupations) occupational categories and comprise all levels of management (i.e. general managers, key management personnel, manager roles)
excluding team leader and supervisory roles. APA’s public report to the WGEA is available at https://www.apa.com.au/careers/working-at-apa.
S11
APA Group Sustainability Report 2017 Rewarding excellence
In response to feedback in our last Employee Engagement
survey and to increase employee recognition, APA launched
its inaugural Excellence Awards in October 2016. These
Awards recognised outstanding achievements and
contributions of individual employees who have gone above
and beyond the usual course of duty. Awards were made
across the categories of Health, Safety and Environment
(HSE), Living the APA Values, Customer Service and
Innovation. Nominated by their fellow employees, the
Award winners came from across all parts of the company
and country, their achievements celebrated in their home
location with special Award ceremonies.
Flexible work in action
In November 2016 over 160 APA employees based in
Melbourne undertook a significant change when their place
of work moved from Dandenong (in the south-eastern
suburbs of Melbourne) to Southbank, near Melbourne’s
CBD some 40km away.
Months of preparation involving all those impacted were
required to make the transition a success – from the
physical changes of moving many records from paper-
based to electronic through to the personal change impacts
of adjusting to longer travel times and for many, public
transport for the first time in years. One of the important
contributors to the success of the move was making flexible
work arrangements available to all employees.
The benefit for APA has been our ability to retain
employees’ skills and knowledge and provide a more
productive work environment.
Developing talent
APA continues to undergo systematic planning to
identify, build and retain a strong pipeline of critical
capability to meet the organisation’s current and future
requirements and to ensure long term continuation of
core business activities.
Leaders participate in a talent management process
to identify high potential and emerging talent and potential
successors for key roles. Employees identified through
this process receive development via one of two talent
programs. In FY2017 almost 100 employees were
identified in this process (with 28% being female) who
then participated in a range of development activities
from structured assessments, to secondments and
specific on-the-job training.
Also during FY2017, APA piloted two women in leadership
programs to target development of female talent.
Participants were invited to participate in either the
Women in Leadership Program or Emerging Executive
Women in Leadership Program. Both programs focused
on creating opportunities for participants to build self-
awareness, leadership skills, and their network both within
APA and externally.
In FY2017, the APA Graduate Program that was developed
in early 2016 was expanded with a further intake in
January 2017 of three engineering graduates based in our
Melbourne offices. The program provides for three, nine
month rotations across different parts of APA’s business
with a view to growing beyond the engineering discipline.
To complement the Graduate Program APA has piloted this
year an Intern Program to provide undergraduates with 4-6
weeks paid work experience. Following the success of the
pilot, plans are in place to establish this program as a key
feature to increase our channels of entry to employment at
APA whilst also encouraging younger employees to join APA.
All of the above development initiatives are complemented
with a variety of coaching and mentoring opportunities,
utilising both internal and external resources.
S12
Living the values Paul McKinnon from APA’s Networks and Power division was announced as the winner for Living the APA Values. He was recognised for his consistent demonstration of the APA values throughout his work and in particular in the critical role he played in minimising damage to the Berri converter station during the South Australia state-wide blackout last year. Working long hours and as APA’s only employee permanently based in Berri, Paul closely monitored equipment and engaged extensively with external customers and staff throughout the night, adapting to changing circumstances. Paul’s written log was invaluable in the subsequent black-out investigations and his commitment and adaptability throughout the situation was a clear demonstration of all APA’s Values (S.T.A.R.S) Safety, Trustworthy, Adaptable, Results and Service.APA Group Sustainability Report 2017 investors.
FY2017 Performance
Actions for FY2018
– Total securityholder return of 4.1% for FY2017.
– Delivered investors a 4.8% increase in distributions.
– Progress or complete current growth capital projects underway and
ensure prudent funding strategies are in place and are executed.
– Maintained investment grade credit ratings (BBB/Baa2).
– Continue to evaluate and develop additional revenue streams in
related energy infrastructure businesses.
– Maintain investment grade credit rating levels.
– Issued A$200 million of 7-year fixed-rate Australian dollar Medium Term
Notes in October 2016 and US$850 million (A$1,109 million) of 10.3-year
senior guaranteed notes into the US 144A market in March 2017.
– Repaid $85.8 million (US$65.0 million) and $295.0 million (US$154.0
million and A$104.2 million) of US Private Placement Notes when they
matured in July 2016 and May 2017 respectively.
– Corporate costs for FY2017 decreased by $20.0 million to $66.7 million
(FY2016: $86.7 million).
– Since FY2016 results, APA has announced $1.2 billion of growth
opportunities, which coupled with the Victorian-Northern Interconnect
expansion project already in flight, will add up to around $800 million of
growth capital investment required over the next 12 months.
– $377.5 million of capital and investment expenditure during FY2017.
– Voluntarily published APA’s second Tax Transparency Report (available
on APA’s website). The Federal Government with support of the
Australian Board of Taxation were seeking greater public disclosure of tax
information by businesses and endorsed the Tax Transparency Code as
part of the 2016-2017 Budget announcements.
Key Sustainability Risks
Risk Management
– Debt and equity - Ensuring continued support from debt and equity
markets for ongoing capital requirements. Inability to secure new debt
facilities at appropriate quantum and price may adversely affect APA’s
operations and/or financial position and performance.
– APA’s investment decisions are made and its balance sheet is utilised
with a continuous focus on maintaining long term investment grade
credit ratings.
– A diverse portfolio of long-life assets underpinned by regulated and
long term bilateral agreements, underscores APA’s ability to service
debt and sustain steady equity distributions.
– Maintain diversified funding base and access to deep and liquid global
debt capital and banking markets.
– APA has a long term sustainable distribution policy having regard
for the capital needs of the business and economic conditions.
Distributions are fully covered by operating cash flow.
– Financial results and other salient developments are communicated
regularly to investors in a timely manner.
APA’S HISTORICAL ANNUAL DISTRIBUTIONS (CENTS PER SECURITY), HAS CONTINUED TO INCREASE
22.0
21.5
21.5
21.5
22.5
24.0
28.0
29.5
31.0
32.8
34.4
35.0
35.5
36.3
38.0
41.5
43.5
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
As at 30 June 2017, APA had over 78,000 securityholders holding 1.1 billion securities, with the top 20 investors holding
65.4% of securities. Currently, approximately 74% of APA’s investors are based in Australian and/or New Zealand.
S13
We will continue to be a reliable and attractive investment which delivers superior returns for Securityholders by:– Achieving reliable and sustainable earnings growth by focusing on long term revenue and reduced costs. – Maintaining a strong and robust balance sheet.– Identifying and evaluating additional attractive infrastructure style investments in related energy businesses.APA Group Sustainability Report 2017