energy. connected.
apa group
annual report.
2018
APA GROUP — ANNUAL REPORT 2018
Our
Vision
Energy affords us the quality of life we have
come to expect in Australia. Affordable,
reliable and sustainable energy is a basic
expectation of Australians, both consumers
and businesses. We live in a country with
bountiful energy resources, and yet in
recent times, we’ve incurred rising energy
bills and concerns about having sufficient
energy supply to meet demand.
As a leading energy infrastructure
business, APA is committed to playing its
part within the broader energy sector to
work towards solving Australia’s energy
trilemma. A collaborative and innovative
approach combining the commitments
and skills of the whole energy supply
chain and governments is what is
required. As we work towards our vision
of connecting Australia to its energy
future, we will play our part in ensuring
that energy is affordable, reliable and
sustainable for us all.
Construction of the Reedy Creek Wallumbilla Pipeline in Queensland, commissioned in May 2018
APA GROUP — ANNUAL REPORT 2018 — 01
FY2018 IN REVIEW
02 Chairman’s Report
04 Managing Director’s Report
06 APA Leadership
08 Highlights
AUSTRALIAN PIPELINE TRUST
10 Directors’ Report
40 Remuneration Report
50 Consolidated Financial Statements
APT INVESTMENT TRUST
101 Directors’ Report
106 Consolidated Financial Statements
125 Additional information
126 Five year summary
127
Investor information
S01 Sustainability Report
Contents
Our
Strategy
MAINTAIN APA’S
FINANCIAL
STRENGTH
GROWTH FOCUS TO ENHANCE
OUR PORTFOLIO OF:
gas transmission pipelines
power generation:
gas-fired and renewables
mid-stream energy
infrastructure assets, including gas
storage and gas processing
CONTINUE TO STRENGTHEN
ASSET MANAGEMENT,
DEVELOPMENT AND
OPERATIONAL CAPABILITIES
02 — APA GROUP — ANNUAL REPORT 2018
chairman’s report.
APA’s vision is to connect Australia to its energy future.
That future has rapidly evolved particularly in recent years,
with influences from both domestic circumstances such
as our dynamic energy markets and government policy,
and globally with demand for Australia’s energy resources
and calls for action on climate change. APA plays a key
role in enabling Australian consumers and businesses
to have access to affordable, reliable and sustainable
energy. During the 2018 financial year, we stepped up our
commitment to this role, working with industry and our
customers and investing over $700 million in new organic
growth projects that will contribute to providing a solution
to Australia’s energy trilemma.
In my first year as your Chairman, I am delighted to share
some highlights about the progress APA has made in
delivering on its strategy this past financial year.
Since its inception in 2000, APA has gone from strength
to strength and our disciplined investment approach has
delivered a portfolio of assets that we own and/or operate
of over $20 billion. APA’s vision to connect Australia to
its energy future is being realised as we progress our
strategic growth trajectory and continue to deliver value
for our Securityholders.
Financial results
In FY2018, APA has presented the market with a solid
set of financial results. Revenue has increased by 2.8 per
cent to $1,941.4 million (1). Off the back of the growth
that we continue to deliver, earnings before interest, tax,
depreciation and amortisation (EBITDA) have increased by
3.3 per cent to $1,518.5 million and net profit after tax has
increased by 11.8 per cent to $264.8 million.
The very nature of APA’s business enables predictable
results for our Securityholders that are largely unaffected
by market conditions. This is achieved through the longevity
of our contracts to supply energy and services to our
customers. These contracts, in turn, support the ongoing
investment in our infrastructure. Over the last few years,
the Australian market has been challenged by fluctuating
commodity prices. We are conscious that the relative
price of these commodities may have an impact on our
customer’s demand for infrastructure in the future. By
applying a customer centric approach, APA sees itself as an
energy industry team player with the ability to offer flexible
services that meet our customers’ long-term needs.
Our total distributions for FY2018 of 45 cents per security
represent a 3.4 per cent increase over distributions for
FY2017. Securityholders have also benefited from a total of
6.33 cents per security of franking credits which accompany
the distributions. In accordance with our distribution policy,
distributions have been fully covered by operating cash
flows. A portion of these cash flows have also been retained
within the business to support our ongoing growth.
With growth continuing to drive our strategy, we are
working on in excess of $1.4 billion of growth projects that
have been agreed with our customers to meet their future
energy needs. In FY2018, APA commissioned the Emu
Downs Solar Farm, Reedy Creek Wallumbilla Pipeline, the
Mt Morgans Gas Pipeline and the Yamarna Gas Pipeline.
1) Total revenue, excluding pass-through (revenue on which no margin is earned).
APA GROUP — ANNUAL REPORT 2018 — 03
These assets will all contribute to earnings in FY2019 and
beyond. Operating cash flow for FY2018 increased by 5.9
per cent to $1,031.6 million. Operating cash flow per security
held strong and increased by 4.1 per cent to 90.7 cents per
security, despite over 65 million new securities being issued
during FY2018 as part of the $500 million equity capital
raise that was undertaken in February.
Delivering for stakeholders
Our success is not only judged by the value created
for Securityholders, but from our ability to service our
customers’ long-term energy infrastructure needs. In
FY2018, APA was one of 15 energy supply chain businesses
that pledged to develop a consumer charter, putting
customers first. We believe that for APA to continue to
succeed, we need to be delivering for our customers and
Australia’s energy users. Instilling customer confidence in
the energy industry requires an industry-wide commitment
across the supply chain for both gas and electricity. At the
heart of The Energy Charter is an assurance to improve
the culture throughout the energy industry by putting the
customer at the centre of each of our business decisions.
At APA we are committed to The Energy Charter and
developing a culture of customer focus and good conduct
across the business.
Energy policy
Throughout FY2018, national energy policy remained highly
topical within Australia. As policy makers seek to tackle
the energy ‘trilemma’ and solve a decade-long failure to
effectively integrate energy and climate policy, ongoing
uncertainty prevails in the market. This affects investment
decisions, prices and energy reliability for Australian
consumers and businesses.
Policy certainty and clarity are the crucial components
to maintaining investment confidence in Australia. This
requires a collaborative approach with the energy industry
and governments working together. APA continues to
support integrated energy and climate policies that will
meet Australia’s carbon reduction commitments, whilst
ensuring affordability and reliability.
In this context, APA continues to encourage the
development of a bipartisan national energy policy which
will give that certainty for future investment in the sector.
Gas remains a viable, low-emissions fuel supply that
Australia has in abundance.
Governance
Throughout FY2018, I have had the opportunity to
meet directly with investors, listening to their feedback
about APA’s strategic direction, board composition and
remuneration report.
In FY2018, we farewelled Mr Leonard Bleasel AM as
Chairman of the APA Board after ten successful years
at the Board’s helm. I was delighted to follow in Len’s
footsteps and accept the position as Chairman, after
contributing in my role as an APA Non-Executive Director
since 2015. APA’s Board also saw Non-Executive Director Mr
John Fletcher retire and welcomed two new Non-Executive
Directors, Ms Shirley In’t Veld and Mr Peter Wasow who
each have a wealth of experience to help navigate the
opportunities and challenges facing the energy market.
During the year, Non-Executive Director Ms Patricia
McKenzie announced her intention to retire at the 2018
Annual Meeting. Given the CKI proposal, I am delighted to
advise that Patricia has agreed to continue as a Director
beyond the Annual Meeting.
CKI Consortium Proposal
As at the time of writing this Report, there have been no
further developments to the proposed transaction between
APA and the CKI Consortium since the announcement
by APA on 13 August 2018 that both parties had entered
into a binding Implementation Agreement for the CKI
Consortium to acquire 100 per cent of APA’s securities.
Your Board believes the Offer of $11.00 cash per security
is compelling for APA Securityholders and we unanimously
recommend it to you. It represents a premium of over 30
per cent (2) on the price APA securities were trading at prior
to the announcement on 13 June 2018 and an FY2017
Enterprise Value/EBITDA multiple of 15.3 times and FY2018
Enterprise Value/EBITDA of 14.8 times (3). We will keep
Securityholders informed as the transaction progresses,
with the expectation of a Securityholder meeting and vote
on the Schemes to be held in late November 2018.
Outlook
The past year has provided Securityholders with continued
growth, as APA has delivered solid financial performance
and further creation of value. Going forward, we will
certainly continue to act in your best interests to ensure the
best possible returns.
APA’s guidance for FY2019 is for EBITDA of between
$1,550 million and $1,575 million and net interest costs of
between $500 million and $510 million. In the event that
the CKI proposal does not proceed and APA remains as a
stand-alone listed company for the full financial year, total
distributions per security are expected to be in the order of
46.5 cents per security, prior to the benefits of any franking
credits that may arise as a result of the ongoing payment
of company tax by APA.
On behalf of the Board, I would like to thank our Managing
Director Mick McCormack, the APA leadership team
and APA’s employees for their contribution this year.
Importantly, I would also like to thank all our Securityholders
for your continued support.
2) The value of $11.00 per security represents a 30%-35% premium to the 12 June 2018 trading price based on the 5 day, 1 month and 3 month volume weighted
average prices of $8.434, $8.374 and $8.144 respectively.
3) Based on 1,179,893,848 APA stapled securities on issue, APA net debt as at 30 June 2018 as per Note 18 of the FY2018 financial statements, APA FY2017 EBITDA
of A$1,470.1 million for the FY2017 multiple and APA FY2018 EBITDA of A$1,518.5 million for the FY2018 multiple.
Michael Fraser
Chairman
04 — APA GROUP — ANNUAL REPORT 2018
managing director’s report.
At APA, we have always looked to continually improve
our business, leverage our strengths and deliver for our
stakeholders. The solid 2018 financial year results reflect
the success of our approach and as we work towards
completing the $1.4 billion plus of committed growth
projects in FY2019, we are on track to continue this success.
Without our customers, there would be no APA. In FY2018,
we commenced a program to foster a greater customer
centric mindset across the business. The energy industry
has had a tough couple of years in terms of regulatory
intervention and political focus. Much of this has stemmed
from the view that the industry is not meeting society’s
expectations, particularly when it comes to energy
affordability and consumer trust is at an all-time low.
For Australian businesses to do well in the longer term,
the entire energy industry needs to be delivering for
consumers. I am very proud that APA is a foundation
member of The Energy Charter initiative. This commitment
to put customers at the centre of Australia’s energy
system by each of these businesses is a major step in
solving Australia’s energy trilemma and meeting
community expectations.
In the past year, energy continued to be a highly charged
and emotive political issue in Australia with any bipartisan
energy policy still to be agreed. Various mechanisms have
been touted to address the issues including the Finkel
Review and resultant draft National Energy Guarantee.
At APA, we are acutely aware that gas is critical to energy
security, affordability and sustainability, now and into the
future. Gas-fired power generation is critical to keeping
electricity prices down and Australian businesses viable.
Gas currently accounts for around 40 per cent of mid merit
and peaking generation capacity in the National Electricity
Market. Governments and the energy industry need to work
collaboratively to make more gas available and therefore
affordable. Whether supporting gas import terminals or
unlocking additional gas resources that Australia is rich
with, it is important that all stakeholders work together
to facilitate and develop new projects, communicating
the facts and evidence to be considered in a well
informed public debate.
Safety and our people remain a priority
The importance of fostering a workplace culture that
operates safely is a key driver at APA. Compliance with
our health, safety and environmental (HSE) obligations
shows continuous improvement and we are working to
build a sustainable future across our workforce. In FY2018,
we completed an overhaul of our Alcohol & Other Drugs
Policy and protocols and launched an online Health and
Wellbeing platform for employees. Despite our team’s best
efforts, the Total Recordable Injury Frequency Rate result
of 8.9 exceeded its target, predominantly due to contractor
injuries. This indicates that we still have some work to do
to ensure procedures are in place to keep all of our workers
safe. We will use data analytics as part of initiatives
to improve injury performance including contractor
performance and management, manual handling and
hand injury prevention.
In FY2018, APA introduced stakeholder engagement
initiatives as a way to drive best practice in our strategic
thinking and across our operations. These initiatives, such
as articulating the APA Way and revising our Code of
Conduct, contributed to enhancing a more progressive
and customer centric corporate culture.
The APA Way is a blueprint that guides how our employees
are expected to behave and ultimately, defines how we
strive to manage our business. At its core, our five STARS
values drive our behaviours and these are supported by
the five principles of our Decision Compass, which guide
the way we make decisions. The APA Way and our Code of
Conduct will help us achieve our vision by ensuring the way
we work and do business aligns with the expectations of all
of our stakeholders.
Strategy
As part of our overall strategy, we continued to deliver
customer focused energy solutions whilst engaging
positively with the communities and respecting the
environment in which we operate. Our $1.4 billion plus
pipeline of growth projects continues to be realised with
the commissioning of a variety of new energy infrastructure
assets across Australia as detailed in the Chairman’s
Report. We also announced a number of significant
contracts and renewals, as well as a new solar farm
development at Badgingarra in Western Australia and the
potential Crib Point Pakenham Pipeline in Victoria linking
AGL’s proposed floating LNG regasification terminal to
APA’s East Coast Grid (subject to AGL FID).
During a year when much uncertainty was generated
with the introduction of the new gas pipelines arbitration
and disclosure regimes, APA’s reliable, low risk business
model and pro-active approach of innovative continual
improvement came to the fore. In particular, we continued
to manage counterparty risks by diversifying our customer
and industry exposure, assessing counterparties’
creditworthiness and entering into long-term contracts
to support major capital spend. As testament to this, the
average contract tenor at APA is in excess of 12 years and
all contracts and renewals have continued to be negotiated
with our customers.
Growth and securityholder value
In FY2017, we embarked upon a three year growth program
which will see APA invest in excess of $1.4 billion in a variety
of energy infrastructure growth projects. As at the end of
FY2018, we had committed $1 billion in capital expenditure
with the balance to be realised in FY2019. We estimate the
additional revenue contribution from these new assets to
be in excess of $75 million in FY2019, increasing to over
$215 million per annum in FY2020.
And still we see more growth in front of us with in excess of
$4 billion of growth opportunities currently identified over
the next four to five years. These opportunities range across
gas pipeline developments, gas and renewables power
generation and other opportunities that are currently at
various stages of development. Despite the challenges
of continual regulatory reform initiatives and an offer to
acquire our business, the APA team has remained focused
on delivering for its customers and growth.
Long term view
As we have detailed in the 2018 Sustainability Report which
is contained in this report, APA recognises that climate
change is a risk that warrants our consideration both as
a business and as a good global citizen. APA is supportive
of Australia’s commitment under the Paris Agreement to
reduce emissions by between 26 and 28 per cent on 2005
levels by 2030. To meet these emissions reductions, major
changes are required for the Australian energy industry.
APA GROUP — ANNUAL REPORT 2018 — 05
We are also aware that the physical impacts of climate
change may impact operational aspects of APA’s operations
and financial performance, such as: the ability to operate
in extreme conditions; maintenance requirements and
our ability to respond to extreme weather events; as well
as consequential changes in insurance costs; our supply
chain. To reinforce our commitment to improving APA’s
Environmental, Social and Governance (ESG) performance,
we have initiated a new program and engaged an
external advisory firm to review APA’s strategic direction
for our ESG management and reporting. It is important
for the sustainability of any business to understand the
opportunities and risks associated with climate change and
how we incorporate those into our strategy. A plan is being
developed which will see a number of ESG initiatives rolled
out from FY2019 and beyond.
This financial year, APA has strengthened its advocacy in
environmental stewardship. We believe that gas is a viable,
lower-emissions fuel supply that can help respond to the
intermittent nature of renewable energy generation while
technology continues to evolve in energy generation.
APA continues to expand its renewable generation portfolio
with the commissioning of the Emu Downs Solar Farm
and the development of our Darling Downs Solar Farm and
Badgingarra Wind and Badgingarra Solar Farms.
APA’s extensive gas pipeline footprint was built with
Australia’s future in mind. Our assets are built for the
long term to meet our customers’ needs for long term
energy supply. Sustainable business practice is incorporated
into the way we work with all our stakeholders including
customers, the environment, community, employees
and investors.
Looking ahead
It is prudent to add that while APA has spent the past
18 years building a pipeline of energy infrastructure assets
and a growth trajectory to create securityholder value,
your Board, has advised its unanimous support for the
Implementation Agreement with the CKI Consortium
to acquire 100 per cent of APA. The compelling offer is
testament to APA’s success, evolving from a simple point-
to-point pipeline business with an enterprise value of
around $1 billion in 2000, to a business now being valued
by a potential acquirer at $22 billion.
Regardless of the outcome of the proposed transaction
which remains subject to a number of conditions, our
vision to connect Australia to its energy future, remains.
I believe that our burgeoning portfolio of infrastructure
assets will continue to deliver energy solutions to the
people, businesses and communities of Australia affordably,
efficiently and reliably for generations to come. I am very
proud to have been a part of APA’s growth and success
and to work alongside all 1,700 members of APA’s team
over the past year.
Mick McCormack
Chief Executive Officer and Managing Director
06 — APA GROUP — ANNUAL REPORT 2018
apa group board.
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Michael Fraser
BCom FCPA FTI MAICD
Independent Chairman
Appointed 1 September 2015
Appointed Chairman 27 October 2017
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 Non-Executive 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 Audit
and Risk Management Committee
and the Chairman of the
Nomination Committee.
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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 Chairman
of Argo Investments Limited
and of Argo Global Listed
Infrastructure 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.
Michael (Mick) McCormack
BSurv GradDipEng MBA FAICD
Chief Executive Officer and
Managing Director
CEO – Appointed 1 July 2005
MD – Appointed 1 July 2006
Mick has over 35 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 power
generation, gas processing, LNG
and underground storage.
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.
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Shirley In’t Veld
BCom LLB (Hons)
Independent Director
Appointed 19 March 2018
Shirley has considerable expertise
and experience in the energy,
mining and renewables sectors.
Shirley is currently a Non-Executive
Director with Northern Star
Resources Limited and NBN Co
Limited and Deputy Chair of
CSIRO. She is formerly a Non-
Executive Director of Perth Airport,
DUET Group, Asciano Limited,
Alcoa of Australia Limited and a
Council Member of the Chamber
of Commerce and Industry of
Western Australia. She was also
the Managing Director of Verve
Energy (2007 – 2012) and, before
that, she worked for 10 years in
senior roles at Alcoa of Australia,
WMC Resources Ltd, Bond
Corporation and BankWest.
In 2014, she was Chairman of the
Queensland Government Expert
Electricity Panel and a member
of the Renewable Energy Target
Review Panel for the Department
of Prime Minister and Cabinet
and, was until recently, a Council
member of the Australian Institute
of Company Directors (WA) and
an Advisory Board member of
the SMART Infrastructure Facility
(University of Wollongong).
Shirley is a member of
the Health, Safety and
Environment Committee and
a member of the People and
Remuneration Committee.
Steven (Steve) Crane
BComm FAICD SF Fin
Independent Director
Appointed 1 January 2011
Debra (Debbie) Goodin
BEc FCA MAICD
Independent Director
Appointed 1 September 2015
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 a member of the Audit
and Risk Management Committee
and a member of the People and
Remuneration Committee.
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Patricia McKenzie
LLB FAICD
Independent Director
Appointed 1 January 2011
Patricia has considerable expertise
and experience in energy market
regulation and extensive corporate
legal experience. She is currently
Chair of Essential Energy.
Patricia was formerly the Chair
and a Director of Healthdirect
Australia; 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,
and a member of the People
and Remuneration Committee.
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 Senex Energy
Limited, oOh!media Limited and
Atlas Arteria Limited, and Chairs
the Audit and Risk Committees
of Senex Energy Limited and
oOh!media Limited and Chairs
the Remuneration Committee for
Atlas Arteria Limited. She was
formerly a Director of Ten Network
Holdings Limited.
Debbie also has extensive executive
experience in operations, finance
and corporate development,
including with engineering and
professional services firms, and is a
Fellow of Chartered Accountants
Australia and New Zealand.
Debbie is the Chairman of the
Audit and Risk Management
Committee, a member of the
Health Safety and Environment
Committee and a member of the
Nomination Committee.
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Peter Wasow
BCom, GradDip (Management)
Fellow (CPA Australia)
Independent Director
Appointed 19 March 2018
Peter has extensive experience
in the resources sector as both a
senior executive and director. He
retired as Managing Director and
Chief Executive Officer of Alumina
Limited in mid-2017. Previously, he
had held the position of Executive
Vice President and Chief Financial
Officer at Santos Limited and,
in a 20-year plus career at BHP,
he held senior positions including
Vice President, Finance, and other
senior roles in Petroleum, Services,
Corporate, Steel and Minerals.
Peter is a Non-Executive Director
with Oz Minerals Limited and the
privately held GHD Group. He is
formerly a Non-Executive Director
of Alcoa of Australia Limited, AWA
Brazil Limitada, AWAC LLC and
Alumina Limited.
Peter is the Chair of the People
and Remuneration Committee and
a member of the Audit and Risk
Management Committee.
apa group senior management.
APA GROUP — ANNUAL REPORT 2018 — 07
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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 energy
infrastructure, financial services
and investment banking
organisations across Australia,
New Zealand and Asia.
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Sam Pearce
BSc LLB MBA
Group Executive Networks
& 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.
Nevenka Codevelle
BCom LLM GAICD
Group Executive Governance,
Risk and Legal
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 has 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.
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Elise Manns
BBus CAHRI
Group Executive
People, Safety and Culture
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
and 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.
Ross Gersbach
BBus MAICD
Chief Executive
Strategy and Development
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.
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.
7
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. Rob has
over 20 years’ of experience in
Australia and internationally,
in energy infrastructure and
telecommunications, across roles
in finance, commercial, strategy,
infrastructure investments and
M&A, as well as regulatory.
08 — APA GROUP — ANNUAL REPORT 2018
highlights FY2018.
$1,518.5m
earnings before interest,
tax, depreciation and
amortisation (EBITDA)
+3.3%
on FY2017
$875.5m
~$425m
total capital and investment
expenditure in FY2018
Expected
in FY2019
$1,031.6m
5.9%
operating cash flow
on FY2017
$11.6 bMarket capitalisation
as at 30 June 2018
45.0¢
+3.4%
FY2018 total distribution
per security
on FY2017
plus total franking credits
of 6.33 cents per security
232mw
257.5mw
renewable power generation owned
and/or operated as at FY2018
under construction to
be completed in FY2019
252km
of new pipelines constructed and
commissioned in FY2018 connecting to
APA’s east and west coast pipeline grids
normalised (1) business performance.
APA GROUP — ANNUAL REPORT 2018 — 09
EBITDA
($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)
2
3
0
,
1
4
7
9
2
6
8
8
1
5
,
1
0
7
4
,
1 1
3
3
,
1
2
2
7 8
4
7
5
4
5
0
4
4
9
1
1
,
3 1
9
9
1
4
9
,
1
8
8
8
,
1
6
5
6
,
1
7
.
0
9
1
.
7
8
1
.
7
7
.
6
4
6 5
0
5
.
.
5
3
5 4
.
1
0 4
8
3 3
6
3
.
.
.
7
4
1
.
8
4
1
.
0
5
1
.
2
5
1
.
0
5
4
0
8
.
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
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 2018
30 June 2017
Changes (%)
2,386.7
1,941.4
1,518.5
264.8
1,031.6
15,227.2
8,810.4
4,126.8
90.7
23.3
45.0
51.5
65.4
2.7
2,326.4
1,888.3
1,470.1
236.8
973.9
15,046.0
9,249.7
3,978.2
87.1
21.2
43.5
49.8
67.4
2.8
2.6
2.8
3.3
11.8
5.9
1.2
4.7
3.9
3.8
9.4
3.4
3.4
3.0
(3.6)
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) On the 23 March 2018, APA Group issued 65,586,479 new ordinary securities on completion of the fully underwritten pro-rata accelerated institutional tradeable
renounceable entitlement offer (Entitlement Offer), resulting in total securities on issue as at 30 June 2018 of 1,179,893,848. The Entitlement Offer was offered
at $7.70 per security, a discount to APA Group's closing market price of $8.26 per security on the 23 February 2018, the last trading day before the record date of
26 February 2018. The numbers of securities used for calculation of earnings per security and operating cash flow per security from FY2018 to FY2014 have been
adjusted. An adjustment factor of 1.0038 has been calculated, being the closing market price per security on 23 February 2018, divided by the theoretical ex-rights
price (TERP) of $8.23 per security.
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 to account for that 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.
10 — APA GROUP — ANNUAL REPORT 2018
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 2018
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 2018. 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:
Michael Fraser
Chairman from 27 October 2017
Michael (Mick) McCormack
Chief Executive Officer and Managing Director
Steven (Steve) Crane
Debra (Debbie) Goodin
Russell Higgins AO
Patricia McKenzie
Shirley In’t Veld
Peter Wasow
Appointed 19 March 2018
Appointed 19 March 2018
Leonard Bleasel AM
Retired as Chairman and Director 27 October 2017
John Fletcher
Retired as a Director 21 February 2018
The Company Secretary of the Responsible Entity during and since the year to 30 June 2018 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; and 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
On 13 June 2018, APA announced that an unsolicited, indicative non-binding proposal had been received from a consortium
comprising CK Infrastructure Holdings Limited (CKI), CK Asset Holdings Limited (CKA) and Power Assets Holdings Limited
(PAH) (together, the Consortium), to acquire all of the stapled securities in APA. The indicative price proposed by the
Consortium was $11.00 cash per stapled security, plus the final six months distribution for FY2018 of 24.0 cents per stapled
security to be paid in September as scheduled. The Board considered it was in the best interests of Securityholders to further
engage with the Consortium and allow due diligence which was undertaken during June – August 2018.
Subsequently, on 13 August 2018, APA announced that it had entered into a conditional Implementation Agreement with CKI,
CKA, PAH and CKM Australia Bidco Pty Ltd (Bidder) under which Bidder (a wholly owned subsidiary of CKA) will acquire all of
the stapled securities in APA under trust schemes (Schemes).
If the Schemes are implemented, APA Securityholders will receive A$11.00 cash per APA stapled security. The transaction
does not affect APA’s final distribution for the 2018 financial year, which the Board announced on 22 August 2018, will be 24.0
cents per stapled security, and will be paid on 12 September 2018.
If the Schemes are implemented at any time after 31 December 2018, APA Securityholders will receive an additional
distribution of 4.0 cents per APA stapled security for each full month in calendar 2019 which elapses prior to implementation
of the Schemes (up to, and including, March 2019).
Implementation of the Schemes is subject to certain conditions outlined in the Implementation Agreement (a copy of which
was attached to APA’s ASX announcement on 13 August 2018). The conditions include:
— Approval of the Australian Competition and Consumer Commission and the Foreign Investment Review Board;
— An Independent Expert opining that the Schemes are fair and reasonable and in the best interests of APA Securityholders;
— No “material change” or “prescribed events” occurring in relation to APA;
— CKA shareholder approval;
— APA Securityholder approval; and
— Court approval.
The APA Directors unanimously recommend the transaction in the absence of a superior proposal and subject to an
Independent Expert concluding (and continuing to conclude) that the Schemes are fair and reasonable and in the best
interests of APA Securityholders.
Depending on the progress of regulatory approvals, a meeting of APA Securityholders is targeted to be held in late
November 2018 to consider the Schemes, with implementation and payment to APA Securityholders targeted to occur in
mid December 2018.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 11
4. Subsequent Events
The following events have occurred subsequent to the period end:
— On 2 July 2018 a new $1,000 million syndicated bank facility came into effect. This new facility has two tranches maturing
on 30 June 2023 and 31 December 2023 respectively.
— On 13 August 2018, APA announced that it had entered into a conditional Implementation Agreement with CKI, CKA,
PAH and CKM Bidder under which Bidder (a wholly owned subsidiary of CKA) will acquire all of the stapled securities in
APA under trust schemes (Schemes). If the Schemes are implemented, APA Securityholders will receive A$11.00 cash per
stapled security. The transaction does not affect APA’s final distribution for the 2018 financial year. If the Schemes are
implemented at any time after 31 December 2018, APA Securityholders will receive an additional distribution of 4.0 cents
per APA stapled security for each full month in calendar 2019 which elapses prior to implementation of the Schemes (up
to, and including, March 2019). Implementation of the Schemes is subject to certain conditions, including regulatory and
shareholder approvals.
— On 22 August 2018, the Directors declared a final distribution of 24.0 cents per security ($283.2 million) for APA Group,
an increase of 4.3%, or 1.0 cent per security over the previous corresponding period (2H FY2017: 23.0 cents). This is
comprised of a distribution of 17.96 cents per security from APT and a distribution of 6.04 cents per security from APTIT.
The APT distribution represents a 8.93 cents per security fully franked profit distribution and 9.03 cents per security capital
distribution. The APTIT distribution represents a 2.90 cents per security profit distribution and a 3.14 cents per security
capital distribution. Franking credits of 3.83 cents per security will be allocated to the APT franked profit distribution. The
distribution is expected to be paid on 12 September 2018.
Other than what is noted above and as disclosed elsewhere in this report, there has not arisen in the interval between the
end of the full year to 30 June 2018 and the date of this report any matter or circumstance that has significantly affected,
or may significantly affect, the Group’s operations, the results of those operations, or the Group’s state of affairs, in future
financial years.
5. About APA
5.1 APA overview
APA is a leading Australian 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 1,700 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 28,600 kilometres of gas mains and pipelines, and almost 1.4 million gas
consumer connections.
APA also has interests in 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 24-fold to $11.8 billion (2), and it has achieved securityholder returns of
17.8% (3) per annum on an annual compounding basis since listing on 13 June 2000 through to 20 August 2018.
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; and
– of midstream energy infrastructure assets, including gas storage and gas processing.
— Continue to strengthen asset management, development and operational capabilities.
— Maintain APA’s financial strength.
These strategies are underpinned by the ‘APA Way’ – how we do business. This new blueprint was integrated into APA’s
culture and mindset during the reporting period. The APA Way is a combination of how we behave, guided by our values (our
‘STARS’), and how we make decisions, guided by APA’s Decision Compass.
1) Owned and/or operated by APA.
2) Market capitalisation as at 20 August 2018.
3) 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.
12 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
5.2 APA objectives and strategies (continued)
Our ‘STARS’ values set the benchmark for how we operate to ensure business integrity:
— 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.
Good decision-making is at the core of successful strategy execution and APA’s Decision Compass sets out clear principles for all
our employees, empowering them to make good decisions with confidence. Employees and all decision makers right through to the
Board, are encouraged to take a moment and ask “is this decision consistent with each of the key decision compass points” as below:
— Do things safely
— Take a long term focus
— Manage APA money as if it’s our own
— Do what we say we will do
— Know our reputation matters
The APA Way puts all employees on the same page, ensuring that the way we work and the many decisions we make are
based on consistent values and principles, and are aligned to what we need to execute on our strategy.
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
APA Group investments
APA managed (not owned by APA)
Integrated Operations Centre
Wind farm
Solar farm
Gas storage facility
Gas processing plant
Gas power station
18
2632
WA
19
21
22
23
20
24
25
27
28
26
32
NT
17
32
8
34
SA
QLD
2
4
9
10
VIC
13
31
34
33
32
30
16
5
3
6
7
34
32
1
34
IOC
29
32
32
NSW
12
11
34
15
14
TAS
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 13
5.3 APA assets and operations (continued)
Energy Infrastructure assets (numbers correspond with those on the map on page 12)
Length (1)
East Coast and Central Region assets
1 Roma Brisbane Pipeline (including Peat Lateral)
2 Carpentaria Gas Pipeline
3 Berwyndale Wallumbilla Pipeline
4 South West Queensland Pipeline
5 Wallumbilla Gladstone Pipeline (including Laterals)
6 Reedy Creek Wallumbilla Pipeline
7 Darling Downs Solar Farm (2)
8 Diamantina and Leichhardt Power Stations
9 Moomba Sydney Pipeline
10 Ethane Pipeline
11 Central West Pipeline
12 Central Ranges Pipeline and
Tamworth Gas Network (gas distribution)
13 Victorian Transmission System
14 Dandenong LNG Storage Facility
15 Orbost Gas Processing Plant (2) (with connection pipeline)
16 SESA Pipeline
17 Amadeus Gas Pipeline (including Laterals)
583 km
944 km
112 km
936 km
556 km
49 km
110 MW
242 MW / 60 MW
2,029 km
1,375 km
255 km
295 km
~250 km of gas mains, ~3,600 gas consumer connections
1,847 km
12,000 tonnes
12 km / ~70 TJ/d
45 km
1,661 km
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 (2)
23 Mt Morgans Gas Pipeline
24 Kalgoorlie Kambalda Pipeline
25 Mid West Pipeline (50%)
26 Parmelia Gas Pipeline
27 Mondarra Gas Storage and Processing Facility
28 Emu Downs Wind Farm
28 Emu Downs Solar Farm
28 Badgingarra Wind Farm (2)
28 Badgingarra Solar Farm (2)
249 km
1,546 km
293 km
198 km
45 MW
5 km
44 km
362 km
448 km
18 PJ
80 MW
20 MW
130 MW
17.5 MW
Energy Investment
29 GDI (EII)
Ownership
interest Detail
20% Gas distribution: Allgas Gas Network ~3,630 km of gas mains,
~108,500 gas consumer connections in Qld and NSW
30 South East Australia Gas Pty Ltd
31 SEA Gas (Mortlake) Partnership
32 Energy Infrastructure Investments
50% Gas pipeline: 687 km SEA Gas Pipeline
50% Gas pipeline: 83 km Mortlake Gas Pipeline
19.9% Gas pipelines: Telfer/Nifty Gas Pipelines and lateral (488 km);
33 EII2
34 Australian Gas Networks
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 (33 TJ/d)
20.2% Wind generation: North Brown Hill Wind Farm (132MW), SA
Nil Gas distribution: ~24,710 km of gas mains and pipelines, ~1.28 million
gas consumer connections, 1,124 km of transmission gas pipelines in
SA, Vic, NSW, Qld & NT
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.
1) Pipeline capacities are available online (www.apa.com.au).
2) Assets under construction.
14 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
6. Financial Overview (continued)
For the financial year to 30 June 2018, APA reported EBITDA of $1,518.5 million, an increase of 3.3% or $48.4 million on the
previous corresponding period EBITDA of $1,470.1 million. This is slightly above the upper level of APA’s guidance range of
$1,475 million to $1,510 million, as advised at the announcement of our FY2017 results and reconfirmed at our 1HFY18 results.
Total revenue (excluding pass-through revenue) increased by $53.1 million to $1,941.4 million, an increase of 2.8% on the
previous corresponding period (FY2017: $1,888.3 million).
Increased revenues and EBITDA were primarily attributable to:
— part year contributions from newly commissioned organic growth assets including the Reedy Creek Wallumbilla Pipeline
(QLD), Mt Morgans Gas Pipeline (WA) and the Emu Downs Solar Farm (WA). Less than $5 million in revenue in FY2018
was from the new growth projects, with the full accretive impact from these projects to flow from FY2019;
— new gas transportation contracts across APA’s East and West Coast Grids, and a new mining customer for the Diamantina
Power Station; and
— US CPI escalation and favourable USD/AUD exchange rates in relation to the Wallumbilla Gas Pipeline.
The solid FY2018 results endorse APA’s prudent and consistent strategy of pursuing secure and sustainable growth
opportunities that earn fair commercial returns. The astute investments, acquisitions and organic growth developments over
the last 18 years, continue to sustain the business as it undertakes the largest growth expansion capital spend in the Group’s
history. Across the three-year period of FY2017 to FY2019, APA will spend in excess of $1.4 billion on committed growth
projects, all of which will contribute to future operating cash flow.
In FY2018, operating cash flow was $1,031.6 million. This represents an increase of 5.9% or $57.7 million over the previous
year (FY2017: $973.9 million), with operating cash flow per security increasing by 4.1%, or 3.6 cents, to 90.7 cents per security
(FY2017: 87.1 (4) cents per security).
On 22 August 2018, the Directors announced a final distribution of 24.0 cents per security, which will take APA’s distributions in
respect of the financial year to a total of 45.0 cents per security. This represents an increase of 3.4%, or 1.5 cents, over FY2017
distributions of 43.5 cents. Franking credits of 3.83 cents per security will be allocated to the final distribution, resulting in the
FY2018 franking credits totalling 6.33 cents per security. APA maintains a sustainable distribution policy to ensure its ability to
fully fund its distributions out of operating cash flows on a going forward sustainable basis, whilst also retaining appropriate
levels of cash in the business to support ongoing growth. APA’s distributions have consistently increased every year for the 18
years the company has been listed.
The following table provides a summary of key financial data for FY2018.
Total revenue
Pass-through revenue (a)
Total revenue excluding pass-through
EBITDA
Depreciation and amortisation expenses
EBIT
Finance costs and interest income
Profit before income tax
Income tax expense
Profit after income tax
Operating cash flow (b)
Operating cash flow per security (cents)
Earnings per security (cents)
Distribution per security (cents)
Distribution payout ratio (c)
Weighted average number of securities (000) (d)
Notes: Numbers in the table may not add up due to rounding.
30 June 2018
$000
30 June 2017
$000
2,386,722
445,307
2,326,420
438,140
1,941,415
1,888,280
1,518,474
(578,916)
939,558
(509,664)
429,894
(165,055)
1,470,122
(570,021)
900,101
(513,767)
386,334
(149,488)
264,839
236,846
1,031,627
90.7
23.3
45.0
51.5%
1,136,875
973,936
87.1
21.2
43.5
49.8%
1,118,523
Changes
$000
60,302
7,167
53,135
48,352
(8,895)
39,457
4,103
43,560
(15,567)
27,993
57,691
3.6
2.1
1.5
1.7%
18,352
%
2.6%
1.6%
2.8%
3.3%
(1.6%)
4.4%
0.8%
11.3%
(10.4%)
11.8%
5.9%
4.1%
9.9%
3.4%
3.4%
1.6%
a) 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.
b) Operating cash flow = net cash from operations after interest and tax payments.
c) Distribution payout ratio = total distribution applicable to the financial year as a percentage of operating cash flow.
d) On the 23 March 2018, APA Group issued 65,586,479 new ordinary securities on completion of the fully underwritten pro-rata accelerated institutional tradeable
renounceable entitlement offer (Entitlement Offer), resulting in total securities on issue as at 30 June 2018 of 1,179,893,848. The Entitlement Offer was offered
at $7.70 per security, a discount to APA Group’s closing market price of $8.26 per security on the 23 February 2018, the last trading day before the record date
of 26 February 2018. The number of securities used for FY2018 and FY2017 calculation of earnings per security and operating cash flow per security have
been adjusted.
4) Operating cash flow per security has been adjusted for the Entitlement Offer completed on the 23 March 2018. An adjustment factor of 1.0038 has been
calculated, being the closing market price per security on 23 February 2018, divided by the theoretical ex-rights price (TERP) of $8.23 per security.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 15
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 June 2018
$000
30 June 2017
$000
Changes
$000
%
Revenue
Energy Infrastructure
East Coast: Queensland
East Coast: New South Wales
East Coast: Victoria
East Coast: South Australia
Northern Territory
Western Australia
1,153,214
166,506
153,699
2,998
32,861
294,681
1,114,428
176,000
156,946
2,958
30,932
291,728
Energy Infrastructure total
1,803,959
1,772,992
Asset Management
Energy Investments
Total segment revenue
Pass-through revenue
Unallocated revenue (a)
Total revenue
EBITDA
Energy Infrastructure
East Coast: Queensland
East Coast: New South Wales
East Coast: Victoria
East Coast: South Australia
Northern Territory
Western Australia
108,537
23,068
1,935,564
445,307
5,851
86,424
24,382
1,883,798
438,140
4,482
2,386,722
2,326,420
962,231
147,095
124,631
2,577
22,923
237,639
925,366
149,484
123,008
2,319
18,771
234,724
Energy Infrastructure total
1,497,096
1,453,672
Asset Management
Energy Investments
Corporate costs
Total EBITDA
66,204
23,068
(67,894)
58,719
24,382
(66,651)
1,518,474
1,470,122
38,786
(9,494)
(3,247)
40
1,929
2,953
30,967
22,113
(1,314)
51,766
7,167
1,369
60,302
36,865
(2,389)
1,623
258
4,152
2,915
43,424
7,485
(1,314)
(1,243)
48,352
3.5%
(5.4%)
(2.1%)
1.4%
6.2%
1.0%
1.7%
25.6%
(5.4%)
2.7%
1.6%
30.5%
2.6%
4.0%
(1.6%)
1.3%
11.1%
22.1%
1.2%
3.0%
12.7%
(5.4%)
(1.9%)
3.3%
Notes: Numbers in the table may not add up due to rounding.
a) Interest income is not included in calculation of EBITDA, but nets off against interest expense in calculating net interest cost.
APA has delivered a solid result in FY2018 reflecting sustainable operations and the intrinsic value of the business, which is
more than the sum of its individual assets. APA’s diversity of expertise, asset type and geographic spread all contribute to
APA’s business sustainability.
Total EBITDA increased by $48.4 million, or 3.3%, to $1,518.5 million, over the FY2017 result of $1,470.1 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.
7.1 Energy Infrastructure
The Energy Infrastructure segment consists of all APA’s interconnected energy infrastructure footprint across mainland
Australia including gas transmission, gas compression, processing and storage assets, renewable energy power generation,
and gas-fired power generation.
This segment is the largest contributor to group revenue, contributing 93.2% (excluding pass-through) and 94.4% of group
EBITDA (before corporate costs) during the financial year. Revenue (excluding pass-through revenue) was $1,804.0 million,
an increase of 1.7% on the previous year (FY2017: $1,773.0 million). EBITDA (before corporate costs) increased by 3.0% on the
previous year to $1,497.1 million (FY2017: $1,453.7 million).
This segment is characterised by the East Coast Gas Grid and the West Coast Gas Grid, the nature of which will result in
both positive and negative swings over the longer term in revenue and EBITDA on the individual assets that make up each
of those grids. In FY2018, for example, increased revenue and EBITDA in Queensland offset reductions in New South Wales
and Victoria as customers with more flexible multi-asset, multi service contracts determined their respective needs, period on
period, for gas sourcing and delivery.
16 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
7.1 Energy Infrastructure (continued)
During the reporting period, new earnings were realised from recently completed and commissioned assets including the
Reedy Creek Wallumbilla Pipeline, the Mt Morgans Gas Pipeline and the Emu Downs Solar Farm. FY2018 earnings for
Energy Infrastructure also benefitted from the US CPI increase on the Wallumbilla Gladstone Pipeline contract, along with
a favourable USD/AUD exchange rate as the majority of contract revenues are in USD.
Energy Infrastructure Revenue by State
Energy Infrastructure EBITDA by State
A$ m
1,600
1,200
800
400
0
90%
A$ m
80%
1,200
70%
800
60%
400
50%
0
FY15
FY16
FY17
FY18
FY15
WA
NT
SA
VIC
NSW
QLD
EBITDA margin
WA
NT
SA
FY16
VIC
FY17
FY18
NSW
QLD
Energy Infrastructure EBITDA by Asset
FY18
FY17
FY16
FY15
0
150
300
450
600
750
900
1,050
1,200
1,350
1,500
A$ m
Wallumbilla Gladstone Pipeline
Carpentaria Gas Pipeline
Victorian Transmission System
Eastern Goldfields Pipeline
Other WA
South West Queensland Pipeline
Diamantina Power Station
SESA Pipeline
Emu Downs Wind and Solar Farm
Roma Brisbane Pipeline
Other Qld assets
Amadeus Gas Pipeline
Pilbara Pipeline System
Reedy Creek Wallumbilla Pipeline
Moomba Sydney Pipeline
Goldfields Gas Pipeline
Mondarra Gas Storage
Note: The charts above exclude discontinued operations previously accounted for within Energy Infrastructure, including earnings from Allgas Networks and Moomba
to Adelaide Pipeline.
The majority of revenues in the Energy Infrastructure segment derive from either regulatory arrangements or long term
capacity-based contracts. Contracts generally have the majority of the revenue fixed over the term of the relevant contract.
WORKING WITH APA’S CUSTOMERS ~ a short term solution for Incitec Pivot
On 25 June 2018, APA announced a one year gas transportation contract with Incitec Pivot (IPL) to deliver gas from
the Northern Territory to IPL’s Gibson Island fertiliser plant near Brisbane. IPL is a long term customer of APA and the
importance of this contract was to assist IPL in keeping its Gibson Island plant operations running for another year whilst
other options are explored for future economically viable gas supply, given the East Coast’s tight gas supply market.
Quote from Jeanne Johns, Managing Director and CEO, Incitec Pivot Limited
“An affordable and reliable gas supply is critical to securing the sustainable future of Incitec
Pivot’s Gibson Island fertiliser manufacturing plant. The Gibson Island site employs around 450
people and produces 550,000 tonnes of fertiliser per year, which is then used within Australia
and globally to support farming communities that grow food to feed millions of people.
It was very satisfying to see the whole of the gas industry supply-chain working together
with us to develop an interim gas solution that will allow our Gibson Island plant in Queensland
to operate for another year.
Despite a gas supply being almost on our doorstep, the current local gas price required us
to source a more affordable gas supply from over 3,300 kms away. The one-year interim
solution has demonstrated that the industry working together can make a huge difference.
APA, along with our other project partners has worked with Incitec Pivot to make that
long journey viable.“
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 17
7.1 Energy Infrastructure (continued)
During FY2018, APA refreshed its suite of gas pipeline services, to provide customers with more options and additional
flexibility making it simpler for customers to better manage their gas portfolios. The refreshed services and approach provide
additional clarity and ease of access for customers to APA’s infrastructure, which will help promote gas market liquidity.
During the reporting period, APA announced several significant new or renewal contracts including: a new $40 million revenue
contract over three years for gas transportation and storage from Queensland into southern markets; a $38 million contract
extension over two years for an East Coast Grid customer; and a new gas transportation agreement with Incitec Pivot to
transport gas over 3,300 km from the Northern Territory to their Gibson Island fertilizer plant near Brisbane.
Changes to Part 23 of the National Gas Rules during the reporting period provide a commercial arbitration framework in
the event parties cannot agree a negotiated contract. APA has continued to successfully negotiate all new contracts and
contract renewals with its customers.
During the financial year, 78.7% of Energy Infrastructure revenue (excluding pass-through) was from capacity reservation
charges from term contracts, 4.3% from other contracted fixed revenues and 6.8% from throughput charges and other
variable components. Given the dynamic east coast gas market, there were additional revenues from the provision of flexible
short term services, accounting for around 1.0%. The regulated portion of APA’s revenue makes up 9.0% of total FY2018
Energy Infrastructure revenue. Given the take-or-pay nature of the majority of APA’s Energy Infrastructure contracts, APA
had direct oversight of 92.0% of its revenue earning for this business segment during the reporting period.
As part of APA’s product refresh of gas transportation services during the period, many of APA’s standard service offerings
and tariffs are now effectively 100% capacity reservation.
FY2018 Energy Infrastructure by Revenue Type
APA Pipelines by Regulation Type (a)
Capacity charge revenue: 78.7%
Throughput charge &
other variable revenue: 6.8%
Contracted fixed revenue: 4.3%
Regulated revenue: 9.0%
Flexible short term services: 1.0%
Other: 0.2%
Full regulation pipelines
Light regulation pipelines
Non-scheme pipelines
a) Owned and/or operated by APA
APA manages its counterparty risk in a variety of ways. One aspect is to consider customers’ credit ratings. During FY2018,
95.6% 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.
FY2018 Energy Infrastructure Revenues
by Counterparty Credit Rating
FY2018 Energy Infrastructure Revenues
by Customer Industry Segment
A- rated or better: 44.9%
BBB and BBB+: 27.8%
Investment Grade (a): 22.9%
Not rated: 4.2%
Sub-investment grade: 0.2%
Energy: 49.1%
Utilities: 24.3%
Resources: 21.6%
Industrials & Others: 5.0%
a) An investment grade credit rating from either S&P (BBB- or better) or Moody’s (Baa3 or better), or joint venture with an investment grade average rating across
owners. Ratings shown as equivalent to S&P rating scale.
APA strives to continually enhance the service offerings available to customers to better address their increasingly complex
and dynamic gas portfolio needs. Significant investment by APA has been made in energy infrastructure in the last decade
to support customers’ needs. The state-of-the-art Integrated Operations Centre (IOC) is one of those customer focused
initiatives that APA has invested in to deliver seamless and reliable services for the benefit of the Australian energy market.
APA’s IOC in Brisbane has dramatically improved Australia’s gas transmission operations, providing customers access to
greater operating flexibility and smarter gas portfolio management. It improves market resilience significantly by utilising the
breadth of the Grid to respond to contingencies. The facility continues to evolve its services and functions to meet the growing
and changing needs of both our customers and APA’s operations.
The IOC plays a major role in APA being able to provide the benefits of system flexibility, efficiencies, cost effective solutions
and safety from having real-time visibility across transmission assets throughout Australia, 24 hours a day, seven days a week.
18 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
7.1 Energy Infrastructure (continued)
Engineering, commercial and systems operation skills integrate into daily decision making to give the business both big picture
and detailed oversight of operations. Gas market opportunities for customers can be quickly realised as can immediate
response and management to periods of unplanned plant, market or customer disruption.
The IOC also plays a key role in keeping our remote employees safe by monitoring and managing the In-Vehicle Monitoring
System (IVMS) thereby better managing APA’s operational risk. More importantly, it provides employees and their families
with a high level of comfort that someone knows where they are at all times whilst they travel between remote locations.
THE IOC – THE EYES AND EARS OF APA TRANSMISSION
~ ensuring security of supply in southern markets during Longford operational constraints
During mid-June 2018, the Longford gas facility in Victoria suffered an operational issue resulting in a risk to the security
of gas supply in southern markets. The Longford gas plant currently supplies the majority of Victoria’s gas requirements,
as well as gas supplies for NSW and Tasmania.
Peak winter and summer periods are often times when “if something can go wrong, it will…and usually at the worst time.”
Gas constraints were already in place that week at Longford to undertake repairs of a gas train. APA also had planned
maintenance and other works underway on the Roma Brisbane Pipeline and at Moomba. Therefore, when the Longford
gas plant undertook to resolve the operational issue during a further two day period, there was a real possibility of a gas
supply shortage in southern markets.
A highly coordinated combination of solutions from
across APA’s East Coast Grid and other external
stakeholders were put into play to ultimately
manage gas supply security. This
included
increased instantaneous southern flow capacity
from APA’s Grid into the Declared Wholesale
Gas Market; optimisation and management of
Moomba Sydney Pipeline (MSP) line pack; Roma
Brisbane Pipeline assistance to allow rebuild of
MSP line pack; and Young, Culcairn and Bulla Park
compressors placed on standby.
The successful outcome as a result of APA’s
interconnected grid system with IOC oversight,
meant that all demand for gas across eastern
Australia was met, and businesses and consumers
that rely on gas as their energy source were
not impacted.
Nicholas Edmiston overseeing operations in APA’s Integrated Operations
Centre in Brisbane
East Coast and Central Region
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 in Queensland.
EBITDA from APA’s assets on the east coast increased by 3.0% during the financial year.
In NSW and Victoria, continued demand for bi-directional services due to dynamic southern and northern gas markets
contributed to the earnings increase. The Moomba Sydney Pipeline continues to play a critical role to the operation of the
East Coast Grid as both a bi-directional gas transmission highway and gas storage facility.
In Queensland, the South West Queensland Pipeline and its bi-directional capability played a key role in gas moving both
east and west. APA’s newest Queensland pipeline and extension to the East Coast Grid - the 49km Reedy Creek Wallumbilla
Pipeline - was completed and commissioned in May 2018. An official opening by the Queensland Premier, the Hon. Annastacia
Palaszczuk, the Minister for Natural Resources, Mines and Energy, the Hon. Dr Anthony Lynham, and the Mayor for Maranoa
Regional Council, Tyson Golder was held in June 2018, at APA’s Wallumbilla operations site.
APA GROUP — ANNUAL REPORT 2018 — 19
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
7.1 Energy Infrastructure (continued)
APA RESPONDING TO CUSTOMER NEEDS
~ connecting APLNG directly to the dynamic east coast domestic gas market
In September 2016, APA announced construction of the new 49 km Reedy Creek Wallumbilla Pipeline to connect the
Australia Pacific LNG Pipeline (APLNG) at Reedy Creek to APA’s 7,500 km East Coast Grid system at Wallumbilla.
Less than two years on, the recently commissioned pipeline (May 2018) is operating and providing APLNG access to the
dynamic eastern Australian domestic gas market.
The new bi-directional pipeline was officially opened by the Queensland Premier, The Hon. Annastacia Palaszczuk, at
APA’s Wallumbilla operations site. Also attending was the Minister for Natural Resources, Mines and Energy, The Hon.
Dr Anthony Lynham, APLNG’s Chief Executive Warwick King, APA’s Chairman Michael Fraser, APA’s Managing Director
Mick McCormack and Tyson Golder, the Mayor for Maranoa Regional Council (image below).
“This new pipeline gives APLNG efficient, flexible access to Australia’s dynamic east coast gas market via Wallumbilla,”
Mr King said. “We are pleased to have reached a long-term agreement with APA that enables us to support the efficient
movement of gas.”
APA entered into a 20-year contract with APLNG to provide a bi-directional service of up to 300 TJ/d on the new
pipeline. APA is able to utilise its unique gas grid to provide bespoke services that supports our customers’ commercial
requirements, and shoring up gas security for domestic markets.
From delivery of pipes in November 2016, to the official opening in June 2018, the Reedy Creek Wallumbilla Pipeline is already providing commercial options
for APLNG to move its gas
APA’s Diamantina gas-fired power station in Mount Isa, Queensland benefitted from a new mining customer during the
period. Capricorn Copper operates the Capricorn Copper mine, north of Mount Isa and was in ramp-up mode for the
first seven months of FY2018, and is now at full contract capacity. The mine is a restart of prior mining operations, which
recommenced in 2017.
During the financial year, APA’s assets in the Northern Territory recorded an uplift in earnings from additional contracting
achieved on the Amadeus Gas Pipeline. South Australian earnings were in line with expectations.
Western Australia
APA services a range of customers in Western Australia within the resources, industrial and utility sectors. In recent years,
interconnections off the main Goldfields pipeline to mining sites has not only extended the Western Australian Grid, but
also reinforced the importance of the Goldfields Gas Pipeline in moving gas from the north into the south-eastern region of
Western Australia.
EBITDA from APA’s Western Australian assets for the financial year increased by 1.2% compared with FY2017.
The Eastern Goldfields Pipeline continues to contribute to increased earnings for APA’s Western Australian assets. During
the period, the new Mt Morgans Gas Pipeline was completed to supply gas to Dacian Gold mining operations. APA has a 10.5
year gas transportation agreement with Dacian Gold and the pipeline commenced generating earnings in the second half of
the reporting period.
In June 2017, APA announced the Yamarna Gas Pipeline and Power Station greenfield projects on behalf of the Gruyere Joint
Venture mine project. Construction and commissioning of the 198 km pipeline was completed during the reporting period,
with the power station construction completed recently in August. Commissioning of the Yamarna Power Station will take
place between August and October. First gold pour is scheduled for the FY2019 June quarter.
With the addition of the Gruyere mine in June 2019, the Eastern Goldfields Pipeline will have five mines using approximately
1,700 kms of interconnected pipelines to the eastern goldfields region in Western Australia. APA expects further opportunities
for growth in this area as miners are seeking reliable and economical energy solutions to ensure their operations are viable for
the life of the mines.
APA is developing a significant renewable energy precinct in the West and during FY2018 completed and commissioned the
20 MW Emu Downs Solar Farm which was underpinned by a 13 year power purchase agreement with Synergy. The project
received $5.5 million funding from the Australian Renewable Energy Agency (ARENA).
20 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
7.1 Energy Infrastructure (continued)
CO-LOCATED EMU DOWNS WIND AND SOLAR
FARMS ~ maximising resources and infrastructure
The site is co-located with APA’s 80 MW Emu Downs Wind
Farm, taking advantage of shared transmission connection
infrastructure. The wind and solar generation profiles at
this location are largely predictable and complementary,
enabling APA to leverage the combined wind and solar
resources and transmit renewable energy through a single
infrastructure network. During the period, there was a
minor impact on earnings for the Emu Downs Wind Farm
due to the cut-in of the Solar Farm, this was more than
offset by the contribution of the Solar Farm, in the latter
part of the financial year.
In FY2017, APA announced construction of the 130 MW
Badgingarra Wind Farm after entering into a long term
offtake agreement with Alinta to satisfy its renewable
energy requirements. Construction was advanced during
the reporting period and is due for completion in early
2019. During FY2018, APA agreed with Alinta to extend
the original 12 year power purchase agreement for the
Badgingarra Wind Farm by five years, and undertake a
new 17.5 MW co-located Solar Farm on the Badgingarra
site, which is adjacent to the Emu Downs renewables farm.
Both Badgingarra Wind and Solar farms will also share
transmission connection infrastructure.
When complete, APA will have an energy precinct in
Western Australia delivering over 245 MW of renewable
energy capitalising on the complementary wind and solar
relationship in this region.
7.2 Asset Management
APA provides asset management and operational services
to the majority of its energy investments and to a number
Its main customers are Australian
of third parties.
Gas Networks Limited (AGN) (5), Energy Infrastructure
Investments and GDI (EII). Asset management services are
provided to these customers under long-term contracts.
APA has the expertise and diversified skillset to provide whole-of-life asset management and operational services for high
voltage power, power generation, gas rotating plant and equipment, stationary engines, gas transmission pipelines and gas
distribution pipelines. These services also include asset inspection, vegetation management, aerial patrols, metering services
and specialist utility asset services.
Revenue (excluding pass-through revenue) from asset management services increased by $22.1 million or 25.6% to $108.5
million (FY2017: $86.4 million) and EBITDA (excluding corporate costs) increased by $7.5 million or 12.7% to $66.2 million
(FY2017: $58.7 million).
Asset Management Revenue
Asset Management EBITDA
A$ m
100
80
60
40
20
0
A$ m
80
50
40
30
20
10
0
FY15
FY16
FY17
FY18
FY15
FY16
FY17
FY18
One-off Customer Contributions
Underlying Asset Management Revenue
One-off Customer Contributions
Underlying Asset Management Revenue
Note: From FY2017 onwards, DPS and the Ethane Pipeline became fully owned assets and are managed within APA’s Energy Infrastructure segment and therefore
no asset management fees earnt.
5) APA sold its 33.05% stake in AGN in August 2014, however, the operating and maintenance agreements remain on foot until 2027.
APA GROUP — ANNUAL REPORT 2018 — 21
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
7.2 Asset Management (continued)
GAS IS A FUEL OF CHOICE ~ 2018 Commonwealth Games village
APA as the operator and a minority investor in
the GDI Allgas Distribution Network in Brisbane
was engaged by the Gold Coast Commonwealth
Games organisers in 2015 to supply natural gas
to the proposed new Athletes’ Village in time for
Games held on the Gold Coast in April 2018. The
work involved extending the GDI gas network
to the greenfield site and reticulating the gas
infrastructure throughout the development as
construction proceeded.
Redevelopment of the precinct was one of the
largest urban renewal projects ever undertaken
on the Gold Coast. Natural gas was used to
supply bulk hot water and cooking to apartments,
pool heating and catering.
Transformation of the athletes’ accommodation is underway to develop permanent apartments for both student
and general accommodation. The remainder of the site is also being developed into a new Gold Coast Health
and Knowledge precinct.
APA worked closely with the developer to ensure that the construction of the gas infrastructure was well coordinated
to work in with the immediate and future needs of the site, and ensured gas was provided to the facilities well in
advance of the Commonwealth Games.
Customer Contributions
APA Operated Gas Networks Statistics
30
20
10
0
Average ~$12m p.a.
1.40
(million)
(km)
29,000
1.35
1.30
1.25
28,000
27,000
FY14
FY15
FY16
FY17
FY18
FY15
FY16
FY17
FY18
Gas consumer connections (LHS)
Networks managed (RHS)
Customer contributions are payments received from a third party for APA to undertake work on the assets it manages to
accommodate that third party’s project. Customer contributions have increased in FY2018 moving the long term average
per annum to approximately $12 million from $10 million per annum average over the last five years. APA continues to expect
annual swings in customer contributions, as these are driven by customer requirements.
Excluding customer contributions, both revenue and EBITDA increased for the Asset Management business due to tariff
adjustments in line with regulatory approvals. Solid connection growth for the gas distribution businesses of AGN and GDI
continues through ongoing investment in new housing estates and high-rise apartment developments, with natural gas
continuing to be a fuel of choice for cooking, hot water and heating in these markets.
REWARDING EXCELLENCE ~ APA Employee Excellence Award winner focusing on Network customers
Each year, APA holds annual awards to celebrate the efforts and success of our employees. During FY2018, the awards
were refreshed and rebranded to the APA Excellence Awards and were aligned to APA’s five ‘STARS’ values - Safety,
Trustworthy, Adaptable, Results and Service.
Nicole Butler from APA’s Commercial Networks division was the dual winner of the APA Excellence “Service” Award,
along with Silvana Alessandro from the Financial Accounting division. Nicole won the award for her role in removing
barriers and roadblocks that were making new Network connection processes unnecessarily complicated for internal
and external customers.
Nicole’s belief that every customer is important resonates with APA’s Values. Nicole is a team player, reinforcing a
customer centric ethos and believes that while it may only take one person to care about the customer’s needs, it takes
a team of people to ensure those needs are met. Nicole’s commitment is testament to all of APA’s Values (S.T.A.R.S)
Safety, Trustworthy, Adaptable, Results and importantly for our Network customers, Service.
22 — APA GROUP — ANNUAL REPORT 2018
directors’ 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
50%
SEA Gas
(Mortlake)
Partnership
50%
South East
Australia
Gas Pty Ltd
Asset details an
APA services
83 km gas pipeline
connecting the Otway
Gas Plant to the Mortlake
Power Station
MAINTENANCE
Partners
Rest
687 km gas pipeline from
Iona and Port Campbell
in Victoria to Adelaide
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 SERVICES
~3,630 km Allgas gas
distribution network
in Queensland with
~108,500 connections
Marubeni Corporation
State Super
CORPORATE SERVICES
OPERATIONAL MANAGEMENT
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
Marubeni Corporation
Osaka Gas
19.9%
Energy
Infrastructure
Investments
Gas-fired power
generation
71 MW
Gas processing
facilities 45 TJ/day
Electricity transmission
cables 244 km
Gas pipelines
totaling 786 km
CORPORATE SERVICES
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, thereby delivering services from a lower
cost base due to portfolio synergies.
EBITDA from Energy Investments was marginally reduced for
the reporting period to $23.0 million (FY2017: $24.4 million).
7.4 Corporate Costs
Corporate costs of $67.9 million for the financial year were
slightly above the previous corresponding period (FY2017:
$66.7 million) due to additional costs associated with the
new Part 23 compliance requirements. Excluding those
additional compliance costs, APA has kept corporate costs
contained during the largest organic growth cycle that the
business has undertaken.
Energy Investments Revenue & EBITDA
25 (A$ m)
Corporate Costs
(A$ m)
20
15
80
60
40
20
0
FY15
FY16
FY17
FY18
FY15
FY16
FY17
FY18
Divested & transferred investments
Continuing investments
Note: DPS and EPX earnings are classified as divested and transferred
investments within Energy Investments up until financial close for the
purpose of the segment reporting.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 23
8. Capital and Investment Expenditure
Capital and investment expenditure for FY2018 totalled $875.5 million. Total capital expenditure (including stay-in-
business capital expenditure but excluding acquisitions and other investing cash flows) for FY2018 was $855.5 million
compared with $340.7 million last year. Growth project expenditure of $742.9 million (FY2017: $271.9 million) was largely
related to the following projects during the year:
— Construction of the Darling Downs Solar Farm and completion and commissioning of the Reedy Creek Wallumbilla
Pipeline in Queensland;
— Construction and completion of Western Australia projects including the Yamarna Gas Pipeline, Mt Morgans Gas
Pipeline and Emu Downs Solar Farm;
— Construction of the Murrin Compressor Station. Yamarna Power Station and Badgingarra Wind Farm are also well
underway, and will be completed in FY2019;
— Commencement of the upgrade of the Orbost Gas Processing Plant in Victoria; and
— Pre-investigative and preliminary license approval undertakings for the proposed Western Slopes Pipeline and Crib
Point Pakenham Pipeline.
APA’s growth capital expenditure continues to be fully underwritten through long-term contractual arrangements or to
have regulatory approval through a relevant access arrangement. Capital and investment expenditure for FY2018 is detailed in
the table below.
Capital and investment
expenditure (a)
Description of major projects
30 June 2018
($ million)
30 June 2017
($ million)
Growth expenditure
Regulated
Non-regulated
Queensland
Victorian-Northern Interconnect expansion, South West
Pipeline Westernhaul Expansion
33.0
106.1
Darling Downs Solar Farm, Reedy Creek Wallumbilla Pipeline
199.2
Victoria
Orbost Gas Processing Plant, early works on Crib Point to Pakenham Pipeline
116.7
New South Wales
Western Slopes Pipeline early works
Western Australia
and Northern Territory Badgingarra Wind Farm, Mt Morgans Gas Pipeline,
Murrin Compressor Station
Yamarna Gas Pipeline and Power Station, Emu Downs Solar Farm,
Other
VIC Metering
Sub-total non-regulated capex
Total growth capex
Stay-in business capex
Total capital expenditure
Investment and acquisitions
Total capital and investment expenditure
Notes: Numbers in the table may not add up due to rounding.
10.7
369.1
14.2
709.9
742.9
112.6
855.5
20.0 (b)
875.5
78.3
–
0.4
30.6
56.5
165.8
271.9
68.8
340.7
36.8
377.5
a) 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.
b) Represents the share purchase price for the Orbost Gas Processing Plant.
As part of the FY2016 results, APA announced that it had
identified around $1.5 billion of organic growth opportunities
across FY2017 to FY2019. APA continues to successfully
pursue organic growth opportunities. To-date across
FY2017 and FY2018, APA has spent in excess of $1.0 billion
on these growth projects in the areas of pipeline extensions
and expansions, renewables and mid-stream assets.
Capital and investment expenditure
6,284.4
A$ m
1,000
750
500
250
0
875.5
673.6
377.5
FY15
FY16
FY17
FY18
SIB capex
Growth capex
Acquisitions & other investment cash flows
24 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
8. Capital and Investment Expenditure (continued)
In FY2018, growth capex expenditure was $742.9 million, which is almost double the average annual growth capex spend of
previous years. The FY2018 actual spend is lower than the approximate $850 million figure indicated to the market in May
2018. This is due to finessing of project timings for procurement contracts as projects have progressed to ensure materials
are better timed to arrive when required. This has resulted in some committed capital expenditure moving from FY2018 into
FY2019. APA expects to spend in the order of $425 million during FY2019 on the in-flight committed organic growth projects
as detailed in the table below.
Some of the new projects completed in FY2018 have now commenced generating revenues. These revenues will increase in
FY2019 as more projects are completed and the projects completed in FY2018 provide a full year of earnings. The full benefit
of the now $1.4 billion plus of growth projects will be received from FY2020 onwards.
Beyond the approximately $425 million guidance for FY2019, APA expects growth capital expenditure in the order of $300
to $400 million per annum over the next two to three years as further growth projects come to fruition across all energy
infrastructure sectors. All projects will continue to be underwritten by long term contracts with customers and will increase
APA’s earnings base as they are commissioned.
Growth Projects Announced FY2017 – FY2019
Projects
FY17
FY18
1H FY19
2H FY19
1H FY20
2H FY20
Customer
Project (% spent)
Pipeline projects
Renewables projects
Midstream projects
Emu Downs Solar Farm
(incl. $5.5m ARENA funding)
Reedy Creek Wallumbilla Pipeline
Darling Downs Solar Farm
(incl. $20m ARENA funding)
Yamarna Pipeline & Power Station
Badgingarra Wind & Solar Farm
Orbost Gas Processing Plant
Other Projects
Total growth capex
(‘in-flight’ to date)
Total revenue contribution
Note: Above diagram is illustrative only.
100%
100%
~88%
~91%
~66%
~50%
13-year contract
20-year contract
12-year contract
Synergy
APLNG
Origin
15-year contract
Gold Road/
Gold Fields JV
17-year contract
Alinta
Multi year contract
Cooper
Various
FY17:
$272m
FY18:
$743m
FY18:
<$5m
FY19:
~$425m
FY19:
~$75m+
FY20:
~$300-400m
FY20:
~$215m+
As detailed in Section 7 above, progress on the remaining major committed projects is as follows:
— The Badgingarra Wind Farm (130MW wind farm) project was extended during the reporting period to include a co-
located 17.5 MW solar farm that will share transmission connection infrastructure with the wind farm. Badgingarra is
located adjacent to APA’s operational 100 MW Emu Downs Wind and Solar Farm in Western Australia. Alinta Energy also
extended the offtake agreement for another 5 years for both the energy and the Large Scale Generation Certificates,
commencing January 2019 through to end CY2035. The wind farm will consist of 37 turbines each with a total blade and
tower height of 150 metres and the solar farm will have approximately 61,800 solar tracking panels. Both projects are on
track for commissioning in December 2018 for contract commencement in January 2019.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 25
8. Capital and Investment Expenditure (continued)
— The Orbost Gas Processing Plant acquired by APA in FY2018 will process raw natural gas from Cooper Energy’s offshore
Sole gas field under a multi-year Gas Processing Agreement from mid-2019. When complete, up to 70TJ per day of gas will
be available for the east coast gas market from this new source of supply. APA is undertaking an upgrade of the site, whilst
also adding a hydrogen sulphide treatment plant to the facility. During the reporting period, APA undertook extensive
stakeholder engagement with the surrounding community, as well as providing local sponsorship and opportunities for
employment of local contractors. In March 2018, The Hon. Lily D’Ambrosio, Minister for Energy, Environment and Climate
Change toured the site and congratulated both APA and Cooper Energy for working together to deliver more gas into
Victoria and the East Coast gas market and jointly creating more than 800 jobs during construction of onshore and
offshore facilities.
— The Darling Downs Solar Farm near Dalby in Queensland is a 110MW solar farm, being built at a cost of around $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 Large Scale Generation Certificates. The project is on track for completion in September 2018.
Over 423,000 fixed solar panels will be installed over a 250 hectare site, connecting to the existing Braemar Substation.
The Queensland Premier, The Hon. Annastacia Palaszczuk toured the site in January 2018, along with The Hon. Dr Anthony
Lynham, Minister for Mines and Energy; The Hon. Mark Furner, Minister for Agricultural Industry Development and Natural
Resources; Paul McVeigh, Mayor of the Western Downs Regional Council; and Deputy Mayor, Andrew Smith.
— APA announced the new build Yamarna Gas Pipeline (YGP) and the Yamarna Power Station (YPS) projects in FY2017. APA
will transport gas a total of almost 1,600 kms over four APA interconnected pipelines, including the greenfield YGP that will
connect to the YPS, to deliver energy to the Gruyere Gold Project in Western Australia. The 198 km YGP was fully constructed
during FY2018 and has now been commissioned to allow the constructed 45MW YPS to be commissioned, which is expected
to be complete in between August and October 2018. 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. Total project cost is estimated to be $180 million.
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.
APA continues to talk with customers to develop new opportunities and help them manage their energy portfolio requirements
including the potential projects of the Western Slopes Pipeline, the Crib Point Pakenham Pipeline, future mining connection
opportunities in Western Australia and connecting Northern Queensland gas basins to APA’s East Coast Grid.
In FY2017, APA announced that it had contracted with a subsidiary of Santos Limited to commence development of a new
450 km Western Slopes Pipeline connecting the proposed Narrabri Gas Project (NGP) to APA’s East Coast Grid through the
Moomba Sydney Pipeline. The project is subject to FID of the NGP by Santos. During the reporting period, APA commenced
engagement with stakeholders along a possible pipeline route.
26 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
8. Capital and Investment Expenditure (continued)
During FY2018, APA announced that it had entered into a Development Agreement and an associated 20 Year Gas
Transportation Agreement with AGL Energy to develop and construct a new 60 km pipeline with a capacity of at least 550TJ/
day. The Crib Point Pakenham Pipeline would connect AGL’s proposed floating LNG regasification plant at Crib Point, to
APA’s East Coast Grid via the Victorian Transmission System at Pakenham. APA’s potential capital expenditure investment
would be in the range of $160 million to $200 million. Since announcing the project in June 2018, APA has been undertaking
engagement with local communities and environmental reviews to determine the best possible route for the pipeline. The
project is subject to Final Investment Decision by AGL during FY2019.
PROPOSED CRIB POINT PAKENHAM PIPELINE ~ Community Consultation
On 12 June 2018, APA entered into a Development
Agreement and associated Gas Transportation
Agreement with AGL Energy for the development
and construction of the Crib Point Pakenham
Pipeline. The project is subject to AGL Energy making
a Final Investment Decision during FY2019.
During FY2018, APA commenced a
comprehensive program of community and
stakeholder consultation for the proposed Crib
Point Pakenham Pipeline project including:
— Multiple one-on-one and community meetings
— Direct mail-outs
— Community sessions
— Development of a project website
In May 2018, APA hosted community drop in sessions in Cardinia and Nar Nar Goon to answer community queries about
the proposed Crib Point Pipeline project. Topics discussed included cultural and heritage surveys, environment, water and
pipeline alignment. AGL representatives were also present to provide information. The sessions were well attended by
landowners and other community members.
A further five community sessions were held in the towns of Balnarring, Hastings, Crib Point, Nar Nar Goon and
Cardinia for landowners, members of the community and other interested stakeholders in July/August 2018. APA
presented key findings of environmental investigations conducted to-date and answered questions from the community.
AGL representatives and technical specialists were also present and participated in the Q&A session following APA’s
pipeline presentation.
Stay-in business capex increased to $112.6 million in FY2018 from $68.8 million in FY2017. This remains in line with both the
long term asset management planning cycle across our assets and the increasing scale of the business and did reflect in
FY2018 ongoing business and technology spend of in the order of $22.4 million – reflecting the continuing growth of the
business.
9. Financing Activities
9.1 Capital Management
As at 30 June 2018, APA had 1,179,893,848 securities on issue. This changed from 30 June 2017, with 65,586,479 new stapled
securities issued following the $500 million capital raise (Entitlement Offer) announced on 21 February 2018 and completed
on 23 March 2018. This additional equity strengthened APA’s balance sheet enabling it to efficiently and prudently fund the
approximately $1.4 billion plus of committed growth capex projects, due for completion through the period to June 2019.
Over many years, APA has consistently maintained the process of funding its growth from a mix of cash generated from
within the business and appropriate levels of debt and equity.
Significant debt transactions during FY2018 were the redemption of the $515 million of Subordinated Notes at their first-call
date of 31 March 2018 and the repayment of $125.8 million (JPY 10 billion) Japanese Medium Term Notes at maturity on 22
June 2018. Committed bank debt funding was increased and extended with the execution in May 2018 of a two tranche 5 and
5.5 year $1,000 million Syndicated Bank Facility, to replace the $518.8 million of syndicated facilities maturing in September
2018 and 2020. Maturity dates of a number of existing bilateral bank facilities with commitments totalling $250 million, were
also extended during the year.
APA’s debt portfolio has a broad spread of maturities extending out to FY2035, with an average maturity of drawn debt of 6.9
years at 30 June 2018. APA’s gearing (6) of 65.4% at 30 June 2018 was lower than the 67.4% at 30 June 2017 due to the $500
million equity raised through the Entitlement Offer. APA remains well positioned to fund its planned growth activities with
around $1,400 million in cash and committed undrawn facilities post completion of the 2 July 2018 syndicated debt facility,
as well as ongoing access to a broad range of debt capital markets.
6) For the purposes 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 their respective inception dates.
APA GROUP — ANNUAL REPORT 2018 — 27
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
9.1 Capital Management (continued)
APA debt maturity profile and diversity of funding sources (a)
$1,600m
$1,200m
$800m
$400m
0
FY19
FY20
FY21
FY22
FY23
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY33
FY34
FY35
Headroom (bank borrowings)
Bank borrowings
Sterling MTN
Euro MTN
US 144A Notes
Australian MTN
US Private Placement Notes
Canadian MTN
USD denominated obligations (b)
a) APA debt maturity profile as at 2 July 2018.
b) USD denominated obligations translated to AUD at the prevailing rate at inception (USD144A - AUD/USD=0.7879, EMTN & Sterling AUD/USD=0.7772).
APA’s appetite for foreign currency and interest rate risk is low. This is reflected in the Treasury Risk Management Policy that
requires conservative levels of hedging of interest rate and foreign currency exposures to minimise the potential impacts from
adverse movements in markets. Other than as 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 17 years of the foundation contracts on the Wallumbilla Gladstone
Pipeline w ill be in received 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 have 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
FY2019 (to Feb 2019)
Average forward USD/AUD exchange rate
0.6927
A large portion of the net revenue from March 2019 is in a 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 2018, 97.7% (30 June 2017: 94.5%) 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 2018, APA had borrowings of $8,810.4 million ($9,249.7 million at 30 June 2017) from a mix of US Private
Placement Notes, Medium Term Notes in several currencies, United States 144A Notes and committed bank facilities.
Net finance costs decreased by $4.1 million, or 0.8%, to $509.7million (FY2017: $513.8 million). The decrease is primarily due
to having a lower level of net drawn debt in FY2018 relative to FY2017. The average interest rate (including credit margins) (7)
applying to drawn debt was 5.65% for the current period (FY2017: 5.56%).
APA’s interest cover ratio for the current period was 2.7 times (June 2017: 2.8 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 the
FY2018 financial year:
— BBB long-term corporate credit rating assigned by Standard & Poor’s (S&P) in June 2009, and was placed on CreditWatch
Positive on 14 August 2018; and
— Baa2 long-term corporate credit rating (outlook Stable) assigned by Moody’s Investors Service (Moody’s) in April 2010,
and affirmed on 13 August 2018.
9.4 Income tax
Income tax expense for the financial year of $165.1 million results in an effective income tax rate of 38.4%, compared to
38.7% for the previous corresponding period. The high effective rate is due to the significant amortisation charges relating to
contract intangibles acquired with the Wallumbilla Gladstone Pipeline, which are not deductible for tax purposes.
7) 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 their respective inception dates.
28 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
9.4 Income tax (continued)
After utilisation of available tax losses and research and development tax offsets, income tax of $52.0 million will be payable
in respect of the year ended 30 June 2018. With PAYG instalments of $18.2 million having already been paid, a tax provision
of $33.8 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 FY2017 distribution
paid 13 September 2017
Interim FY2018 distribution
paid 14 March 2018
Cents per
security
Total distribution
$000
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
5.83
2.47
7.29
3.03
2.38
21.00
2.50
65,001
27,490
81,202
33,821
26,490
234,004
On 22 August 2018, the Directors declared a final distribution for APA for the financial year of 24.0 cents per security which
is payable on 12 September 2018. Franking credits of 3.83 cents per security will be allocated to the APT franked profit
distribution. The FY2018 final distribution will comprise the following components:
APT franked profit distribution
APT capital distribution
APTIT profit distribution
APTIT capital distribution
Total
Franking credits allocated
Final FY2018 distribution
payable 12 September 2018
Cents per
security
Total distribution
$000
8.93
9.03
2.90
3.14
24.00
3.83
105,412
106,513
34,228
37,022
283,175
As a result, the total distribution applicable to the year ended 30 June 2018 is 45.0 cents per security, a 3.4% increase over the
total distribution of 43.5 cents per security applicable to the year ended 30 June 2017. Franking credits allocated for the year
ended 30 June 2018 distribution totalled 6.33 cents per security.
The Distribution Reinvestment Plan remains suspended.
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 11.2% (8).
APA’s total securityholder return since listing in June 2000 on the ASX, is 1,978 (9), a compound annual growth rate of 17.8%.
APA total securityholder returns since listing (June 2000) to 20 August 2018
2,000
1,500
1,000
500
0
Jul 00 Jul 01
Jul 02 Jul 03 Jul 04 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09
Jul 10 Jul 11
Jul 12
Jul 13
Jul 14
Jul 15
Jul 16
Jul 17
Jul 18
APA total securityholder return
Utilities accumulation index
S&P/ASX 200 accumulation index
8) Figures quoted are sourced from IRESS and measured as at 30 June 2018.
9) Indexed from 13 June 2000, the date of APA’s listing on the ASX.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 29
9.7 Guidance for 2019 financial year
Based on current operating plans and available information, APA expects EBITDA for the full year to 30 June 2019 to be in a
range of $1,550 million to $1,575 million.
Net interest cost is expected to be in a range of $500 million to $510 million.
In the event that the CKI proposal does not proceed and APA remains as a stand-alone listed company for the full financial
year, distributions per security for the 2019 financial year are expected to be in the order of 46.5 cents per security, with
franking credits which may be allocated to those distributions enhancing that cash payout.
As per current APA distribution policies, all distributions will be fully covered by operating cash flows.
EBITDA ($ millions)
Net interest cost ($ millions)
FY2019 guidance
FY2018 actual
$1,550 to $1,575
$500 to $510
$1,518.5
$509.7
Total distribution (cents per security)
In the order of 46.5 cents (10)
45.0 cents
10. Regulatory Matters
Gas Policy developments
Australia’s economic compliance regime for gas pipelines is set out in the National Gas Law (NGL) and the National Gas Rules
(NGR). Some of APA’s pipelines have been covered by the National Gas Access Regime since it was introduced in the 1990’s.
This regime includes mechanisms for regulatory pricing approval for “fully regulated” pipelines, and lesser obligations for “light
regulation” pipelines.
Additional information disclosure and commercial arbitration rules came into effect in August 2017 (December 2017 in
Western Australia) and applies to APA’s unregulated pipelines, which are known by the term “non-scheme” pipelines. APA
has worked with the Gas Market Reform Group, Australian Energy Markets Operator and the industry on the design and
implementation of the additional rules.
Under the additional rules, pipeline operators are required to publish their pricing methodologies for non-scheme pipelines. This
information for APA’s East Coast and Central Region gas transmission assets was published on APA’s website on 31 January
2018 and for APA’s Western Australian gas transmission assets on 19 June 2018. It includes APA’s pricing methodology and
other information in relation to pipeline services and tariffs for these assets consistent with the requirements of the National
Gas Rules (Part 23). The published tariffs are consistent with tariffs that APA has agreed with its customers over a number
of years and with competitive outcomes. APA supports this initiative of improved information transparency. Additional
disclosure provisions require publication by 31 October 2018 of individual pipeline financial statements and average prices.
The commercial arbitration rules provide negotiating parties who cannot reach agreement, access to an arbitrator to
determine a commercial outcome consistent with the outcomes that would occur in a workably competitive market. APA
has continued to successfully negotiate all new contracts and contract renewals with its customers since the additional rules
came into effect.
The COAG Energy Council has agreed to final recommendations on the design and implementation of a pipeline capacity
trading reform package following industry discussions that APA participated in, including:
— A capacity trading platform to be operated by the Australian Energy Market Operator, to facilitate the secondary trade of
pipeline capacity between shippers;
— A daily auction of un-nominated contracted shipper capacity, run by the Australian Energy Market Operator, on all
major pipelines.
The new capacity trading market mechanisms are scheduled to commence in March 2019.
Limited Merits Review
On 30 October 2017, the Australian Government abolished the limited merits review process of the Australian Competition
Tribunal in relation to decisions by the Australian Energy Regulator or Economic Regulation Authority (Western Australia).
Judicial review continues to be available as a means of challenging an error by the regulator in its access arrangement
determinations.
AEMC review of economic regulatory rules
During the year, the Australian Energy Market Commission (AEMC) undertook a review of the scope of economic regulation
applied to regulated pipelines under Parts 8-12 of the National Gas Rules.
On July 3 2018, the AEMC released its final report recommending a variety of legislative and rule changes. The key
recommendations from APA’s perspective are:
— The alignment of the arbitration process for covered pipelines to that which applies in Part 23 of the National Gas Rules to
non-scheme pipelines;
— All expansions of regulated pipelines, past and present, covered or uncovered are to be included in the access arrangement
for the pipeline. This means that the currently uncovered expansions of the Goldfields Gas Pipeline would be included in
that pipeline’s next access arrangement due in January 2020; and
— The regulator to set an initial capital base for light regulated pipelines that don’t currently have one. This will have
application to the Carpentaria Gas Pipeline and the Kalgoorlie Kambalda Pipeline.
10) In the event that the CKI proposal does not proceed and APA remains as a stand-alone listed company for the full financial year.
30 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
Regulatory resets
The diagram below outlines the scheduled regulatory reset dates for pipelines owned and operated by APA. During FY2018,
approximately 9.0% of APA’s Energy Infrastructure revenues were revenues that are subject to regulated outcomes.
2018
2019
2020
2021
2022
2023
Central Ranges Pipeline (a)
Central Ranges Network (a)
Goldfields Gas Pipeline
Amadeus Gas Pipeline
Roma Brisbane Pipeline
Victorian Transmission System
a) Asset will cease to be covered as of 1 July 2019 in accordance with the National Gas Law and Rules.
Current regulatory period
Next regulatory period
Key regulatory matters addressed during the year included:
Victorian Transmission System Access Arrangement
In November 2017, the Australian Energy Regulator published its final decision on the access arrangement applying to the
Victorian Transmission System from 1 January 2018. The Australian Energy Regulator approved APA’s recent significant
expansions of the system to enable gas flows between Victoria and New South Wales, as well as the need for further future
expansions of the Victorian system, as prudent expenditure. Average tariffs will be largely unchanged from the previous period.
Roma Brisbane Pipeline Access Arrangement
In November 2017, the Australian Energy Regulator also published its final decision on the Roma Brisbane Access Arrangement
which will apply from 1 January 2018. The Regulator in its decision recognises changes in the pipeline configuration and
demand profile since the Regulator’s last review through the approval of a bi-directional postage stamp tariff structure. The
new tariff is in line with that applying in the previous period, and APA’s ongoing revenues that flow from longer term contracts
that are currently in place, are unchanged by the determination.
Other access arrangement information
In July 2018, the Australian Energy Regulator released its draft rate of return guideline. The revised guideline, subject to
implementation, would not apply to any APA pipeline until 2021. APA has a number of concerns with the rate of return
proposed in the draft decision and will be making submission to the Australian Energy Regulator on that basis. A final decision
is expected in December 2018.
The Economic Regulation Authority of Western Australia released in June 2018 its draft rate of return guideline. This guideline
when finalised will apply to the Goldfields Gas Pipeline’s next Access Arrangement, which is due to commence in January 2020.
There are aspects of the guideline with which APA does not agree and these will be pursued in submissions to the Regulator.
Energy industry developments
THE ENERGY CHARTER ~ the energy industry working together to deliver energy for a better Australia
Energy is an essential service and delivering it in accordance
with community expectations is what the whole energy industry
needs to do every day. APA plays an essential part in Australia’s
energy supply chain, as does each and every producer, generator,
pipeline and network operator and retailer.
In FY2018, 15 CEOs (including APA’s Mick McCormack), from across the Australian energy supply chain, committed
to develop a consumer charter to put customers first and foremost within each of their businesses and the energy
industry as a whole. The Energy Charter aims to engender collective accountability for customer outcomes across the
whole industry to ensure that customers can feel confident that their energy needs are being met and that the energy
sector is working in customers’ interests. This commitment will be demonstrated through the embedding of customer
focused culture; improving affordability; focussing on reliability, safety and sustainability; improving the customer
experience; and supporting customers in vulnerable circumstances. It is also about working collaboratively with each
other, government and community to deliver better outcomes for customers and the community.
Energy Consumers Australia is playing a leadership role in the development of The Energy Charter. All energy businesses
will be invited to commit to The Energy Charter, by which they agree to publicly identify how they are delivering against
the Charter Principles, and if not, why not.
Collaboration with consumer and end user advocacy groups with the energy industry has been a critical feature
of the Energy Charter’s development. Together, our aim is to deliver better energy outcomes for all customers and
Australians alike.
Public consultation on the process to provide input is expected later in CY2018. For more information go to
www.theenergycharter.com.au.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 31
11. Health, Safety and Environment
11.1 Health and safety reporting
During the reporting period, APA continued implementing the Health, Safety and Environment (HSE) Strategic Plan with
FY2018 being the second year of a three year undertaking. The plan is designed to further develop APA’s HSE framework,
systems, culture and initiatives to prevent harm to our people, contractors and the broader community, and to deliver a
sustainable future. Key achievements of the HSE strategic initiatives during the period included:
— Undertaking a comprehensive review of how APA and its contractors report and manage asset strikes to gas and other
utility underground infrastructure, particularly within Networks operations where infrastructure is located in populated
areas. The comprehensive review resulted in a focus on asset strike prevention and the trialling of new work practices and
innovative equipment such as a ground penetrating radar, that has helped reduce the number of related strike incidents;
— APA’s Alcohol and Other Drugs Policy was updated to reflect a blood alcohol level of 0.00 for all employees and contractors.
A new protocol was introduced that provides greater emphasis on managing risks associated with alcohol and other drugs.
It provides for random testing for both field and corporate personnel. The protocol was rolled out with an education and
awareness program and forms part of the induction and ongoing training program of all employees and contractors; and
— Introduction of the ‘Bounce – Aspire, Participate, Achieve’ Health and Wellbeing Program. This included the rollout of an
online Health and Wellbeing portal for all employees that provides the latest information on key wellness topics, as well
as access to confidential assessments.
APA continues to target being a zero harm workplace for its employees, contractors and the broader communities in which it
operates. Disappointingly, despite an increased focus on safety and training, APA’s key injury metrics deteriorated during the
reporting period.
The Lost Time Injury Frequency Rate (LTIFR) at the financial
year end was 1.76, up from 0.52 in the last financial year
and the Total Reportable Injury Frequency Rate (TRIFR) for
FY2018 was 8.94, up from 7.50 in FY2017. Both frequency
rates cover employees and contractors. There were multiple
factors impacting the increases including continued increase
in reporting and a large amount of project work and
challenges in effective contractor management, which will
become key areas for improvement in FY2019. Going forward,
APA will be focussing on TRIFR as its main lag metric as it
is a truer indicator of health and safety performance than
LTIFR. Importantly, there were no fatalities of employees or
contractors in FY2018 (FY2017: nil).
Total reportable injury frequency rate (TRIFR)
15
10
5
0
8.11
10.41
8.94
7.5
FY15
FY16
FY17
FY18
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.
Injuries were predominantly hand and musculoskeletal type injuries. As a result, APA has introduced targeted programs
such as the Hand Safety campaign and is also undertaking a comprehensive review of work practices with the goal to prevent
manual handling injuries through task risk assessments and improved targeted manual handling training.
ASSET STRIKE – KNOW WHAT’S BELOW ~ LOCATE before you EXCAVATE
In response, APA developed a series of initiatives
to address these root causes, including:
— Ground Penetrating Radar (GPR) which has been
successfully trialled
— Locating equipment training for supervisors and
users
— Locating device performance specifications
to be standardised
— Asset owners including APA are required to review
and update their DBYD information where it is
found to be not correct or incomplete
— Change in work practices and mindset
— Successful trial of Excavation Process flowchart
and checklist
With the change in mindset from implementing these
initiatives, there has been a sizable reduction in asset
strike incidences during the reporting period.
With the majority of gas and other utility infrastructure
buried underground and out of sight, asset strikes are an
ongoing risk to APA’s business, particularly within Networks
operations where infrastructure is located in populated
areas. To reduce this risk, a comprehensive reporting
mechanism was implemented in 2016 to capture detailed
asset strike data. This includes recording any strike on both
gas and electrical assets classified as high risk.
Increasing visibility on the incidence of asset strikes and
having a measure of how significant the issue might
possibly be, meant that investigations, process reviews
and preventative actions can take place to reduce the risk
of incidence. All incidents are investigated following the
Incident, Cause, Analysis Method (ICAM) which is based
around 4 key questions: 1) what happened?; 2) why did it
happen?; 3) what are we going to do about it?: and 4) what
did we learn that we can share?
Following a comprehensive review of all the incident root
causes recorded post implementation of the new reporting
system, a range of causal issues were revealed, notably:
— Failure to locate assets – both accurately and
effectively
— Limitations of existing cable locating equipment
— Proliferation of mechanical excavation within three
metres of assets
— Non-compliant installation practices
— Dial Before You Dig (DBYD) information incorrect,
or not properly displayed
32 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
11.1 Health and safety reporting (continued)
The Strategic Improvement Plan and the planned initiatives for FY2018 have been achieved during the year with further
details contained in the Sustainability Report. Of particular note for the period was APA’s focus on continuing to foster a
positive Health and Safety culture at APA. During the reporting period, further development of our leaders to ‘lead a safety
culture’ was undertaken through various training and development programs.
APA’s employees continue to enthusiastically participate in APA’s annual awards recognition initiative. In FY2018, the format of
the Excellence Awards was refreshed to align to APA’s ‘STARS’ values of Safety (including health and environment), Trustworthy,
Adaptable, Results and Service. Over 130 nominations were received, including over 40 for the Safety Award. This award recognises
those who go above and beyond to ensure APA is a safe and environmentally conscious organisation where people feel respected,
valued and where their health and wellbeing is a primary focus. The winner in FY2018 was Carlo Corso, APA’s Operational Services
Manager, for his leadership in assisting colleagues to understand, support and educate each other on the importance of APA safety
systems, including the Permit to Work system, fire prevention and control, and Safe Work Method Statements.
APA’s initiative in FY2016 as part of the Strategic Improvement Plan SafeDrive+ program of installing in vehicle monitoring
systems (IVMS) in APA vehicles continues to reap safety benefits and manage APA’s operational risk. APA has a fleet of
around 550 vehicles, with over 300 currently fitted with the IVMS technology. In FY2018, with over 15 million kilometres
travelled by APA vehicles, there was a significant reduction in the high risk violation metrics in the areas of speed and wearing a
seatbelt whilst moving. Vehicle movements are monitored via APA’s Integrated Operations Centre in Brisbane which provides
employees working remotely and/or driving long distances, and their families, with a high level of comfort that APA knows
where they are at all times and when they should arrive at their nominated destinations.
The Safety and Operating Plan for the distribution networks in NSW and Victoria that APA operates has been audited during
the financial year, in accordance with technical regulatory requirements.
For further information on APA’s health and safety initiatives, please refer to the Sustainability Report (page S11 to S15),
which forms part of this report.
11.2 Environmental Strategy
Following the completion of APA’s Environmental Strategy and Improvement Plan in FY2017, an Environmental Management
Plan (EMP) Improvement Program has been developed and was approved by the Board during the reporting period.
Implementation of the EMP Program has also commenced.
The purpose of the EMP Program is to apply, at the asset level, the environment framework delivered under the
Environmental Strategy and Improvement Plan. The central deliverable of the EMP Program is a refresh of APA’s existing
environmental compliance tools that will achieve alignment, standardisation and more streamlined integration of controls
into business operations.
As the EMP Program is being implemented across the whole business, input will be incorporated from all operational business
divisions in Transmission and Networks and Power and the compliance methods applied to these business units will also be
integrated into APA’s Infrastructure Development projects as they commence.
A key component of the EMP Program is the rollout of a revised environmental risk assessment process. This bespoke risk
assessment methodology developed under the environmental framework will ensure alignment and standardisation of how
APA assesses environmental risk throughout the organisation.
The EMP Program also links to and integrates with existing businesses systems and processes wherever possible, for example
GIS capabilities, training and on-boarding programs, work planning and scheduling, contractor management, emergency
response and incident management.
The EMP Program will see interdepartmental collaboration across the enterprise, linking processes and aligning thinking
between the Environment Team and key departments including the Group Risk and Compliance, Technical and Regulator
Compliance, Systems and Assurance, Infrastructure Protection, Enterprise Asset Management and Engineering.
During FY2018, significant planning work was commenced to set the EMP Program up for success. Compliance registers have
been combined, asset hazard analyses commenced and two pilot Environmental Management Plans have been completed
for the Dandenong LNG facility (Victoria) and the Central Ranges Pipeline (NSW). These pilots validated the risk assessment
methodology, tested the system integration of control methods and have been supported by extensive communication and
awareness in operational business units.
A new Environment Homepage was launched on APA’s Intranet in March 2018. This is designed as the central landing point
for all APA employees to find compliance plans, learning resources, tools and guidelines and more. The site and central
information bank for environmental resources has demonstrated its worth by the increased awareness and understanding of
environmental risk and compliance across APA.
For further information on APA’s environmental management initiatives, please refer to the Sustainability Report (page S04
to S07), which forms part of this report.
11.3 Environmental regulations
Environmental regulatory frameworks continued to evolve and change across Australia in FY2018. APA monitors, adapts and
complies with changes in environmental compliance requirements. Where appropriate, APA contributes industry knowledge
for consideration in the development of environmental legislation.
APA operates its assets under approved licences within relevant state and territory jurisdictions. Collaboration between APA’s
compliance and environmental functions ensures that environmental obligations are planned for concurrently with other regulatory
requirements so that pipeline, distribution, power and gas processing assets owned and/or operated by APA are designed, constructed,
tested, operated and maintained in accordance with licences issued by the relevant state and territory technical regulators.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 33
11.3 Environmental regulations (continued)
APA a contributor to the ongoing update of the Australian Standard AS 2885 “Pipelines – Gas and Liquid Petroleum” suite of
documents during the reporting period. This Australian Standard is a key part of all pipeline-related environmental compliance
frameworks for the high-pressure pipeline industry.
During the period, APA also contributed the expertise of our employees to the working group of the Australian Pipelines and
Gas Association (APGA) that revised the ‘APGA Code of Environmental Practice (2017)’. The APGA Code of Environmental
Practice is an important document that provides industry accepted guidance on environmental management through the
planning and asset acquisition, construction, operational and decommissioning phases of a pipelines’ lifecycle.
Internal compliance audits were completed across the Transmission, Networks, Power and Infrastructure Development
business divisions during FY2018. Senior management reviews audit report findings and any material non-compliances and
incidents are communicated.
APA did not receive any penalty notices relating to environmental compliance in any Australian jurisdictions during the
reporting period.
11.4 Environmental reporting
APA continues to comply with periodic and ad hoc state and territory environmental reporting obligations. During the period,
APA’s business units compiled and submitted National Pollutant Inventory (NPI) reports to the responsible state and territory
regulators for any of the relevant 93 substances that may have been emitted to the air, land and water, and transported
in waste.
APA’s business units also submitted periodic Environmental Reports (including monthly and annual reports) to state and
territory regulators in FY2018, verifying the implementation of environmental controls and minimisation of environmental
risk across our business activities.
In October 2017, APA complied with Australia’s National Greenhouse and Energy Reporting (NGER) obligations for FY2017.
APA’s main sources of emissions are from the combustion of natural gas in compressor stations, from fugitive emissions
associated with natural gas pipelines, and from gas fired power stations. NGER 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.
APA’s summary of Scope 1 and 2 emissions and energy consumption for the 2017 financial year as reported under the NGER,
are set out in the following table. Reports are completed each year at the end of October for the prior financial year to allow
organisations time to collect, collate and calculate their energy and emissions data. APA will report its FY2018 data to the
Clean Energy Regulator in October 2018.
Scope 1 (a) CO2 emissions (tonnes)
Scope 2 (b) CO2 emissions (tonnes)
Energy consumption (c) (GJ)
FY2017
FY2016
Change
1,228,807
1,084,236
25,012
26,555
23,930,506
19,510,937
13.33%
(5.81%)
22.65%
a) Scope 1: emissions associated directly with APA facilities, such as company vehicles, ‘fuel combustion’ and fugitive emissions from gas pipelines.
b) Scope 2: are indirect emissions that are emitted by sources owned by another company, but result from APA’s activities such as consumption of purchased
electricity/fuel not generated by the facility but used under its operations.
c) Energy Consumption is referring to the total calculation of all energy consumed and produced by APA across all facilities i.e. it is 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 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 FY2016 figures not including Daandine Power
Station as this was reported in the on-site service provider’s report only.
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 System sets out the approach for ensuring risk is effectively identified, managed and
monitored. This comprises three elements including the Risk Management Policy; Risk Management Enablers providing for
governance, a strong risk culture, technology support and ongoing training; and the Risk Management Framework which sets
out key risk management processes.
The Enterprise Risk Management System is aligned to the international risk standard ISO 31000. All other functional risk
frameworks align to the Enterprise Risk Management System to provide consistency and a common language for risk which
is integral to key business decisions.
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. 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.
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/.
34 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
12. Risk Overview (continued)
APA Risk Management
– Review current and emerging material risks
– Review key risks and compliance policies
– Review insurance arrangements
– Review of risk strategy and framework
– Approve crisis management plan
– Promote a risk aware culture
APA Group Board
APA Group Audit &
Risk Management Committee
Executive Risk Management
Committee
– Approve risk strategy, risk policy and
risk 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
APA Divisions
– Implement Risk Frameworks
– Own risks, controls and actions
– Own compliance plans and controls
– Support provided from
functional risk specialists
– Review and report risk exposures
– Apply risk appetite in key decisions
Independent Review
– Internal Audit
– External Audit
– Third party audits and reviews
Divisional Review
– Functional risk review
– Divisional audits and testing
12.1 Key risks
Type of Risk
Description
Management Actions to Mitigate Risks
Strategic risks – risks arising from the industry and geographical environments within which APA operates, including its
markets, customers, brand and reputation, and regulatory policy.
Economic regulation
Bypass and
competition risk
APA has a number of significant assets and
investments in its portfolio subject to economic
regulation, which includes the regulation of
prices that APA is permitted to charge for
certain services. Government policy in relation
to the Australian domestic gas market also
continues to develop. Changes in policy as to
which assets are regulated and the settings
applicable to regulated assets can impact
APA’s business.
APA’s future earnings may be reduced if
customers purchase gas transportation services
from new pipelines that by-pass or compete
with APA’s pipelines, rather than from APA’s
existing pipelines.
Gas demand risk
Reduced end user demand for gas driven by its
price, relative to competing energy sources or
gas swap contracts, may reduce demand levels
for services on APA’s assets.
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.
— Strong regulatory and policy functions,
active in regulatory management and policy
development.
— Assessment of key policy change proposals
for potential impacts on APA’s business.
— Structured and flexible services that
leverage APA’s capability and infrastructure.
— Customer relationship engagement
and active management of business
development opportunities.
— Asset management plans aligned with
capacity contracting strategy.
— Monitoring commodity markets, export
outlook and gas market developments for
throughput impacts.
— Flexible gas transport and storage services
supporting gas fired generators.
— Long term gas storage/transportation
agreements.
— Recontracting strategy and market
monitoring.
— Knowledge and monitoring of gas reserves
to identify potential opportunities.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 35
12.1 Key risks (continued)
Type of Risk
Description
Management Actions to Mitigate Risks
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.
— Portfolio of investment grade credit
rated customers.
— Strong counterparty credit due diligence
with customer credit exposures
closely monitored.
Contract renewal risk Due to a range of factors, APA may not be
Reputation risk
Climate Risk
successful in recontracting available pipeline
capacity or power generation capacity when
it comes due for contract renewal, or may only
be able to recontract at reduced prices or for
shorter periods.
APA relies on a level of public acceptance for
the development and operation of its assets.
Community sentiment in relation to the energy
industry as a whole, as well as APA’s business
may impact APA’s commercial opportunities,
its ability to develop new projects and operate
its assets.
APA and its customers may be adversely
affected by the physical impacts of climate
change including increases in temperature,
sea levels, and the frequency of adverse
climatic events including fires, storms, floods
and droughts.
— Contractual credit support arrangements
in place.
— Recontracting strategy in place with close
monitoring of contract renewal portfolio.
— Monitoring of emerging gas supply
alternatives and power generation market
developments to identify opportunities.
— Engagement with key stakeholders
(landowners, producers, customers,
government etc).
— Industry engagement and contribution
to Energy Charter initiative.
— Commitment to implementation of
Task Force on Climate Related Financial
Disclosures (TCFD).
— Program of work to understand climate
change impacts on business and strengthen
climate risk governance is underway.
Financial risks – risks arising from the management of APA’s financial resources, accounting, tax and financial disclosure.
Interest rates and
refinancing risks
APA is exposed to movements in interest rates
where floating interest rate funds are not
effectively hedged. It also remains exposed
to refinancing risk if it is unable to replace an
existing loan with a new one at a critical time.
— Risk limits set by the Board and
managed in line with APA’s Treasury Risk
Management Policy.
— Debt structured to spread maturities over
a number of years.
— Maximum and minimum interest rate
hedging levels defined and managed using
derivatives and debt issued at fixed interest
rates through to maturity.
— Access to broad range of global debt capital
markets maintained.
Foreign exchange risks APA is subject to currency fluctuations in relation
— Risk limits set by the Board and
Investment risk
Credit rating risks
to the purchase, supply and installation of
goods and services revenue, and borrowings,
in a currency other than Australian dollars.
There can be no assurance that APA will be
able to effectively hedge its foreign currency
exposure, particularly in periods of significant
currency volatility, and/or that APA’s hedges will
prove effective.
Assumptions and forecasts used in making
decisions to acquire assets and make
investments, may ultimately not be realised.
This may result in lower than expected returns,
unanticipated costs, new skillsets or capabilities
needing to be acquired, new types of regulatory
approvals being needed where APA has
limited experience.
Any downgrade in APA’s credit rating could harm
its ability to obtain financing, could increase
its financing costs or cause the instruments
governing APA’s future debt to contain more
restrictive covenants.
managed in line with APA’s Treasury Risk
Management Policy.
— Hedging instruments used to cap non-AUD
denominated revenue and expenses.
— Foreign currency borrowings fully hedged.
— Board approved corporate and asset models
used for investment decisions and planning.
— Models underpinning investment decisions
independently reviewed.
— Oversight by APA’s Due Diligence
Committees for material investment
transactions.
— Board approves all treasury transactions
with counterparties falling below defined
credit rating thresholds.
— Counterparties are risk assessed with
credit ratings monitored and credit support
obtained to limit risk exposure.
36 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
12.1 Key risks (continued)
Type of Risk
Description
Management Actions to Mitigate Risks
Operational Risks – risks arising from inadequate or failed internal processes, people or systems or from external events
including construction and corporate projects, technology, environment, and health and safety.
Operations risk
APA is exposed to a number of risks affecting
operations including those resulting in
equipment failures or breakdowns, pipeline
ruptures, employee or equipment shortages,
workplace safety issues, 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.
Information
technology and cyber
risk
APA’s operations rely on a number of
information technology systems, applications
and business processes utilised in the delivery
of business functions, including APA’s customer
management system, grid network and
integrated operations centre.
People risk
Construction and
development risk
APA is dependent on its ability to attract,
engage, develop and retain the right employees
within a market where there is varying supply
of skilled workers. APA’s operations are
geographically dispersed which can make
attraction and retention of skilled employees in
regional and remote locations a challenge.
APA’s business strategy includes the
development of new pipeline capacity,
renewable and gas-fired power generation
plants, gas storage facilities and gas processing
assets. This involves a number of typical
construction risks, including potential failure
to obtain necessary approvals, employee or
equipment shortages, third party contractor
failure, higher than budgeted construction costs
and project delays.
— Operations are subject to operational safety
and environment management programs.
— Maintenance of engineering standards,
including integrity monitoring and
maintenance programs as part of risk based
asset life cycle management.
— Asset monitoring through control
rooms to manage flows and asset
maintenance issues.
— Comprehensive insurance
arrangements provided as part of asset
protection program.
— IT infrastructure managed in accordance
with recognised industry standards across
hardware, software, applications and
communication systems.
— Cyber security standards across APA
IT infrastructure, including IT vendors
continually assessed for new threats
and vulnerabilities.
— IT systems including SCADA are subject to
regular reviews and independent testing.
— Leadership capability programs in place.
— Recruitment practices in place and subject
to improvement.
— Talent management programs to
identify and develop technical and
leadership personnel.
— Comprehensive training programs in place
to maintain and develop competencies.
— Access and approvals management for
new construction projects.
— Dedicated construction project
management capability and governance to
manage efficient, safe and quality delivery
of construction projects.
Compliance risks – legal or regulatory risks arising in respect of laws, regulations, licences and recognised practising codes
including health, safety and environment, asset construction and operation, and other corporate compliance requirements.
Compliance and
operating licences
APA is subject to a range of operational
regulatory requirements including environmental
laws and regulations, occupational health
and safety requirements and technical and
safety standards. Changes in any such laws,
regulations or policies may increase compliance
requirements and costs.
— Comprehensive Enterprise Compliance
Management System with regulations
identified, controls monitored and assurance.
— Comprehensive safety management system
including safety compliance monitoring.
— Dedicated specialist teams providing
asset level assurance for technical and
environment compliance.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 37
13. Directors
13.1 Information on Directors and Company Secretary
See pages 06 to 07 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
Company
Period of directorship
Michael Fraser
Aurizon Holdings Limited
Since February 2016
Michael McCormack
–
–
Steven Crane
Debra Goodin
nib holdings limited
Since September 2010, Chair since October 2011
Senex Energy Limited
oOh!media Limited
Since May 2014
Since November 2014
Ten Network Holdings Limited
August 2016 to November 2017
Atlas Arteria Limited
Since September 2017
Russell Higgins AO
Telstra Corporation Limited
Since September 2009
Argo Investments Limited
Since September 2011, Chair since July 2018
Argo Global Listed Infrastructure Limited
Chair since July 2018
Patricia McKenzie
–
–
Shirley In’t Veld
Asciano Limited
DUET Group
November 2010 to August 2016
August 2013 to May 2017
Northern Star Resources Limited
Since September 2016
Peter Wasow
Alcoa Australia Limited
Oz Minerals Limited
Alumina Limited
January 2014 to July 2017
Since November 2017
September 2011 to May 2017
13.3 Directors’ meetings
During the financial year, 17 Board meetings, four Audit and Risk Management Committee meetings, four People and
Remuneration Committee meetings, four Health Safety and Environment Committee meetings and six 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:
Board
People &
Remuneration
Committee
Audit & Risk
Management
Committee
Health Safety
& Environment
Committee
Nomination
Committee
Directors
Michael Fraser
Michael McCormack
Steven Crane
Debra Goodin
Russell Higgins AO
Patricia McKenzie
Shirley Int’d Veld
Peter Wasow
Leonard Bleasel AM (11)
John Fletcher (12)
A
17
17
17
17
17
17
7
7
6
10
B
16
17
17
17
17
17
6
6
6
9
A
2
–
4
–
–
4
2
2
–
2
B
2
–
3
–
–
4
2
2
–
2
A
4
–
4
4
4
–
–
1
–
3
B
4
–
4
4
4
–
–
1
–
3
A
–
–
–
4
4
4
2
–
–
–
B
–
–
–
4
4
4
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.
A
6
–
1
6
6
1
–
–
1
1
B
6
–
1
6
6
1
–
–
1
1
11) Leonard Bleasel AM retired as a Director on 27 October 2017.
12) John Fletcher retired as a Director on 21 February 2018.
38 — APA GROUP — ANNUAL REPORT 2018
directors’ 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 2018 is 800,118 (2017: 1,365,674 (13)).
The following table sets out Directors’ relevant interests in APA securities as at 30 June 2018:
Directors
Michael Fraser
Michael McCormack
Steven Crane
Debra Goodin
Russell Higgins AO
Patricia McKenzie
Shirley Int’d Veld (14)
Peter Wasow (15)
Leonard Bleasel AM (16)
John Fletcher (17)
Fully paid
securities as at
1 July 2017
Securities
acquired
Fully paid
Securities securities as at
30 June 2018
disposed
25,000
320,000
130,000
19,200
122,719
22,889
–
–
637,616
88,250
77,942
30,000
–
3,800
7,220
1,348
25,000
15,000
–
–
1,365,674
160,310
–
–
–
–
–
–
–
–
–
–
–
102,942
350,000
130,000
23,000
129,939
24,237
25,000
15,000
–
–
800,118
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
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 specific 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.
13) At 30 June 2017 the aggregate number of APA securities held directly or beneficially by Directors or their related entities included 637,616 securities held by
Leonard Bleasel AM who retired on 27 October 2017 and 88,250 securities held by John Fletcher who retired on 21 February 2018. The aggregate number of APA
Securities held directly or beneficially by the current Directors or their related entities as at 30 June 2017 was 639,808.
14) Shirley In’t Veld was appointed as a Director effective 19 March 2018. She held 25,000 securities on appointment.
15) Peter Wasow was appointed as a Director effective 19 March 2018. He held nil securities on appointment.
16) Leonard Bleasel AM retired as the Chairman and a Director on 27 October 2017. He held 637,616 securities on retirement.
17) John Fletcher retired as a Director on 21 February 2018. He held 88,250 securities on retirement.
directors’ report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 39
16. Remuneration Report
The remuneration report is attached to and forms part of this report.
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 95.
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 27 to the financial statements.
The Board has considered those non-audit services provided by the Auditor and, in accordance with advice provided by 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 28 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 21 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
Michael Fraser
Chairman
Sydney, 22 August 2018
Debra Goodin
Director
40 — APA GROUP — ANNUAL REPORT 2018
remuneration report.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
Individuals covered by this Remuneration Report
1.
The Remuneration Report for APA for FY2018 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 Action
2001, unless indicated otherwise, and forms part of the Directors’ Report.
This Report includes the following KMP:
— Non-executive Directors (NEDs) – current and former; and
— Executive Key Management Personnel (KMP) (1).
Name
NEDs
Michael Fraser
Steven Crane
Debra (Debbie) Goodin
Russell Higgins AO
Shirley In’t Veld
Patricia McKenzie
Peter Wasow
Leonard Bleasel AM
John Fletcher
Executive KMP
Role
Chairman
Director
Director
Director
Director
Director
Director
Chairman (former)
Director (former)
Michael (Mick) McCormack
Chief Executive Officer/Managing Director (CEO/MD)
Peter Fredricson
Ross Gersbach
Robert Wheals
Chief Financial Officer (CFO)
Chief Executive Strategy and Development
Group Executive Transmission
Term as KMP in 2018
Full year (2)
Full year
Full year
Full year
Part year (3)
Full year
Part year (4)
Part year (5)
Part year (6)
Full year
Full year
Full year
Full year
2. Executive Summary
2.1 FY2018 Remuneration highlights
The table below provides a snapshot of the key changes and outcomes under the relevant remuneration frameworks.
APA’s financial performance 2014 to 2018
Normalised financial results (7)
FY2014 FY2015 FY2016 FY2017 FY2018
Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) ($m) 747.3
822.3
1,330.5
1,470.1
1,518.5
Profit after tax ($m)
Operating cash flow per security (cents) (8)
Distribution per security (cents) (9)
Closing security price at 30 June ($)
199.6
203.9
179.5
236.8
264.8
49.6
36.3
6.89
56.3
38.0
8.24
77.1
41.5
9.24
87.1
43.5
9.17
90.7
45.0
9.85
1) The Board reviewed the composition of Executive KMP from 1 July 2017. It was recognised that members of the Executive Committee all had some degree of
authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. However, by the nature of their positions, some
had a greater focus on planning and strategy, whilst, conversely, others concentrated more on the tactical execution of the business strategy. The Executive
KMP disclosed are those whom, the Board deemed, most accurately met the definition prescribed under Australian Accounting Standards Board (AASB) 124.
2) Appointed Chairman 27 October 2017.
3) Appointed 19 March 2018.
4) Appointed 19 March 2018.
5) Retired 27 October 2017.
6) Retired 21 February 2018.
7) Normalised financial results are the statutory financial results excluding significant items. The Board considers these measures to best reflect the core
earnings of APA.
8) The number of securities used for the calculation of operating cash flow per security from FY2018 to FY2014 have been adjusted by an adjustment factor of
1.0038 to reflect the discounted rights offer issued in March 2018. The average number of securities for FY2015 and FY2014 has been further adjusted by an
adjustment factor of 1.0360 to reflect the discounted rights offer issued between 23 December 2014 and 28 January 2015. The average number of securities
for FY2015 and FY2014 has been further adjusted by an adjustment factor of 1.0360 to reflect the discounted rights offer issued between 23 December 2014
and 28 January 2015.
9) Represents the total distribution applicable to the financial year.
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 41
e t o t al remun
e
r
a
7.5%
Avera g
i
n
c
r
e
a
se for Exe c u t i v
FY2018
79.0%
t
i
o
n
P
e K M
0
20
40
60
80
100
2.1 FY2018 Remuneration highlights (continued)
Fixed pay
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.
Short term incentive
f
e
g
Aver a
i xed pay in
c
r
e
a
s
e
3.6%
f
or Executi v e K M P
Total remuneration outcomes
In FY2018, APA continued
to see strong business
performance and delivery
of value to Securityholders.
This drove an increase in
the average (actual) total
remuneration received
compared to FY2017.
STI performance continues to be assessed against
a balanced scorecard.
STI awards are subject to the performance gateway
of Operating Cash Flow per Security (OCFPS). For
FY2018, OCFPS performance was assessed at 137.1%
out of a maximum of 150%. This provides the total
opportunity to which the individual executive
performance outcomes are applied.
FY2017
80.7%
STI outcome as % maximum
Long term incentive
Reflecting the link between organisational
performance and executive reward, executives
will forfeit 50% of their LTI allocation under the
Relative TSR performance hurdle. The internal
hurdle, EBITDA/Funds Employed (FE), achieved an
outcome of 95.4%. This means that 47.7% of the total
LTI opportunity will be awarded in respect of the
FY2018 financial year.
120
90
60
30
0
(30)
Minimum shareholding requirements
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
APA
ASX/S&P 200 Utilities
ASX/S&P 100
APA Market Cap Ranking in ASX100
The Directors, CEO/MD and CFO met the minimum security holding requirement, the only exception being Mr Wasow,
as a newly appointed Director (19 March 2018). The remaining Executive KMP continued to progress towards the required level
for this requirement.
Non-executive Directors fees
There were no increases to Non-executive Director and Committee fees. Effective 1 January 2018, the Board adopted a total
remuneration approach, whereby all NED emoluments are inclusive of any superannuation contributions.
2.2 Actual remuneration earned in FY2018
The table below summarises the actual remuneration earned by the current executive KMP relating to the past financial year.
Name
M McCormack
P Fredricson
R Gersbach
R Wheals
Fixed pay (10) $
STI (11) $
LTI vested (12) $
Total $
1,955,000
1,708,690
1,740,831
5,404,521
903,000
924,980
780,000
532,960
535,330
503,680
559,233
577,932
446,764
1,995,193
2,038,242
1,730,444
This table supplements, and is different to, the Statutory Remuneration table, which presents the accounting expense for
both vested and unvested awards in accordance with the Australian Accounting Standards.
10) Fixed pay is inclusive of cash salary and any salary sacrifice items (including any relevant fringe benefits tax) such as car parking, motor vehicles and superannuation.
11) STI refers to performance achieved in FY2018 and is paid in September 2018.
12) LTI vested refers to the cash amount paid in September 2018, based on the VWAP and number of reference units vesting at that time.
42 — APA GROUP — ANNUAL REPORT 2018
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
2.3 Looking ahead to Financial Year 2019 (FY2019)
The table below provides an overview of the activities concerning remuneration strategies and frameworks planned for FY2019.
Fixed pay
We will continue to set fixed pay levels with reference to comparable external benchmarks.
Short term incentive (STI)
Consistent with prior financial years, balanced scorecards will be established for each
Executive KMP, covering key performance indicators across financial, business, strategic,
people development and health, safety and environment with measures for target and
stretch outcomes in FY2019.
Long term incentive (LTI)
The Board continues to believe that the LTI provides the most effective link between
executive retention and alignment with the creation of longer term Securityholder value.
3. Executive Remuneration Framework
The Board recognises 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 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 an appropriate component of remuneration is linked to the creation of value for our investors.
3.1 Remuneration overview for FY2018
The following timeline illustrates the time frame for the assessment and delivery of fixed remuneration and variable reward.
Jul 15
Jul 16
Jul 17
Jul 18
Jul 19
Jul 20
Jul 21
Jul 22
Fixed Pay
Fixed pay for following year assessed August 2018
LTI
performance
STI
Award based on performance 1 July 2017 to 30 June 2018
Paid September 2018
LTI – allocation performance period
Fixed Pay
1/3 vesting (after 1 year)
1/3 vesting (after 2 years)
1/3 vesting (after 3 years)
3.2 Remuneration structure
The table to the right provides an
overview of the pay mix for Executive
KMP. Each remuneration element
is expressed as a percentage of
the target total reward opportunity.
30%
CEO/MD 40%
30%
25%
Other
Executive
KMP
50%
25%
Fixed pay
Fixed pay includes base salary and any salary sacrifice items (including any relevant fringe benefits tax) such as car parking,
motor vehicles and superannuation. The level of fixed pay is based on a number of factors, including the skills and experience
of the individual, external market positioning and the size and complexity of the role.
Fixed pay
STI
LTI
APA benchmarks each Executive KMP role against external positions in companies with comparable market capitalisation,
similar industries and key comparators to gain a comprehensive view of all elements of executive remuneration.
Variable reward
Variable reward consists of incentive schemes which focus on APA and individual performance on an annual (STI) and longer
term (LTI) basis.
The size of the “pool” of funds available for the short term incentive is determined by the Group’s OCFPS for the year. This
is then subject to individual performance of executives against key measures. Actual performance against STI objectives
is assessed at the end of the financial year. This assessment is reviewed by the People and Remuneration Committee (the
Committee). The Committee (in conjunction with the Board) reviews the assessment of each executive’s outcome in light of
the overall business performance, and provides final approval of the STI outcomes upon completion of the review.
The LTI complements the STI by focussing executives on the long term performance of APA. Performance is assessed over the
three years preceding the LTI allocation, based on relative shareholder returns (relative TSR measure) and cash flow leverage
achieved based on operating assets (EBITDA/FE measure). The Committee reviews the performance over the preceding
three year period, with the Board providing final approval of the LTI allocation.
APA GROUP — ANNUAL REPORT 2018 — 43
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
4. Executive Incentive Plans and FY2018 Outcomes
4.1 Short term incentive plan
The diagram below outlines the STI plan design for FY2018.
r
e
i
f
i
d
o
m
d
n
a
y
a
w
e
t
a
G
l
w
o
F
h
s
a
C
g
n
i
t
a
r
e
p
O
y
t
i
r
u
c
e
S
r
e
p
STI Scorecard
Scorecard area
Financial
Strategic
Health, safety & environment
People development & culture
Personal (including specific
divisional KPIs)
t
n
e
d
n
e
p
e
d
%
g
n
i
t
h
g
e
W
i
P
M
K
e
v
i
t
u
c
e
x
E
n
o
STI opportunity
Role
Target
Stretch
CEO/MD
30.0%
45.0%
Other
Executive
KMP
25.0%
37.5%
Individual
STI outcome
(delivered
in cash in
September)
STI opportunity is only realisable if the OCFPS gateway performance set by the Board is met.
If the gateway is met, the STI opportunity available may be modified based on OCFPS performance achieved.
The adjustment is based on a sliding scale and the STI is either positively or negatively modified depending on the financial result.
FY2018 STI outcomes – CEO/MD
The Board reviewed the CEO/MD’s performance in light of APA’s performance in FY2018, taking into account his performance
against the key performance indicators (KPIs) in his STI scorecard, and determined that the STI outcome is 85.0% of his Target.
CEO/MD FY18 STI scorecard outcomes
Scorecard area
KPI measure
Weighting
Outcome
Financial
Strategic
Deliver OCFPS targets
Delivery of capital projects
Regulatory Management
Strategy Development
Non-Pipeline Growth
Health, safety
& environment
TRIFR
CHAT (Contractor HSE
Assessment Tool) Audits complete
People development
& culture
Leadership & Succession
Diversity & Inclusion
Personal
Total
At Board Discretion
53%
25%
5%
7%
10%
100%
Threshold
100%
85%
The CEO/MD sets the scorecard measures for the other Executive KMP, ensuring scorecards reflect the priorities of the
relevant area of the business as well as APA as a whole. FY2018 STI scorecard outcomes for the Executive KMP ranged
between 84.7% and 94.2% of Target (i.e. 100%).
These are individual performance outcomes which are then adjusted by APA’s performance against the OCFPS performance
modifier, which acts as a form of ‘gate opener’ and a determinant of the overall STI opportunity.
FY2018 STI outcomes – Executive KMP
Detailed below are the individual scorecard outcomes for each of the Executive KMP. While there are a number of shared
KPIs, different weightings and KPIs have also been set for each Executive KMP, reflecting the nature of their role and its
contribution to APA’s business outcomes.
Executive KMP
P Fredricson
R Gersbach
R Wheals
KPI outcomes against target outcome (maximum opportunity)
Financial KPIs
Non-financial KPIs Performance outcome
100.0% (45.0%)
74.7% (55.0%)
86.1% (100%)
100.0% (25.0%)
79.6% (75.0%)
84.7% (100%)
100.0% (38.0%)
90.6% (62.0%)
94.2% (100%)
44 — APA GROUP — ANNUAL REPORT 2018
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
FY2018 STI outcomes – Executive KMP (continued)
The table below provides an overview of the STI outcomes for FY2018, representing the combination of both individual
performance outcomes (against agreed objectives) and the application of the STI Plan modifier (i.e. the OCFPS performance
level of 137.1% out of a maximum of 150%).
Executive KMP
M McCormack
P Fredricson
R Gersbach
R Wheals
STI earned
STI forfeited
% of maximum
opportunity
$ earned
% of maximum
opportunity
$ foregone
77.7%
78.7%
77.4%
86.1%
1,708,690
532,960
535,330
503,680
22.3%
21.3%
22.6%
13.9%
490,685
144,290
156,170
81,320
4.2 Long term incentive plan
The Executive KMP have a target LTI opportunity of 100% of their allocated percentage of total reward, increasing to a
maximum of 150%, where outstanding performance is achieved against the performance hurdles. The diagram below
outlines the LTI plan design for FY2018.
Jul 15
Jul 16
Jul 17
Jul 18
Jul 19
Jul 20
Jul 21
Relative TSR (50%)
Measured relative to a peer group comprising of S&P/ASX 100
constituents and over the three financial years preceding the
allocation of reference units.
1/3 vesting
after one year
EBITDA/FE (50%)
Measured over the three financial years preceding the allocation
of reference units.
1/3 vesting after three years
1/3 vesting after two years
Allocation of reference units based on relative TSR and EBITDA/FE performance
using a 30-day VWAP. Reference units are settled in cash, and do not entitle
the executive to voting rights or distributions. There is no retesting of the allocation.
Determining the number of reference units
Relative TSR
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 over a three year period.
EBITDA/FE
A sliding scale also ranges between 0% and 150%, which becomes progressively more challenging with the
maximum amount of 150% available only when EBITDA/FE performance is significantly above the agreed
financial metrics.
Allocation schedules
Measure
Performance outcome
Allocation outcome
Relative TSR
Less than 50 percentile
0% of eligible reference units
Between 50 percentile and 82.5 percentile
Sliding scale between 0% and 150% of eligible reference units
EBITDA/FE
Less than 10.372%
Greater than 10.372%
0% of eligible reference units
Sliding scale between 80% and 150% of eligible reference units
FY2018 LTI outcomes
Eligible executives received cash-settled reference units with an allocation date of August 2018 (vesting and paid in September
over the three following years of 2019, 2020 and 2021 in equal parts). The table below provides a summary of LTI awards
based on performance against the hurdles for the current and previous three years.
Year allocation
Relative TSR (50%)
Performance assessment
LTI awarded % of
EBITDA/FE (50%) maximum allocation
FY2015
FY2016
FY2017
FY2018
100.0
85.3
73.4
0.0
90.8
62.9
83.2
63.6
95.4
74.1
78.3
31.8
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 45
FY2018 LTI outcomes (continued)
Below is a summary of LTI allocations relating to FY2018 based on performance against the hurdles over the three year
performance period. These units were allocated in August 2018.
Executive KMP
M McCormack
P Fredricson
R Gersbach
R Wheals
Number of reference
units allocated
Potential value of
allocation yet to vest ($) (13)
71,364
21,975
22,437
18,981
699,032
215,252
219,777
185,925
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
Termination
without cause
Termination
with cause
CEO/MD
Permanent
12 months
52 weeks fixed pay
Immediate without notice period
Executive KMP other than CEO/MD Permanent
Six months
13 weeks fixed pay
Immediate without notice period
5.2 Additional provisions
The table below summarises additional provisions as they relate to the remuneration of Executive KMP.
Provision
Clawback
Cessation of employment
STI
LTI
The Board in its discretion may determine that some, or all, of an Executive KMP’s 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.
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).
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, an STI award will be paid
out based on the proportion of the period
that has passed at the time of change of
control to the extent to which performance
conditions have been met.
Subject to Board discretion, if a change
of control occurs, all previously allocated
reference units will vest to the extent to which
performance conditions have been met, i.e.
tenure. 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.
5.3 Minimum security ownership requirement
The minimum security ownership requirement helps to ensure the interests of Directors, Executive KMP and investors
are aligned.
Executive KMP (14) are expected to grow their holding to the minimum security ownership requirement within five years from
the date of the implementation of the minimum security ownership requirement policy in 2016. These security holdings have
to be acquired from post-tax income as APA does not have an equity-settled LTI. As at 30 June 2018:
— The minimum security ownership requirement for the CEO/MD equals his annual gross fixed pay; and
— The minimum security ownership requirement for Executive KMP is 50% of their annual gross fixed pay.
5.4 Sign-on/loans/termination payments provided to Executive KMP
APA did not pay any sign-on payments to Executive KMP during FY2018.
No loans have been made to any Executive KMP and/or related parties.
No termination payments have been made to Executive KMP during FY2018.
13) The potential value of the allocation has been estimated based on the cash award valuations at the allocation date.
14) Subsequently appointed Executive KMP have three years from their date of appointment to meet the minimum security ownership requirement.
46 — APA GROUP — ANNUAL REPORT 2018
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
6. Non-executive Directors
6.1. 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 or participate in incentive plans of any type. One off ‘per diems’ may be paid in
exceptional circumstances. No payments were made under this arrangement in this or the prior reporting period. Fees are
inclusive of superannuation contributions which are provided in accordance with the statutory requirements under the
Superannuation Guarantee Act.
The Board Chairman does not receive additional fees for attending committee meetings.
6.2 Aggregate fee pool
The aggregate fee pool for NEDs is currently $2,500,000 (inclusive of the applicable superannuation guarantee levy).
6.3 Director fees
No changes were made to NED fees in FY2018. Note that the fees detailed below are inclusive of superannuation (15).
Fees
Board
Audit and Risk Management Committee
Health, Safety and Environment Committee
People and Remuneration Committee
Nominations Committee
Effective 1 January 2018
Chairman
$000
Member
$000
511.4
47.9
39.9
39.9
174.1
23.9
19.9
19.9
None paid
None paid
6.4 Minimum security ownership requirement
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 NEDs
and is a requirement of their employment agreement. As at 30 June 2018 all NEDs met this requirement, with the exception
of Peter Wasow, who was newly appointed in March 2018.
7. Remuneration Governance
7.1 Role of People and Remuneration Committee
The Committee has been established by the Board to oversee Executive KMP and NED remuneration. The role of the Committee
is to ensure the provision of a robust remuneration system that aligns employee and investor interests whilst 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 and talent plans.
7.2 Composition of the Committee
The members of the Committee, all of whom are independent NEDs, are:
— Peter Wasow (Chairman);
— Steven Crane;
— Shirley In’t Veld; and
— Patricia McKenzie.
The CEO/MD and nominated senior executives attend meetings of the Committee by invitation. The Committee met four
times during the year.
15) NED fees, as reported in FY2017 and FY2016, were exclusive of superannuation. Effective 1 January 2018, APA adopted a total remuneration approach,
whereby all NED emoluments are inclusive of any superannuation contributions.
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 47
7.3 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 FY2018, 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
— 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, providing analysis to the Committee and Board. This advice is used as a guide, and does not serve
as a substitute for the thorough consideration of the issues by each Director.
8. Statutory Tables
8.1 Total remuneration earned and received by Executive KMP (16)
Short-Term Employment Benefits $
Post-Employment $
LTI Plans $
Total $
Salary (17)
Awarded STI (18)
Superannuation
Security-Based
Payments (19)
M McCormack
2018
2017
P Fredricson
2018
2017
R Gersbach
2018
2017
R Wheals
2018
2017
Total Remuneration
2018
2017
1,930,000
1,865,000
1,708,690
1,724,472
878,000
842,000
904,931
860,000
755,000
702,000
532,960
541,944
535,330
512,739
503,680
461,765
25,000
35,000
25,000
35,000
20,049
35,000
25,000
30,000
1,479,646
1,485,242
5,143,336
5,109,714
472,995
485,756
1,908,955
1,904,700
488,139
504,246
1,948,449
1,911,985
381,368
374,026
1,665,048
1,567,791
4,467,931
3,280,660
95,049
2,822,148
10,665,788
4,269,000
3,240,920
135,000
2,849,270
10,494,190
16) This table outlines the total remuneration earned by Executive KMP during FY2017 and FY2018, calculated in accordance with the appropriate accounting
standard, AASB 2: Share-based Payments. The FY2017 total remuneration differs from the amount disclosed in the Report last year due to the review of
Executive KMP.
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) 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. Cash settled reference units which were allocated during FY2018, based on an
estimated VWAP of $9.7953.
48 — APA GROUP — ANNUAL REPORT 2018
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
8.2 NED Statutory Remuneration Disclosure – NED Remuneration for FY2017 and FY2018
Financial Year
M Fraser (20)
FY2018
FY2017
S Crane
FY2018
FY2017
D Goodin
FY2018
FY2017
R Higgins AO
FY2018
FY2017
P McKenzie
FY2018
FY2017
S In’t Veld (21)
FY2018
P Wasow (22)
FY2018
L Bleasel AM (23)
FY2018
FY2017
J Fletcher (24)
FY2018
FY2017
Total
FY2018
FY2017
employment benefits
Short-term Post-employment
benefits
Fees
$
Superannuation
$
Total
$
377,667
196,227
208,125
217,200
211,775
195,750
217,200
213,600
195,400
192,200
35,900
18,854
19,775
20,650
20,125
18,600
20,600
20,300
18,600
18,300
413,567
215,081
227,900
237,850
231,900
214,350
237,800
233,900
214,000
210,500
56,252
5,355
61,607
62,527
5,930
68,457
152,129
453,500
144,800
213,600
1,625,875
1,682,077
14,464
43,100
13,733
20,300
154,482
160,104
166,593
496,600
158,533
233,900
1,780,357
1,842,181
8.3 Outstanding LTI awards
The following table sets out the movements in the number of LTI reference units and the number of LTI reference units that
have been allocated to executives but have not yet vested or been paid, and the years in which they will vest.
Reflecting the equity raising in February 2018, all unvested units have been adjusted by a factor of 1.0017. The adjustment (25)
is not retrospective and only impacts allocations vesting in August 2018, August 2019 and August 2020.
20) Appointed Chairman 27 October 2017.
21) Appointed 19 March 2018.
22) Appointed 19 March 2018.
23) Retired 27 October 2017.
24) Retired 21 February 2018.
25) Effective from 22 August 2018, being the date of Board approval.
APA GROUP — ANNUAL REPORT 2018 — 49
remuneration report. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 30 JUNE 2018
8.3 Outstanding LTI awards (continued)
Opening
balance
at 1 Jul
2017 (26)
45,047
125,636
155,720
15,750
42,672
49,110
16,611
45,024
50,111
10,500
32,277
39,875
Allocation
Date
M McCormack
2014
P Fredricson
R Gersbach
R Wheals
2015
2016
2017
2018
Total
2014
2015
2016
2017
2018
Total
2014
2015
2016
2017
2018
Total
2014
2015
2016
2017
2018
Total
Units
allocated
in 2018
Cash settled
reference
units paid
(45,047)
(62,765)
Closing
balance
at 30 Jun
2018
Units
subject to
allocation by
the Board in
Aug 2018
Reference units allocated that have
not yet vested or been paid and
the months in which they will vest
Aug
2018
Aug
2019
Aug
2020
Aug
2021
62,871
62,871
(51,848)
103,872
51,936
51,936
188,742
188,742
62,914
62,914
62,914
(15,750)
(21,318)
(16,352)
(16,611)
(22,493)
(16,685)
(10,500)
(16,125)
(13,277)
58,077
59,271
48,477
21,354
32,758
58,077
22,531
33,426
59,271
16,152
26,598
48,477
71,364
23,788
23,788
23,788
177,721
138,638
86,702
23,788
21,354
16,379
16,379
19,359
19,359
19,359
21,975
7,325
7,325
57,092
43,063
26,684
22,531
16,713
16,713
19,757
19,757
19,757
22,437
7,479
7,479
59,001
43,949
27,236
7,325
7,325
7,479
7,479
16,152
13,299
13,299
16,159
16,159
16,159
18,981
6,327
6,327
45,610
35,785
22,486
6,327
6,327
8.4 Securityholdings
The following table sets out the relevant interests of NEDs and Executive KMP in APA securities:
Year ended 30 June 2018
Non-executive Directors
M Fraser (27)
S Crane
D Goodin
R Higgins AO
P McKenzie
S In’t Veld (28)
P Wasow (29)
Executive KMP
M McCormack
P Fredricson
R Gersbach
R Wheals
Opening Balance at
1 July 2017
Securities
Acquired
Securities
Disposed
Closing Balance
at 30 June 2018
25,000
130,000
19,200
122,719
22,889
–
–
320,000
40,000
20,485
32,000
77,942
–
3,800
7,220
1,348
25,000
15,000
30,000
8,500
1,206
1,883
–
–
–
–
–
–
–
–
–
–
–
102,942
130,000
23,000
129,939
24,237
25,000
15,000
350,000
48,500
21,691
33,883
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) The units have been adjusted following the discounted equity entitlement offer.
27) Appointed Chairman 27 October 2017.
28) Appointed 19 March 2018.
29) Appointed 19 March 2018.
50 — APA GROUP — ANNUAL REPORT 2018
consolidated statement of profit or loss and other
comprehensive income.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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 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:
Transfer of gain on cash flow hedges to profit or loss
(Loss)/gain on cash flow hedges taken to equity
Gain on associate hedges taken to equity
Income tax relating to items that may be reclassified subsequently
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
Profit attributable to:
Unitholders of the parent
Non-controlling interest – APT Investment Trust unitholders
APA stapled securityholders
Total comprehensive income attributable to:
Unitholders of the parent
Non-controlling interest – APT Investment Trust unitholders
APA stapled securityholders
Note
2018
$000
2017
$000
4
4
5
5
5
5
6
2,364,798
2,304,627
21,924
21,793
2,386,722
2,326,420
(214,339)
(578,916)
(445,307)
(515,515)
(197,545)
(5,206)
429,894
(165,055)
(207,329)
(570,021)
(438,140)
(518,249)
(197,747)
(8,600)
386,334
(149,488)
264,839
236,846
1,588
(476)
1,112
93,901
(278,831)
8,632
52,906
(123,392)
(122,280)
142,559
196,790
68,049
264,839
74,510
68,049
142,559
2018
23.3
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
355,257
72,967
428,224
2017
(Restated)
21.2
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.
consolidated statement of financial position.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
AS AT 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 51
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other
Current assets
Non-current assets
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
18
9
20
9
20
23
11
12
12
15
10
18
20
14
10
18
20
6
14
21
2018
$000
2017
$000
100,643
251,720
55,525
28,534
12,487
448,909
14,030
591,487
271,597
9,691,666
1,183,604
2,992,431
33,502
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
14,778,317
14,273,617
15,227,226
15,045,948
381,676
329,219
139,401
83,629
20,922
954,847
5,089
9,321,377
128,510
558,442
71,951
60,183
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
10,145,552
10,369,530
11,100,399
11,067,765
4,126,827
3,978,183
3,288,123
(331,165)
105,412
3,114,617
(207,773)
60,804
3,062,370
2,967,648
1,030,176
34,228
976,284
34,198
Equity attributable to unitholders of APT Investment Trust
22
1,064,404
1,010,482
Other non-controlling interest
Total non-controlling interests
Total equity
53
53
1,064,457
1,010,535
4,126,827
3,978,183
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
52 — APA GROUP — ANNUAL REPORT 2018
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consolidated statement of cash flows.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 53
Note
2018
$000
2017
$000
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
Loans advance to related parties
Proceeds from issue of securities
Payments of security issue costs
Payment of debt 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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Unrealised exchange losses on cash held
2,635,344
2,508,269
(1,111,969)
(1,065,473)
18,841
1,774
9,967
(473,243)
(49,087)
1,031,627
22,411
2,290
5,755
(481,427)
(17,889)
973,936
(875,030)
(340,753)
663
–
–
(1,161)
693
(35,250)
(760)
(1,456)
(875,528)
(377,526)
309,718
(761,733)
(282)
505,016
(10,554)
(1,581)
–
2,144,576
(1,944,932)
–
–
–
(8,446)
2,149
(354,679)
(135,616)
(369,781)
(109,371)
(449,711)
(285,805)
(293,612)
394,501
(246)
310,605
84,506
(610)
Cash and cash equivalents at end of financial year
18
100,643
394,501
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
54 — APA GROUP — ANNUAL REPORT 2018
consolidated statement of cash flows. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Reconciliation of profit for the year to the net cash provided by operating activities
Profit for the year
Acquisition costs from business combinations
Profit on disposal of property, plant and equipment
Share of net profits of joint ventures and associates using the equity method
Dividends/distributions received from equity accounted investments
Depreciation and amortisation expense
Finance costs
Unrealised foreign exchange loss
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
2018
$000
2017
$000
264,839
236,846
–
(466)
(21,924)
18,841
578,916
15,569
1,966
6,904
18,894
(3,177)
(1,695)
20,115
(11,303)
28,167
115,981
1,031,627
(101)
(311)
(21,793)
22,411
570,021
13,926
28
7,514
(16,766)
(371)
266
27,286
(562)
3,943
131,599
973,936
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.
notes to the consolidated financial statements.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 55
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
3. Segment information
4. Revenue
5. Expenses
6.
Income tax
7. Earnings per security
8. Distributions
Capital Management
18. Net debt
19. Financial risk management
20. Other financial instruments
21. Issued capital
Group Structure
22. Non-controlling interests
23. Joint arrangements and associates
24. Subsidiaries
Other
Operating Assets and Liabilities
25. Commitments and contingencies
9. Receivables
10. Payables
26. Director and senior executive remuneration
27. Remuneration of external auditor
11. Property, plant and equipment
12. Goodwill and intangibles
28. Related party transactions
29. Parent entity information
13. Impairment of non-financial assets
30. Adoption of new and revised Accounting Standards
14. Provisions
31. Events occurring after reporting date
15. Other non-current assets
16. Employee superannuation plans
17. Leases
56 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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 25
580 George Street
Sydney NSW 2000
Tel: (02) 9693 0000
The consolidated general purpose financial report for the year ended 30 June 2018 was authorised for issue in accordance
with a resolution of the directors on 22 August 2018.
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.
Working capital position
The working capital position as at 30 June 2018 for APA Group is that current liabilities exceed current assets by $505.9 million
(2017: current assets exceeded current liabilities by $74.1 million) primarily as a result of current borrowings of $329.2 million
and $139.4 million (AUD equivalent) of cash flow hedge liabilities.
APA Group has access to sufficient available committed, un-drawn bank facilities of $868.8 million as at 30 June 2018 (2017:
$1,068.8 million) to meet the repayment of current borrowings on due date.
The Directors continually monitor APA Group’s working capital position, including forecast working capital requirements
and have ensured that there are appropriate refinancing strategies and adequate committed funding facilities in place to
accommodate debt repayments as and when they fall due.
Foreign currency transactions
Both the functional and presentation currency of APA Group and APT is Australian dollars (A$). 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.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 57
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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.
Reportable segments
2018
Segment revenue (a)
External sales revenue
Equity accounted net profits
Pass-through revenue
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
Depreciation and amortisation
Energy
Asset
Infrastructure Management
$000
$000
Energy
Investments
$000
Other Consolidated
$000
$000
1,802,505
108,537
–
44,265
1,454
–
401,042
–
–
21,924
–
1,144
1,848,224
509,579
23,068
1,495,642
66,204
–
–
1,454
–
–
–
–
21,924
1,144
–
–
–
–
–
–
–
–
1,911,042
21,924
445,307
2,598
2,380,871
5,851
2,386,722
1,561,846
21,924
2,598
1,497,096
(567,925)
66,204
(10,991)
23,068
(67,894)
1,518,474
–
–
(578,916)
–
(67,894)
(67,894)
Earnings before interest and tax (“EBIT”)
929,171
55,213
23,068
(67,894)
939,558
Net finance costs (b)
Profit before tax
Income tax expense
Profit for the year
Segment assets and liabilities
Segment assets
Carrying value of investments using
the equity method
Unallocated assets (c)
Total assets
Segment liabilities
Unallocated liabilities (d)
Total liabilities
13,995,163
212,521
10,967
–
–
271,597
(509,664)
429,894
(165,055)
264,839
–
–
14,218,651
271,597
736,978
15,227,226
440,276
64,829
–
–
505,105
10,595,294
11,100,399
a) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial.
b) Excluding finance lease and investment interest income, and any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting
purposes, but including other interest income.
c) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts and equity forwards.
d) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts.
58 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Energy
Asset
Infrastructure Management
$000
$000
Energy
Investments
$000
Other Consolidated
$000
$000
1,771,349
86,424
–
48,646
1,643
–
389,494
–
1,821,638
475,918
–
21,793
–
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
900,101
(513,767)
386,334
(149,488)
236,846
Depreciation and amortisation
(559,033)
(10,988)
–
–
(570,021)
Earnings before interest and tax (“EBIT”)
894,639
47,731
24,382
(66,651)
1,453,672
58,719
24,382
(66,651)
1,470,122
–
(66,651)
(66,651)
Financial Performance
3. Segment information (continued)
2017
Segment revenue (a)
External sales revenue
Equity accounted net profits
Pass-through revenue
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
Net finance costs (b)
Profit before tax
Income tax expense
Profit for the year
Segment assets and liabilities
Segment assets
Carrying value of investments using
the equity method
Unallocated assets (c)
Total assets
Segment liabilities
Unallocated liabilities (d)
Total liabilities
13,670,034
210,449
10,662
–
–
259,882
–
–
13,891,145
259,882
894,921
15,045,948
376,220
55,626
–
–
431,846
10,635,919
11,067,765
a) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial.
b) Excluding finance lease and investment interest income, and any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting
purposes, but including other interest income.
c) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts and equity forwards.
d) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts.
Information about major customers
Included in revenues arising from energy infrastructure of $1,802.5 million (2017: $1,771.3 million) are revenues of approximately
$689.4 million (2017: $704.8 million) which arose from sales to APA Group’s top three customers.
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 59
Financial Performance
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 income
Interest income on redeemable preference shares (GDI) (a)
Finance lease income
Finance income
Rental income
Total revenue
2018
$000
1,801,962
44,265
2017
$000
1,770,794
48,646
1,846,227
1,819,440
108,537
401,042
509,579
86,424
389,494
475,918
2,355,806
2,295,358
5,851
1,144
1,454
8,449
543
4,482
2,589
1,643
8,714
555
2,364,798
2,304,627
Share of net profits of joint ventures and associates using the equity method
21,924
21,793
2,386,722
2,326,420
a) 2017 includes interest on redeemable ordinary shares (EII)
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.
60 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Financial Performance
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
2018
$000
395,904
183,012
578,916
44,265
401,042
445,307
517,503
8,968
6,990
533,461
(23,697)
509,764
743
5,008
515,515
12,417
2,280
14,697
(4,221)
20,915
166,154
197,545
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
518,249
11,308
3,033
14,341
2,295
25,993
155,118
197,747
a) The average interest rate applying to drawn debt is 5.65% p.a. (2017: 5.56% 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.
Income tax
6.
The major components of tax expense are:
Income statement
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to current tax of prior years
(54,536)
612
(34,518)
456
Deferred tax expense relating to the origination and reversal of temporary differences
(111,131)
(115,426)
Total tax expense
Tax reconciliation
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
Adjustments recognised in the current year in relation to the current tax of prior years
R&D tax incentive
(165,055)
(149,488)
429,894
386,334
(128,968)
(115,900)
20,415
(58,319)
19
21,891
(59,263)
319
(166,853)
(152,953)
–
690
612
496
708
533
456
1,768
(165,055)
(149,488)
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 61
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Financial Performance
Income tax (continued)
6.
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 $165.1 million (2017: $149.5 million). An income tax provision of $33.8 million (2017: $28.9
million) has been recognised after utilisation of all available group tax losses and partial utilisation of available transferred
tax losses (refer to Note 10).
Deferred tax balances
Deferred tax (liabilities)/assets arise from the following:
2018
Gross deferred tax liabilities
Property, plant and equipment
Deferred expenses
Defined benefit obligation
Other
Gross deferred tax assets
Provisions
Cash flow hedges
Security issue costs
Deferred revenue
Investments equity accounted
Tax losses
Net deferred tax liability
2017
Gross deferred tax liabilities
Property, plant and equipment
Deferred expenses
Defined benefit obligation
Other
Gross deferred tax assets
Provisions
Cash flow hedges
Security issue costs
Deferred revenue
Investments equity accounted
Tax losses
Net deferred tax liability
Unrecognised deferred tax assets
Opening
balance
$000
Charged to
income
$000
Charged to
equity
$000
Closing
balance
$000
(810,121)
(56,480)
(68)
(1,054)
(93,648)
1,677
47
821
(867,723)
(91,103)
45,891
87,819
3,624
4,406
2,441
221,277
365,458
(502,265)
(2,500)
(118)
(2,317)
9,342
(108)
(24,327)
(20,028)
(111,131)
–
–
(476)
–
(476)
–
53,534
2,524
–
(628)
–
55,430
54,954
(903,769)
(54,803)
(497)
(233)
(959,302)
43,391
141,235
3,831
13,748
1,705
196,950
400,860
(558,442)
(724,525)
(54,563)
1,383
(730)
(85,596)
(1,917)
185
(324)
–
–
(1,636)
–
(810,121)
(56,480)
(68)
(1,054)
(778,435)
(87,652)
(1,636)
(867,723)
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)
–
(76,903)
–
–
(3,451)
–
(80,354)
45,891
87,819
3,624
4,406
2,441
221,277
365,458
(81,990)
(502,265)
2018
$000
2017
$000
1,641
1,641
The following deferred tax assets have not been brought to account as assets:
Tax losses – capital
62 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Financial Performance
Income tax (continued)
6.
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 24.
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
2018
cents
23.3
2017
(Restated)
cents
21.2
The earnings and weighted average number of ordinary securities used in the calculation of basic and diluted earnings per
security are as follows:
Net profit attributable to securityholders for calculating basic and diluted
earnings per security
2018
$000
2017
$000
264,839
236,846
2018
No. of securities
000
2017
(Restated)
No. of securities
000
Adjusted weighted average number of ordinary securities used in the
calculation of basic and diluted earnings per security
1,136,875
1,118,522
During March 2018, APA Group issued 65,586,479 new ordinary securities on completion of the fully underwritten pro-rata
accelerated institutional tradeable renounceable entitlement offer (Entitlement Offer). The Entitlement Offer was offered
at $7.70 per security, a discount to APA Group’s closing market price of $8.26 per security on the 23 February 2018, the
last trading day before the record date of 26 February 2018. The number of securities used for the current and prior period
calculation of earnings per security have been adjusted for the discounted rights issue. An adjustment factor of 1.0038 has
been calculated, being the closing market price per security on 23 February 2018, divided by the theoretical ex-rights price
(TERP) of $8.23 per security.
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 63
Financial Performance
8. Distributions
Recognised amounts
Final distribution paid on 13 September 2017
(2017: 16 September 2016)
Profit distribution – APT (a)
Capital distribution – APT
Profit distribution – APTIT (a)
Capital distribution – APTIT
Interim distribution paid on 14 March 2018
(2017: 15 March 2017)
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 12 September 2018 (c)
(2017: 13 September 2017)
Profit distribution – APT (d)
Capital distribution – APT
Profit distribution – APTIT (a)
Capital distribution – APTIT
2018
cents per
security
2018
Total
$000
2017
cents per
security
2017
Total
$000
5.46
10.78
3.07
3.69
23.00
8.30
7.29
3.03
2.38
60,803
120,183
34,198
41,107
256,291
92,491
81,202
33,821
26,490
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
250,719
106,890
60,959
38,770
21,814
21.00
234,004
20.50
228,433
19.86
24.14
44.00
221,313
268,982
490,295
8.93
9.03
2.90
3.14
24.00
105,412
106,513
34,228
37,022
283,175
33.16
9.84
43.00
5.46
10.78
3.07
3.69
23.00
369,534
109,618
479,152
60,803
120,183
34,198
41,107
256,291
a) Profit distributions were unfranked (2017: unfranked).
b) Interim profit distributions were 5.83 cents per security franked and 2.47 cents per security unfranked (2017: 4.67 cents per security franked and 4.92 cents per
security unfranked).
c) Record date 29 June 2018.
d) Final profit distributions are to be fully franked (2017: 4.67 cents per security franked and 0.79 cents per security 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)
2018
$000
3,228
2017
$000
4,413
64 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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
2018
$000
226,315
(1,494)
224,821
25,252
1,480
88
79
2017
$000
275,331
(2,120)
273,211
13,028
1,787
1,605
78
251,720
289,709
14,030
14,030
15,496
15,496
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
41,392
33,754
306,530
381,676
5,089
5,089
40,827
28,914
242,870
312,611
4,984
4,984
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.
11. Property, plant and equipment
Gross carrying amount
Balance at 1 July 2016
Additions
Disposals
Transfers
Balance at 30 June 2017
Additions
Disposals
Transfers
Freehold land
and buildings
- at cost
$000
Leasehold
improvements
- at cost
$000
Plant and
equipment
- at cost
$000
234,838
5,072
10,059,642
2,280
(24)
5,639
242,733
702
–
5,282
–
–
5,095
10,167
–
–
493
5,150
(9,089)
295,300
(306,034)
10,351,003
31,278
(4,071)
229,407
905,622
–
272,876
(278,651)
Work in
progress
- at cost
$000
195,132
340,309
–
Total
$000
10,494,684
347,739
(9,113)
–
10,833,310
937,602
(4,071)
–
Balance at 30 June 2018
248,717
10,660
10,651,086
856,378
11,766,841
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 65
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Operating Assets and Liabilities
11. Property, plant and equipment (continued)
Freehold land
and buildings
– at cost
$000
Leasehold
improvements
– at cost
$000
Plant and
equipment
– at cost
$000
Work in
progress
– at cost
$000
Accumulated depreciation
Balance at 1 July 2016
Disposals
Depreciation expense (Note 5)
Transfers
Reclassification to inventories
(32,015)
24
(7,430)
260
–
(2,279)
(1,271,303)
–
(750)
–
–
8,707
(378,960)
(260)
861
Balance at 30 June 2017
(39,161)
(3,029)
(1,640,955)
Disposals
Depreciation expense (Note 5)
Balance at 30 June 2018
–
(7,184)
(46,345)
–
(923)
3,874
(387,797)
(3,952)
(2,024,878)
–
–
–
–
–
–
–
–
–
Total
$000
(1,305,597)
8,731
(387,140)
–
861
(1,683,145)
3,874
(395,904)
(2,075,175)
Net book value
As at 30 June 2017
As at 30 June 2018
203,572
202,372
7,138
6,708
8,710,048
8,626,208
229,407
856,378
9,150,165
9,691,666
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.
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
Finalisation of provisional purchase price accounting
Balance at end of financial year
2018
$000
2017
$000
1,183,604
1,184,588
–
(984)
1,183,604
1,183,604
66 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Operating Assets and Liabilities
12. Goodwill and intangibles (continued)
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)
2018
$000
21,456
2017
$000
21,456
1,060,681
1,060,681
43,104
58,363
43,104
58,363
1,183,604
1,183,604
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.
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)
Write-offs
Balance at end of financial year
3,589,799
3,604,143
1,161
–
1,456
(15,800)
3,590,960
3,589,799
(415,517)
(183,012)
–
(248,436)
(182,881)
15,800
(598,529)
(415,517)
2,992,431
3,174,282
APA Group holds various third party operating and maintenance contracts. The combined gross carrying amount of $3,591.0
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.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 67
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Operating Assets and Liabilities
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.
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 1.0% p.a. (2017: 1.1% 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. (2017: 8.25% p.a.) for Energy Infrastructure assets and 8.25% p.a.
(2017: 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
2018
$000
78,433
5,196
83,629
30,180
41,771
71,951
28,153
8,299
41,981
–
78,433
14,791
5,032
10,357
30,180
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
68 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Operating Assets and Liabilities
14. Provisions (continued)
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 yield in respect of services provided by employees up to reporting date.
15. Other non-current assets
Line pack gas
Gas held in storage
Defined benefit asset (Note 16)
Other assets
2018
$000
20,607
6,010
6,693
192
33,502
2017
$000
20,343
6,010
4,870
192
31,415
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 2018. 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 loss
Benefits paid
Administrative expenses, taxes and premiums paid
Closing defined benefit obligation
2,234
46
2,280
135,620
(133,959)
6,693
(5,032)
2,842
191
3,033
135,029
(134,804)
4,870
(4,645)
134,804
143,101
2,234
5,369
786
5,138
(13,873)
(499)
133,959
2,842
4,599
1,001
1,550
(17,665)
(624)
134,804
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 69
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
2018
$000
2017
$000
135,029
138,488
5,323
6,726
2,128
786
(13,873)
(499)
4,408
7,002
2,419
1,001
(17,665)
(624)
135,620
135,029
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 benefit obligation is a discount rate of 4.1% gross of
tax (2017: 4.1%), based on the corporate bond yield curve published by Milliman, an expected salary increase rate of 3.0%
(2017: 3.0%), and pension indexation rate of 2.0% (2017: 2.0%). 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 $5,722,000 (increase
by $6,321,000); and
— If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $1,813,000
(decrease by $1,715,000).
— If the expected pension indexation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by
$4,313,000 (decrease by $3,932,000).
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 to pay $2.0 million in contributions to the defined benefit plans during the year ending 30 June 2019.
70 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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)
2018
$000
2,775
8,763
12,832
24,370
24,370
(8,860)
15,510
1,480
14,030
15,510
2017
$000
3,227
9,655
14,715
27,597
27,597
(10,314)
17,283
1,787
15,496
17,283
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
13,641
36,487
22,437
72,565
12,970
41,660
26,462
81,092
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 recognis ed as a liability when received and released to the statement of profit or loss on a
straight line basis over the lease term.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 71
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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
2018 and 2017 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 issuance,
new debt or the redemption of existing debt and through a disciplined distribution payment policy.
18. Net debt
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 detailed in the
table below.
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.
Cash at bank and on hand
Short-term deposits
Cash and cash equivalents
Guaranteed senior notes (a)
Other financial liabilities
Current borrowings
Guaranteed senior notes (a)
Bank borrowings (b)
Subordinated notes (c)
Other financial liabilities
Less: unamortised borrowing costs
Non-current borrowings
Total borrowings
Net debt
2018
$000
99,277
1,366
100,643
(318,373)
(10,846)
2017
$000
43,087
351,414
394,501
(115,738)
(11,120)
(329,219)
(126,858)
(9,089,991)
(9,022,710)
(200,000)
–
–
(515,000)
(73,458)
42,072
(82,059)
45,862
(9,321,377)
(9,573,907)
(9,650,596)
(9,700,765)
(9,549,953)
(9,306,264)
a) Represents USD denominated private placement notes of US$384 million, CAD medium term notes (MTN) of C$300 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 (2017: Includes JPY MTN of ¥10,000 million). Refer to Note 19 for details of interest rates
and maturity profiles.
b) Refer to Note 19 for details of interest rates and maturity profiles.
c) Represents AUD denominated subordinated notes. Refer to Note 19 for details of interest rates and maturity profiles.
72 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
18. Net debt (continued)
Cash and
cash
equivalents
$000
Borrowings
due within
1 year
$000
Borrowings
due after
1 year
$000
Net debt
$000
Reconciliation of net debt
Net debt as at 1 July 2016
Cash movements
84,506
310,605
Foreign exchange movements due to fair value changes
(610)
Transfer from due after 1 year to due within 1 year
Amortisation of deferred borrowing costs
–
–
(409,829)
(9,314,373)
(9,639,696)
392,437
27,519
(136,985)
–
(592,081)
196,360
136,985
(798)
110,961
223,269
–
(798)
Net debt as at 30 June 2017
394,501
(126,858)
(9,573,907)
(9,306,264)
Net debt as at 1 July 2017
Cash movements
Foreign exchange movements due to fair value changes
Transfer from due after 1 year to due within 1 year
Amortisation of deferred borrowing costs
394,501
(293,612)
(246)
–
–
(126,858)
(9,573,907)
(9,306,264)
137,015
(13,298)
(326,078)
–
315,000
158,403
(384,758)
(398,302)
326,078
(3,790)
–
(3,790)
Net debt as at 30 June 2018
100,643
(329,219)
(9,321,377)
(9,549,953)
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)
2018
$000
2017
$000
9,408,364
1,068,750
–
9,138,448
1,068,750
515,000
10,477,114
10,722,198
9,408,364
200,000
9,138,448
–
–
515,000
9,608,364
9,653,448
–
–
868,750
1,068,750
–
–
868,750
1,068,750
a) Represents USD denominated private placement notes of US$384 million, CAD medium term notes (MTN) of C$300 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 (2017: Includes JPY MTN of ¥10,000 million). Refer to Note 19 for details of interest rates
and maturity profiles.
b) Refer to Note 19 for details of interest rates and maturity profiles.
c) Represents AUD denominated subordinated notes. Refer to Note 19 for details of interest rates and maturity profiles.
19. 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.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 73
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. Financial risk management (continued)
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 and electricity price risk
arising from the electricity contract for difference.
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). 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.
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:
2018
US Dollar (USD)
Japanese Yen (JPY)
Canadian Dollar (CAD)
British Pound (GBP)
Euro (EUR)
Swedish Krona (SEK)
Danish Krona (DKK)
2017
US Dollar (USD)
Japanese Yen (JPY)
Canadian Dollar (CAD)
British Pound (GBP)
Euro (EUR)
Swedish Krona (SEK)
Danish Krona (DKK)
Cash & cash
Total
equivalents Receivables borrowings
$000
$000
$000
Cross
currency
swaps
$000
Foreign Net foreign
currency
position
$000
exchange
contract
$000
3,143
–
–
–
–
–
–
3,143
–
–
–
–
–
–
–
–
(4,576,684)
(433,791)
(109,807)
(5,117,139)
–
–
(308,496)
308,496
(1,694,493)
1,694,493
(2,129,801)
2,129,801
–
–
–
–
–
–
–
18,911
43,344
4,102
–
–
–
18,911
43,344
4,102
(8,709,474)
3,698,999
(43,450)
(5,050,782)
3,393
40,002
(4,406,537)
(417,663)
(347,362)
(5,128,167)
–
–
–
–
–
–
–
–
–
–
–
–
(115,738)
115,738
(301,230)
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)
74 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. 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 exposures 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
2018
Average
exchange
rate
$
Foreign
currency
Contract Value
< 1 year
$000
1 – 2 years
$000
2 – 5 years
$000
Fair value
$000
Forecast revenue and associated receivable
Pay USD / receive AUD
USD
0.6528
137,462
–
Forecast capital purchases
Pay AUD / receive USD
Pay AUD / receive EUR
Pay AUD / receive SEK
Pay AUD / receive DKK
USD
EUR
SEK
DKK
0.7596
0.6821
5.7572
5.1321
(27,515)
(17,039)
(2,087)
(4,102)
–
–
(1,795)
(140)
(77)
(7,045)
(34,212)
–
–
15,957
734
1,706
(3,142)
387
2017
Forecast revenue and associated receivable
Pay USD / receive AUD
USD
0.7082
306,474
146,605
–
33,119
86,719
(7,262)
(36,007)
15,642
Forecast capital purchases
Pay AUD / receive USD
Pay AUD / receive EUR
Pay AUD / receive SEK
Pay AUD / receive DKK
USD
EUR
SEK
DKK
0.7507
0.6884
5.8684
5.2308
(92,269)
(26,461)
(18,108)
(99,936)
(13,308)
(16,691)
(1,831)
(4,102)
(140)
(1,872)
(41,257)
–
(2,113)
2,153
(2,129)
6,543
69,700
110,673
(43,269)
37,573
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 $137.5 million (2017: $453.1 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.
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
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.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 75
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. Financial risk management (continued)
a) Market risk (continued)
Cross currency swap contracts (continued)
The following table details the cross currency swap contract principal payments due as at the reporting date:
Cash flow hedges
2018
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
2012 CAD Medium Term Notes
2012 US144A
2012 GBP Medium Term Notes
2017 US144A
Pay USD / receive foreign currency
2015 EUR Medium Term Notes
2015 GBP Medium Term Notes
2017
Pay AUD / receive foreign currency
2003 USPP Notes
2007 USPP Notes
2009 USPP Notes
AUD/USD
AUD/USD
AUD/USD
AUD/CAD
AUD/USD
AUD/GBP
AUD/USD
0.6573
0.8068
0.7576
1.0363
1.0198
0.6530
0.7668
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)
(994,901)
(924,013)
–
(1,198,134)
(247,062)
(388,491)
(1,884,033)
(3,766,638)
–
–
–
–
–
–
–
–
–
–
AUD/USD
AUD/USD
AUD/USD
0.6573
0.8068
0.7576
–
–
–
(95,847)
–
(151,215)
(153,694)
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
2015 EUR Medium Term Notes
2015 GBP Medium Term Notes
AUD/CAD
AUD/USD
AUD/GBP
AUD/USD
USD/EUR
USD/GBP
1.0363
1.0198
0.6530
0.7668
0.9514
0.6773
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(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)
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, 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 (2017: nil); and
— Equity reserves would decrease by $1,272.0 million with a 20 percent depreciation of the A$ or increase by $849.4 million with
a 20 percent increase in foreign exchange rates (2017: decrease by $1,255.0 million or increase by $839.8 million respectively).
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 $100.6 million as at 30 June 2018
(2017: $394.5 million).
76 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. Financial risk management (continued)
a) Market risk (continued)
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:
Weighted average
interest rate
Notional
principal amount
Fair value
2018
% p.a.
2017
% p.a.
2018
$000
2017
$000
2018
$000
2017
$000
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)
7.30
8.05
5.14
5.11
6.80
7.30
5.18
5.38
247,062
388,491
125,865
247,062
1,036
11,950
1,884,033
1,500,099
338,786
3,766,638
4,423,181
24,031
(14,249)
(9,706)
85,006
81,206
6,286,224
6,296,207
375,803
142,257
a) This amount includes a notional amount of USD 2.3 billion (2017: 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.
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 $2,000,000 or increase by $2,000,000 (2017: decrease by $5,150,000 or increase
by $5,150,000). This is mainly attributable to APA Group’s exposure to interest rates on its variable rate borrowings; and
— equity reserves would increase by $40,738,000 with a 100 basis point decrease in interest rates or decrease by $31,154,000
with a 100 basis point increase in interest rates (2017: increase by $31,379,000 or decrease by $27,772,000 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 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 impact of the 1.00% change
in interest rates on the higher derivative fair value this year, which has been partially offset by the reduction in the tenor
of the derivatives.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 77
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. Financial risk management (continued)
a) Market risk (continued)
Price risk – equity price
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 (2017: $nil); and
— there is no effect on equity reserves as APA Group holds no available-for-sale investments (2017: $nil).
Price risk – electricity price
APA Group is exposed to electricity price risk arising from a contract for difference in an electricity agreement with a customer.
The contract guarantees the Group a fixed price for electricity offtake. The sensitivity of the contract for difference to changes
in the electricity price is provided in the fair value of financial instrument section.
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 the 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 2018 has been
determined to be immaterial and no liability has been recorded (2017: $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.
78 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. 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.
Average
interest rate
% p.a.
Less than
1 year
$000
More than
1 – 5 years
$000
Maturity
5 years
$000
2018
Unsecured financial liabilities
Trade and other payables
Unsecured bank borrowings (a)
Denominated in A$
Other financial liabilities (b)
Guaranteed Senior Notes (c)
Denominated in A$
2007 Series E
2007 Series G
2007 Series H
2010 AUD Medium Term Notes
2016 AUD Medium Term Notes
Denominated in US$
2003 Series D
2007 Series D
2007 Series F
2009 Series B
2012 US 144A
2015 US 144A (b)
2015 US 144A (b)
2017 US 144A
Denominated in stated foreign currency
2012 CAD Medium Term Notes
2012 GBP Medium Term Notes
2015 GBP Medium Term Notes (b)
2015 EUR Medium Term Notes (b)
2015 EUR Medium Term Notes (b)
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
24 Jul 19
26 Nov 24
22 Mar 30
22 Mar 22
22 Mar 27
–
3.07
381,676
6,114
–
204,419
–
–
7,903
29,578
29,367
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
4.25
4.25
3.50
1.38
2.00
73,214
6,002
4,617
23,250
7,500
99,360
162,324
11,354
11,761
49,123
62,483
20,287
58,523
19,529
39,351
53,726
36,341
40,615
–
98,588
75,837
334,875
30,000
–
–
187,787
104,797
907,572
249,932
81,147
235,087
299,179
157,727
215,008
1,103,923
162,458
1,175,053
4,477,914
–
–
–
–
203,750
–
–
–
–
–
1,612,832
649,400
1,371,999
–
595,446
1,574,423
–
1,086,471
7,123,688
a) Bank facilities mature or expire on 2 July 2018 ($518.75 million limit), 18 May 2019 ($50 million limit), 19 December 2019 ($100 million limit), 18 May 2020
($150 million limit), 19 December 2020 ($100 million limit) and 18 July 2022 ($150 million limit). A new $1,000 million syndicated bank facility came into effect
on 2 July 2018. The two tranches of this facility mature on 30 June 2023 and 31 December 2023 respectively.
b) Facilities are denominated in or fully swapped by way of CCIRS into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at
30 June 2018. These amounts are fully hedged by forward exchange contracts or future US$ revenues.
c) Rates shown are the coupon rate.
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 79
Capital Management
19. Financial risk management (continued)
c) Liquidity risk (continued)
Average
interest rate
% p.a.
Less than
1 year
$000
More than
1 – 5 years
$000
Maturity
5 years
$000
2017
Unsecured financial liabilities
Trade and other payables
Unsecured bank borrowings (a)
2012 Subordinated Notes (b)
Denominated in A$
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 Notes
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
Denominated in stated foreign currency
2012 JPY Medium Term Notes
2012 CAD Medium Term Notes
2012 GBP Medium Term Notes
2015 GBP Medium Term Notes (c)
2015 EUR Medium Term Notes (c)
2015 EUR Medium Term Notes (c)
1 Oct 72
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
22 Jun 18
24 Jul 19
26 Nov 24
22 Mar 30
22 Mar 22
22 Mar 27
–
–
6.30
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
312,611
–
32,221
–
–
142,361
–
–
2,567,692
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
240,641
78,130
235,087
–
318,708
157,619
207,013
1,097,872
156,419
–
–
–
–
211,250
–
–
–
–
760,068
1,613,033
644,790
1,430,522
–
–
634,905
1,567,617
–
1,085,184
930,569
4,084,679
10,548,988
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.
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).
80 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. Financial risk management (continued)
Fair value measurements recognised in the statement of financial position (continued)
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 2018 (2017: 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.
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.
Contract for difference
The financial statements include a contract for difference arising from an electricity agreement with a customer that
guarantees the Group a fixed price for electricity offtake for the agreed term which is measured at fair value. The fair value
of the contract for difference is derived from internal discounted cash flow valuation methodology, which includes some
assumptions that are not able to be supported by observable market prices or rates.
In determining the fair value, the following assumptions were used:
— estimated long term forecast electricity pool prices are applied as market prices are not readily observable for the
corresponding term;
— forecast electricity volumes are estimated based on an internal forecast output model;
— the discount rates are based on observable market rates for risk-free instruments of the appropriate term;
— credit adjustments are applied to the discount rates to reflect the risk of default by either the Group or a specific
counterparty. Where a counterparty specific credit curve is not observable, an estimated curve is applied which takes into
consideration the credit rating of the counterparty and its industry; and
— these instruments are classified in the fair value hierarchy at level 3.
Changes in any of the aforementioned assumptions may be accompanied by changes in other assumptions which may have
an offsetting impact.
Fair value hierarchy
2018
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
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
Contract for difference used for hedging (a)
–
–
–
–
–
–
–
–
–
2,045
592,244
29,130
623,419
800
215,641
13,486
–
229,927
–
–
–
–
–
–
–
6,536
6,536
2,045
592,244
29,130
623,419
800
215,641
13,486
6,536
236,463
a) This represents the fair value change during the year. There were no settlements during the year.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 81
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
19. Financial risk management (continued)
Fair value hierarchy (continued)
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
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
–
–
–
–
–
–
–
–
2,673
416,256
65,485
484,414
4,977
269,019
27,912
301,908
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.
Financial liabilities
Unsecured long term Private Placement Notes
Unsecured Australian Dollar Medium Term Notes
Unsecured Japanese Yen Medium Term Notes
Unsecured Canadian Dollar Medium Term Notes
Unsecured US Dollar 144A Medium Term Notes
Unsecured British Pound Medium Term Notes
Unsecured Euro Medium Term Notes
Carrying amount
Fair value (level 2) (a)
2018
$000
2017
$000
2018
$000
2017
$000
730,049
500,000
–
308,496
4,057,344
1,694,492
2,129,801
710,742
500,000
115,738
301,230
3,906,504
1,610,281
2,007,377
768,992
528,646
–
312,539
3,992,019
1,768,993
2,108,339
9,420,182
9,151,872
9,479,528
774,803
534,030
116,681
308,490
4,008,505
1,721,799
1,976,924
9,441,232
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.
20. Other financial instruments
Derivatives at fair value:
Equity forward contracts
Assets
Liabilities
2018
$000
2017
$000
2018
$000
2017
$000
1,236
1,484
–
–
Derivatives at fair value designated as hedging instruments:
Foreign exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
29,101
–
Cross currency interest rate swaps – cash flow hedges
24,903
Contract for difference – cash flow hedges
Financial item carried at amortised cost:
Redeemable preference share interest
Current
–
285
55,525
32,991
–
17,574
–
285
52,334
10,656
2,100
120,551
6,094
–
14,267
4,214
127,287
–
–
139,401
145,768
82 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
20. Other financial instruments (continued)
Assets
Liabilities
2018
$000
2017
$000
2018
$000
2017
$000
Financial items carried at amortised cost:
Redeemable preference shares
10,400
10,400
Derivatives – at fair value:
Equity forward contracts
Indexed revenue contracts
Derivatives at fair value designated as hedging instruments:
Foreign exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
809
–
29
–
Cross currency interest rate swaps – cash flow hedges
580,249
Contract for difference – cash flow hedges
–
1,189
–
32,494
–
414,690
–
–
–
3,767
2,830
–
121,471
442
–
–
–
13,645
2,072
166,370
–
Non-current
591,487
458,773
128,510
182,087
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 19 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.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 83
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
20. Other financial instruments (continued)
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.
21. Issued capital
Units
2018
$000
2017
$000
1,179,893,848 securities, fully paid (2017: 1,114,307,369 securities, fully paid) (a)
3,288,123
3,114,617
Movements
Balance at beginning of financial year
Securities issued under entitlement offer
Capital distributions paid (Note 8)
Issue costs of securities
Tax relating to security issue costs
2018
No. of units
000
2018
$000
2017
No. of units
000
2017
$000
1,114,307
65,586
–
–
–
3,114,617
380,782
(201,385)
(8,415)
2,524
1,114,307
3,195,445
–
–
–
–
–
(80,828)
–
–
Balance at end of financial year
1,179,893
3,288,123
1,114,307
3,114,617
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.
84 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Group Structure
22. 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
Total comprehensive income allocated to non-controlling interests for the year
Cash flows
Net cash provided by operating activities
Net cash (used in)/provided by investing activities
Distributions paid to non-controlling interests
Net cash used in financing activities
2018
$000
2017
$000
774
1,063,708
738
1,009,757
1,064,482
1,010,495
78
78
13
13
1,064,404
1,010,482
1,064,404
1,010,482
68,061
(12)
68,049
68,049
68,852
(54,725)
(135,616)
(14,127)
72,979
(12)
72,967
72,967
75,570
33,801
(109,371)
(109,371)
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.
APT Investment Trust
Other non-controlling interest
APT Investment Trust
Issued capital:
Balance at beginning of financial year
Issue of securities under entitlement offer
Distribution – capital return (Note 8)
Issue costs of units
Reserves:
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
1,064,404
53
1,010,482
53
1,064,457
1,010,535
976,284
124,234
(67,597)
(2,745)
1,005,074
–
(28,790)
–
1,030,176
976,284
–
–
34,198
68,049
(68,019)
34,228
41,812
72,967
(80,581)
34,198
4
1
48
53
4
1
48
53
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 85
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Group Structure
23. 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
2018
2017
Ownership interest %
Energy Infrastructure Investments
Energy infrastructure
Gas transmission
Gas transmission
Power generation (wind)
Australia
Australia
Australia
Australia
50.00
50.00
19.90
20.20
50.00
50.00
19.90
20.20
Name of entity
Joint ventures
SEA Gas
SEA Gas (Mortlake)
EII 2
Associates
GDI (EII)
Gas distribution
Australia
20.00
20.00
2018
$000
2017
$000
Investment in joint ventures and associates using the equity method
271,597
259,882
Joint Ventures
Aggregate carrying amount of investment
APA Group’s aggregated share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Associates
242,768
229,693
17,105
9,039
26,144
17,175
8,007
25,182
Aggregate carrying amount of investment
28,829
30,189
APA Group’s aggregated share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
4,819
(407)
4,412
4,618
2,914
7,532
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 25.
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
2018
%
88.2 (a)
50.0 (b)
2017
%
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.
86 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Group Structure
23. Joint arrangements and associates (continued)
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.
24. 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 (e)
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)
APA Facilities Management Pty Limited (b),(c)
APA Midstream Holdings Pty Limited (b),(c)
APA Operations (EII) Pty Limited (b),(c)
APA Operations Pty Limited (b),(c)
APA Orbost Gas Plant Pty Ltd (c),(d)
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)
APA SEA Gas (Mortlake) Holdings Pty Ltd (b),(c)
APA SEA Gas (Mortlake) Pty Ltd (b)
APA Services (Int) Inc.
APA Sub Trust No 1 (b),(e)
Country of
registration/
incorporation
Ownership interest
2018
%
2017
%
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
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
100
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 87
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Group Structure
24. Subsidiaries (continued)
Name of entity
APA Sub Trust No 2 (b),(e)
APA Sub Trust No 3 (b),(e)
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)
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),(e)
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)
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)
EDWF Holdings 2 Pty Ltd (b),(c)
EDWF Manager Pty Ltd (b),(c)
Epic Energy East Pipelines Trust (b),(e)
EPX Holdco Pty Limited (b),(c)
EPX Member Pty Limited (b),(c)
EPX Trust (b),(e)
Ethane Pipeline Income Financing Trust (b),(e)
Ethane Pipeline Income Trust (b),(e)
Gasinvest Australia Pty Ltd (b),(c)
GasNet A Trust (e)
GasNet Australia Investments Trust (e)
GasNet Australia Trust (b),(e)
GasNet B Trust (b),(e),(f)
Country of
registration/
incorporation
Ownership interest
2018
%
2017
%
–
–
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
–
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
–
Australia
Australia
–
–
–
Australia
–
–
–
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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
88 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Group Structure
24. Subsidiaries (continued)
Name of entity
Goldfields Gas Transmission Pty Ltd (b)
Gorodok Pty. Ltd. (b),(c)
Griffin Windfarm 2 Pty Ltd (b)
Moomba to Sydney Ethane Pipeline Trust (b),(e)
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 Limited (b),(c)
Southern Cross Pipelines Australia Pty Limited (b),(c)
Trans Australia Pipeline Pty Ltd (b),(c)
Votraint No. 1606 Pty Limited (b)
Votraint No. 1613 Pty Limited (b)
Western Australian Gas Transmission Company 1 Pty Ltd (b),(c)
Wind Portfolio Pty Ltd (b),(c)
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.
Country of
registration/
incorporation
Ownership interest
2018
%
2017
%
Australia
Australia
Australia
–
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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
96
100
100
100
100
100
100
100
100
100
100
100
100
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 2018 year.
e) 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.
f) APA GasNet B trust terminated on 17 May 2018.
Other
25. 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 2018 and 30 June 2017.
2018
$000
2017
$000
287,506
2,293
289,799
583,387
2,698
586,085
52,586
43,034
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 89
Other
26. 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),(b)
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
2018
$
1,625,875
154,482
1,780,357
3,638,690
25,000
1,479,646
5,143,336
6,923,693
2017
$
1,682,077
160,104
1,842,181
3,589,472
35,000
1,485,242
5,109,714
6,951,895
7,748,591
95,049
2,822,148
7,509,920
135,000
2,849,270
10,665,788
10,494,190
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.
b) The FY2017 total remuneration differs from the amount disclosed in the prior year due to the review of the composition of Executive KMP, refer to the remuneration
report for further details.
27. 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)
Other non-audit, non-assurance services (b)
734,800
19,300
544,915
9,091
654,900
18,900
263,700
–
1,308,106
937,500
a) Services provided were in accordance with the external auditor independence policy. Other assurance services mainly comprise assurance services in relation
to the AER financial reporting guideline for Non-Scheme pipelines, security related transactions (equity and debt raisings) and procedures in relation to ASIC
Regulatory Guide 231 requirements (2017: Consisted of 2017 144A debt issuance and procedures in relation to ASIC Regulatory 231 requirements).
b) Services provided were in accordance with the external auditor independence policy. Other non-audit, non-assurance services comprise the facilitation of an
industry charter workshop.
90 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Other
28. Related party transactions
a) Equity interest in related parties
Details of the percentage of ordinary securities held in subsidiaries are disclosed in Note 24 and the details of the percentage
held in joint operations, joint ventures and associates are disclosed in Note 23.
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 24 for details of the entities that comprise APA Group.
Australian Pipeline Limited
Management fees of $4,717,014 (2017: $3,967,352) 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 26.
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:
2018
SEA Gas
Energy Infrastructure Investments
EII 2
GDI (EII)
2017
SEA Gas
Energy Infrastructure Investments
EII 2
GDI (EII)
Dividends
from
related
parties
$000
5,975
3,841
3,253
5,772
18,841
10,357
4,689
3,244
4,121
22,411
Sales to
related
parties
$000
3,853
46,671
764
62,053
113,341
3,717
26,553
752
51,711
82,733
Purchases
from
related
parties
$000
–
–
–
–
–
–
–
–
99
99
Amount
owed by
related
parties
$000
311
15,486
47
7,417
23,261
96
5,792
46
7,094
13,028
Amount
owed to
related
parties
$000
–
–
–
–
–
–
–
–
–
–
At year end, APA Group had a shareholder loan receivable from SEA Gas of $0.3 million (2017: $nil).
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 91
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Other
29. 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
Total comprehensive income
2018
$000
2017
$000
2,695,971
731,861
2,497,220
757,947
3,427,832
3,255,167
132,313
132,313
127,269
127,269
3,295,519
3,127,898
3,288,123
7,396
3,114,616
13,282
3,295,519
3,127,898
147,408
147,408
283,264
283,264
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 (2017: $nil).
Contingent liabilities of the parent entity
No contingent liabilities have been identified in relation to the parent entity.
30. 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
— AASB 15 ‘Revenue from Contracts with Customers’, and AASB 2015-8
‘Amendments to Australian Accounting Standards – Effective date of AASB 15’
1 January 2018
1 January 2018
30 June 2019
30 June 2019
— AASB 16 ‘Leases’
1 January 2019
30 June 2020
As per the table above a number of new standards and amendments to standards are effective for annual periods beginning
after 1 January 2018 with earlier adoption permitted. APA Group has chosen not to early adopt the new or amended standards
in preparing these consolidated financial statements.
92 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Other
30. Adoption of new and revised Accounting Standards (continued)
The expected impacts of the new standards on APA Group include:
AASB 9 ‘Financial Instruments’
AASB 9 ‘Financial Instruments’ (AASB 9) is effective for annual periods beginning on or after 1 January 2018, with early
adoption permitted. APA Group will apply this new standard from 1 July 2018 (financial year ended 30 June 2019). AASB 9
addresses the classification, measurement and de-recognition of financial assets and financial liabilities, introduces new rules
for hedge accounting and a new impairment model for financial assets.
APA Group has completed an assessment of the potential impact of the adoption of AASB 9 on the consolidated financial
statements and does not expect the new standard to affect the classification and measurement of its financial assets or
financial liabilities. The new hedge accounting rules will align the accounting for hedging instruments more closely with APA
Group’s risk management practices. AASB 9 will expand the range of eligible hedging instruments, and allow for a portfolio
management approach to hedge accounting. Changes in the fair value of foreign exchange forward contracts attributable to
forward points, and basis spread in relation to cross currency swaps, provide the option to be deferred in a new cost of hedging
reserve within equity. The deferred amounts are to be recognised against the related hedge transaction when it occurs. APA
Group confirms that its current hedge relationships will qualify as continuing hedges upon the adoption of AASB 9.
AASB 9 requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit
losses as is the case under AASB 139. Based upon this assessment, aside from the additional disclosure requirements, it is not
expected that AASB 9 will have any material impact on APA Group’s accounts.
APA Group will apply the new rules retrospectively, except for hedge accounting which is applied prospectively, with practical
expedients permitted under the standard, although no material changes are expected. A review of the current classification
and measurement of financial assets and liabilities has been undertaken to see if any changes are required. However due to
the nature of instruments held, no changes were identified. A detailed assessment of all current hedge relationships has been
undertaken to ensure they comply under the new rules and confirm if any of the new concepts could be employed to better
manage the existing risks. Once again nothing has been identified. New hedge documentation has been completed for each
type of current hedge relationship and regression testing completed in the Treasury Management System for a sample of
relationships to ensure no system errors or constraints result, and that effectiveness results are as expected. Recognition of
impairment is also not expected to change. The history of collection rates shows that APA Group does not have an expected
loss on collection of debtors or loans.
AASB 15 ‘Revenue from Contracts with Customers’
AASB 15 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. APA will apply this
new standard from 1 July 2018 (financial year ended 30 June 2019).
APA Group has completed an assessment of the impact of the adoption of AASB 15 on the consolidated financial statements.
The key components of the assessment project included stratification of revenue streams, data gathering, review of contracts,
and assessment and quantification of the expected impact.
APA Group’s approach to assessing the impact of the transition to AASB 15 centred on detailed reviews of the major contracts
covering each of the revenue streams, contracts were selected based on their representativeness of and significance for that
revenue stream. Each contract reviewed was assessed against the AASB 15 five-step model and other considerations under
the standard. A comparison was also made against APA Group’s current accounting policies to quantify the impact. The key
judgements and assumptions made have been reviewed by internal stakeholders.
Apart from providing more extensive disclosures on the Group’s revenue transactions, APA Group does not anticipate that
the application of AASB 15 will have a significant impact on the financial position and/or financial performance of the Group.
AASB 16 ‘Leases’
AASB 16 ‘Leases’ (AASB 16) is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted
for entities that apply AASB 15 at or before the date of initial application of AASB 16. APA will apply AASB 16 in the financial
year beginning 1 July 2019 (financial year ended 30 June 2020).
Under AASB 16, the Group’s accounting for leases as a lessee will result in the recognition of a right-of-use (ROU) asset and an
associated lease liability in the Consolidated Statement of Financial Position. The lease liability represents the present value of
future lease payments, with the exception of short-term leases. An interest expense will be recognised on the lease liabilities
and a depreciation charge will be recognised for the ROU assets. There will also be additional disclosure requirements under
the new standard. The Group’s accounting for leases as a lessor remains unchanged under AASB 16.
APA Group has completed an initial assessment of the impact of the adoption of AASB 16 on the consolidated financial
statements. This assessment covered a variety of scenarios based on the various transition options and practical expedients
applied. At this stage no decision has been made as to the transition option to be taken. The key judgements and assumptions
made to date have been reviewed by internal stakeholders.
APA Group’s approach to assessing the impact of the transition to AASB 16 centred on data gathering, discount rate
determination, detailed reviews of each lease contract, and evaluation under the requirements of AASB 16.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 93
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Other
30. Adoption of new and revised Accounting Standards (continued)
The impact on the Group’s consolidated statement of Profit or Loss as a result of the adoption of AASB 16 will depend on,
inter alia, the transition method chosen, discount rates applied, the extent to which APA Group uses the practical expedients
and recognition exemptions, and any additional leases that APA Group enters into prior to 1 July 2019.
As at 30 June 2018, APA Group had non-cancellable undiscounted operating lease commitments of $72.6 million as disclosed
in Note 17 of the 2018 APA Group consolidated financial statements. These commitments predominantly relate to commercial
offices, motor vehicles and Crown leases which will require recognition as ROU assets and associated lease liabilities. The
implementation of AASB 16 is not expected to result in the recognition of ROU assets or lease liabilities each totalling more
than the reported commitments as at 30 June 2018, nor does APA Group expect the adoption of AASB 16 to materially affect
its financial results or to impact its ability to comply with any of its loan covenants.
31. Events occurring after reporting date
On 2 July 2018 a new $1,000 million syndicated bank facility came into effect. This new facility has two tranches maturing on
30 June 2023 and 31 December 2023 respectively.
On 13 August 2018, APA announced that it had entered into a conditional Implementation Agreement with CK Infrastructure
Holdings Limited (CKI), CK Asset Holdings Limited (CKA), Power Assets Holdings Limited (PAH) and CKM Australia Bidco Pty
Ltd (Bidder) under which Bidder (a wholly owned subsidiary of CKA) will acquire all of the stapled securities in APA under trust
schemes (Schemes). If the Schemes are implemented, APA Securityholders will receive A$11.00 cash per stapled security. The
transaction does not affect APA’s final distribution for the 2018 financial year. If the Schemes are implemented at any time
after 31 December 2018, APA Securityholders will receive an additional distribution of 4.0 cents per APA stapled security for
each full month in calendar 2019 which elapses prior to implementation of the Schemes (up to, and including, March 2019).
Implementation of the Schemes is subject to certain conditions, including regulatory and shareholder approvals.
On 22 August 2018, the Directors declared a final distribution of 24.00 cents per security ($283.2 million) for APA Group.
This is comprised of a distribution of 17.96 cents per unit from APT and a distribution of 6.04 cents per unit from APTIT. The
APT distribution represents a 8.93 cents per unit fully franked profit distribution and 9.03 cents per unit capital distribution.
The APTIT distribution represents a 2.90 cents per unit profit distribution and a 3.14 cents per unit capital distribution.
Franking credits of 3.83 cents per security will be allocated to the franked profit distribution. The distribution will be paid on
12 September 2018.
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.
94 — APA GROUP — ANNUAL REPORT 2018
directors’ declaration.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
For the financial year ended 30 June 2018
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; 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
Michael Fraser
Chairman
Sydney, 22 August 2018
Debra Goodin
Director
auditor’s independence declaration.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO AUSTRALIAN PIPELINE LIMITED AS RESPONSIBLE ENTITY FOR AUSTRALIAN PIPELINE TRUST
APA GROUP — ANNUAL REPORT 2018 — 95
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
22 August 2018
The Directors
Australian Pipeline Limited as responsible entity for
Australian Pipeline Trust
Level 25, 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 2018, 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, 22 August 2018
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
132
96 — APA GROUP — ANNUAL REPORT 2018
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 controlled
entities (the “Group”), which comprises the consolidated statement of financial position as at 30 June
2018, 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, 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 2018 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 (the “Responsible Entity”), 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.
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.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
133
independent auditor’s report.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST
APA GROUP — ANNUAL REPORT 2018 — 97
Key Audit Matter
Carrying Value of Property, Plant and
Equipment, Goodwill and Other
Intangible Assets
As at 30 June 2018 the Group’s balance
sheet includes property, plant and
equipment (PPE) of $9.7 billion, goodwill of
$1.2 billion and other intangible assets of
$3.0 billion, which are allocated across
several cash generating units (CGUs) as
disclosed in Notes 11 and 12.
The assessment of the recoverable amount
of the Group’s PPE, 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.
How the scope of our audit responded to the Key
Audit Matter
Our procedures included, but were not limited to:
Assessing management’s determination
of the Group’s CGUs based on our
understanding of the business. We have
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 PPE, goodwill and other
intangible assets to determine any asset
impairments,
Challenging in conjunction with our
o
corporate finance specialists the Group’s
assumptions and estimates used to
determine the recoverable amount of a
sample of CGUs, including those relating
to:
forecast revenue by reference to:
future contract renewals
contracting of spare capacity
o operating and maintenance expenses
with reference to actual costs incurred
in the current period and approved
budgets for forecast periods
o discount rates with reference to:
external data
Deloitte developed discount
rates.
Assessing historical accuracy of
managements 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,
and
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
We also assessed the appropriateness of the
disclosures in Notes 11 and 12 to the
financial statements.
134
98 — APA GROUP — ANNUAL REPORT 2018
independent auditor’s report.
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
Our procedures included, but were not limited to,
engaging our Treasury specialists to assist with:
Understanding management’s controls over
the recording of derivative transactions and
the 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
on sample basis the valuation of the derivative
financial instruments, and
Testing on a sample basis the application of
hedge accounting (including hedge
effectiveness and measurement of
ineffectiveness), in particular for WGP, and
validating that the derivative financial
instruments qualified for hedge accounting are
in accordance with the relevant accounting
standards.
We also assessed the appropriateness of the
disclosures in Notes 18 and 19 to the financial
statements.
Key Audit Matter
Derivative transactions and balances
including the application of hedge
accounting
As at 30 June 2018 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 British
Pounds and Euros as disclosed in Note 18.
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, and
Cross currency interest rate swaps
to manage the currency risk
associated with foreign currency
denominated borrowings.
In addition, as disclosed in Note 19,
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 which are complex.
Other Information
The directors of the Responsible Entity (“the Directors”) 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 2018, 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.
135
independent auditor’s report.
AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST
APA GROUP — ANNUAL REPORT 2018 — 99
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
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
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.
136
100 — APA GROUP — ANNUAL REPORT 2018
independent auditor’s report.
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 the Responsible Entity of Australian Pipeline Trust
included in pages 40 to 49 of the Directors’ Report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of Australian Pipeline Limited as responsible entity of
Australian Pipeline Trust for the year ended 30 June 2018, has been prepared in accordance with
section 300A of the Corporations Act 2001.
Responsibilities
The directors have voluntarily presented the Remuneration Report of the 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, 22 August 2018
137
directors’ report.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 101
APT Investment Trust and its Controlled Entities (ARSN 115 585 441)
Directors’ Report for the year ended 30 June 2018
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
2018. 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 year are:
Michael Fraser
Chairman as at 27 October 2017
Michael (Mick) McCormack
Chief Executive Officer and Managing Director
Steven (Steve) Crane
Debra (Debbie) Goodin
Russell Higgins AO
Patricia McKenzie
Shirley In’t Veld
Peter Wasow
Appointed 19 March 2018
Appointed 19 March 2018
Leonard Bleasel AM
Retired as Chairman and Director 27 October 2017
John Fletcher
Retired as a Director 21 February 2018
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 Group.
3. State of Affairs
On 13 June 2018, APA announced that an unsolicited, indicative non-binding proposal had been received from a consortium
comprising CK Infrastructure Holdings Limited (CKI), CK Asset Holdings Limited (CKA) and Power Assets Holdings Limited
(PAH) (together, the Consortium), to acquire all of the stapled securities in APA. The indicative price proposed by the
Consortium was $11.00 cash per stapled security, plus the final six months distribution for FY2018 of 24.0 cents per stapled
security to be paid in September as scheduled. The Board considered it was in the best interests of Securityholders to further
engage with the Consortium and allow due diligence which was undertaken during June – August 2018.
Subsequently, on 13 August 2018, APA announced that it had entered into a conditional Implementation Agreement with CKI,
CKA, PAH and CKM Australia Bidco Pty Ltd (Bidder) under which Bidder (a wholly owned subsidiary of CKA) will acquire all of
the stapled securities in APA under trust schemes (Schemes).
If the Schemes are implemented, APA Securityholders will receive A$11.00 cash per APA stapled security. The transaction
does not affect APA’s final distribution for the 2018 financial year, which the Board announced on 22 August 2018, will be 24.0
cents per stapled security, and will be paid on 12 September 2018.
If the Schemes are implemented at any time after 31 December 2018, APA Securityholders will receive an additional
distribution of 4.0 cents per APA stapled security for each full month in calendar 2019 which elapses prior to implementation
of the Schemes (up to, and including, March 2019).
Implementation of the Schemes is subject to certain conditions outlined in the Implementation Agreement (a copy of which
was attached to APA’s ASX announcement on 13 August 2018). The conditions include:
— Approval of the Australian Competition and Consumer Commission and the Foreign Investment Review Board;
— An Independent Expert opining that the Schemes are fair and reasonable and in the best interests of APA Securityholders;
— No “material change” or “prescribed events” occurring in relation to APA;
— CKA shareholder approval;
— APA Securityholder approval; and
— Court approval.
The APA Directors unanimously recommend the transaction in the absence of a superior proposal and subject to an
Independent Expert concluding (and continuing to conclude) that the Schemes are fair and reasonable and in the best
interests of APA Securityholders.
Depending on the progress of regulatory approvals, a meeting of APA Securityholders is targeted to be held in late
November 2018 to consider the Schemes, with implementation and payment to APA Securityholders targeted to occur in mid
December 2018.
102 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
4. Subsequent Events
On 13 August 2018, APA announced that it had entered into a conditional Implementation Agreement with CKI, CKA, PAH and
CKM Bidder under which Bidder (a wholly owned subsidiary of CKA) will acquire all of the stapled securities in APA under trust
schemes (Schemes). If the Schemes are implemented, APA Securityholders will receive A$11.00 cash per stapled security. The
transaction does not affect APA’s final distribution for the 2018 financial year. If the Schemes are implemented at any time
after 31 December 2018, APA Securityholders will receive an additional distribution of 4.0 cents per APA stapled security for
each full month in calendar 2019 which elapses prior to implementation of the Schemes (up to, and including, March 2019).
Implementation of the Schemes is subject to certain conditions, including regulatory and shareholder approvals.
On 22 August 2018, the Directors declared a final distribution for the 2018 financial year of 6.04 cents per unit ($71.3 million).
The distribution represents a 2.90 cents per unit unfranked profit distribution and 3.14 cents per unit capital distribution. The
distribution is expected to be paid on 12 September 2018.
Other than what is noted above and as disclosed elsewhere in this report, there has not arisen in the interval between the
end of the full year to 30 June 2018 and the date of this report any matter or circumstance that has significantly affected,
or may significantly affect, the Group’s operations, the results of those operations, or the Group’s state of affairs, in future
financial years.
5. Review and Results of Operations
The Consolidated Entity reported net profit after tax of $68.0 million (FY2017: $73.0 million) for the year ended 30 June 2018
and total revenue of $68.1 million (FY2017: $73.0 million).
6. Distributions
Distributions paid to Securityholders during the financial year were:
APTIT profit distribution
APTIT capital distribution
Total
Final FY2017 distribution
paid 13 September 2017
Interim FY2018 distribution
paid 14 March 2018
Cents per
security
Total distribution
$000
Cents per
security
Total distribution
$000
3.07
3.69
6.76
34,198
41,107
75,305
3.03
2.38
5.41
33,821
26,490
60,311
On 22 August 2018, the Directors declared a final distribution for APTIT for the financial year of 6.04 cents per security which
is payable on 12 September 2018 and will comprise the following components:
APTIT profit distribution
APTIT capital distribution
Total
Final FY2018 distribution
payable 12 September 2018
Cents per
security
Total distribution
$000
2.90
3.14
6.04
34,228
37,022
71,250
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 2018) 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 06 to 07 for information relating to qualifications and experience of the Directors and the Company Secretary.
directors’ report. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 103
7.2 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
Company
Period of directorship
Michael Fraser
Aurizon Holdings Limited
Since February 2016
Michael McCormack
–
–
Steven Crane
Debra Goodin
nib holdings limited
Since September 2010, Chair since October 2011
Senex Energy Limited
oOh!media Limited
Since May 2014
Since November 2014
Ten Network Holdings Limited
August 2016 to November 2017
Atlas Arteria Limited
Since September 2017
Russell Higgins AO
Telstra Corporation Limited
Since September 2009
Argo Investments Limited
Since September 2011, Chair since July 2018
Argo Global Listed Infrastructure Limited
Chair since July 2018
Patricia McKenzie
–
–
Shirley In’t Veld
Asciano Limited
DUET Group
November 2010 to August 2016
August 2013 to May 2017
Northern Star Resources Limited
Since September 2016
Peter Wasow
Alcoa Australia Limited
Oz Minerals Limited
Alumina Limited
January 2014 to July 2017
Since November 2017
September 2011 to May 2017
7.3 Directors’ meetings
During the financial year, 17 Board meetings, four Audit and Risk Management Committee meetings, four People and
Remuneration Committee meetings, four Health Safety and Environment Committee meetings and six 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:
Board
People &
Remuneration
Committee
Audit & Risk
Management
Committee
Health Safety
& Environment
Committee
Nomination
Committee
Directors
Michael Fraser
Michael McCormack
Steven Crane
Debra Goodin
Russell Higgins AO
Patricia McKenzie
Shirley Int’d Veld
Peter Wasow
Leonard Bleasel AM (1)
John Fletcher (2)
A
17
17
17
17
17
17
7
7
6
10
B
16
17
17
17
17
17
6
6
6
9
A
2
–
4
–
–
4
2
2
–
2
B
2
–
3
–
–
4
2
2
–
2
A
4
–
4
4
4
–
–
1
–
3
B
4
–
4
4
4
–
–
1
–
3
A
–
–
–
4
4
4
2
–
–
–
B
–
–
–
4
4
4
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.
A
6
–
1
6
6
1
–
–
1
1
B
6
–
1
6
6
1
–
–
1
1
1) Leonard Bleasel AM retired as a Director on 27 October 2017.
2) John Fletcher retired as a Director on 21 February 2018.
104 — APA GROUP — ANNUAL REPORT 2018
directors’ report. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
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 2018 is 800,118 (2017: 1,365,674 (3)).
The following table sets out Directors’ relevant interests in APA securities as at 30 June 2018:
Directors
Michael Fraser
Michael McCormack
Steven Crane
Debra Goodin
Russell Higgins AO
Patricia McKenzie
Shirley Int’d Veld (4)
Peter Wasow (5)
Leonard Bleasel AM (6)
John Fletcher (7)
Fully paid
securities as at
1 July 2017
Securities
acquired
Fully paid
Securities securities as at
30 June 2018
disposed
25,000
320,000
130,000
19,200
122,719
22,889
–
–
637,616
88,250
77,942
30,000
0
3,800
7,220
1,348
25,000
15,000
–
–
1,365,674
160,310
–
–
–
–
–
–
–
–
–
–
–
102,942
350,000
130,000
23,000
129,939
24,237
25,000
15,000
–
–
800,118
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.
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.
Indemnification of Officers
9.
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 specific 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.
3) At 30 June 2017 the aggregate number of APA securities held directly or beneficially by Directors or their related entities included 637,616 securities held by
Leonard Bleasel AM who retired on 27 October 2017 and 88,250 securities held by John Fletcher who retired on 21 February 2018. The aggregate number of APA
Securities held directly or beneficially by the current Directors or their related entities as at 30 June 2017 was 639,808.
4) Shirley In’t Veld was appointed as a Director effective 19 March 2018. She held 25,000 securities on appointment.
5) Peter Wasow was appointed as a Director effective 19 March 2018. He held nil securities on appointment.
6) Leonard Bleasel AM retired as the Chairman and a Director on 27 October 2017. He held 637,616 securities on retirement.
7) John Fletcher retired as a Director on 21 February 2018. He held 88,250 securities on retirement.
directors’ report. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
APA GROUP — ANNUAL REPORT 2018 — 105
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 121.
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
Michael Fraser
Chairman
Sydney, 22 August 2018
Debra Goodin
Director
106 — APA GROUP — ANNUAL REPORT 2018
consolidated statement of profit or loss and other
comprehensive income.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Continuing operations
Revenue
Expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
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
4
4
5
6
2018
$000
68,061
(12)
68,049
–
68,049
2017
$000
72,979
(12)
72,967
–
72,967
68,049
72,967
68,049
68,049
72,967
72,967
68,049
72,967
2018
6.0
2017
(Restated)
6.5
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
consolidated statement of financial position.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
AS AT 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 107
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
2018
$000
2017
$000
8
8
11
9
13
774
738
7,737
8,511
1,055,971
1,001,246
1,063,708
1,009,757
1,064,482
1,010,495
78
78
13
13
1,064,404
1,010,482
1,030,176
34,228
976,284
34,198
1,064,404
1,010,482
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
108 — APA GROUP — ANNUAL REPORT 2018
consolidated statement of changes in equity.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Balance at 1 July 2016
Profit for the year
Total comprehensive income for the year
Distributions to unitholders
Balance at 30 June 2017
Balance at 1 July 2017
Profit for the year
Total comprehensive income for the year
Issue of capital (net of issue costs)
Distributions to unitholders
Balance at 30 June 2018
Note
7
13
7
Issued
capital
$000
1,005,074
–
–
(28,790)
976,284
976,284
–
–
121,489
(67,597)
Retained
earnings
$000
41,812
72,967
72,967
Total
$000
1,046,886
72,967
72,967
(80,581)
(109,371)
34,198
1,010,482
34,198
68,049
68,049
–
1,010,482
68,049
68,049
121,489
(68,019)
(135,616)
1,030,176
34,228
1,064,404
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
consolidated statement of cash flows
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 109
Cash flows from operating activities
Trust distribution – related party
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
(Advances to)/receipts from related parties
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Proceeds from issue of units
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
2018
$000
27,979
39,349
1,167
369
(12)
2017
$000
28,610
45,531
1,167
274
(12)
68,852
75,570
–
(54,725)
(54,725)
124,234
(2,745)
(135,616)
(14,127)
–
–
–
32,566
1,235
33,801
–
–
(109,371)
(109,371)
–
–
–
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.
110 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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
3. Segment information
4. Profit from operations
5.
Income tax
6. Earnings per unit
7. Distributions
Capital Management
11. Other financial instruments
12. Financial risk management
13. Issued capital
Group Structure
14. Subsidiaries
Other
15. Commitments and contingencies
16. Director and senior executive remuneration
Operating Assets and Liabilities
17. Remuneration of external auditor
8. Receivables
9. Payables
10. Leases
18. Related party transactions
19. Parent entity information
20. Adoption of new and revised Accounting Standards
21. Events occurring after reporting date
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 111
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Basis of Preparation
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 25
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 2018 was authorised for issue in accordance with a resolution of the directors
on 22 August 2018.
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.
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
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
Total expenses
2018
$000
2017
$000
27,979
27,979
39,350
–
430
28,610
28,610
44,141
(510)
464
39,780
44,095
302
68,061
274
72,979
(12)
(12)
(12)
(12)
112 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Financial Performance
4. Profit from operations (continued)
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.
6. Earnings per unit
Basic and diluted earnings per unit
2018
cents
6.0
2017
(Restated)
cents
6.5
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
2018
$000
68,049
2018
No. of
units
000
2017
$000
72,967
2017
(Restated)
No. of
units
000
Adjusted weighted average number of ordinary units used in the
calculation of basic and diluted earnings per unit
1,136,875
1,118,522
During March 2018, APA Group issued 65,586,479 new ordinary securities on completion of the fully underwritten pro-rata
accelerated institutional tradeable renounceable entitlement offer (Entitlement Offer). The Entitlement Offer was offered
at $7.70 per security, a discount to APA Group’s closing market price of $8.26 per security on the 23 February 2018, the
last trading day before the record date of 26 February 2018. The number of securities used for the current and prior period
calculation of earnings per security has been adjusted for the discounted rights issue. An adjustment factor of 1.0038 has
been calculated, being the closing market price per security on 23 February 2018, divided by the theoretical ex-rights price
(TERP) of $8.23 per security.
7. Distributions
2018
cents per
unit
2018
Total
$000
2017
cents per
unit
2017
Total
$000
Recognised amounts
Final distribution paid on 13 September 2017
(2017: 16 September 2016)
Profit distribution (a)
Capital distribution
Interim distribution paid on 14 March 2018
(2017: 15 March 2017)
Profit distribution (a)
Capital distribution
3.07
3.69
6.76
3.03
2.38
5.41
34,198
41,107
75,305
33,821
26,490
60,311
3.75
0.63
4.38
3.48
1.96
5.44
41,811
6,976
48,787
38,770
21,814
60,584
notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 113
Financial Performance
7. Distributions (continued)
Total distributions recognised
Profit distributions (a)
Capital distributions
Unrecognised amounts
Final distribution payable on 12 September 2018 (b)
(2017: 13 September 2017)
Profit distribution (a)
Capital distribution
a) Profit distributions unfranked (2017: unfranked).
b) Record date 29 June 2018.
2018
cents per
unit
6.10
6.07
12.17
2.90
3.14
6.04
2018
Total
$000
68,019
67,597
135,616
34,228
37,022
71,250
2017
cents per
unit
7.23
2.59
9.82
3.07
3.69
6.76
2017
Total
$000
80,581
28,790
109,371
34,198
41,107
75,305
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.
Operating Assets and Liabilities
8. Receivables
Finance lease receivable – related party (Note 10)
Current
Finance lease receivable – related party (Note 10)
Non-current
2018
$000
774
774
7,737
7,737
2017
$000
738
738
8,511
8,511
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
78
13
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.
114 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Operating Assets and Liabilities
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)
2018
$000
2017
$000
1,167
4,669
4,669
10,505
10,505
(1,994)
8,511
774
7,737
8,511
1,167
4,669
5,837
11,673
11,673
(2,424)
9,249
738
8,511
9,249
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.
Capital Management
11. Other financial instruments
Non-current
Advance to related party
Investments carried at cost:
Investment in related party (a)
2018
$000
2017
$000
948,592
893,867
107,379
107,379
1,055,971
1,001,246
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.
Financial assets are classified into the following specified categories: ‘available-for-sale’ financial assets and ‘loans
and receivables’.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
notes to the consolidated financial statements. continued.
APA GROUP — ANNUAL REPORT 2018 — 115
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
11. Other financial instruments (continued)
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.
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 (“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. The Consolidated Entity’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.
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.
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 within a given period of time. 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 $6,023,000 or decrease by $5,968,000
(2017: increase by $6,431,000 or decrease by $6,372,000 respectively). This is mainly attributable to the Consolidated Entity’s
exposure to interest rates on its variable rate inter-entity balances. The sensitivity has decreased due to lower weighted
average 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 other payables of $78,000 (2017: $13,000), all of which are
due in less than 1 year (2017: less than 1 year).
116 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
Capital Management
13. Issued capital
Units
2018
$000
2017
$000
1,179,893,848 units, fully paid (2017: 1,114,307,369 units, fully paid) (a)
1,030,176
976,284
Movements
Balance at beginning of financial year
Issue of units under entitlement offer
Capital distributions paid (Note 7)
Issue cost of units
2018
No. of units
000
2018
$000
2017
No. of units
000
2017
$000
1,114,307
65,586
–
–
976,284
124,234
(67,597)
(2,745)
1,114,307
1,005,074
–
–
–
–
(28,790)
–
Balance at end of financial year
1,179,893
1,030,176
1,114,307
976,284
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
GasNet Australia Investments Trust
Other
Country of
registration/
incorporation
Ownership interest
2018
%
2017
%
Australia
100
100
15. Commitments and contingencies
The Consolidated Entity had no material contingent assets, liabilities and commitments as at 30 June 2018 and 30 June 2017.
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
2018
$
1,625,875
154,482
1,780,357
3,638,690
25,000
1,479,646
5,143,336
6,923,693
2017
$
1,682,077
160,104
1,842,181
3,589,472
35,000
1,485,242
5,109,714
6,951,895
notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 117
Other
16. Director and senior executive remuneration (continued)
Remuneration of senior executives (a),(b)
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
2018
$
2017
$
7,748,591
95,049
2,822,148
7,509,920
135,000
2,849,270
10,665,788
10,494,190
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.
b) The FY2017 total remuneration differs from the amount disclosed in the prior year due to the review of the composition of Executive KMP, refer to the remuneration
report for further details.
17. 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)
6,000
5,700
15,990
27,690
5,900
5,600
–
11,500
a) Services provided were in accordance with the external auditor independence policy. Other assurance services comprise assurance services in relation to security
related transactions (equity raising).
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 (2017: 100% owned by APT Pipelines Limited).
c) Transactions with related parties within the Consolidated Entity
During the financial year, the following transactions occurred between the Trust and its other related parties:
— loans advanced and payments received on long-term inter-entity loans; and
— payments of distributions.
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 $774,000 are owing from a subsidiary of APT for amounts due under a finance lease
arrangement (2017: $738,000);
— non-current receivables totalling $7,737,000 are owing from a subsidiary of APT for amounts due under a finance lease
arrangement (2017: $8,511,000); and
— non-current receivables totalling $948,592,000 (2017: $893,867,000) are owing from a subsidiary of APT for amounts due
under inter-entity loans.
Australian Pipeline Limited
Management fees of $1,152,000 (2017: $943,000) 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 $1,152,000 (2017: $943,000) were reimbursed by APT.
118 — APA GROUP — ANNUAL REPORT 2018
notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
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
2018
$000
2017
$000
774
738
1,063,708
1,009,757
1,064,482
1,010,495
78
78
13
13
1,064,404
1,010,482
1,030,176
34,228
–
976,284
34,198
–
1,064,404
1,010,482
68,049
–
68,049
72,967
–
72,967
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
No guarantees have been entered into by the parent entity in relation to the debts of its subsidiaries.
Contingent liabilities of the parent entity
No contingent liabilities have been identified in relation to the parent entity.
20. 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
As per the table above a number of new standards and amendments to standards are effective for annual periods beginning
after 1 January 2018 with earlier application permitted. The Consolidated Entity has not chosen to early adopt the new or
amended standards in preparing these consolidated financial statements.
notes to the consolidated financial statements. continued.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018
APA GROUP — ANNUAL REPORT 2018 — 119
Other
20. Adoption of new and revised Accounting Standards (continued)
The expected impacts of the new standards on the Consolidated Entity include:
AASB 9 ‘Financial Instruments’
AASB 9 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Consolidated
Entity will apply this new standard from 1 July 2018 (financial year ended 30 June 2019). AASB 9 addresses the classification,
measurement and de-recognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a
new impairment model for financial assets.
The Consolidated Entity has completed an assessment of the potential impact of the adoption of AASB 9 on the consolidated
financial statements and does not expect the new standard to affect the classification and measurement of its financial
assets or financial liabilities. The new hedge accounting rules will align the accounting for hedging instruments more closely
with APA Group’s risk management practices. The new impairment model requires the recognition of impairment provisions
based on expected credit losses rather than only incurred credit losses as is the case under AASB 139. Based upon the
Consolidated Entity’s assessment, aside from the additional disclosure requirements, it is not expected that AASB 9 will have
any material impact to the Consolidated Entity’s accounts.
Due to the nature of instruments held, no changes are required to the current classification and measurement of financial
assets and liabilities. The Consolidated Entity currently has not entered into any hedge relationships, and as a result will not
be impacted by the hedge accounting changes in AASB 9. Recognition of impairment is not expected to change, with historic
collection rates demonstrating that the Consolidated Entity does not have an expected loss on collection of debtors or loans.
AASB 15 ‘Revenue from Contracts with Customers’
AASB 15 is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Consolidated
Entity will apply this new standard from 1 July 2018 (financial year ended 30 June 2019).
The Consolidated Entity has completed an assessment of the potential impact of the adoption of AASB 15. As the revenue of
the Consolidated Entity is limited to interest earnt on inter-entity loans, distribution revenue and finance lease income, AASB
15 does not have any impact on the Consolidated Entity.
AASB 16 ‘Leases’
AASB 16 is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply
AASB 15 at or before the date of initial application of AASB 16. The consolidated entity will apply AASB 16 in the financial year
beginning 1 July 2019 (financial year ended 30 June 2020).
The Consolidated Entity has completed an assessment of the potential impact of the adoption of AASB 16. As the Consolidated
Entity is a lessor only, the new standard will not have a material impact on the consolidated financial statements.
21. Events occurring after reporting date
On 13 August 2018, APA announced that it had entered into a conditional Implementation Agreement with CK Infrastructure
Holdings Limited (CKI), CK Asset Holdings Limited (CKA), Power Assets Holdings Limited (PAH) and CKM Australia Bidco Pty
Ltd (Bidder) under which Bidder (a wholly owned subsidiary of CKA) will acquire all of the stapled securities in APA under trust
schemes (Schemes). If the Schemes are implemented, APA Securityholders will receive A$11.00 cash per stapled security. The
transaction does not affect APA’s final distribution for the 2018 financial year. If the Schemes are implemented at any time
after 31 December 2018, APA Securityholders will receive an additional distribution of 4.0 cents per APA stapled security for
each full month in calendar 2019 which elapses prior to implementation of the Schemes (up to, and including, March 2019).
Implementation of the Schemes is subject to certain conditions, including regulatory and shareholder approvals.
On 22 August 2018, the Directors declared a final distribution for the 2018 financial year of 6.04 cents per unit ($71.3 million).
The distribution represents a 2.90 cents per unit unfranked profit distribution and 3.14 cents per unit capital distribution. The
distribution will be paid on 12 September 2018.
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.
120 — APA GROUP — ANNUAL REPORT 2018
directors’ declaration.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
For the financial year ended 30 June 2018
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
Michael Fraser
Chairman
Sydney, 22 August 2018
Debra Goodin
Director
auditor’s independence declaration.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
TO AUSTRALIAN PIPELINE LIMITED AS RESPONSIBLE ENTITY FOR APT INVESTMENT TRUST
APA GROUP — ANNUAL REPORT 2018 — 121
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
h
22 August 2018
The Directors
Australian Pipeline Limited as responsible entity for
APT Investment Trust
Level 25, 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 2018, 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, 22 August 2018
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
163
122 — APA GROUP — ANNUAL REPORT 2018
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 2018, 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 2018
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
164
independent auditor’s report.
APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES
TO THE UNITHOLDERS OF APT INVESTMENT TRUST
APA GROUP — ANNUAL REPORT 2018 — 123
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 2018,
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.
165
124 — APA GROUP — ANNUAL REPORT 2018
independent auditor’s report.
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, 22 August 2018
166
additional information.
APA GROUP — ANNUAL REPORT 2018 — 125
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 16 August 2018).
Twenty largest holders
No. of securities
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Custodial Services Limited
BNP Paribas Noms Pty Ltd
Argo Investments Limited
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Citicorp Nominees Pty Limited
BKI Investment Company Limited
Bainpro Nominees Pty Limited
Australian Foundation Investment Company Limited
AMP Life Limited
BNP Paribas Nominees Pty Ltd
Milton Corporation Limited
Ecapital Nominees Pty Limited
Navigator Australia Ltd
HSBC Custody Nominees (Australia) Limited
251,232,285
199,497,155
144,944,108
96,896,463
31,669,578
21,426,315
13,356,245
10,882,525
7,016,040
6,277,124
6,076,864
4,394,714
4,384,931
4,040,000
3,887,302
3,032,000
2,077,766
1,951,896
1,718,769
1,357,648
%
21.29
16.91
12.28
8.21
2.68
1.82
1.13
0.92
0.59
0.53
0.52
0.37
0.37
0.34
0.33
0.26
0.18
0.17
0.15
0.12
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
816,119,728
69.17
No. of holders
%
No. of securities
154
8,257
10,458
29,869
27,237
75,975
0.20
10.87
13.77
39.31
35.85
852,716,546
165,131,072
74,101,397
76,931,769
11,013,064
100.00
1,179,893,848
100.00
%
72.27
14.00
6.28
6.52
0.93
1,821 holders hold less than a marketable parcel of securities (market value less than $500 or 51 securities based on a market
price on 16 August 2018 of $9.96).
Substantial holders
By notice dated 13 March 2018, BNP Paribas Nominees Pty Limited as custodian for UniSuper Limited advised that it had an
interest in 189,951,079 stapled securities, as at 9 March 2018.
By notice dated 21 June 2017, BlackRock Group advised that it had an interest in 55,818,084 stapled securities, as at 19 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.
126 — APA GROUP — ANNUAL REPORT 2018
five year summary.
Financial Performance (Statutory)
2018
2017
2016
2015
2014
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
Weighted average number of securities (4)
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
2,386.7
1,941.4
1,518.5
(578.9)
939.6
(509.7)
(165.1)
264.8
–
264.8
2,326.4
1,888.3
1,470.1
(570.0)
900.1
(513.8)
(149.5)
236.8
–
236.8
2,094.3
1,656.0
1,330.5
(520.9)
809.7
(507.7)
(122.5)
179.5
–
179.5
1,553.6
1,119.2
1,269.5
(208.2)
1,061.3
(324.2)
(177.2)
559.9
356.0
203.9
15,227.2
15,045.9
14,842.7
14,652.9
8,810.4
4,126.8
9,249.7
3,978.2
9,037.3
4,029.1
8,642.8
4,382.7
1,396.0
992.5
747.3
(156.2)
591.1
(325.1)
77.7
343.7
144.1
199.6
7,972.5
4,789.4
2,496.5
$m
1,031.6
973.9
862.4
562.2
431.5
cents
cents
cents
%
times
m
23.3
90.7
45.0
65.4
2.7
21.2
87.1
43.5
67.4
2.8
16.0
77.1
41.5
66.4
2.6
56.1 (5)
39.5 (5)
56.3
38.0
63.4
2.6
49.6
36.3
64.2
2.3
1,136.9
1,118.5
1,118.5
999.4 (5)
870.2 (5)
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 (6)
Notes:
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
962.2
147.1
124.6
2.6
22.9
237.6
66.2
23.1
(67.9)
–
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
(66.7)
(86.7)
–
–
340.1
120.8
130.2
1.9
18.0
212.6
49.5
21.8
(73.6)
1.0
234.5
115.6
127.6
2.4
15.2
189.0
67.6
18.0
(72.5)
50.1
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) On the 23 March 2018, APA Group issued 65,586,479 new ordinary securities on completion of the fully underwritten pro-rata accelerated institutional tradeable
renounceable entitlement offer, resulting in total securities on issue as at 30 June 2018 of 1,179,893,848. The entitlement offer was offered at $7.70 per security, a
discount to APA Group’s closing market price of $8.26 per security on the 23 February 2018, the last trading day before the record date of 26 February 2018. The
numbers of securities used for calculation of earnings per security and operating cash flow per security from FY2018 to FY2014 have been adjusted. An adjustment
factor of 1.0038 has been calculated, being the closing market price per security on 23 February 2018, divided by the theoretical ex-rights price (TERP) of $8.23 per
security.
5) Between 23 December 2014 and 28 January 2015, APA Group issued a total of 278,556,562 new ordinary securities on completion of the fully underwritten
accelerated renounceable entitlement offer, resulting in total securities on issue as at 30 June 2015 of 1,114,307,369. The entitlement offer 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 used for calculation of earnings per security and operating cash flow per
security have been adjusted. An adjustment factor of 1.036 has been calculated, being the closing market price per security on 9 December 2014, divided by the
theoretical ex-rights value (TERP) of $7.40 per security.
6) Australian Gas Networks Limited sold in August 2014.
APA GROUP — ANNUAL REPORT 2018 — 127
29 June 2018
12 September 2018
25 October 2018
20 February 2019 (1)
31 December 2018 (1)
13 March 2019 (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
in September.
statements with the final distribution
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.
investor information.
Calendar of events
Final distribution FY2018 record date
Final distribution FY2018 payment date
Annual meeting
Interim results announcement
Interim distribution FY2019 record date
Interim distribution FY2019 payment date
1) Subject to change.
Annual Meeting Details
Date:
Thursday, 25 October 2018
Venue:
InterContinental Sydney Hotel,
James Cook Ballroom,
117 Macquarie 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
Level 25, 580 George Street,
Sydney NSW 2000
PO Box R41,
Royal Exchange NSW 1225
Telephone: +61 2 9693 0000
Facsimile: +61 2 9693 0093
Website: apa.com.au
APA Group Registry
Link Market Services Limited
Level 12, 680 George Street,
Sydney NSW 2000
Locked Bag A14,
Sydney South NSW 1235
Telephone: +61 1800 992 312
Facsimile: +61 2 9287 0303
Email: apagroup@linkmarketservices.com.au
Website: linkmarketservices.com.au
Disclaimer:
APA Group comprises two registered investment schemes, Australian Pipeline Trust (ARSN 091 678 778) and APT Investment Trust (ARSN 115 585 441), the securities
of which are stapled together. Australian Pipeline Limited (ACN 091 344 704) is the responsible entity of Australian Pipeline Trust and APT Investment Trust. Please
note that Australian Pipeline Limited is not licensed to provide financial product advice in relation to securities in 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.
sustainability. matters.
apa group
sustainability report.
2018.
APA GROUP — SUSTAINABILITY REPORT 2018
our sustainability approach.
contents
S01
Message from the
Managing Director
S02 Customers
S04 Environment
S08 Community
S11 Employees
S16
Investors
the apa way.
how we do business
the apa way is how we do business – it comprises
how we behave, guided by our values & how we
make decisions guided by our decision compass.
how we act
and behave
Safe
Trustworthy
Adaptable
Results
Service
Do things safely
Take a long term
focus
Manage APA money
as if it's our own
Do what we say
we do
Know our reputation
matters
our val u e s
how we
make decisions
o
u
r decision c o m p a ss
APA Group is one of Australia’s largest companies and a
leading Australian energy infrastructure business, 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 sustainable
energy solutions that are safe, reliable, innovative and
cost-effective.
Through a stakeholder lens, APA profiles the five
stakeholder groups that are essential to our sustainability
as a business and to the energy industry as a whole.
To achieve sustainable outcomes, ‘how’ we go about
managing our business is as important as the outcomes or
‘what’ our business does. The actions and decisions that our
employees make each day impact each other,
our customers, securityholders, and the communities
and environment in which we operate.
The APA Way guides how we behave – it is our blueprint for
how we want to do business. At its core, five values known
as our 'STARS' drive our behaviours. These are supported by
the five principles of our Decision Compass, which guide the
way we make decisions.
APA recognises the importance of addressing all aspects
of sustainability. In FY2018, APA initiated an enterprise wide
sustainability review and improvement program, identifying
strategic improvements for our Environmental, Social and
Governance (ESG) profile to ensure ongoing sustainability.
The program is being resourced with senior APA staff
and external consultants who bring specialised subject
matter knowledge and an independent perspective to
this transformational program. Given the significance
and broad ranging nature of the program, it is anticipated
'it' will be undertaken over multiple years.
While the program is reviewing all aspects of ESG, key
elements of the program include:
— Assessing climate risk with Task Force on Climate-related
Financial Disclosures criteria;
— Reviewing environmental management practices
to ensure APA is meeting or exceeding environment
regulatory compliance;
— Reviewing key sustainability metrics and targets related
to APA and our stakeholders.
The FY2018 Sustainability Report details APA’s financial
year performance against targeted sustainability actions
for the period. The Report also outlines material economic,
environmental and social sustainability risks, and how
APA mitigates those risks.
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 Ball & Doggett 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. By using ecoStar Offset rather
than a non-recycled paper, the environmental impact was reduced by:
1,892 kg
of landfill
3,250 kWh
of energy
55,325 litres
of water
2,797 km
travel in the average
European car
3,074 kg
of wood
280 kg
CO2 and
greenhouse gases
message from the managing director.
APA GROUP — SUSTAINABILITY REPORT 2018 — S01
It is important for the sustainability of any business to
understand the opportunities and risks associated with
climate change and how we incorporate those into our
strategy. A plan is being developed which will see a number
of ESG initiatives rolled out from FY2019 and beyond.
Our commitment to developing long-term community
relationships runs parallel to safely operating our assets,
as we are mindful of the impact our operations have
on the surrounding communities and environment.
We believe that continuing to maintain and improve
strong connections with local communities helps foster
an internal appreciation of the regions where we operate.
This Report shares with you some of those two-way
connections developed during FY2018.
During the financial year, APA completed numerous
employee initiatives including undertaking “Strategy into
Action” leadership workshops and introducing diversity and
inclusion working groups to drive our inclusivity, flexibility,
cross-generational and employer of choice strategic
objectives. Safety of our people, the environment and
communities where we operate and our assets themselves,
remains paramount in our mindset and how we go about
our daily business.
During FY2018, investor interest was strong with the
completion of the $500 million equity capital raise to
help fund the largest capital expenditure program in
APA’s history. We thank our investors for their support
of our business.
On behalf of the whole APA team, I thank all our
stakeholders for helping us deliver assets that support
APA achieving our vision of connecting Australia to its
energy future.
Mick McCormack
Chief Executive Officer and Managing Director
FY2018 was a year when the message of ensuring all
Australians have access to affordable, sustainable and
reliable energy was heard loud and clear by the energy
industry and policy makers. Solving Australia’s energy
trilemma requires a collaborative approach, and APA is
doing its part. Gas will play a critical role in Australia’s
future energy mix, as will technological advancements
and energy policy certainty.
APA’s flexible, long-term investment approach has
supported the development of the market we have today,
connecting new gas sources with market participants and
providing innovative solutions for our customers. In our
18 year history APA has invested over $13 billion in energy
infrastructure, delivering energy to the people, businesses
and communities that rely on it for essential services and to
fuel Australia’s growth.
In APA’s FY2018 Sustainability Report, we are pleased to
update you on our key sustainability initiatives as it relates
to our stakeholders.
We have continued to execute on our $1.4 billion plus
pipeline of growth projects with the commissioning of the
Emu Downs Solar Farm, Reedy Creek Wallumbilla Pipeline,
the Mt Morgans Gas Pipeline and the Yamarna Gas
Pipeline. Our customers are central to APA’s success and we
will continue to work diligently to service their commercial
needs in Australia’s dynamic energy market.
APA was one of 15 energy businesses across the supply
chain during the year that committed to develop a
consumer charter focused on delivering improved customer
outcomes. APA is a foundational member of the initiative
and part of the Industry Working Group developing
The Energy Charter.
As Australia’s efforts to meet the Paris Agreement
commitments continue, APA strengthened its advocacy in
environmental stewardship. Gas is a viable, low-emissions
fuel supply that Australia has in abundance. Renewable
energy technology is fast evolving but its reliability to
respond to market needs is some way off. So when the sun
is not shining and the wind is not blowing, Australia needs
access to a fast start up, flexible, reliable and low emissions
energy supply which gas already provides.
In FY2018, we registered as a supporter of the Task Force
on Climate-related Financial Disclosures. We also bolstered
our renewable generation portfolio with the commissioning
of the Emu Downs Solar Farm. We continued construction
of APA’s Darling Downs Solar Farm and the Badgingarra
Wind Farm, and announced an adjacent new solar project.
To reinforce our commitment to improving APA’s
Environmental, Social and Governance (ESG) performance,
we have initiated a new program and engaged an external
advisory firm to comprehensively review APA’s strategic
direction for our ESG management and reporting.
S02 — APA GROUP — SUSTAINABILITY REPORT 2018
customers.
We will deliver value to our customers
and create responsive solutions to meet
their needs by:
— Working together with customers to provide optimal
energy market solutions.
— Providing market-leading flexible solutions to meet our
customers’ changing requirements.
— Ensuring the highest level of service reliability to enable
customers to manage their operations.
— Strengthening our business relationships by seeking
regular feedback to improve our services and
customer experience.
FY2018 Performance
Actions for FY2019
Growth
— Progress construction and development of various
energy infrastructure projects to meet agreed
commissioning schedules including the Darling Downs
Solar Farm, Badgingarra Wind and Solar Farms,
Yamarna Power Station and the Orbost Gas Processing
Plant.
— Continue to identify and capture opportunities that
deliver flexible, responsive and sustainable solutions for
our customers.
— Continue to work with customers to realise planned
projects into committed projects to deliver projects
in transmission, storage, power generation and gas
processing sectors.
Customer Solutions
— Continue to offer flexible transportation and storage
services and innovative solutions to meet our customers’
diverse requirements across Australia.
— Continue to refine APA’s Integrated Operations Centre,
grid operations and customer management system to
provide enhanced services and deliver reliable supply.
— Continue to implement Gas Market Reform Group
rules – financial reporting, capacity trading and auction.
— Continue proactive engagement with customers and
the development of feedback-led business improvement
initiatives to improve services and customer experience.
Growth
— Completion of the Emu Downs Solar Farm, Reedy Creek
Wallumbilla Gas Pipeline, Mt Morgans Gas Pipeline and
Yamarna Gas Pipeline.
— Progressed construction of the Darling Downs Solar
Farm, Badgingarra Wind Farm, Yamarna Power
Station, as well as the refurbishment of the Orbost Gas
Processing Plant.
— Announced the extension of the Purchase Power
Agreement with Alinta Energy from 12 years to 17 years
for the 130 MW Badgingarra Wind Farm, along with the
additional greenfield construction of the adjacent 17.5
MW Badgingarra Solar Farm.
— Customers entered into new flexible multi-asset
contracts including a three-year contract with a major
existing customer on the East Coast, expansion of
existing multi-asset contracts in Western Australia and
a one-year contract with Incitec Pivot to deliver gas
3,300km from the Northern Territory to Brisbane.
— Continued to connect new gas sources with market
participants, including agreements entered into with AGL
Energy to construct the Crib Point Pakenham Pipeline
(subject to project FID by AGL).
— Continued distribution network growth with around
35,000 additional customer connections across Victoria,
South Australia, Queensland and New South Wales on
networks owned and/or operated by APA.
Customer Solutions
— Progressed implementation of Gas Market Reform
Group (GMRG) rules, meeting information disclosure
requirements on 31 January 2018 for east and central
regions and on 19 June 2018 for Western Australia.
— Launched ‘services refresh’ and a new standard Gas
Transportation Agreement framework across APA’s
transmission assets to better accommodate the
market’s needs for simplicity and flexibility of services.
— Introduced customer feedback surveys seeking feedback
to improve services and customer experience.
— Foundational member of The Energy Charter initiative,
which encompasses the whole energy supply chain to
improve customer outcomes.
APA GROUP — SUSTAINABILITY REPORT 2018 — S03
Key Sustainability Risks
Risk Management
— Demand for gas – the volume of gas that is transported
— Long-term contractual agreements with strong
by APA is dependent on end user demand, which is
influenced by the strength of the industry sectors that
require gas to operate. 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.
counterparties underpin assets.
— Ability to provide flexible and innovative customer
solutions.
— Complementary investments in gas storage and power
generation and continued evaluation of emerging
growth opportunities such as wind and 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
underpinning APA’s assets.
— Connect more gas resources with additional 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.
– APA’s Western Australian assets have become
increasingly interconnected to deliver energy across
longer distances to reach remote mining locations.
— Provide infrastructure connectivity/flexibility to existing
and emerging gas markets.
— Flexible and innovative customer solutions.
— APA operates assets in accordance with all relevant
regulations and standards, including robust
maintenance and asset monitoring regimes.
— Management of urban encroachment and excavation
activities close to APA infrastructure.
— An integrated approach to Emergency Response,
Business Continuity and Crisis Management is applied
across the business.
— Participation in anti-terrorist exercises and testing
to provide effective emergency response systems to
manage a potential cyber attack.
— Given the change in market dynamics, customers are
seeking increased flexibility in their energy delivery.
APA continually reviews its product and service suite
and provides innovative and optimal solutions to
our customers.
— APA has introduced customer surveys to seek feedback
on areas to improve services and customer experience.
The new supplier prequalification process will provide
greater certainty and confidence to our customers and
other stakeholders about the suppliers APA works with.
Melissa Ogden from APA’s Infrastructure Procurement team running training
for APA’s new Supplier Pre-qualification (ASP) Program
— Operations – APA and our customers are exposed to a
number of operational risks such as equipment failures
or breakdowns, pipeline rupture, technology failures
including sabotage or terrorism attack including
cyber attack.
— Poor service delivery to customers impacting customer
confidence.
New supplier prequalification program
~ safeguarding against supply chain risk
APA relies on a multitude of suppliers’ goods and services to
help deliver connected, sustainable energy solutions to our
customers. In FY2018, APA’s procurement team introduced
a supplier prequalification assessment and compliance
program to manage elements of potential supply chain
risk. The new process will measure and monitor each
key supplier against critical prerequisites to protect APA
from risks such as Health Safety and Environment (HSE)
management policies, procedures and breaches, associated
legal actions, insolvency events, child labour policies and
prevention, equal opportunity, diversity and fair pay. An up-
to-date database of key suppliers’ policies and procedures
will be maintained in a central repository. This will enable
APA to assess financial, legal and insurance, HSE, quality
management and supply chain risks. It will also confirm
that the suppliers’ operations are consistent with APA’s core
values - safe, trustworthy, adaptable, results and service.
S04 — APA GROUP — SUSTAINABILITY REPORT 2018
environment.
We will continue to deliver
an environmentally responsible
safe and essential service by:
— Taking a systematic and risk-based approach to
environmental management.
— Maintaining compliance with environmental obligations
— Contributing to policy and responding to climate change
initiatives to promote the use of gas as essential to a low
emissions energy mix.
in all jurisdictions we conduct our business.
— Evaluating further renewable energy and low emission
— Meeting or exceeding the Australian Pipelines and Gas
Association ("APGA") Code of Environmental Practice.
— Considering environmental risks in all investment and
procurement decision-making.
gas generation opportunities.
— Expanding the understanding of Environmental,
Social and Governance (ESG) and climate risks across
our business.
FY2018 Performance
Actions for FY2019
— APA did not receive any penalty notices relating to
environmental compliance in any Australian jurisdictions
in FY2018.
— Continue to expand our renewable energy portfolio with
the scheduled commissioning of the Darling Downs
Solar Farm and the Badgingarra Wind and Solar Farms.
— Commenced an Environmental Management Plan (EMP)
— Contribute to industry and government policy
Improvement Program across the business.
— Registered as a supporter of the Task Force on Climate-
related Financial Disclosures (TCFD) to demonstrate
APA’s support for voluntary and consistent climate-
related financial risk disclosures and initiated a project to
improve disclosures for FY2019.
discussions on environmental regulation and climate
policy.
— Continue to develop relationships with APA’s industry
member bodies, the Clean Energy Council and Business
Council of Australia, to promote effective climate
change policy.
— Continued to expand APA’s renewable generation
— Explore and analyse risks and opportunities associated
with ESG and climate risk across our business in
accordance with the TCFD guidelines.
capacity with the completion of the Emu Downs Wind
Farm, ongoing construction of the Darling Downs Solar
Farm, Badgingarra Wind Farm, and the announcement
of the new greenfield Badgingarra Solar Farm.
— Contributed to the ongoing update of the Australian
Standard AS 2885 “Pipelines – Gas and Liquid
Petroleum” suite of documents.
— Contributed to the Australian Pipelines and Gas
Associations (APGA) working group that revised the
‘APGA Code of Environmental Practice (2017)’.
— Contributed to climate policy discussions and
recommendations contained in the Finkel Report,
and in relation to the proposed National Energy
Guarantee promoting the role of renewables and gas
as important contributors to achieving meaningful
emission reduction targets.
— Continued to develop relationships with APA’s industry
member bodies, the Clean Energy Council and Business
Council of Australia, to promote effective climate
change policy.
— FY2018 APA Annual Report and Sustainability
Report was printed on 100% recycled paper made
Carbon Neutral.
Key Sustainability Risks
Risk Management
— Environmental Harm – If not managed appropriately,
APA’s activity in the operation and construction of
our assets, has the potential to cause harm to the
environment, through air emissions, release of chemicals
or hydrocarbons, inappropriate waste storage and
disposal, the disturbance of heritage sites or protected
flora and fauna.
— APA has an HSE Management System called
“Safeguard” that provides a framework to manage
our Health, Safety and Environment risks.
— Operational procedures underpin this framework and
include important steps to manage environmental risks
such as waste storage and disposal, the handling and
storage of chemicals and prevention of the spread of
declared weeds.
— APA has in place management plans that identify
local environmental risks and outline control
measures that are applied and integrated into
our operational procedures.
Environmental management at APA
Our Health, Safety and Environment (HSE) Policy approved
by APA’s Board HSE Committee sets outs APA’s goal to
achieve zero harm for all employees, contractors and
third party stakeholders operating our assets or working
near them. It also applies to community members living
near our assets and importantly, avoiding and minimising
environmental harm. Every employee, contractor and sub-
contractor has an obligation to prevent or minimise any
environmental harm arising from APA’s operations
and activities.
Environmental Social Governance (ESG) Performance
During FY2018, APA engaged an external advisory firm
to commence an independent analysis of APA’s strategic
direction regarding Environmental, Social, Governance
(ESG) practices and reporting. This work is intended to
provide senior management with recommendations for
improvements and inform a transformation program
scheduled to commence in FY2019. This will include
reviewing all key aspects of ESG such as environmental
practices, climate risk management and broader
sustainability practices and metrics.
Emissions management
APA’s extensive energy infrastructure asset base embeds
our operations across Australia’s rural and metropolitan
communities. As part of this, our obligation to safely
operate and maintain our infrastructure includes managing
potential emissions from our activities. Hence managing
emissions such as noise, light, vibration or odour is part of
our commitment to the community and environment.
Consideration of emissions risks is factored into our
environmental risk assessments. APA stores environmental
information in our Environmental Management Plans, and
emissions are a key environment area in our corporate
environment framework.
Reducing emissions
~ Moomba and Wallumbilla Compressor Stations
APA’s compressor stations at Moomba and Wallumbilla
(station 3) are integral components in the delivery of gas
through both our South West Queensland Pipeline (SWQP)
and Wallumbilla Gladstone Pipeline (WGP).
In FY2018, members from both our Integrated Operation
Centre and SWQP Reliability Improvement Project teams
modified each compressors’ operating conditions to assist
with their efficiency.
This was achieved by reducing the minimum on-load speed
of the engine gas-producers within the compressor units by
around 5%.
This modification will help towards reducing the hours a
unit is required online. This is the first (and essential) step
towards online optimisation of machine usage. It helps APA
better align machine utilisation with the continual changes
from our customer’s gas orders. A win-win all around.
Achieving these kinds of sustainability benefits for the
business, both financial and environmental, as well as the
potential for scalability of initiatives and resulting benefits
to other parts of our transmission operations is one of the
key reasons why APA is one of Australia’s leading energy
infrastructure businesses.
APA GROUP — SUSTAINABILITY REPORT 2018 — S05
Across our asset footprint and across various emissions
types, APA’s pipeline assets have a low impact on
communities. A very small proportion of our facilities trigger
any local, state or territory emissions licencing thresholds.
However, APA is committed to respecting the communities
where we operate. We maintain lines of contact with the
community via our Integrated Operations Centre, which is
available 24/7 to receive notification from the community
of any issues that may arise.
APA complies with the Commonwealth National
Greenhouse and Energy Reporting Act 2007, and reports its
annual Scope 1 and 2 emissions (refer to section 11.4 of the
FY2018 Directors’ Report).
Native Vegetation Management
APA takes a risk-based approach to environmental
management. Identification, assessment and management
of risks associated with native vegetation is undertaken
through our environmental risk assessment process and
actioned through environmental management plans.
Soil and Water Management
APA continues to manage our activities and our contractors’
operations on land and watercourses in a way that strives
to avoid or minimise risk. Some examples include: frequent
patrols of our transmission pipeline easements to identify
erosion issues early; we factor watercourses into our risk
assessment; and avoid interaction with watercourses
whenever practicable.
Moomba Compressor Station, South Australia
S06 — APA GROUP — SUSTAINABILITY REPORT 2018
Respecting indigenous cultures and the environment
The location of APA’s latest greenfield gas pipeline
construction project, the Yamarna Gas Pipeline (YGP)
in remote Western Australia, travels through native title
claimant areas and sites of cultural significance. The 198km
pipeline is an extension of APA’s Eastern Goldfields Pipeline,
connecting the Gruyere Gold Project to a reliable gas supply
for its mining operations.
From the onset, APA committed to developing the project in
collaboration with the local community.
The team engaged with representatives from the
Nangaanya language group in Laverton, members of the
Council of Tribal Elders and the Yilka claimant group. This
ensured all stakeholders were informed and comfortable
with APA’s plans, as well as guaranteeing that APA had met
its environmental compliance obligations.
APA’s extensive assessment of the landscape also provided
support to multiple ethnographic and archaeological
surveys, and contributed substantial data to the regional
knowledgebase.
From these surveys, six unregistered culturally significant
sites were identified and three previously known sites were
accurately positioned. This information was provided to the
Department of Land, Planning and Heritage to assist with
future management.
Bunting boundary protecting Yamarna cultural heritage site during
construction of the Yamarna Gas Pipeline, Western Australia
Managing Climate Change Issues
Carbon Disclosure Project
APA participated in the Carbon Disclosure Project during
the reporting period, a voluntary disclosure to investors on
carbon emissions, liability, reduction activities, strategies
and management. APA’s overall score of “C”, which is in line
with the sector peers and ASX200 average.
APA’s ESG Improvement Program will recommend
initiatives that will positively impact APA’s overall score in
future years.
Task Force on Climate-related Financial Disclosures
APA expressed support for voluntary and consistent
climate-related financial disclosures in FY2018 by
registering as a supporter of the Task Force on Climate-
related Financial Disclosures (TCFD). APA is currently
undertaking an extensive review of its Environmental,
Social and Governance reporting with the assistance of an
independent advisory firm, to determine climate-related
opportunities and risks for the business. This includes a
detailed assessment of APA’s climate risk disclosure against
the four TCFD categories of governance, strategy, risk
management and metrics and developing an associated
plan to improve this disclosure in FY2019.
Clean energy policy
APA continues to support reducing carbon emissions as a
risk mitigation response to minimise the effects of climate
change. APA supports technology agnostic domestic
solutions that integrate energy and climate policies to meet
Australia’s carbon reduction commitments, while ensuring
affordability and reliability. APA continues to encourage the
development of bipartisan national energy policy. Certainty,
clarity and a commitment to a national energy policy are
crucial to maintaining investment confidence. APA’s mix
of assets will play an important role in meeting these
goals through the combination of intermittent renewable
generation with reliable, low emissions gas-fuelled
generation in Australia’s future energy mix.
Investing in renewable energy
In 2018, APA commissioned the 20 MW Emu Downs Solar
Farm, which will add to the production and reliability of
the Emu Downs Wind Farm. APA also announced the
Badgingarra Solar Farm project which is a 17.5 MW tracking
array that will be co-located with the 130 MW Badgingarra
Wind Farm. It is the same concept that APA deployed at
the adjacent Emu Downs Wind and Solar Farm. In this
particular location, wind and solar have complementary
generation profiles due to the predictable nature of the
underlying wind and solar resources. APA’s combined solar
and wind farm site maximises the collection and generation
of renewable energy, efficiently transmitting that energy
through the same transmission connection infrastructure.
Taking advantage of this complementary resource and
maximising use of shared infrastructure has enabled APA
to successfully develop this project.
During FY2019, APA expects to commission the 110 MW
Darling Downs Solar Farm, the 130 MW Badgingarra
Wind Farm and the 17.5 MW Badgingarra Solar Farm.
APA continues to evaluate further renewable energy
opportunities together with stand-alone and integrated
low emission gas generation. This combination of
intermittent renewable generation with reliable, low
emissions gas-fuelled generation is well positioned to help
deliver energy to people, businesses and communities that
use it, affordably, efficiently and reliably.
APA GROUP — SUSTAINABILITY REPORT 2018 — S07
Construction of APA’s Badgingarra Wind Farm, Western Australia
S08 — APA GROUP — SUSTAINABILITY REPORT 2018
community.
We will positively engage with the
communities where 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 awareness initiatives
and giving programs that target vulnerable communities.
— Exploring opportunities to involve employees in the
community programs we support, and reciprocating by
inviting socially disadvantaged children and young adults
to APA workplaces to learn about our business and
encourage education.
FY2018 Performance
Actions for FY2019
— APA donated to four initiatives as part of its Building
Brighter Futures program: Clontarf Foundation, Bill
Crews Charitable Trust Literacy Program, The Fred
Hollows Foundation and Australian Schools Plus.
— APA undertook key sponsorships of the Taronga Zoo
Foundation and the Australian Brandenburg Orchestra.
As part of the Australian Brandenburg Orchestra
sponsorship, APA sponsored concerts in two locations
where it has substantial operations with a concert in
Brisbane and a free community concert in Toowoomba.
— Selected APA employees engaged directly with our
Building Brighter Futures partners by travelling to their
communities to work with them. This included the five-
day Clontarf Kununurra Experience; the week-long Fred
Hollows Foundation See Australia field trip to Bourke;
and multiple day-long exchanges with Clontarf
Foundation academies at the schools where they
operate and at APA sites.
— Diversity & Inclusion (D&I) is an important aspect
of working life at APA, and APA supported three
D&I-focused charities: Dress for Success, Orange Sky
Laundry and White Ribbon Australia.
— As part of an APA program where employees were
sponsored by APA to donate time to a charity, several
APA employees volunteered at registered charitable
organisations of their choice.
— APA offices held individually organised events to raise
money for causes such as Australia’s Biggest Morning
Tea, Pink Ribbon Day (both Cancer Council), Black Dog
Institute and Movember.
— APA continued with ongoing annual contact and
engagement programs with landowners and occupiers
along existing transmission pipelines to facilitate safety
awareness and provide a forum for concerns and issues
to be raised and addressed.
— 29 APA employees participated in the Sydney Street
Choir Corporate Challenge in Martin Place which
raised $5,000 to help men and women dealing with
homelessness, mental illness, addiction and/or social
disadvantage.
— Commenced a community and stakeholder consultation
program for the proposed Crib Point Pakenham
Pipeline project.
— Continued ongoing community and stakeholder
consultation for the proposed Western Slopes
Pipeline project.
— Maintain support of our community investment
program, Building Brighter Futures, through headline
partnerships and promote and support fundraising
events across the business.
— Financially support and maintain employee engagement
with our three key D&I charitable initiatives: Dress for
Success, Orange Sky Laundry and White Ribbon Australia.
— Continue to financially support community events
by encouraging and empowering APA worksites
across Australia to organise fundraising events.
— Progress the community and stakeholder consultation
program of activities for the various new infrastructures
projects across the business.
Raj Kallath – Reedy Creek Wallumbilla Pipeline Project Manager,
Wallumbilla, Queensland
APA GROUP — SUSTAINABILITY REPORT 2018 — S09
Key Sustainability Risks
Risk Management
— Community Relations – Maintaining community support
— APA engagement with community interests including
and goodwill for APA’s activities.
through local sponsorships.
— Encroachment – urban encroachment around existing
pipeline easements can increase the potential for
damage with pipeline location changes.
— Community education and communication for
construction activities including “Dial Before you Dig”
(DBYD) service.
— Landowner liaison and education.
— Participation in Australian Pipelines and Gas Association
Corridor Committee/pipeline operator groups.
— Liaison with council and planning authorities to manage
potential encroachment issues.
— Prequalification and ongoing monitoring of suppliers
to ensure compliance with APA standards.
APA and the Clontarf Foundation supporting
Indigenous communities
APA has been supporting the Clontarf Foundation for eight
years, as part of its commitment to promote community
development. With many of APA’s facilities situated at
or near Indigenous Australian communities, the Clontarf
Foundation’s goal to improve the health and educational
standards for young Indigenous Australians is an important
one. APA’s partnership with the Clontarf Foundation
provides financial support, sharing of skills via mentoring,
traineeships and work experience to help deliver the
Clontarf program to over 6,000 boys nationally each year.
APA Corporate Development team member Gordon Sue with Clontarf
youngsters and other partner representatives during their engagement
experience, in the Top End, Northern Territory
— Supplier practices – working with our suppliers
to manage environment, safety and social
responsibility issues.
Community Investment Program
Building Brighter Futures is APA’s community investment
program. Designed to provide support to socially
disadvantaged communities including Indigenous and Torres
Strait Islander communities, the program targets locations
where APA operates. In addition to financial support, APA’s
relationships with Building Brighter Futures beneficiaries
is an intrinsic partnership including knowledge sharing,
employee engagement and exchange activities.
In financial year 2018, APA’s Building Brighter Futures
headline partnerships included: The Clontarf Foundation;
The Fred Hollows Foundation; Bill Crews Charitable Trust
Literacy Program; and Australian Schools Plus.
Furthermore, APA donated to three charitable
organisations that supported our Diversity and Inclusion
focus on age, gender and culture:
— Orange Sky Laundry.
— Dress for Success.
— White Ribbon Australia.
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:
— Improve the lives of the individuals and communities we
are supporting.
— 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 FY2018 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;
two locations where we have substantial operations.
S10 — APA GROUP — SUSTAINABILITY REPORT 2018
Reedy Creek Wallumbilla Pipeline stakeholder engagement
~ testimonial from Colin Maunder – owner of Maunder
Pastoral Company
We were kept up to date regarding key project
developments in the lead up to construction so nothing
occurred that surprised us as landholders.
“Right from the start of the Reedy Creek Pipeline proposal
we have found APA a good company to work with.
Consultation with people involved was always done in a
positive and non-threatening manner. Ian Crombie, our
Liaison Officer, was polite and co-operative, as a go to
person and Matthew Morrow explained the construction
processes clearly. We would have to agree that we were well
informed about the project development and progress.
We found the communication networks easy to work
with. Employees explained the process clearly and they
were prepared to listen to us in a respectful manner.
APA kept us well informed regarding all aspects of the
projects development.
The easement negotiation process was straightforward and
we found APA to be reasonable. If any concerns arose, there
was always someone whom we could contact easily.
If our Officer was going to be away/on leave he advised us,
by phone or email, what to do if we had any concerns.
Regular feedback about developments occurring regarding
the routing of the pipeline was offered. We did suggest the
re-routing of the pipeline because of rough terrain and this
was taken on board. APA observed suggestions and concerns
about existing infrastructure, such as access lanes to cattle
yards, and these problems were worked around effectively.
Community and Stakeholder Engagement
APA values and respects its relationships with the
stakeholders and communities where 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 project’s consultation
process, and ensure that they remain fully informed.
— Be inclusive: ensure the community has easy access
to clear and concise information about projects, while
ensuring it is communicated in language (for example,
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 stakeholders.
— Be a part of the community: use the business’ projects as
a way to contribute to stronger local communities with
the potential to provide economic and social benefits.
— 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 identifying who in the project team has responsibility
for engaging the stakeholder(s) and the best timing and
format for these engagements.
The plans are not static documents, evolving as the project
progresses. They require revision and flexibility to meet
changing needs and circumstances. Each project plan is
usually reviewed every three months or as required.
Compensation for the easement granted by APA seemed
adequate and fair, and we felt our overall relationship with
them was valued.
We were adequately informed regarding key milestones in
the lead up to construction, and were satisfied that suitable
arrangements were in place to manage the impacts that
may inevitably occur.
Given the fact that we were compensated for
inconveniences, it must be said that when the pipeline was
completed we were happy that impacts of construction
had been suitably managed and best practice observed.
We were able to continue our grazing operation without
any major inconveniences due to construction works.
The rehabilitation progress is satisfactory at this point
in time.
APA also were involved with fundraising activities within
the community, which was to be admired, as sometimes,
it is difficult for these companies to be seen by the general
public as doing anything good for the communities. There
is always a lot of negativity presented by the likes of the
media, and vocal groups.
Overall commitments made by APA were observed and
the journey so far has been amicable throughout, leading
us to believe APA have done their best to form positive
relationships with landholders.”
Business Continuity/Emergency Response/
Crisis Management
APA’s approach to emergency recovery is integral to our
operations and values. It seeks to protect our assets,
property, people and IT systems, and to consider the
environment and local communities we impact. Our
integrated approach to Business Continuity/Emergency
Response/Crisis Management provides for effective
recovery whilst continuing to service our customers and
meet regulatory requirements by assessing:
— Emergency response for energy infrastructure
assets incidents.
— Business continuity response for premises, people,
IT systems and cyber type incidents.
— Crisis management response, involving APA’s Executive
team which focusses on high severity incidents.
APA maintains programs of testing to ensure our approach
remains current and reflects changes in our business, our
customers and the communities we are part of.
APA regularly participates in internal and external testing
of emergency response procedures, exploring scenarios
and stress testing our emergency response plans and crisis
management plans. This ensures that should an emergency
situation occur, APA is equipped with the necessary tools to
help manage the situation.
Exploring scenarios and testing emergency response and
crisis management plans is a vital way to share information
and best practice. In FY2018, APA participated in the
Australian Government’s Trusted Information Sharing
Network for Critical Infrastructure Resilience full-day
workshop. Representatives from the banking and finance,
communications, food and grocery and health sectors also
attended, along with the police. The exercise focused on
emergency information and communication needs, the
interdependencies between the different sectors and the
importance of raising awareness amongst all stakeholders.
employees.
We are committed to providing an
inclusive, rewarding and collaborative
working environment where all our
people can contribute, perform and
succeed. We do this by:
APA GROUP — SUSTAINABILITY REPORT 2018 — S11
— Fostering a culture to ensure our health, safety and
environmental obligations show continuous improvement
in performance and that risks are identified and
managed to 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.
— Developing deep technical expertise in a continuous
learning environment with inspiring, accountable leaders.
— Living and embedding the APA Way so our culture is a
key enabler of our success.
FY2018 Performance
Actions for FY2019
Safety
— All leading HSE indicators (1) were met or exceeded
including HSE leadership activities.
— The Total Recordable Injury Frequency Rate (TRIFR)
result was 8.9 (2), predominantly due to contractor injuries
exceeding target. No fatalities occurred.
— The Lost Time Injury Frequency Rate (LTFIR) result was
1 .76 which exceeded the FY2018 target of <1.
— Completed overhaul of Alcohol & Other Drugs Policy
and protocols.
— An online Health and Wellbeing platform was launched
for employees with good uptake.
— Commenced implementation of action plan to improve
Chain of Responsibility capability which will meet new
National Chain of Responsibility laws and managing our
supply chain risk.
— Targeted promotion and education on key HSE matters
such as contractor management, distractions, gas safety
and safety leadership.
— Utilised data from APA’s In Vehicle Monitoring System
to develop campaigns to target speeding and use of
seat belts.
— Conducted necessary Crisis and Emergency
Management training and tests.
— Delivered a safety reset training module to employees
and contractors in APA’s Transmission and Networks
business to address safety risks, seek employee input
about how APA can improve its safety performance and
reinforce the collective responsibility employees have in
being mindful of workplace safety.
Leading for growth and diversity
— 297 leaders completed Leadership Styles & Climate
“Strategy into Action” workshops with structured
coaching sessions.
— Employee Survey conducted with 78% participation and
a positive engagement score (71% favourable).
Safety
— Target TRIFR of no more than 7. APA will use data
analytics to develop activities to improve injury
performance including (but not limited to) contractor
performance and management, manual handling and
focus on prevention of hand injuries.
— Continued development of a comprehensive process
safety framework, measures and integration with
current Safety Management system.
— Implement company-wide Health and Wellbeing
program targeting areas identified from APA’s Health
and Wellbeing online platform.
— Safety Leadership initiatives and programs as part of
APA’s overall leadership and development framework.
— Improve mobility and usability of HSE reporting.
Leading for growth and diversity
— Launch a new people management fundamentals
program called Leading @ APA, aimed at new and
frontline leaders.
— Implementation of engineering capability framework.
— Develop business specific competencies and learning
frameworks to embed and improve technical know-how
and capability.
— HR Systems project re-commenced to upgrade people
processes and system capability.
— Improve capability and processes around key people
functions such as recruitment, resource planning,
business partnering, change management and
learning design.
— Continue work on the D&I strategy with emphasis on:
– Development of Employee Value Proposition
– Gender Targets Action Plan implementation
– New Apprenticeship program
– Increased use of flexibility arrangements.
— Review and redesign the performance and reward/
— Engineering capability framework completed and ready
remuneration models.
for roll-out in FY2019.
— HR Systems review project commenced but put on hold
for some months due to resourcing constraints.
— Introduction of Diversity & Inclusion (D&I) Working
Groups to assist in the implementation of D&I Strategy
in key objectives of Inclusivity, Flexibility, Cross-
generational and Employer of Choice.
— APA’s Board approved a Gender Targets Action
Plan to work towards achievement of female
participation targets.
— Introduced new, structured Talent Review process
to improve talent and succession outcomes.
— Continued promotion of APA values and culture via
the launch of The APA Way, APA Excellence Awards,
leadership programs, and extensive refresh of APA’s
Code of Conduct.
— Refreshed Code of Conduct to be rolled out to
employees and contractors.
1) Leading HSE indicators refers to performance measures of activities
undertaken in the workplace at the time they occur aimed at preventing
HSE incidents.
2) Lag indicators refer to performance measures capturing HSE events after
they have occurred. TRIFR is measured as the number of lost time and
medically treated injuries sustained per million hours worked. APA’s figure
includes employees and contractors.
S12 — APA GROUP — SUSTAINABILITY REPORT 2018
Key Sustainability Risks
Risk Management
— Failure to provide a safe workplace resulting in serious or
— APA maintains a comprehensive workplace HSE
fatal injuries (Safety).
— Potential for legal proceedings for failure to comply with
Health, Safety and Environmental legislative obligations.
— Employee capability, recruitment and
engagement – Failure to develop, attract and
retain talented employees.
— Failure to focus on the health and wellbeing of our
people impacting productivity, absenteeism and
culture/behaviour.
— Failure to comply with Employment, Discrimination
(sex, race, disability, age, gender), EEO and
Diversity regulations resulting in potential fines
or negative publicity.
Management System. 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.
— APA maintains a number of initiatives to ensure there
is a pool of talent and internal capability for now and
in the future.
— 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.
— APA maintains a comprehensive workplace HSE
Management System. It is predicated on the principles
of hazard and risk identification, control measures and
a robust assurance framework.
— Health and wellbeing education and awareness is a
key element of the system. In FY2018 APA introduced
a Health and Wellbeing employee platform to support
employee learning.
— As part of our assurance framework and HSE audits,
APA regularly reviews its people metrics and trends,
as well as conducting employee surveys.
— APA has several initiatives in place to strengthen the
cultural, gender and age diversity of APA’s workforce
including the 2017-2020 Diversity & Inclusion Strategy
and Gender Targets Action Plan.
— Employees are regularly trained in their obligations
with respect to lawful and appropriate behaviour,
discrimination and complaints and investigation
processes are in place to address issues.
— Employment terms and conditions are established
and regularly reviewed to ensure they meet or exceed
legislative requirements.
— Potential for a Process Safety incident at an APA asset
— A Process Safety framework is currently under
resulting in a major accident or explosion.
development and is being incorporated into APA’s HSE
Management system.
— It is predicated on Industry best practice and the
principals of understanding Process Safety risk,
specifying the critical control measures to safeguard
those risks.
— As part of APA’s assurance program, Health and Safety
audits are also undertaken in all parts of the business,
including on some key Process Safety critical controls.
APA GROUP — SUSTAINABILITY REPORT 2018 — S13
Leading for growth
In FY2018, 297 of APA’s leaders participated in our
Leadership Styles and Climate (Strategy into Action)
program which now has seen all of APA’s existing leaders
attend in the last two years. This program focused on
connecting leaders to the APA strategy, setting a standard
on how to lead at APA and then providing tools and
techniques on how to leverage various leadership styles to
lead for growth, improved team climate and performance.
Via this program, 138 leaders (those who manage >3
people) received a 1:1 report debrief and coaching on how
they lead and the impact this has on the climate in their
team. After this training, 91% of attendees reported to have
communicated the strategy to their team with the majority
also reporting positive team improvements. In FY2019, we
will commence re-assessing our leaders who have previously
completed the program and will provide this program to
new leaders within APA.
We also successfully piloted a new leadership program to
build core people management skills expected of all leaders
at APA: Leading at APA. It is aimed at new and frontline
leaders in particular, and covers such topics as:
— Understanding their role as a leader at APA.
— Building high trust relationships.
— Conducting good quality conversations - in person
and remotely – to:
– Manage for performance, set expectations,
provide enriched feedback, delegate tasks and
develop their people.
– Empower people to take ownership of and be
accountable for achieving their goals while managing
the how, not just the result.
– Be fair and consistent in how they manage.
– Leverage delegation as a way to develop and grow
team member capability.
In FY2019 we will commence the rollout of this programme
to leaders within APA.
Diversity and inclusion
APA’s 2017-2020 Diversity & Inclusion Strategy focuses on
achieving diversity of thought, by strengthening the cultural,
gender and age diversity of APA’s workforce.
To achieve this goal, in FY2018 APA established four working
groups aligned to the diversity and inclusion priority areas
of Flexibility, Inclusion, Cross-Generational and Employer of
Choice, with the objective of creating a workplace where
APA is known as:
— Inclusive – where differences are recognised and
language and behaviour demonstrate organisational
commitment to diversity and inclusion;
— An Employer of Choice – attracting and retaining diverse
talent and increased female representation in senior
leadership and engineering/operational roles;
— Flexible – flexible work practices providing greater
role accessibility and supporting individuals to balance
personal and work requirements; and
— Cross-generational – a strong talent pipeline, supported
by an engaged and skilled workforce, mentoring and
succession planning, leverage and transfer of critical
skills and knowledge.
Each working group is led by a member of APA’s Executive
Committee as the sponsor and comprises representatives
from across the business who meet at least monthly to
design and deliver initiatives aligned to APA’s Diversity &
Inclusion Strategy.
In addition, APA has established a Diversity and Inclusion
Champion network, comprising of employees across the
business who meet approximately once a month to keep
informed on APA's diversity and inclusion progress, as well
as to contribute to the discussion and help design and
co-ordinate future initiatives and priorities.
Some of the work undertaken by the D&I Working Groups
is highlighted below:
Inclusive
The “Inclusivity” working group co-ordinated a series of
diversity and inclusion site events to recognise and celebrate
inclusivity, including Harmony Day and International
Women’s Day. These events were promoted across the
business to increase awareness and generate discussion
about creating an inclusive work environment. Focus areas
for FY2019 include:
— Recognising and celebrating the National Aboriginal and
Islanders Day of Celebration with our partners The Fred
Hollows Foundation and Clontarf Foundation.
— Launching an Inclusive Leadership Program for all
people leaders, alongside Unconscious Bias training
for employees, commencing in FY2019.
Cultural
clusion
In
I
n
c
l
u
s
i
o
n
Diversity of
thought
diversity of
thought:
APA’s workplace is naturally inclusive and
respectful of all employees. Employees
are empowered to think innovatively and
leverage cultural, gender and age diversity
to improve business performance
cultural:
APA embraces differences in culture,
beliefs and customs to build upon our
diversity of thought
gender:
APA seeks to attract and retain a high
quality, gender balanced workforce
Gender
Age
age:
APA leverages value through the
experience and potential of a cross-
generational workforce
Inclusion
S14 — APA GROUP — SUSTAINABILITY REPORT 2018
An Employer of Choice
APA is aiming to increase the female participation in its
workforce and set targets in FY2017 to be achieved by
2022. The targets and our progress to achieving them
are set out below:
Area
Female %
Target by
2022
FY18 status
against
Target
FY17 status
against
Target
30%
27%
27%
25%
17%
17%
Total
Workforce
Senior
Leaders (3)
Talent
Pipeline (4)
Cross-Generational
The “Cross-Generational” working group analysed the
demographic composition of the workforce at APA. It
identified a number of key areas of focus including, the
development of new capabilities and bringing different
generations into specific skill areas. During the Reporting
Period, the focus has been on developing an apprenticeship
program and revising and extending our current graduate
program. An APA wide mentoring program and a phased
retirement program has also been established.
APA’s Gender Diversity Profile
The following tables provide an overview of the percentage
of women at APA, as well as the percentage of women
in leadership roles, as reported to the Workplace Gender
Equality Agency (WGEA) in 2018.
>30%
30%
22%
Table 1: Women profile (as reported to WGEA for the period
1 April 2017 - 31 March 2018)
The “Employer of Choice” working group has carriage of the
Gender Targets. During FY2018 we completed the Gender
Targets Action Plan, which was approved by the Board.
The Plan sets out APA’s actions for the next four years to
achieve its gender targets including:
— Attraction of females to APA – ensuring APA has
a positive image and is attracting diverse talent
(e.g. improved advertising and promotion; external
partnerships).
— Recruitment/Selection – increasing the quantity of
females recruited in line with APA’s merit/quality
requirements (e.g. improved recruitment capability
and policies).
— Development – ensuring our development efforts are
effective for women and men at all levels in APA (e.g.
revised Talent Review process, coaching, networking,
and technical development opportunities).
Percentage of non-executive Directors who
are women
Percentage of workforce who are women
Percentage of total leadership roles filled by
women (1)
Percentage of technical and trades roles
filled by women
42%
27%
20%
3%
1) Leadership roles are defined in accordance with the WGEA occupational
categories and comprise all levels of management (i.e. key management
personnel, general managers, senior managers and other manager roles
excluding team leader and supervisory roles.)
Table 2: Breakdown of women in leadership roles (as reported
to WGEA for the period 1 April 2017-31 March 2018)
0%
29%
24%
14%
22%
— Retention – improving retention of females at all points
of their career (e.g. senior sponsorship; pay equity).
CEO
Executive Committee
Other executives/general managers
Senior managers
Other managers
— Performance and Metrics – what gets measured, gets
done (e.g. KPIs for senior leaders; regular reporting;
recruitment targets).
This working group has also undertaken work on reviewing
how our recruitment companies “sell” the benefits of APA
to external candidates as well as completing an internal
survey on what APA’s Employee Value Proposition should
be. This will be a key input into the development of our
Employer of Choice program in FY2019.
Flexibility
The “Flexibility” working group analysed how many people
are on flexible working agreements and has also liaised with
external organisations on what flexibility they are offering
to their employees. It is currently redefining flexibility for
APA and educating leaders through a new initiative on how
to manage flexibly. APA provides primary carers with 14
weeks of parental leave at full pay, or 28 weeks at half pay.
In 2017 – 2018, APA achieved a return-to-work rate of
94% for those on parental leave and continues to
pro-actively work with and support working parents
with flexible work options. APA provides a supportive
working environment for breastfeeding mothers and is
accredited by the Australian Breastfeeding Association
as a Breastfeeding Friendly Workplace.
3) Senior Leaders comprises “Other executives/general managers” and “senior managers” as reported to WGEA above.
4) Talent Pipeline refers to the pipeline of candidates in our talent pools
APA GROUP — SUSTAINABILITY REPORT 2018 — S15
Developing Talent and Capability
APA’s leaders continue to participate in talent management
sessions to identify and build a strong pipeline of critical
capability to meet the organisation’s current and future
requirements and ensure long-term continuation of core
business activities.
Developing and celebrating APA’s culture
Employee Survey
During the Reporting period, APA conducted its two yearly
employee survey, Your Voice, aimed at gaining a better
understanding of the organisation’s culture, identifying
strengths and opportunities.
78% of APA’s employees participated in the survey with
the top results including:
— Safety approach (90% favourable).
— Diversity & Inclusion (77% favourable).
— Employee Engagement (71% favourable).
— Business Alignment and Collaboration (both 69% favourable).
The key areas identified for improvement across the
company were Agility, Personal Growth and Development,
and Process Efficiency. Corporate and divisional action
plans are in place and being regularly monitored to look
to address areas of concern.
Employee Awards
As part of continuing to strengthen the implementation
and articulation of APA’s values, the APA Excellence Awards
for 2017-18 were redesigned and structured around the
STARS values. There were six awards – five individual
awards, one for each value, namely Safety, Trustworthy,
Adaptable, Results and Service, and a sixth Team award
for the team displaying at least 3 of the 5 values. There
were an unprecedented 135 nominations for this year’s
Awards with winners announced across Australia in April
2018, through a series of presentations recognising all
nominees as well as winners.
All senior leaders have participated in the talent review
process in 2018, to identify high potential and emerging
talent as well as potential successors for key roles.
The process was also to identify capability gaps across
the organisation. This year employees were asked to
submit a detailed employee profile that captured their
career aspirations, mobility and their strengths and
development needs. This information fed into the talent
review process. Employees identified through this process
receive development via a talent program ranging from
structured assessments and feedback, on-the-job training,
secondments, coaching and tailored development.
Approximately 150 employees were assessed using
a new structured talent review process.
APA continues to focus on building its internal development
tools. It will be launching an APA mentoring program in
August 2018 to proactively develop talent and potential
successors for key roles.
Work has also been ongoing in establishing key technical
and functional capability frameworks and learning
environments to continue to improve and deepen APA’s
technical expertise. During the reporting period areas
of focus included establishing a broad, company-wide
Engineering Capability framework, improved competency
development at our LNG facility in Dandenong, a learning
framework for our Transmission Market Services functions
and improved training and assessments for permit issuing.
Case study ~ Health and Safety program bounces
into action
APA’s three-year Health Safety and Environment (HSE)
Strategic Plan aims to promote employee wellbeing
and progress our HSE framework, systems, culture and
initiatives to prevent harm to our employees and the
broader community. One of FY2018’s key HSE highlights
was the introduction of an employee Health and Wellbeing
program ‘Bounce’ that has the tagline Aspire, Participate,
Achieve (APA). This online Health and Wellbeing portal
was launched in August 2017 and provides employees with
up-to-date information on topical health and wellbeing
subjects such as exercise tips, healthy recipes and managing
stress, as well as offering access to confidential online
health assessments. An extension of the program will
be rolled out in FY2019 across the company, with specific
target areas identified from the platform driving next
year's initiatives.
S16 — APA GROUP — SUSTAINABILITY REPORT 2018
investors.
We will continue to be a reliable and
attractive investment which delivers solid
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.
— Providing clarity and transparency of the business
through appropriate and timely reporting and
communication.
FY2018 Performance
Actions for FY2019
— Ensure APA’s communications with investors regarding
the current CKI Consortium takeover proposal are
clear and timely.
— Progress or complete current growth capital
projects underway.
— Continue to evaluate and develop additional revenue
streams in related energy infrastructure businesses.
— Maintain investment grade credit ratings.
— Total securityholder return of 11.2% for FY2018
(FY2017, 4.1%).
— Delivered investors a 3.4% increase in distributions.
— Maintained investment grade credit ratings (BBB/Baa2).
— Raised ~$500 million through a fully underwritten
pro-rata accelerated institutional tradeable retail
renounceable entitlement offer in Feb 2018. New
Securities were offered at a 6.8% discount to the last
closing price on 20 February 2018. Both the Institutional
and Retail campaigns were well supported by investors.
~65.6 million new securities were issued in March 2018.
— Redeemed the $515 million Subordinated Notes at the
first call date in March 2018, reducing net interest by
$4.1 million to $509.7 million. (FY2017, $513.8 million).
— Maintained corporate costs as a proportion of EBITDA
(continuing business) at 4.3% in FY2018 (FY2017, 4.3 %).
— APA remains on track in delivering $1.4 billion plus of
growth opportunities between FY2017-2019, which will
contribute incremental annual revenue of ~$215 million
of revenue from FY2020.
— $875.5 million of capital and investment expenditure
during FY2018.
— Voluntarily published APA’s third 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 2017-2018 Budget announcements.
APA’S HISTORICAL ANNUAL DISTRIBUTIONS (CENTS PER SECURITY), HAS CONTINUED TO INCREASE
28.0
29.5
32.8
31.0
34.4
35.0
35.5
36.3
38.0
43.5
45.0
41.5
22.0
21.5
21.5
21.5
22.5
24.0
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
APA GROUP — SUSTAINABILITY REPORT 2018 — S17
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.
As at 30 June 2018, APA had over 77,000 securityholders
holding 1.2 billion securities, with the top 20 investors
holding 68.7% of securities. Currently, approximately 74% of
APA’s investors are based in Australia and/or New Zealand.
Emu Downs Solar Farm, Western Australia