APA
Annual Report 2019

Plain-text annual report

annual report. 2019 Cover image: Raj Kallath, APA’s Project Manager for the Reedy Creek Wallumbilla Pipeline project. Above: APA’s Orbost Gas Processing Plant in Victoria will connect the Sole Gas Field, a new gas supply source into the east coast market in FY2020. APA GROUP — ANNUAL REPORT 2019 contents. FY2019 in Review 02 Chairman’s Report 04 Managing Director’s Report 06 APA Group Board 07 APA Group Senior Management 08 2019 Highlights Australian Pipeline Trust ARSN 091 678 778 10 Directors’ Report 45 Remuneration Report 59 Consolidated Financial Statements APT Investment Trust ARSN 115 585 441 117 Directors’ Report 121 Consolidated Financial Statements 143 Additional Information 144 Five Year Summary 145 Investor Information Growing energy infrastructure responsibly and sustainably to meet the needs of our customers and stakeholders is what we do at APA. That’s why almost two decades on, we are one of Australia’s leading energy infrastructure companies. We play a major role in Australia’s energy market by connecting gas supply sources to markets, and connecting energy we generate from both gas-fired power and renewables technology to our customers. It’s therefore important that we act responsibly by doing what we say we will do, and by doing the right thing by all of our stakeholders, always. We take a long term view so that our infrastructure will serve future generations, providing responsible energy that affords Australians the quality of life we enjoy and expect. APA GROUP — ANNUAL REPORT 2019 — 01 chairman’s report. Michael Fraser Chairman FY2019 saw the continued delivery of APA’s largest ever organic growth program – more than $1.4 billion of energy infrastructure added to APA’s footprint over the last three years. Of most significance is the value of the services and flexibility this infrastructure will deliver to our customers for years to come. $21 billion Assets owned and/or operated by APA APA has pursued a consistent strategy for almost two-decades and that strategy has demonstrated its value to APA’s customers, Securityholders and business generally. APA has grown significantly over this time – $21 billion of assets owned and/or operated by APA; more than 1,800 employees operating and maintaining those assets; and over $1 billion in operating cash flow generated annually. For Securityholders, distributions have been reliable and have increased as the business has grown. Every dollar invested in APA when it listed in June 2000, has grown more than 22 times over those 19 years (1). Leadership A major contributor to that success has been APA’s long standing CEO and Managing Director, Mick McCormack, who retired in July after 14 years of leading the business. Mick’s foresight and his ‘get-the-job’ done attitude has been instrumental in cementing APA as a leading Australian energy infrastructure owner and operator. On behalf of all APA Securityholders and employees, I would like to acknowledge and thank Mick, and his family, for those 14 years of dedication to leading APA. In May 2019, after an extensive search and selection process, the Board announced Rob Wheals as CEO and Managing Director, effective 6 July 2019. Rob has been with APA since 2008. He started as General Manager Commercial, managing the commercial function in APA’s transmission business and joined the Executive team in 2012 as Group Executive Transmission. Rob has a deep understanding of the Australian energy market and the challenges and opportunities facing APA and the industry as we transition to a lower carbon future. He is particularly passionate about delivering for our customers, and has been instrumental in implementing APA’s Customer Promise over the last few months. Personally, it has been a great pleasure for me to have been involved in the launch of APA’s Customer Promise to our customers. During the financial year, APA’s Board underwent a number of changes. Russell Higgins AO and Patricia McKenzie retired from the Board and I thank them both for their significant contributions to APA, each over a number of years. We were fortunate to welcome James Fazzino to the Board in February 2019. His extensive corporate experience as a former Chief Executive Officer of one of Australia’s larger manufacturing companies exposed to the gas sector will complement the Board’s existing skills and capabilities. 1) Total Securityholder Return since listing to 30 June 2019 is calculated on the assumption that all distributions are reinvested at the ex-distribution date. 02 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor InformationFinancial results APA’s financial performance for FY2019 was a very solid one, particularly in light of the fact that the organisation was subject to a takeover proposal from a CKI consortium for six months of the year. The results and continued growth of APA in light of those circumstances are a credit to APA’s people and their ability to stay focused on driving the business forward. Outlook APA’s guidance for FY2020 is for EBITDA of between $1,660 million and $1,690 million and net interest costs of between $505 million and $515 million. Total distributions per security for the financial year are expected to be in the order of 50.0 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. Along with your Board, I am very pleased that this expected 6.4% increase in distributions results from the anticipated growth in operating cash flow as our organic growth program continues to deliver new projects. On behalf of the Board, I would like to thank the APA leadership team and APA’s employees for their dedication and hard work during what has been another very active year for the company. I would also like to thank you, our Securityholders, for your continued support. We strongly believe that APA is well positioned to continue to deliver long-term growth and securityholder value, well into the future. Michael Fraser Chairman Total revenue (excluding pass-through revenue) increased 4.6% on FY2018 to $2,031.0 million. Earnings before interest, tax, depreciation and amortisation increased 3.6% to $1,573.8 million. Net profit after tax increased 8.8% to $288.0 million. Operating cash flow (OCF) was slightly below FY2018 levels at $1,012.1 million, primarily due to an increase in income tax paid by APA. The Board has declared a final distribution of 25.5 cents per security, taking total distributions for FY2019 to 47.0 cents per security. As a result of the increased income tax APA paid during the financial year, a further 3.66 cents per security of franking credits will attach to the final distribution for the year. Sustainability Following steps taken in FY2018, we have continued with our environment, social and governance (ESG) initiatives program with an emphasis on aligning our climate risk management with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). APA accepts the Intergovernmental Panel on Climate Change’s (IPCC) assessment of climate change science that the climate is changing due to human influence. We believe that climate change is a significant issue facing the energy industry and the Australian community in general. We also believe that natural gas and our diversified energy asset portfolio will overtime play an important role in the shift to a lower carbon, sustainable energy future. During FY2019, we undertook a scenario analysis using three divergent climate-driven scenarios to stress-test the resilience of APA over the 10 years to 2030. This analysis is detailed in APA’s Sustainability Report, but in summary, the Board expects that APA’s portfolio of assets will be economically and physically resilient to climate-related impacts under the scenarios tested over at least the next 10 years. We believe that it is our responsibility to provide consistent information to stakeholders, including our investors, on climate-related risks and opportunities and we will continue to actively monitor, assess and report on our findings. $1,574 million EBITDA increased 3.6% on FY2018 47.0 cents Distribution per security increased 4.4% on FY2018 APA GROUP — ANNUAL REPORT 2019 — 03 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationmanaging director’s report. Rob Wheals Chief Executive Officer and Managing Director Safety first, always I have been with APA for over 10 years. For me as an employee during that time and now taking over as CEO, safety and the wellbeing of our people and the communities around our assets, remains APA’s number one priority. Pleasingly, our increased efforts and focus in FY2019 have led to a significant reduction in injuries to our people. The Total Reportable Injury Frequency Rate (TRIFR) has reduced by around a third on FY2018 results to 5.98 per million hours worked. We still have more work to do however, particularly with regard to our contractor workforce, to ensure that they are carrying out work on behalf of APA to the same high safety standard that we set and achieve with our employees. Strategy remains on track Since commencing in my new role, one of the most common questions that I am asked is whether I will be ‘changing APA’s strategy?’ And the simple answer to that question is ‘no’. APA’s long-standing strategy of growing the business through leveraging our existing asset portfolio and skills has served the business well. Each year the Board and Executive team review and ratify the APA strategy. Having been a part of the strategy review earlier this year, I am in full support of APA’s strategy as it stands, including our exploration of gas transmission and distribution growth opportunities in North America. At APA, we have demonstrated our ability to successfully acquire, integrate and grow energy infrastructure businesses. We do not see geographical location as an impediment, or added risk to those proven capabilities. Testament to APA’s commitment to this part of our strategy is the recent decision to relocate Ross Gersbach, our current Chief Executive of Strategy and Development, to APA’s Houston office. As we have said in the past, we are interested in this market due to the opportunities that it presents to invest in energy infrastructure at appropriate rates of return with a longer-term opportunity to grow and add further value to APA. 33% reduction in the TRIFR safety metrics down to 5.98 per million hours worked It is a great honour and privilege for me to deliver my first report to Securityholders as APA’s CEO and Managing Director. The solid results delivered in FY2019 are due to the combined efforts of a team of 1,800 APA employees led by our retiring Managing Director, Mick McCormack, working together to deliver services to our customers; good stewardship and engagement with communities and the environment; and collaboration with the broader energy industry. When our stakeholders are satisfied, our business does well and we are able to return that success to you, our investors by way of growing distributions and building a stronger and larger APA. 04 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor InformationDelivering the strategy I have recently initiated a review of APA’s purpose, vision, strategic imperatives and operating model to ensure we have the right structure and appropriate resources for the efficient and effective execution of our strategy. I fully expect the outcome to deliver improved clarification of our goals, reporting lines, and decision-making to enhance our speed and agility as we deliver that strategy. APA has grown over almost two decades because our customers continue to request energy infrastructure, increased services, and flexible and bespoke solutions to support their energy needs. If it is in the energy infrastructure space and we can add value for the benefit of our customers, we are committed to investigating and delivering the best in class solutions available. Having spent the last decade with APA at the coalface of working with our transmission customers, I am proud to have been instrumental in the development and launch of APA’s Customer Promise in recent months. I am very respectful and mindful of the fact that it is our customers’ businesses that drive APA’s performance. If our customers’ businesses are growing and we are helping them with that growth through flexibility of the services we provide, it follows that our business will grow too. Summarising those sentiments is APA’s Customer Promise, which is a whole of company promise to deliver service to our customers’ that they value. Complementing this customer initiative is APA’s active involvement in the development of the energy industry’s Energy Charter over the last couple of years. The goal of the Energy Charter is to improve customer outcomes through the energy industry working together by putting the customer at the centre of each of our businesses and the energy system as a whole. The Energy Charter was launched in January 2019 and currently has 18 signatories across the electricity and gas supply chains. Signatories to the Energy Charter are required to disclose annually their performance against the Charter’s principles. An independent Accountability Panel will evaluate the collective disclosures and publish a report of its findings and recommendations for continuous improvement by each business. Growth remains strong As you read the Operational Review of the Directors’ Report, you will find a long list of organic growth projects undertaken over the last three financial years. It has been APA’s largest period of capital investment – $1.4 billion-plus invested in new energy infrastructure that our customers have asked for and underwritten with long-term contracts. Over that period, we have built around 272 kilometres of new pipelines and more than 300 MW of new power generation, including 275 MW from new renewable assets. We will shortly be connecting a new source of gas supply into the east coast gas market via APA’s Orbost Gas Processing Facility in Victoria, which will be commissioned in the last quarter of calendar year 2019. Gas prices on the east coast of Australia are currently high due to high demand for gas resources and a tightening of traditional supply sources. As a result, Australian’s are now paying some of the highest prices globally for gas, and this is putting stress on domestic manufacturers and consumers. APA has long believed that increasing gas supply is the only real solution to Australia’s high gas price dilemma and we are working with our customers by providing them with flexible services to help bring new supply sources to market. We continue to see growth opportunities ahead for APA. Currently we have several Memorandums of Understanding with customers for new pipeline developments on the east coast, subject to their gas supply development projects reaching final investment decisions. In the Northern Territory, the lifting of the government’s fracking moratorium provides opportunity for new gas supply developments and connecting that supply to markets in the north and east of Australia. In Victoria, APA’s proposed Dandenong Power Station project is being considered under the government’s Underwriting New Generation Investments (UNGI) scheme. In Western Australia, the mining boom across a number of key mineral commodities continues, and affordable price and reliable supply is making gas the fuel of choice in that region. Looking ahead APA is not a business that has rested on its laurels or prior achievements, and we know there is more we can do to help further develop Australia’s energy industry and improve ways of going about our business. Acting responsibly, with integrity, and doing what we say we will do are high priorities of mine. We are currently in the midst of a company-wide environmental, social and governance review and improvement program to raise the bar on our practices, capabilities and disclosures in these three key areas. Our Sustainability Report for this reporting year is consequently more comprehensive. We recognise that as investors in our business, you should have transparency in relation to risks and the ongoing sustainability of company operations. Our assets have been built for long-term use. We want our investors to be with us for the long term too, and we want you to continue to see value and security in your investment. I am excited for the opportunities I can see for APA in the coming years and I feel that we are well-positioned to capitalise on those opportunities and manage any challenges that may also arise in the course of our business. I look forward to meeting many of our investors over the coming months and at our Annual Meeting to be held in Sydney, Thursday 24 October 2019. Rob Wheals Chief Executive Officer and Managing Director $1.4 billion + invested in new energy infrastructure across FY2017-FY2019 APA GROUP — ANNUAL REPORT 2019 — 05 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationapa group board. 1 1 2 3 4 5 6 7 2 3 4 Michael Fraser BCom FCPA MAICD Independent Chairman Appointed 1 September 2015 Appointed Chairman 27 October 2017 Robert (Rob) Wheals BCom CA GAICD Chief Executive Officer and Managing Director Appointed 6 July 2019 Michael has more than 35 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. Rob joined APA Group in September 2008 as General Manager Commercial and joined APA’s Executive team in 2012 as Group Executive Transmission. Rob was appointed APA’s Chief Executive Officer and Managing Director, effective 6 July 2019. Michael is a Director of Aurizon Holdings Limited. He is also a former Chairman of the Clean Energy Council, Elgas Limited, ActewAGL and the NEMMCo Participants Advisory Committee, as well as a former Director of Queensland Gas Company Limited, the Australian Gas Association and the Energy Retailers Association of Australia. Michael is a member of the Audit and Risk Management Committee and the Chairman of the Nomination Committee. 5 Debra (Debbie) Goodin BEc FCA MAICD Independent Director Appointed 1 September 2015 Debbie has experience as a Non-Executive Director, including as a member and Chair of Board Audit and Risk and Remuneration 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 for each of these companies. She was formerly a Director of Ten Network Holdings Limited. Debbie also has 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 Chair of the Audit and Risk Management Committee, a member of the Health Safety and Environment Committee and a member of the Nomination Committee. Rob has over 25 years’ experience in Australia and internationally in energy infrastructure and telecommunications across roles in operations, finance, commercial, strategy, infrastructure investments, regulatory and mergers and acquisitions. 6 Shirley In’t Veld BCom LLB (Hons) Independent Director Appointed 19 March 2018 Shirley has 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 the Chair of the Health, Safety and Environment Committee and a member of the People and Remuneration Committee. 06 — APA GROUP — ANNUAL REPORT 2019 Steven (Steve) Crane BCom FAICD SF Fin Independent Director Appointed 1 January 2011 James Fazzino BEc (Hons) FCPA Non-Independent Director Appointed 21 February 2019 James has experience both locally and internationally in the industrial chemicals, fertilisers, explosives and manufacturing sectors. James is currently the Chairman of Manufacturing Australia, Chairman of Osteon Medical, Co-convenor of the Male Champions of Change 2015 Group, Vice Chancellors Fellow at La Trobe University, Adjunct Professor at La Trobe Business School, and a member of the Expert Advisory Panel of the Australian Energy Market Operator. He was formerly the Managing Director and Chief Executive Officer of Incitec Pivot Limited and before that, its Finance Director and Chief Financial Officer. James is a member of the Audit and Risk Management Committee and a member of the Health, Safety and Environment Committee. Steve has over 40 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 experience as a Non-Executive Director of listed entities. He is currently Chairman of nib holdings limited, Taronga Conservation Society Australia, Global Valve Technology Limited and a Director of SCA Property Group. 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, a member of the Nomination Committee and a member of the People and Remuneration Committee. 7 Peter Wasow BCom, GradDip (Management), Fellow (CPA Australia) Independent Director Appointed 19 March 2018 Peter has 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. FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationapa group senior management. 1 1 2 3 4 5 6 7 2 3 4 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. 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. 6 Sam Pearce BSc LLB MBA Group Executive Networks and Power Sam is responsible for the operation and management of APA Group’s fully and minority owned gas distribution and power generation and electricity transmission assets, as well as for Australian Gas Networks’ assets. Sam joined APA Group in July 2008 and was formerly General Manager Corporate Development and Investments. Sam has over 20 years' experience in the energy sector, covering mergers and acquisitions, investment management, commercial and business development, greenfields project development, strategy and operations. Nevenka Codevelle BCom LLM GAICD Group Executive Governance, Risk and Legal Nevenka is responsible for APA Group's Governance, Risk 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. 5 Elise Manns BBus CAHRI Group Executive People, Safety and Culture Elise is responsible for managing APA Group's People, Safety and Culture division, which covers APA’s people strategy and culture, its safety and environmental performance and governance and all activities relating to APA’s people, their development, health, wellbeing, and employment arrangements. Elise joined APA Group in May 2012 as General Manager Human Resources and in October 2015 joined the Executive team becoming Group Executive Human Resources. Elise has a strong background in employment relations and workplace change, organisational restructuring and business improvement. Elise has over 25 years’ human resources experience in Australia's heavy manufacturing, engineering, steel and utilities sectors. Ross Gersbach BBus MAICD Chief Executive Strategy and Development Ross is responsible for APA Group’s strategy, energy investments, regulatory and government affairs, environmental development, and mergers and acquisitions. He has responsibility for further enhancing APA Group's portfolio of assets that complement the value of its infrastructure, including APA Group's investments in midstream gas infrastructure, and the operation and development of these assets. As at the end of Q1 FY2020, Ross is relocating to North America to lead APA’s efforts in securing investments in the US. 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 25 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 Darren Rogers BEng MEng MBA GAICD Acting Group Executive Transmission Following Rob Wheals appointment to CEO and Managing Director, Darren has been appointed as Acting Group Executive Transmission. Darren is responsible for managing APA's customers and revenue contracts, as well as growing APA's gas transmission revenues. Darren manages all operational aspects of APA’s 15,000 kilometres of gas transmission pipelines and gas storage facilities. Darren joined APA Group in 2017 and was previously General Manager Asset Management for Transmission. Prior to joining APA, Darren has performed senior executive roles in commercial, asset management and operations, leading large and complex divisions across a number of companies. APA GROUP — ANNUAL REPORT 2019 — 07 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information2019 highlights. $1,574 million EBITDA increased 3.6% on FY2018 climate action APA has aligned our climate risk with the recommendations of the Task Force on Climate-Related Financial Disclosures and undertaken a climate-driven scenario analysis 47.0 cents Distribution per security increased 4.4% on FY2018 -33% Total Reportable Injury Frequency Rate decreased in FY2019 $12.7 billion Market capitalisation as at 30 June 2019 $1,478 million Invested in growth capital expenditure FY2017-FY2019 $426 million in FY2019 Added to APA’s portfolio ~272 km transmission pipelines 45 mw gas-fired power station ~278 mw renewable generation 08 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnormalised (2) business performance. 1 3 0 2 , 1 4 9 , 1 8 8 8 , 1 2 3 0 , 1 2 1 0 , 1 4 7 9 6 5 6 , 1 . 7 0 9 1 . 7 8 . 8 5 8 1 . 7 7 9 1 1 , 1 . 6 4 5 4 7 5 , 1 8 1 5 , 1 0 7 4 , 1 1 3 3 , 1 2 6 8 5 4 5 2 2 8 . 5 3 5 4 . 1 0 4 8 3 . 0 . 7 4 . 0 5 4 . 7 4 1 . 8 4 1 . 0 5 1 . 2 5 1 . 4 5 1 5 1 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 5 1 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 5 1 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 5 1 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 5 1 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 5 1 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F EBITDA ($m) Operating cash flow (3) ($m) Revenue excluding pass‑through (4) ($m) Operating cash flow per security (5) (cents) Distributions per security (cents) Total assets ($b) financial results. $ million Revenue Revenue excluding pass-through (4) EBITDA Profit after tax Operating cash flow (3) Financial position Total assets Total drawn debt (6) Total equity Financial ratios Operating cash flow per security (5) (cents) Earnings per security (cents) Distribution per security (cents) Distribution payout ratio (%) FFO to Debt (%) FFO to Interest (times) 30 June 2019 30 June 2018 Changes 2,452.2 2,031.0 1,573.8 288.0 1,012.1 15,433.9 9,352.1 3,599.4 85.8 24.4 47.0 54.8 10.8 3.0 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 50.1 10.7 3.0 2.7% 4.6% 3.6% 8.8% (1.9%) 1.4% 6.1% (12.8%) (5.4%) 4.7% 4.4% 9.4% 0.9% — 2) Normalised financial results exclude significant items. 3) Operating cash flow = net cash from operations after interest and tax payments. 4) Pass-through revenue is revenue on which no margin is earned, and is offset by corresponding pass-through costs. 5) On 23 March 2018, APA Group issued 65,586,479 new ordinary securities, resulting in total securities on issue of 1,179,893,848. The weighted average numbers of securities from FY2015 to FY2018 have been adjusted to account for that rights issue. 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. 6) 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. APA GROUP — ANNUAL REPORT 2019 — 09 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information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 2019 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 2019. 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: Current Directors: Michael Fraser Robert (Rob) Wheals Steven (Steve) Crane James Fazzino Debra (Debbie) Goodin Shirley In’t Veld Peter Wasow Former Directors: Russell Higgins AO Patricia McKenzie First appointed 1 September 2015 Chairman: 27 October 2017 Chief Executive Officer and Managing Director: 6 July 2019 1 January 2011 21 February 2019 1 September 2015 19 March 2018 19 March 2018 7 December 2004 (Retired as a Director 20 February 2019) 1 January 2011 (Retired as a Director 8 March 2019) Michael (Mick) McCormack Chief Executive Officer: 1 July 2005 and Managing Director: 1 July 2006 (Retired as CEO and Managing Director 5 July 2019) The Company Secretary of the Responsible Entity during the year and since the year end is Nevenka Codevelle. 2. State of Affairs Rob Wheals commenced as APA’s new Chief Executive Officer and Managing Director with effect from 6 July 2019, following Mick McCormack’s retirement on 5 July 2019. 3. Subsequent Events The following events have occurred subsequent to the period end: — On 1 July 2019, APA repaid $99.0 million (USD 75.0 million) of US Private Placement Notes at maturity. — On 24 July 2019, APA repaid $289.5 million (CAD 300.0 million) of Medium Term Notes at maturity. — On 21 August 2019, the Directors declared a final distribution of 25.5 cents per security ($300.9 million) for APA Group, an increase of 6.3%, or 1.5 cents per security over the previous corresponding period (2H FY2018: 24.0 cents). This is comprised of a distribution of 18.97 cents per security from APT and a distribution of 6.53 cents per security from APTIT. The APT distribution represents a 8.53 cents per security fully franked profit distribution and 10.44 cents per security capital distribution. The APTIT distribution represents a 2.55 cents per security profit distribution and a 3.98 cents per security capital distribution. Franking credits of 3.66 cents per security will be allocated to the APT franked profit distribution. The distribution is expected to be paid on 11 September 2019. 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 2019 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. 4. About APA 4.1 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. There were no significant changes in the principal activities of APA during the reporting period. 10 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 4.2 APA overview APA is a leading Australian energy infrastructure business developing, owning and operating energy infrastructure. It owns and/or operates in excess of $21 billion of energy infrastructure assets across Australia, and operates these with a skilled workforce in excess of 1,800 people. APA has a diverse portfolio of over 15,000 kilometres (7) 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, electricity transmission 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 29,000 kilometres of gas mains and pipelines, and around 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 North Brown Hill Wind Farm (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 25-fold to $12.43 billion (8), and it has achieved securityholder returns of 17.2% (9) per annum on an annual compounding basis since listing on 13 June 2000 through to 19 August 2019. 4.3 APA objectives and strategies APA is committed to delivering solutions for customers that are safe, reliable and cost-effective, so that all of our stakeholders are better off as we work together to create a better energy future. During the reporting period, building on development work commenced in FY2018, APA committed to customer-focused initiatives aimed at ensuring customers, service and value are at the centre of our business. Within APA, the APA Customer Promise was developed and launched throughout the business supported by a multi-year program (Red Dot Program) aimed at aligning our culture, service delivery and processes with the Customer Promise. APA’s Customer Promise is to deliver services our customer’s value demonstrated in three core ways: firstly, listening to understand; secondly, enabling our people to respond; and finally, doing what we say we will do. The second initiative was APA taking a leading role in the establishment of the Energy Charter. The Energy Charter is a whole of energy industry initiative in which signatories commit to giving effect to a number of principles to improve customer outcomes and are held accountable for progress against those commitments. The Energy Charter currently has 18 signatories across the energy supply chain including APA. APA, together with other signatories will be required to report their progress against the Energy Charter principles by 30 September 2019. An Accountability Panel will assess the disclosures and make findings and recommendations for improvement in its report by 30 November 2019. APA’s strategy — Deliver services our customers value consistent with APA’s Customer Promise — Continue to strengthen asset and stakeholder management, development and operational capabilities — Continue our growth focus to enhance APA’s portfolio of: – gas transmission pipelines; – gas-fired and renewable power generation assets; and – midstream energy infrastructure assets, including gas storage and gas processing facilities. — Explore growth opportunities in our core business of gas transmission and distribution in North America — Maintain APA’s financial strength Wallumbilla Compressor Station in Queensland 7) Owned and/or operated by APA. 8) Market capitalisation as at 19 August 2019. 9) 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 ex-distribution rate per security. Figures quoted are sourced from Refinitiv Eikon. APA GROUP — ANNUAL REPORT 2019 — 11 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 4.3 APA objectives and strategies (continued) APA’s strategy is reviewed and ratified annually by APA’s Board and Executive. This includes APA’s new CEO and Managing Director Rob Wheals who was Group Executive Transmission at the time of the FY2019 review. Since commencing in his new role in July, Rob has initiated an internal review of APA’s purpose, vision, strategic imperatives and operating model with senior leaders throughout the business to ensure we deliver on the company strategy effectively and efficiently. This review is in progress at the time of this report being finalised. This Review is about how we implement the strategy based on growth that we remain committed to under Rob’s leadership. The strategy to grow remains relevant because our customers continue to demand expansion of our energy infrastructure for their energy processing and transportation needs, and because we continue to identify value accretive investment in the energy infrastructure space. So long as we can continue to add value to each dollar we invest on behalf of Securityholders, we will continue to grow APA. As previously indicated, APA continues to see significant growth opportunities because of those customer needs. Potential projects are spread across Australia and include a mix of all APA’s infrastructure capabilities. For example, with buoyant key commodity prices in Western Australia, the resources sector remains strong and offers APA several growth opportunities across gas pipelines and power generation. In Western Australia, gas offers our customers a very cost effective and reliable energy solution from gas and gas-fired generation over the use of more carbon intensive fuels such as diesel. In the Northern Territory, the government’s lifting of the gas moratorium on fracking exploration in early 2018 has encouraged producers to resume exploration activities and commence discussions regarding connecting gas to markets. In eastern Australia, traditional southern gas basin and northern coal seam gas reserves are depleting faster than new reserves are being brought on-line, leading to a production decline from existing fields. Tight supply and high gas prices are natural economic drivers for developing new gas supply sources. APA is currently completing the Orbost Gas Processing Plant in Victoria that will unlock a new gas source by connecting the Sole Gas Field into the east coast market. APA has development and gas transportation agreements in place, subject to final investment decisions, by both AGL Energy Limited and Santos Limited, that could potentially see APA develop two new pipelines to bring gas from two new potential gas supply sources into eastern Australia. These two projects alone if they proceed are expected to require capital investment by APA in the order of $700 million. APA also has a Memorandum of Understanding agreement in place with Comet Ridge Limited and Vintage Energy Limited, for pipeline route development works for a new 240 kilometre pipeline which could unlock new gas supply from the Galilee Basin by connecting it to markets in Queensland. APA has recently been granted a Survey Licence to commence field surveys and stakeholder engagement whilst the gas producers continue to investigate the economics to support the project. APA’s proposed Dandenong Power Station project in Victoria was shortlisted during FY2019 as part of the Federal Government’s Underwriting New Generation Investments (UNGI) scheme. Stage 1 of the project comprises of approximately 220 MW of fast start, efficient gas fuelled power generation with the potential for a further 110 MW capacity if stage 2 is developed. APA’s existing Dandenong site is located close to both gas demand and supply centres and can leverage APA’s existing energy infrastructure. The UNGI process is still in its early investigative phase, during which time APA continues to work on identifying potential customers to underwrite the project. APA’s operations are currently based wholly within Australia however, we do receive revenue in US dollars from the Wallumbilla Gladstone Pipeline. As previously advised to Securityholders, APA is actively working on the assessment of opportunities to invest in gas transmission and/or gas network businesses in North America. APA is attracted by the depth and vitality of the gas market in the United States of America in particular, and the positive regulatory settings that exist in that market. APA has seconded Chief Executive of Strategy and Development Ross Gersbach, to an Executive role based in APA’s Houston office, to progress the commitment APA has made to North America, effective end of Q1 FY2020. As Australian and global communities move to de-carbonise their economies, APA is ensuring that it understands and anticipates the long-term implications for Australia’s energy industry and our business. APA considers that natural gas plays an essential role in providing secure and reliable electricity by supporting the integration of renewable energy with flexible, peaking power, which will be increasingly required as coal-fired generation is retired and removed from Australia’s energy mix over the next 30 years. Importantly, APA advocates that any transition to a lower carbon future should look to avoid unaffordable increases in energy costs and declining energy reliability. During the reporting period, APA used the Taskforce on Climate-Related Financial Disclosures (TCFD) recommendations and undertook a climate-risk scenario analysis to assess the risks and opportunities to the business over the next decade to 2030. As we mature in the use of TCFD, we anticipate that the time horizon used for future scenario analysis will be extended beyond ten years to be more consistent with the long-lived nature of our assets. Further information on the scenario analysis is in APA’s 2019 Sustainability Report available on APA’s website. This work is part of APA’s enterprise wide environmental, social, governance (ESG) review and improvement program that was commenced in FY2018. 12 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 4.4 APA’s roadmap Underpinning APA’s strategy is the APA Way, which is the blueprint for how APA does business. It guides how we conduct our business and helps shape our culture. It sets standards on how we behave through our APA ‘STARS’ values, and how we make decisions, guided by APA’s Decision Compass. The APA Way is embedded in APA’s Code of Conduct (Our Code) that was refreshed and rolled-out during the first half of FY2019. 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 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. Pipe laydown for the Murrin Murrin Lateral looping project in Western Australia APA GROUP — ANNUAL REPORT 2019 — 13 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 4.5 APA assets and operations APA’s assets and operations are reported in three principal business segments: — Energy Infrastructure includes all of APA’s wholly or majority owned gas pipelines, gas storage, gas compression and processing assets and gas-fired and renewable energy power generation assets; — Asset Management provides commercial, operating services and/or asset maintenance services to APA’s energy investments and third parties for appropriate fees; and — Energy Investments 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. The map below details APA’s assets and investments portfolio: 33 17 35 33 8 2 18 33 19 20 21 22 23 24 25 26 27 29 28 35 5 33 1 33 33 35 30 6 3 7 12 4 9 10 11 35 34 33 31 16 13 32 35 15 14 14 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 4.5 APA assets and operations (continued) Energy Infrastructure assets (numbers correspond with those on the map on page 14) 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 8 Diamantina and Leichhardt Power Stations 9 Moomba Sydney Pipeline 10 Moomba to Sydney 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) (and 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, ~3,750 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 Agnew Lateral 21 Yamarna Gas Pipeline 22 Gruyere Power Station 23 Mt Morgans Gas Pipeline 24 Eastern Goldfields Pipeline 25 Kalgoorlie Kambalda Pipeline 26 Mid West Pipeline (50%) 27 Mondarra Gas Storage and Processing Facility 28 Parmelia Gas Pipeline 29 Emu Downs Wind Farm 29 Emu Downs Solar Farm 29 Badgingarra Wind Farm 29 Badgingarra Solar Farm 249 km 1,546 km 25 km 198 km 45 MW 5 km 293 km 44 km 362 km 18 PJ 448 km 80 MW 20 MW 130 MW 17.5 MW Energy Investment 30 GDI (EII) Ownership interest Detail 20% Gas distribution: Allgas Gas Network ~3,700 km of gas mains, ~112,200 gas consumer connections in QLD and NSW 31 South East Australia Gas Pty Ltd 32 SEA Gas (Mortlake) Partnership 33 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); 34 EII2 35 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: ~25,100 km of gas mains and pipelines, ~1.3 million gas consumer connections, 1,124 km of transmission gas pipelines in SA, Vic, NSW, Qld & NT 1) Pipeline capacities are available online (www.apa.com.au). 2) Asset under construction. APA GROUP — ANNUAL REPORT 2019 — 15 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 5. 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 APA Group, and therefore these are described in this report as ‘normalised’ measures. In FY2019, APA has continued to deliver consistent and sound results for investors, delivering on prudent and sustainable growth initiatives, and increasing distribution returns to Securityholders. The 2019 financial year has been a significant year for APA with a number of key events and milestones in the business’s 19 year history taking place, including: — Commissioning of a number of new infrastructure assets across pipelines, gas fired power generation and renewables; — Investment of $462.8 million in growth projects that will contribute to future operating cash flow; — Development and launch of two customer-centric initiatives – The Energy Charter developed by Australian energy businesses right across the energy supply chain, and APA’s company-wide Customer Promise and Red Dot program; — Replacement of over $700 million of higher cost maturing debt with lower cost long term debt, reducing APA’s annual interest expense going forward; — Receipt of a Scheme of Arrangement acquisition proposal from the CKI Consortium (CKI proposal) was received during 1H FY2019 at a transaction value premium of approximately 30% to APA’s volume weighted average security price prior to the offer and an FY2018 EV/EBITDA multiple of 15 times. The proposal did not proceed due to a decision by Australia’s Federal Treasurer in November 2018 (not to allow the proposed acquisition); and — Retirement of APA’s long-standing CEO and Managing Director, Mick McCormack, and internal succession appointment of Rob Wheals to the position. APA reported EBITDA of $1,573.8 million inclusive of $11.1 million of once-off costs associated with the CKI proposal ($5.8 million) and the retirement of Mick McCormack ($5.3 million). This result represents an increase of 3.6% or $55.3 million on the previous corresponding period EBITDA of $1,518.5 million. APA gave guidance at the 1H FY2019 results that EBITDA for the full year period was expected to be within the upper end of the guidance range of $1,550 million to $1,575 million. Given the stable nature of APA’s cash flows and long term, take or pay contracts, APA has consistently provided a reliable narrow EBITDA guidance range over a number of years. Total revenue (excluding pass-through revenue) increased by $89.6 million to $2,031.0 million, an increase of 4.6% on the previous corresponding period (FY2018: $1,941.4 million). Increased revenues and EBITDA were primarily attributable to: — Full year contribution from some of the organic growth projects commissioned in FY2018, including the Reedy Creek Wallumbilla Pipeline (QLD), Mt Morgans Gas Pipeline (WA) and the Emu Downs Solar Farm (WA); — Part year contributions from recently commissioned growth assets including the Darling Downs Solar Farm (QLD), Badgingarra Wind Farm (WA), Yamarna Gas Pipeline (WA), Gruyere Power Station (WA), and Agnew Lateral (WA); — Uplift on the Goldfields Gas Pipeline as a result of the new organic expansions on the Eastern Goldfields Pipeline network as listed above; — Full year contribution from the new contract on the Diamantina Power Station with Capricorn Copper mine; and — Favourable USD/AUD exchange rates and annual US CPI escalation in relation to the Wallumbilla Gas Pipeline. FY2019 further progressed APA’s largest growth capital expenditure program in the company’s history to-date. $1.4 billion plus has been invested in growth projects over the last three financial years. The new growth projects contributed approximately $65 million in incremental new revenues during FY2019. This was slightly down on the $70 million figure previously indicated, due in the main to minor delays in the commercial operations of Badgingarra Wind and Solar Farms. Construction of the connection into the transmission grid for these two assets also impacted energy despatched from Emu Downs Wind and Solar Farms during the cut-in period. With all projects fully commissioned and operating in FY2020, incremental revenue from FY2020 is expected to be in the order of $190 million per annum (from the FY2017 base), increasing in FY2021 to approximately $215 million per annum when the Orbost Gas Processing Plant will contribute its first full year of earnings. An increase in income tax paid by APA in FY2019 impacted operating cash flow, which decreased 1.9% or $19.5 million to $1,012.1 million compared to the previous year (FY2018: $1,031.6 million). Operating cash flow per security decreased 5.4%, or 4.9 cents, to 85.8 cents per security (FY2018: 90.7 (10) cents per security), due to an increase in income tax paid and the higher number of securities on issue, on average, over FY2019. From FY2020, operating cash flow is expected to increase as a result of the incremental revenues flowing from the $1.4 billion plus of organic growth projects. 10) Operating cash flow per security has been adjusted for 1H FY2018 for the Entitlement Offer completed on the 23 March 2018. 16 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 5. Financial Overview (continued) On 21 August 2019, the Directors announced a final distribution of 25.5 cents per security, which will take APA’s distributions in respect of the financial year to a total of 47.0 cents per security. This is 0.5 cents per security above guidance and represents an increase of 4.4%, or 2.0 cents, over FY2018 distributions of 45.0 cents. Franking credits of 3.66 cents per security will be allocated to the final distribution reflecting the increased tax paid by APA and resulting in the FY2019 franking credits totalling 6.86 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 distribution policy is to generally grow distributions in line with operating cash flow growth, having regard for the future capital needs of the business and economic conditions, and ensuring distributions are fully covered by operating cash flow. APA has paid an interim and full year distribution every year for the 19 years the company has been listed, and distributions have consistently grown each year. The following table provides a summary of key financial data for FY2019. Total revenue Pass-through revenue (1) Total revenue excluding pass-through EBITDA Depreciation and amortisation expenses EBIT Finance costs and interest income Profit before income tax Income tax (expense) / benefit Profit after income tax Operating cash flow (2) Operating cash flow per security (cents) Earnings per security (cents) Distribution per security (cents) Distribution payout ratio (3) Weighted average number of securities (000) 30 June 2019 $000 30 June 2018 $000 2,452,171 421,198 2,386,722 445,307 2,030,973 1,941,415 1,573,756 (611,358) 962,398 (497,419) 464,979 (176,966) 288,013 1,518,474 (578,916) 939,558 (509,664) 429,894 (165,055) 264,839 Changes $000 % 65,449 2.7% (24,109) (5.4%) 89,558 55,282 4.6% 3.6% (32,442) (5.6%) 22,840 12,245 35,085 2.4% 2.4% 8.2% (11,911) (7.2%) 23,174 8.8% 1,012,127 1,031,627 (19,500) 85.8 24.4 47.0 54.8% 1,179,894 90.7 23.3 45.0 50.1% 1,136,875 (4) (4.9) 1.1 2.0 4.7% 43,019 (1.9%) (5.4%) 4.7% 4.4% 9.4% 3.8% Numbers in the table may not add up due to rounding. 1) Pass-through revenue is revenue on which no margin is earned. 2) Operating cash flow = net cash from operations after interest and tax payments. 3) Distribution payout ratio = total distribution applicable to the financial year as a percentage of operating cash flow. 4) On the 23 March 2018, APA Group issued 65,586,479 new ordinary securities on completion of 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 calculation of earnings per security and operating cash flow per security has been adjusted. APA GROUP — ANNUAL REPORT 2019 — 17 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6. Business Segment Performances and Operational Review APA reports across three business segments: — Energy Infrastructure: APA’s wholly or majority owned energy infrastructure assets across all categories – transmission and compression, processing, generation (gas and renewables) and storage; — Asset Management: The provision of asset management and operating services for third parties and the majority of APA’s investments; and — Energy Investments: APA’s interests in energy infrastructure investments. Statutory reported revenue and EBITDA performance by business segments is set out below. 30 June 2019 $000 30 June 2018 $000 Changes $000 % Revenue (1) Energy Infrastructure East Coast: Queensland East Coast: New South Wales East Coast: Victoria East Coast: South Australia Northern Territory Western Australia 1,207,108 1,152,975 173,594 144,380 3,004 30,301 340,685 166,243 153,166 2,925 32,861 293,115 Energy Infrastructure total 1,899,072 1,801,285 54,132 7,351 4.7% 4.4% (8,786) (5.7%) 79 (2,560) 47,570 2.7% (7.8%) 16.2% 97,786 5.4% (14,135) (13.0%) 5,364 3,793 23.3% 141.7% 92,808 4.8% (24,109) (5.4%) (3,250) (55.5%) 94,398 28,432 6,470 2,028,372 421,198 2,601 108,533 23,068 2,678 1,935,564 445,307 5,851 2,452,171 2,386,722 65,449 2.7% 1,010,063 149,362 113,992 2,051 19,171 277,805 962,231 147,095 124,631 2,577 22,923 237,639 1,572,444 1,497,096 52,954 28,432 66,204 23,068 (80,074) (3) (67,894) 47,831 2,267 5.0% 1.5% (10,639) (8.5%) (526) (20.4%) (3,752) (16.4%) 40,166 75,347 16.9% 5.0% (13,249) (20.0%) 5,364 12,180 23.3% (17.9%) 1,573,756 1,518,474 55,282 3.6% Asset Management Energy Investments Other segment revenue Total segment revenue Pass-through revenue Unallocated revenue (2) Total revenue EBITDA Energy Infrastructure East Coast: Queensland East Coast: New South Wales East Coast: Victoria East Coast: South Australia Northern Territory Western Australia Energy Infrastructure total Asset Management Energy Investments Corporate costs Total EBITDA Numbers in the table may not add up due to rounding. 1) Refer to revenue note 4 for additional disclosure on revenue streams from contracts with customers disaggregated by geographical location and major sources. 2) Interest income is not included in calculation of EBITDA, but nets off against interest expense in calculating net interest cost. 3) Includes $11.1 million of costs associated with the CKI proposal and the former Managing Director’s retirement. 18 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6.1 Energy Infrastructure The Energy Infrastructure segment consists of all APA’s energy infrastructure footprint across mainland Australia including gas transmission, gas compression, gas processing and storage assets, renewable energy power generation, and gas-fired power generation. 91.0% of revenues in this segment are derived from either long-term take-or-pay contracts, or regulated assets. Contracts generally have the majority of the revenue fixed over the term of the relevant contract. The predictable and long-term nature of APA’s revenue underpins APA’s reliable low risk business model value proposition. Energy Infrastructure is the largest business segment contributor to group revenue, contributing 93.5% (excluding pass- through) and 95.1% of group EBITDA (before corporate costs) during the financial year. Revenue (excluding pass-through revenue) was $1,899.1 million, an increase of 5.4% on the previous year (FY2018: $1,801.3 million). EBITDA (before corporate costs) increased by 5.0% on the previous year to $1,572.4 million (FY2018: $1,497.1 million). With the current-day flexible nature of the way we structure our contracts, both in terms of interconnected multi-assets and multi services, revenue and EBITDA outcomes fluctuate on the individual assets that make up APA’s East Coast and West Coast grids. Customers value this flexibility as it provides them with more options to better manage their energy needs in Australia’s very dynamic gas market. That is, they can source gas from in excess of 40 receipt points over the East Coast Grid. In FY2019, increased revenue and EBITDA in Queensland and New South Wales offset reductions in the other eastern Australian states, reflecting the changing nature of gas supply and demand centres. Victoria experienced lower peak injections due to a milder winter in 2018 impacting FY2019 outcomes, and there was reduced export through Culcairn in New South Wales as northern parts of the grid provided more domestic gas to eastern Australia. Queensland benefitted from the first full year contribution from the Reedy Creek Wallumbilla Pipeline commissioned in FY2018. The Wallumbilla Gladstone Pipeline is APA’s largest single contributing asset to earnings, and favourable USD/AUD exchange rate returns on the USD revenues earnt and the annual US CPI increase continue to have a positive impact on Queensland results. New earnings were realised from several completed and commissioned assets during FY2019 including: Gas transmission — Yamarna Gas Pipeline (WA) — Agnew Gas Lateral (WA) Gas-fired and Renewable power generation assets — Gruyere Power Station (WA) — Badgingarra Wind Farm (WA) — Darling Downs Solar Farm (QLD) The Reedy Creek Wallumbilla Pipeline, Mt Morgans Gas Pipeline and the Emu Downs Solar Farm all contributed a full year of earnings following commissioning during FY2018. With APA’s Northern Territory assets now connected into the eastern Australia market, this opens up further opportunities for the development of new gas sources in northern Australia, with APA’s assets well placed to facilitate getting that gas to multiple markets. During the reporting period, earnings on the Amadeus Gas Pipeline decreased due to an increase in third party revenue share with the foundation customer. In Western Australia, the growth and expansion of the Goldfields Gas Pipeline network over the last four years has seen around 500 kilometres of greenfield pipeline added to APA’s West Coast Grid, along with additional compression and a power station. This has had a positive flow-on benefit to earnings on the connected Goldfields Gas Pipeline, as gas is transported through up to four APA pipelines to reach customers and their mining operations. In this remote and mineral rich region, gas is delivering both a reliable and cost-effective energy solution for multiple customers along the 2,000 kilometres plus of interconnected pipeline. The sum of the parts of all of these small to medium expansion projects in Western Australia over the last few years resulted in more than a 16% increase in both revenue and EBITDA for FY2019 over the previous corresponding year. This demonstrates the collective impact and benefit of interconnected assets and the ability to offer multi-asset services. APA continues discussions with potential and existing customers across Western Australia regarding opportunities for gas transportation, compression, storage and power generation. APA has signed a GTA on the Goldfields Gas Pipeline with new customer Kalium Lakes Limited to deliver gas to its Beyondie Sulphate of Potash Project. The project is subject to Kalium Lakes final investment decision (FID) anticipated during CY2019 and it is targeting initial production in late 2020. APA has commenced early works on the design of a metering station. With the commissioning of the Gruyere Power Station in Western Australia during the reporting period, APA’s gas-fired power generation capability, including investments, is now over 400 MW. The Diamantina Power Station continued to benefit from increasing energy demand in the Mount Isa region including supplying its newest customer, Capricorn Copper mine with its first full year of energy. APA GROUP — ANNUAL REPORT 2019 — 19 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6.1 Energy Infrastructure (continued) A multi-asset and service solution in the West ~ meeting customer needs In June 2017, APA announced it would invest around $180 million to construct a 198 kilometre gas pipeline and a 45 MW power station to supply power to the Gruyere Gold Project in Western Australia. APA’s investment is underpinned by a 15 year gas transportation agreement to support the 15 year Electricity Supply Agreement with the Gruyere Gold Project. The Gruyere Project is a 50:50 joint venture between the ASX listed Gold Road Resources Ltd (ASX: GOR) and the global miner Gold Fields Limited. Gruyere is  expected to produce between 75,000 and 100,000 ounces of gold in calendar year 2019. Once steady state production is achieved, the average annual production is forecast at 300,000 ounces. The Yamarna Gas Pipeline and Gruyere Power Station together have been supplying power throughout 2H FY2019, with the mine achieving first gold pour in the June 2019 quarter. Gruyere Management commented “For the Gruyere project, APA’s bundled energy solution with a single interface has been effective in simplifying the Project’s operations.” Gruyere Power Station connected to the Yamarna Gas Pipeline in Western Australia Energy Infrastructure Revenue by State Energy Infrastructure EBITDA by State A$ m 1,600 1,200 800 400 0 90% A$ m 80% 1,200 70% 800 60% 400 50% 0 FY16 FY17 FY18 FY19 FY16 WA NT SA VIC NSW QLD EBITDA margin WA NT SA FY17 VIC FY18 FY19 NSW QLD Energy Infrastructure EBITDA by Asset FY19 FY18 FY17 FY16 0 150 300 450 600 750 900 1,050 1,200 1,350 1,500 A$ m Wallumbilla Gladstone Pipeline Diamantina Power Station Victorian Transmission System Eastern Goldfields Pipeline Other WA assets South West Queensland Pipeline Darling Downs Solar Farm SESA Pipeline and other SA assets Emu Downs Wind and Solar Farms Gruyere Power Station Roma Brisbane Pipeline Other Qld assets Amadeus Gas Pipeline Pilbara Pipeline System Badgingarra Wind Farm Carpentaria Gas Pipeline Moomba Sydney Pipeline and other NSW pipelines Goldfields Gas Pipeline Mondarra Gas Storage and Processing Facility 20 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6.1 Energy Infrastructure (continued) Renewable generation ~ responding to customer needs APA’s entry into renewables began in late 2009 with an investment in the North Brown Hill 132 MW Wind Farm in South Australia through the EII2 consortium (APA: 20.2% share). In 2011, APA acquired the 80 MW Emu Downs Wind Farm in Western Australia along with the development rights for an adjacent 130 MW site. This acquisition was underpinned by a 20 year revenue contract with Synergy, the Western Australia government owned energy retailer. During APA’s largest organic growth expansion period from FY2017 to FY2019, APA added the following renewable assets to its power generation portfolio: 20 MW Emu Downs Solar Farm; 130 MW Badgingarra Wind Farm; 17.5 MW Badgingarra Solar Farm (commissioned in August 2019); and the 110 MW Darling Downs Solar Farm. This gives APA a renewables generation portfolio (wholly owned and investments) of almost 490 MW. A number of factors originally steered APA in the direction of extending its energy infrastructure into renewables including government policy, the quality of the wind resource available at the assets acquired, the quality of the offtake customers, and project returns that met APA’s investment return hurdles. Those assets have proven to be solid investments and 10 years on, APA has the expertise in building and operating a material renewables portfolio. APA has also co-located solar generation on wind farm sites, taking advantage of shared transmission connection infrastructure and the complementary characteristics of the resources. In recent years, the driver for more renewables has been customer demand, with customers wanting more wind and solar generation within their portfolios and the accompanying Large Scale Renewable Certificates. Our renewable energy customers now include AGL Energy, Synergy, Origin Energy and Alinta Energy who are all existing gas transmission customers of APA. Going forward, APA will continue to invest in energy infrastructure assets that our customers want us to invest in and are prepared to underwrite with long-term contracts that satisfy our investment criteria. In FY2019, earnings generated from wholly owned renewables amounted to around 3% of total revenue and EBITDA. Current development projects in the renewables space include APA’s Beelbee Solar Farm site located adjacent to the recently completed Darling Downs Solar Farm in Queensland. This site has the potential for an additional approximately 150 MW of solar generation. Studies to-date indicate that Beelbee’s electricity network location benefits from a stable and attractive Marginal Loss Factor should the site be developed. Darling Downs Solar Farm in Queensland Working with customers – solutions, service and flexibility During the reporting period, APA announced a variation to an existing multi-asset GTA on the East Coast Grid to replace an expiring GTA. The arrangements make particular use of the Roma Brisbane Pipeline to help meet the electricity needs of consumers in Queensland, especially during the summer season. Total revenue in the order of $40 million is expected from the GTA over the next three years, with revenue already contributing to FY2019 earnings. APA is continually working with customers to add value to the services we provide in order to optimise their energy needs. Also commencing in January 2019 was a two year contract extension for southerly services on APA’s East Coast Grid which contributed to FY2019 earnings. Many of the solutions developed with our customers are bespoke to their specific requirements. The interconnected nature of APA’s gas transportation grids facilitates access to multi-assets and services that give customers the flexibility they want to optimise their energy portfolios. Incitec Pivot Limited (IPL) is a foundation customer of APA. Its Gibson Island fertiliser plant near Brisbane had been facing the threat of closure due to difficulties in sourcing an affordable energy supply over the last few years. Despite gas sources near IPL’s southeast Queensland location, the local gas price was untenable. Working with IPL, and collaborating with a gas producer and another gas pipeline operator, an innovative solution was developed to secure affordable gas from 3,300 kilometres away for calendar year 2019. In June 2019, the Queensland government announced APLNG-Armour Joint Venture as the preferred tenderer for a highly- prospective gas tenement in the Surat Basin, adjacent to mature APLNG-operated tenements. Under the tender conditions, gas can only be sold to Australian manufacturing businesses, with gas supplied under agreements associated with the APLNG Armour Joint Venture tender from 1 April 2020. This agreement led to APA further announcing in June 2019 a variation to the GTA with IPL which extends a service under the GTA through to 1 January 2023. APA GROUP — ANNUAL REPORT 2019 — 21 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6.1 Energy Infrastructure (continued) Increasingly, gas producers are tendering on gas tenement releases in Queensland, many of which are conditioned for domestic-only supply. The interconnected nature of the East Coast Grid, expanded in recent years by the Reedy Creek Wallumbilla Pipeline, strongly positions APA as part of the solution in transporting these new domestic gas supplies from Queensland, into the eastern Australian domestic market. During the reporting period, APA signed a Memorandum of Understanding with Comet Ridge Limited and Vintage Energy Limited to commence an in-field work program to select a pipeline route to connect the Queensland Galilee Basin to gas markets. The proposed 240 kilometre Galilee Moranbah Pipeline and associated infrastructure would be built, owned and operated by APA. Importantly, it will connect the new gas supply source in the Galilee Basin to Moranbah in Central Queensland, which is the gas processing and distribution hub for northern Bowen Basin gas resources. In July 2019, APA was granted a Survey Licence by the Queensland Government that enables APA to further progress pipeline route investigations for the Galilee Moranbah Pipeline and commence engagement with a range of project stakeholders. Above and beyond for customers ~ using our interconnected grid to its full potential The gas market in Australia is now extremely dynamic and no two days are the same as demand requirements change and supply, particularly on the east coast, can be sourced from multiple options from north to south and west. Plant outages, either planned maintenance or unplanned events, and climate related disasters, such as floods and cyclones, can also impact day-to-day scheduling. Fast response is required to manage any of these events in order to 1) maintain our customers’ operations and minimise the impact on them as well as their customers; 2) maintain the integrity of the system for all users; and 3) minimise any wastage of gas. APA’s Integrated Operations Centre (IOC) in Brisbane is able to provide fast response solutions as it houses the combined skills of commercial, operational and maintenance personnel with oversight and control of all APA assets. During FY2019, APA assisted customers in managing a delayed start-up phase post a major shutdown and an unplanned shutdown by providing parking services and re-distributing line-pack throughout its East Coast Grid. In February 2019, the widespread flooding across North Queensland impacted manufacturing plants along the Carpentaria Gas Pipeline for several months. IPL’s Phosphate Hill operations were suspended due to flooding damaging the rail infrastructure and they sought APA’s assistance to divert their gas to other users and buyers across APA’s East Coast Grid. APA was able to utilise both the newly commissioned (in December 2018) bi-directional function of the Carpentaria Gas Pipeline and the South West Queensland Pipeline, to transport that gas into the east coast gas market. It’s this quick and flexible response of providing workable solutions for our customers, that has become a valued service of both APA’s IOC and our 7,600 kilometres of interconnected East Coast Grid assets. Over the last three years, a number of new regulatory initiatives were introduced to improve information symmetry and transparency between customers and pipeline operators for non-scheme pipelines as defined under Part 23 of the National Gas Rules (NGR). This has included publishing APA’s pricing methodologies and the introduction of a commercial arbitration process if negotiating parties cannot reach commercial agreement. In FY2019, further initiatives were implemented including the publishing of financial statements and associated information (October 2018) and a pipeline capacity trading reform package under Parts 24 and 25 of the NGR (March 2019). The pipeline capacity trading reforms included a trading platform operated by the Australian Energy Market Operator (AEMO) to facilitate the secondary trading of firm pipeline capacity between shippers, and a daily auction platform for any un-nominated contracted shipper capacity on all major pipelines, also run by AEMO. APA invested significantly in setting up for these services, with incremental capital and ongoing operating costs in relation to Parts 24 and 25 recoverable under the NGR. The design, development and implementation process took over a year and included customer training on how to use the new services. Since commencement on 1 March 2019 until the end of July 2019 reporting year, no capacity has been traded by shippers. However, the auction platform has accommodated the equivalent of 3.75 PJ of gas transported, providing additional liquidity into the east coast domestic market. APA is supportive of mechanisms that help improve liquidity and transparency into Australia’s gas market whilst maintaining appropriate investment incentives. With the full range of Gas Market Reform Group initiatives now in place, APA’s view is that time needs to be allowed for the market to have the opportunity to fully utilise the additional information disclosures and new facilities before any further reforms are considered. APA continues to work closely with our customers to meet their individual needs and the range of new contracts and contract variations as detailed above with both large entities and smaller customers, demonstrates APA’s willingness to facilitate fair commercial outcomes for all parties. APA’s assets are built for long-term use with Australia’s oldest gas pipeline, the Roma Brisbane Pipeline, celebrating 50 years of operations in 2019. As a result, our customer relationships have been formed over many years and we are proud that we have continued to commercially negotiate with our customers and that the independent arbitration facility has not been required to resolve negotiation impasse. 22 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6.1 Energy Infrastructure (continued) APA’s value proposition APA offers investors a solid value proposition that brings together the combination of high quality energy infrastructure, continued organic growth and a low risk business model. In FY2019, 91% of Energy Infrastructure revenue (excluding pass-through) was from contracted and regulated revenues. Specifically, 79.8% of Energy Infrastructure revenue (excluding pass-through) was from take-or-pay capacity reservation charges from long term offtake agreements, 2.9% from other contracted fixed revenues and 8.1% from throughput charges and other variable components. Given the dynamic east coast gas market, there were some additional revenues from the provision of flexible short term and other services, accounting for less than 1%. The regulated portion of APA’s revenue which is predominantly derived from the Victorian Transmission System makes up 8.3% of total FY2019 Energy Infrastructure revenue. Supporting APA’s cash flow stability is the company’s contract profile, which has a revenue weighted average contract tenor of in excess of 12 years. The very nature of APA’s revenue streams provides for predictability and cash flow stability contributing to APA’s low risk business model. FY2019 Energy Infrastructure by Revenue Type APA Pipelines by Regulation Type (a) Full regulation pipelines Light regulation pipelines Non-scheme pipelines a) Owned and/or operated by APA Capacity charge revenue: 79.8% Regulated revenue: 8.3% Contracted fixed revenue: 2.9% Throughput charge & other variable revenue: 8.1% Flexible short term services: 0.8% Other: 0.1% 91.0% take or pay/regulated APA manages its counterparty risk in a variety of ways. One aspect is to consider customers’ credit ratings. During FY2019, 92.9% 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. FY2019 Energy Infrastructure Revenues by Counterparty Credit Rating FY2019 Energy Infrastructure Revenues by Customer Industry Segment A- rated or better: 45.0% BBB and BBB+: 38.2% Other Investment Grade (1): 9.7% Not rated: 6.8% Sub-investment grade: 0.3% 92.9% Investment grade Energy: 48.3% Utilities: 23.6% Resources: 21.3% Industrials & Others: 6.8% 1) An investment grade credit rating from either S&P (BBB- or better) or Moody’s (Baa3 or better), or a joint venture with an investment grade average rating across owners. Ratings shown as equivalent to S&P’s rating scale. APA GROUP — ANNUAL REPORT 2019 — 23 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6.2 Asset Management APA provides asset management and operational services to the majority of its energy investments and to a number of third parties. Its main customers are Australian Gas Networks Limited (AGN) (11), Energy Infrastructure Investments and GDI (EII). Asset management services are provided to these customers under long-term contracts. Included in this reporting segment are Customer Contributions from Transmission third party projects. 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 networks. 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 decreased by $14.1 million or 13.0% to $94.4 million (FY2018: $108.5 million) and EBITDA (excluding corporate costs) decreased by $13.2 million or 20.0% to $53.0 million (FY2018: $66.2 million). This was due to reduced Customer Contribution activity in FY2019 compared to the previous year, and an outperformance in the incentive fee achieved in FY2018 for Network services that was not repeated in FY2019. 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 for FY2019 were $11.7 million compared to $18.0 million in FY2018. This was due to the completion of a number of significant projects during FY2018, including connection of the Northern Gas Pipeline into both APA’s Amadeus Gas Pipeline and the Carpentaria Gas Pipeline, and less project activity in Victoria compared to the previous reporting period. The long term average per annum of Customer Contributions over the last five years remains at approximately $12 million per annum. APA continues to expect annual swings in customer contributions, as these are driven by customer requirements. Asset Management Revenue Asset Management EBITDA A$ m 100 80 60 40 20 0 A$ m 60 50 40 30 20 10 0 FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 One-off Customer Contributions Underlying Asset Management Revenue One-off Customer Contributions Underlying Asset Management EBITDA Note: From FY17 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. Customer Contributions APA Operated Gas Networks Statistics Average ~$12m p.a. 20 15 10 5 0 1.45 (million) (km) 30,000 1.40 1.35 1.30 1.25 29,000 28,000 27,000 FY15 FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19 Gas consumer connections (LHS) Networks managed (RHS) The Asset Management segment continues to see strong demand for gas connections in new housing developments in Victoria, with an observed slowing in South Australia and Queensland of gas connections growth compared to previous years. 11) APA sold its 33.05% stake in Envestra (subsequently renamed Australian Gas Networks or AGN) in August 2014, however, the operating and maintenance agreements remain on foot until 2027. 24 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 6.3 Energy Investments APA has interests in a number of complementary energy investments across Australia. Asset and ownership interests Asset details an APA services Partners Mortlake Gas Pipeline SEA Gas Pipeline 50% SEA Gas (Mortlake) Partnership 83 km gas pipeline connecting the Otway Gas Plant to the Mortlake Power Station MAINTENANCE 50% South East Australia Gas Pty Ltd 687 km gas pipeline from Iona and Port Campbell in Victoria to Adelaide MAINTENANCE Rest Rest 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) 19.9% Energy Infrastructure Investments 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 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 increased by 23.3% for the reporting period to $28.4 million (FY2018: $23.1 million). 6.4 Corporate Costs Corporate costs for FY2019 were $80.1 million. This includes $11.1 million of one-off costs associated with the CKI proposal during the first half of the reporting period and the former Managing Director’s retirement. Corporate costs (net of one-off costs) for FY2019 were $69.0 million compared to $67.9 million for the previous corresponding period. This is a 1.6% increase compared to the 4.4% increase in EBITDA (excluding the impact of the one-off cost) during the reporting period. APA continues to remain vigilant in keeping corporate costs contained. Nonetheless, corporate costs (net of one-off costs) increased 3.4% across FY2017 to FY2019, compared to EBITDA (net of one-off costs) increasing 7.8% for the same period. The majority of the increase has been as a result of the additional costs associated with compliance reviews and other newly introduced regulatory requirements. CORPORATE SERVICES ~3,700 km Allgas gas distribution network in Queensland with ~112,500 connections Marubeni Corporation State Super CORPORATE SERVICES OPERATIONAL MANAGEMENT Gas-fired power generation 71 MW MM Midstream Investments Osaka Gas Gas processing facilities 45 TJ/day Electricity transmission cables 244 km Gas pipelines totaling 786 km CORPORATE SERVICES OPERATIONAL MANAGEMENT Energy Investments Revenue & EBITDA A$ m 20 10 0 FY16 FY17 FY18 FY19 Corporate Costs A$ m 1,500 1,200 900 600 300 0 % 8 6 4 2 0 (1) (2) FY14 FY15 FY16 FY17 FY18 FY19 Corporate costs (LHS) Corporate costs/EBITDA (3) (RHS) EBITDA (LHS) 1) Includes $11.1 million of costs associated with the CKI proposal and the former Managing Director’s retirement. 2) Corporate costs excluding one-off items. 3) EBITDA excluding corporate cost. APA GROUP — ANNUAL REPORT 2019 — 25 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 7. Capital and Investment Expenditure Total capital expenditure (including growth projects and stay-in-business capital expenditure but excluding acquisitions and other investing cash flows) for FY2019 was $581.3 million (FY2018: $855.5 million). There were no acquisitions undertaken in FY2019 and therefore no investment expenditure. During FY2019, the focus has been on APA’s single largest capex expenditure program in the company’s history, with APA investing more than $1.4 billion across the three year period of FY2017 to FY2019. Capital and investment expenditure for FY2019 is detailed in the table below. Capital and investment expenditure (1) Growth expenditure Regulated Non-regulated Queensland New South Wales Description of major projects 30 Jun 2019 ($ million) 30 Jun 2018 ($ million) Victorian–Northern Interconnect expansion, Warragul looping and Western Outer Ring Main (WORM) 30.6 33.0 Darling Downs Solar Farm, Reedy Creek Wallumbilla Pipeline 17.8 199.2 Victorian–Northern Interconnect expansion, Western Slopes Pipeline early works, Moomba Sydney Pipeline Southern Haul and Maximum Operating Pressure Expansion Victoria Orbost Gas Processing Plant, early works on Crib Point to Pakenham Pipeline Western Australia and Northern Territory Yamarna Gas Pipeline and Gruyere Power Station, Emu Downs Solar Farm, Badgingarra Wind and Solar Farms, Agnew Lateral and the Murrin Compressor Station Customer contribution projects and others Includes Capacity Trading and Auction Grid enhancements and other recoverable expenditure Sub-total non-regulated capex Total growth capex Stay-in business capex (2) Other technology expenditure Total capital expenditure Investment and acquisitions Total capital and investment expenditure Numbers in the table may not add up due to rounding. 15.6 175.2 10.7 116.7 192.7 369.1 30.9 432.2 462.8 93.5 24.9 581.3 — 581.3 14.2 709.9 742.9 85.9 26.7 855.5 20.0 (3) 875.5 1) The capital expenditure shown in this table represents net cash used in investing activities as disclosed in the cash flow statement, and excludes accruals brought forward from the prior period and carried forward to next period. 2) Represents stay-in-business capital expenditure not recoverable from customers and/or regulatory frameworks. 3) Represents the purchase price for the Orbost Gas Processing Plant. Growth project expenditure in FY2019 of $462.8 million (FY2018: $742.9 million) was largely related to the following projects during the year: — Construction and completion of the Yamarna Gas Pipeline and Gruyere Power Station, and Agnew Lateral, all located in WA and interconnected with the Goldfields Gas Pipeline and/or the Eastern Goldfields Pipeline; — Construction of the Murrin Compressor Station and commencement of engineering and procurement for the Murrin Murrin lateral looping project; — Construction of the Darling Downs Solar Farm (QLD) and Badgingarra Wind and Solar Farms (WA); — Construction/upgrade of the Orbost Gas Processing Plant in Victoria, which is now scheduled to deliver first sales gas in Q4 CY2019; and — Ongoing pre-investigative and preliminary license approval undertakings for the proposed (subject to customer FID) Western Slopes Pipeline and Crib Point Pakenham Pipeline projects. Growth capital expenditure is fully underwritten through long-term contractual arrangements or has regulatory approval through a relevant access arrangement. Stay in business (SIB) capex increased to $93.5 million in FY2019 from $85.9 million in FY2018, an increase of 8.8%. The increase correlates to the size and scope of APA’s diverse energy infrastructure portfolio and remains in line with the long term asset management planning cycle across our assets. 26 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 7. Capital and Investment Expenditure (continued) Capital expenditure also includes ongoing business and technology spend – reflecting the continuing growth of the business and regulatory changes over the last two years. APA’s Information and Technology (I&T) function works collaboratively with all APA divisions to deliver modern I&T solutions and services, which are secure, compliant and contribute to the organisation's strategic objectives and goals as the business continues to grow. In FY2019, $24.9 million (FY2018: $26.7 million) was invested in I&T related solutions, services and infrastructure. Grid Analytics ~ turning data into an asset In 2016, APA established a Data Analytics program with the objective of enabling more efficient, informed and timely decision making. APA treats data as an asset and we have set about building a sustainable, unified analytics platform with consistent tools and processes being applied across the entire business. Our trusted data set, which is comprised of data from multiple enterprise systems, has grown since the program commenced and now encompasses approximately over 4TB of data across 22 billion rows. So how do we turn this data into an asset? Example: Within APA’s Integrated Operations Centre (IOC) a visual representation of the Grid is being used to proactively monitor flow and capacity, whilst another data model is used to track customer requests and anticipate demand. This enables APA to deliver critical customer outcomes and improved customer service. Growth projects APA’s significant FY2017 to FY2019 growth capex program has resulted in: — Approximately 272 kilometres of new-build pipelines added to APA’s footprint; — More than 300 MW of new power generation including over 275 MW from renewable assets; and — The connection of a new source of gas supply into the east coast gas market via APA’s newest gas processing facility and connecting pipeline in Victoria. An update on the major projects undertaken in FY2019 is as follows: Yamarna Gas Pipeline and Gruyere Power Station (WA): Underwriting these two projects are a 15-year gas transportation agreement and a 15-year electricity supply agreement for the Gruyere Gold Project, a 50:50 joint venture between ASX listed Gold Road Resources Ltd and the global miner Gold Fields Limited. The 198 kilometre pipeline was completed in FY2018 and commissioned in FY2019. Practical completion of the 45 MW power station occurred in late 2018. APA has been supplying power to the mine since January 2019, helping the mine meet the significant milestone of “first gold pour” in the June 2019 quarter. Full loads are expected in FY2020 as the mine commissioning progresses towards full operation. Darling Downs Solar Farm (QLD): This 110 MW solar farm is underwritten by a 12 year contract with Origin Energy. APA assumed the principal contractor role in December 2018 following the collapse of the EPC contractor RCR Tomlinson in November 2018. Through our strong project management capabilities and contract management expertise, APA was able to complete construction of the solar farm within budget and commence operations without loss of budgeted revenue. Commercial operations commenced in January 2019. Badgingarra Wind and Solar Farms: Both projects are underpinned by a 17 year agreement with Alinta Energy. The 130 MW wind farm was commissioned and commenced commercial operations in January 2019. Construction of the 17.5 MW solar farm has been completed and is expected to commence commercial operation in August 2019. Orbost Gas Processing Plant: APA acquired the moth-balled processing plant in FY2018. Extensive refurbishment work has been carried out on the plant during FY2019 to enable the processing of up 70 TJ/day of gas from Cooper Energy’s Sole gas field. Commissioning is expected to commence in early September to ensure delivery of first sales gas during Q4 CY2019. APA GROUP — ANNUAL REPORT 2019 — 27 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 7. Capital and Investment Expenditure (continued) Helping customers gear up for peak demand ~ smart initiatives like the Moomba Sydney Pipeline Southern Haul project Reliability of energy supply when it is needed is what we all expect – energy on demand. Our expectations as consumers increase during peak demand periods when temperatures are high in summer, or when we need heating in winter. We expect that we can flick a switch and our expectations will be instantly met every time. The strain on the National Electricity Market (NEM) across eastern Australia has been increasing over the past few years with the retirement of aging coal-fired generators. As a result, the NEM is being put under increased pressure at peak capacity times. Some renewable energy has been added into the network system, but it does not necessarily generate energy when it is needed, and when it does, the technology is not yet available to store significant amounts of energy for when it might be needed. Gas is able to provide the reliable, fast start cleaner energy that is needed. To help alleviate this situation quickly, APA took the initiative and committed to the Southern Haul Reliability and Expansion project on the Moomba Sydney Pipeline. This has involved pre-investing in capital works to increase operating pressures in some sections, renewing and improving critical control systems and spending capital on compressor reliability. The outcome of this will be APA being able to provide up to 27 TJ/day of additional capacity from winter 2019 onwards, to meet our customer’s requirements so they can meet consumer demand expectations. APA is working with producers throughout eastern Australia to bring more gas to market. During FY2019, APA signed a Memorandum of Understanding with Comet Ridge Limited and Vintage Energy Limited to commence an in-field work program to select a pipeline route to connect the Queensland Galilee Basin to eastern gas markets. This will be a significant pipeline project for APA with important beneficial outcomes for the tight eastern Australian gas market. In March 2019, the Federal Government announced APA’s proposed Dandenong Power Station project as a shortlisted project under its Underwriting New Generation Investments (UNGI) scheme. The UNGI program aims to provide financial support to facilitate the development of new firm generation capacity in the NEM. APA’s proposed power station would offer customers very fast start, efficient electricity generation and would be designed to support and complement penetration of the NEM by renewables. Located adjacent to APA’s existing Dandenong gas storage facilities, the proposed site of the power station is ideally located close to both gas demand and supply and would leverage APA’s existing infrastructure. It has been designed as a two-stage project with stage 1 comprising 12 fast start gas fuelled reciprocating engines with a capacity of approximately 220 MW. Stage 2 would deliver an additional six units generating approximately 110 MW of gas-fired power. The UNGI process is still in the very early stages of project assessment at this time, and APA continues to work on identifying a customer to underwrite the project. Preliminary work continued during the reporting period on the proposed pipeline projects with AGL Energy Limited and Santos Limited, both of whom continue to work through the feasibility of their own significant projects. APA entered into a Development Agreement with AGL Energy Limited in June 2018 for the development and construction of the approximate 60 kilometre Crib Point Pakenham Pipeline, subject to AGL achieving FID on their proposed Crib Point Gas Import Jetty Project in Victoria. AGL have indicated they expect the outcome of the Environmental Effects Statement to occur no earlier than late FY2020, following which AGL expects to move to FID. If AGL approve their proposed import jetty project, AGL expects first gas to be delivered to Crib Point in the second half of FY2022. Similarly, APA has an agreement in place, subject to FID by Santos Limited of its Narrabri Gas Project, to potentially develop and build a new approximately 460 kilometre pipeline to be called the Western Slopes Pipeline, connecting the Narrabri gas resource to the east coast gas market. Over the last year, APA has continued to work on various approvals and landowner engagements for both projects. Additional details of APA’s project engagement is included in APA’s FY2019 Sustainability Report. If both projects achieve FID approval, they will provide much needed new sources of gas supply into Australia’s east coast market. More gas supply is expected to put downward pressure on the high gas prices that domestic manufacturers and consumers are currently faced with. APA’s growth capex history A$ m 600 400 200 0 5 year average ~$421m p.a. 10 year average ~$338m p.a. FY15 FY16 FY17 FY18 FY19 28 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 7. Capital and Investment Expenditure (continued) APA has a strong history of investing in energy infrastructure and since listing, has invested well over $14 billion into Australia’s energy infrastructure network. Over the last 10 years on average, APA has invested over $300 million per annum of growth capex, and in the last five years that average has increased to around $421 million per annum. APA continues to work closely with customers on a range of capex project opportunities and continues to expect growth capital expenditure to be in the order of $300 to $400 million per annum over the next two to three years. Capital and investment expenditure A$ m 800 600 400 200 0 FY16 FY17 FY18 FY19 8. Financing Activities 8.1 Capital Management As at 30 June 2019, APA had 1,179,893,848 securities on issue. This is unchanged from 30 June 2018. Acquisitions & other investment cash flows Growth capex SIB & other IT capex APA funds its growth with appropriate levels of equity, cash retained in the business and debt, in order to maintain strong BBB and Baa2 credit ratings. As at 30 June 2019, APA had $1.9 billion in cash and committed undrawn facilities available to assist in the ongoing funding of the business and planned growth activities looking ahead. At 30 June 2019 APA had $9,352.1 million ($8,810.4 million as at 30 June 2018) of committed drawn debt facilities, with an additional $1,550 million of undrawn committed bank facilities available to the business. APA has issued debt into a diverse range of global bond and banking markets, such as US Private Placement Notes, Medium Term Notes in several currencies (Australian and Canadian dollars, Euros, Sterling and Japanese Yen), United States 144A Notes and Australian dollar Syndicated and Bilateral bank facilities. The debt portfolio has a broad spread of maturities extending out to FY2035, with an average maturity of drawn debt of 6.8 years as at 30 June 2019. APA debt maturity profile and diversity of funding sources (1) $1,600m $1,200m $800m $400m 0 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 Headroom (undrawn committed facilities) Bank borrowings Sterling MTN Euro MTN US 144A Notes Japanese MTN Australian MTN US Private Placement Notes USD denominated obligations (2) 1) APA debt maturity profile as at 31 July 2019. 2) USD denominated obligations translated to AUD at the prevailing rate at inception (USD144A – AUD/USD=0.7879, EMTN & Sterling AUD/USD=0.7772). APA maintains a prudent treasury policy that requires high levels of interest rate hedging to minimise the potential impacts from adverse market movements. As at 30 June 2019, 100.0% (30 June 2018: 97.7%) of interest obligations on gross borrowings were either hedged into or issued at fixed interest rates for varying periods extending out to 2035. APA GROUP — ANNUAL REPORT 2019 — 29 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 8.1 Capital Management (continued) Financing activities for APA during the financial year included: Timing Financing activity September 2018 Repayment of $95.8 million (US$63.0 million) of US Private Placement Notes at maturity March 2019 May 2019 June 2019 Issuance of £400 million (A$742.4 million) of 12.3 year fixed rate Notes from its Euro Medium Term Note Programme Extension of a $50 million Bilateral Bank Facility for 3 years to May 2022 and repayment of $219.4 million (US$122.0 million and A$68.2 million) of US Private Placement Notes at maturity Issuance of ¥10 billion (A$132.9 million) 15 year fixed rate Notes from its Euro Medium Term Note Programme Since FY2019 end, APA has also repaid: — $99.0 million (USD 75.0 million) of US Private Placement Notes at maturity (1 July 2019); and — $289.5 million (CAD 300.0 million) of Medium Term Notes at maturity (24 July 2019). Through these financing activities, APA has been able to extend the average tenor of its debt facilities and lower the average cost of our debt portfolio, delivering annualised interest savings in the order of $23 million per year. The diverse debt portfolio demonstrates the support APA has from global debt capital markets, with the latest S&P Global Ratings update for APA (November 2018) stating, “We view APA as having good relationships with its banks, a high standing in the credit market, and prudent risk management.” APA acquired the Wallumbilla Gladstone Pipeline in June 2015. Revenues are denominated in USD and were initially received in June 2015 from the 20 year foundation contracts. Operating costs are passed through to the shippers. Today, around US$3 billion (i.e. US 144A Notes maturing in 2025 and 2035, Euro MTN maturing in 2027 and Sterling MTN maturing in 2030), of the original US$3.7 billion of debt that was borrowed to assist with funding of that acquisition, is retained in, or swapped into, US dollar denominated debt obligations at an all-in annual rate of 4.61%. This USD debt is being managed as a “designated hedge” for those virtually certain revenues. During the reporting period, APA undertook a restructuring of the hedging in respect of the 2022 €700 million issued in March 2015. This issue was originally part of the designated hedge relationship noted above and was originally swapped into US dollars. In September 2018, APA unwound the cross currency interest rate swaps (CCIRS) in respect of that issue and put in place new CCIRS, converting the debt to an Australian dollar liability (A$1,132 million) enabling the revenues from March 2019 to March 2022 to be hedged back into Australian dollars. Due to that hedge restructure, APA received some $151 million in cash from the CCIRS unwind. APA has hedged the US dollar denominated Wallumbilla Gladstone Pipeline revenues receivable from March 2019 to March 2022 at the rates in the table below. Period FY2019 FY2020 FY2021 FY2022 (to March 2022) Average forward USD/AUD exchange rate 0.7020 0.7192 0.7199 0.7099 A large portion of the net revenue from April 2022 remains in the designated hedge relationship with the remaining US$3 billion in debt and as such, when that revenue is receivable and hedged, it will be recognised in the profit or loss largely at future hedge rates. 8.2 Interest costs Net interest costs decreased in FY2019 by $12.2 million to $497.4 million (FY2018: $509.7 million). The 2.4% decrease in FY2019 relative to FY2018 is primarily due to the refinancing of higher cost debt. This included the Japanese Yen Medium Term Notes that matured in June 2018; the US Private Placement Notes that matured in September 2018 and May 2019; the APA Group Subordinated Notes that were redeemed 31 March 2018; as well as an increase in capitalised interest associated with APA’s growth projects. The average interest rate (including credit margins) applying to drawn debt was 5.53% for FY2019 (FY2018: 5.65%), reflective of the partial year impact of the higher interest costs of some of the abovementioned facilities. 30 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 8.3 Credit ratings APT Pipelines Limited, the borrowing entity of APA, maintained the following two investment grade credit ratings during the 2019 financial year: — BBB long-term corporate credit rating assigned by Standard & Poor’s (S&P) in June 2009, and last confirmed on 21 November 2018; and — Baa2 long-term corporate credit rating (outlook Stable) assigned by Moody’s Investors Service (Moody’s) in April 2010, and last confirmed on 26 February 2019. APA calculates the Funds From Operations (FFO) to Interest to be 3.0 times (FY2018: 3.0 times) and FFO to Net Debt to be 10.8% for FY2019 (FY2018: 10.7%). FFO to Net Debt is the key quantitative measure used by S&P and Moody’s to assess APA’s credit worthiness and credit rating. APA’s credit metrics continue to strengthen as increasing operating cash flow allows the funding of both increased securityholder distributions and increased growth capex which delivers increased EBITDA and, in turn, increased operating cash flow. With FFO to Net Debt of 10.8% and FFO to Interest of 3.0 times being at the stronger end of BBB/Baa2 rating metric guidelines, APA continues to have confidence that the balance sheet can continue to support both organic growth and long term growth in securityholder distributions. APA’s FFO to Net Debt has been between 10% and 11% for the past three years and we expect this to continue for FY2020. 8.4 Income tax Income tax expense for the financial year of $177.0 million results in an effective income tax rate of 38.1%, compared to 38.4% 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 income tax purposes. After utilisation of available tax losses and Research and Development tax offsets, income tax of $71.8 million will be payable in respect of the year ended 30 June 2019 (FY2018: $52.0 million). The cash tax payable results in an effective tax paid rate of 15.4% in FY2019 compared to 12.1% in FY2018. With PAYG instalments of $39.8 million having already been paid, a tax provision of $32.0 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/. To assist APA Securityholders who wish to submit their annual tax return prior to receiving their annual APA Tax Statement in mid September, APA has developed an online tax estimator tool. The Estimator tool will generate Pro Forma Tax Return Inputs based on information entered by Securityholders and therefore should be considered “indicative only” compared to the confirmed accurate information contained in APA’s Annual Tax Statement. The Tax Estimator will be available under the Investor section on APA’s website following confirmation by the Board via an ASX release of the final FY2019 distribution (https://www.apa.com.au/investors/my-securities/apa-annual-tax- statement-estimator/). 8.5 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 FY2018 distribution paid 12 September 2018 Interim FY2019 distribution paid 13 March 2019 Cents per security Total distribution $000 Cents per security Total distribution $000 8.93 0.00 9.03 2.90 3.14 24.00 3.83 105,412 — 106,513 34,228 37,022 283,175 7.47 2.03 6.58 2.97 2.45 21.50 3.20 88,099 24,024 77,668 35,014 28,872 253,677 APA GROUP — ANNUAL REPORT 2019 — 31 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 8.5 Distributions (continued) On 21 August 2019, the Directors declared a final distribution for APA for the financial year of 25.5 cents per security which is payable on 11 September 2019. Franking credits of 3.66 cents per security will be allocated to the APT franked profit distribution. The FY2019 final distribution comprises the following components: APT franked profit distribution APT capital distribution APTIT profit distribution APTIT capital distribution Total Franking credits allocated Final FY2019 distribution payable 11 September 2019 Cents per security Total distribution $000 8.53 10.44 2.55 3.98 25.50 3.66 100,663 123,153 30,056 47,002 300,874 As a result, the total distribution applicable to the year ended 30 June 2019 is 47.0 cents per security, a 4.4% increase over the total distribution of 45.0 cents per security applicable to the year ended 30 June 2018. Franking credits allocated for the year ended 30 June 2019 distribution totalled 6.86 cents per security. The Distribution Reinvestment Plan remains suspended. 8.6 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 ex-distribution date, was 15.0% (12). APA’s total securityholder return since listing in June 2000 on the ASX, is 2,083 (13), a compound annual growth rate of 17.2%. APA total securityholder returns since listing (June 2000) to 19 August 2019 2,400 1,800 1,200 600 0 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun 19 APA total securityholder return Utilities accumulation index S&P/ASX 200 accumulation index 8.7 Guidance for 2020 financial year Based on current operating plans and available information, APA expects EBITDA for the full year to 30 June 2020 to be in a range of $1,660 million to $1,690 million. Net interest cost is expected to be in a range of $505 million to $515 million. Distributions per security for the 2020 financial year are expected to be in the order of 50.0 cents per security, with franking credits which may be allocated to those distributions enhancing that cash payout. As per current APA distribution policies, all distributions will be fully covered by operating cash flows. EBITDA ($ millions) Net interest cost ($ millions) FY2020 guidance FY2019 actual $1,660 to $1,690 $505 to $515 $1,573.8 $497.4 Total distribution (cents per security) In the order of 50.0 cents 47.0 cents 12) Figures quoted are sourced from Refinitiv Eikon and measured as at 30 June 2019. 13) Indexed from 13 June 2000, the date of APA’s listing on the ASX. 32 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 9. Regulatory Matters, Energy Policy and Energy Industry Developments Australia’s economic regulatory 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 lighter obligations for “light regulation” pipelines. Gas Policy developments 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 Market Operator and the industry on the design and implementation of the additional rules over the past four years. During FY2019, the implementation of the remaining market policy revisions under the direction of the COAG Energy Council was completed. Part 23 compliance – roll out In October 2018, APA published its first set of financial statements and associated information as specified under Part 23 of the National Gas Rules. Together with the January 2018 publication of APA’s pricing principles and methodology, and standing terms, prospective pipeline users now have available a broad range of information to enable enhanced assessment of pipeline service offers. APA has continued to work with our customers to negotiate commercial terms that are acceptable and beneficial for all parties. There have been no formal access requests that could lead to arbitration since that formal process was introduced in August 2017. APA’s experience is that our gas transportation customers continue to work with us to develop commercial arrangements that are mutually beneficial and satisfactory to all parties. The ACCC is expected to shortly release its interim report on its review of Part 23 information lodged by industry participants in October 2018. Part 24 and 25 capacity trading and auction APA undertook extensive business system developments to ensure the successful implementation on 1 March 2019 of both a Capacity Trading Platform for the secondary trade of pipeline capacity, and a daily auction facility of firm contracted but un-nominated pipeline capacity. Both facilities are being run by the Australian Energy Market Operator (AEMO). COAG Energy Council Regulation Impact Statement (RIS) In late December 2018, the COAG Energy Council Senior Committee of Officials released the terms of reference for a RIS on the recent raft of gas pipeline regulation reform actions. APA has been engaging in this process and an initial draft public report for consultation is expected to be released in October 2019. Security of Critical Infrastructure The Federal Government introduced the Security of Critical Infrastructure Act 2018 in April 2018 with the objective of providing a framework for managing risks to national security relating to critical infrastructure by improving transparency of ownership and operational control of critical Australian infrastructure. All required information on APA’s assets and investment assets which met the threshold criteria under the legislation was submitted to the Critical Infrastructure Register during the reporting period. This included information on pipelines, gas storage facilities, power stations and electricity interconnectors. APA continues to work with the Critical Infrastructure Centre to ensure completeness and accuracy of existing and new assets in the register. Regulatory resets The diagram below outlines the scheduled regulatory reset dates for pipelines owned and operated by APA. During FY2019, approximately 8.3% of APA’s Energy Infrastructure revenues were revenues that are subject to regulated outcomes. Calendar year 2019 2020 2021 2022 2023 2024 Goldfields Gas Pipeline Amadeus Gas Pipeline Roma Brisbane Pipeline Victorian Transmission System Current regulatory period Next regulatory period APA GROUP — ANNUAL REPORT 2019 — 33 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 9. Regulatory Matters, Energy Policy and Energy Industry Developments (continued) Key regulatory matters addressed during the year included: Goldfields Gas Pipeline access arrangement The Western Australian Economic Regulation Authority has released a draft decision on proposed revisions to the Access Arrangement for the Goldfields Gas Pipeline, which had been submitted to the regulator for approval in December 2018. The draft decision is in accordance with current legislation, and applies only to the covered (regulated) capacity in the pipeline. A recommendation, by the AEMC, that the uncovered capacity of otherwise covered pipelines be covered, and regulated, has not yet been resolved. A final decision on the Access Arrangement revision proposal is expected from the Economic Regulation Authority late in 2019. Regulator WACC decision In December 2018, the Australian Energy Regulator and the Economic Regulation Authority of Western Australia published their respective rate of return instruments that are binding on regulated businesses and the regulator until December 2022. Although there are some differences in the detail contained within each instrument, the resulting rates of return are very similar. APA understands the need to ensure that energy prices are as affordable as possible and that allowed returns have a direct linkage to energy prices. However, regulators over the last few years have reduced allowed returns to a level where continued investment in essential energy infrastructure is threatened. APA does not see this as being in the long term interest of consumers, particularly where pipeline construction and expansion needs to be encouraged to ensure supply from new gas fields is developed. Energy industry developments The Energy Charter – industry initiative APA plays a key role in delivering energy throughout Australia. We want that energy to be affordable, reliable and sustainable for all Australians and note the challenges in achieving this, particularly as the energy industry transitions towards a lower carbon future. We are one part of the energy industry supply chain and understand that to deliver on these objectives, each business across the whole of the energy supply chain needs to play its part. In that context, APA was a driving force behind the Energy Charter initiative. The Energy Charter brings together businesses across the gas and electricity supply chains under a common set of principles and more detailed principles in action to improve customer outcomes. Currently, there are 18 signatories to the Energy Charter. APA is committed to the 5 principles of the Energy Charter: 1) We will put customers at the centre of our business and the energy system 2) We will improve energy affordability for customers 3) We will provide energy safely, sustainably and reliably 4) We will improve the customer experience 5) We will support customers facing vulnerable circumstances Signatories are required to disclose their performance against each principle and principle in action on an annual basis. The first disclosure reports are due to be provided to an independent Accountability Panel by 30 September 2019. Signatories’ disclosure reports will be publicly available. The Panel will evaluate the disclosures and publish a report setting out findings and recommendations for continuous improvement by each business and the industry as a whole by 30 November 2019. APA’s Energy Charter disclosure report and the Accountability Panel report will be available on the Energy Charter Accountability Panel website, as well as being accessible via APA’s website. initiative, APA has APA’s Customer Promise Initially developed independently to the Energy reviewed the Charter ‘customer experience’ from the perspective of our infrastructure customers. This included independent customer surveys seeking feedback on what is important to each customer and their current perception of what APA does well and what needs improvement. APA’s Customer Promise is a commitment by all of our employees, whether directly customer facing or not, about listening to our customers, ensuring we have the right structure and tools that our people  can respond and doing what we say we’ll do. 34 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 9. Regulatory Matters, Energy Policy and Energy Industry Developments (continued) The Principles of APA’s Customer Promise are consistent with the Principles of the Energy Charter and therefore both initiatives come together to improve APA’s customer centric culture. The Customer Promise was launched internally during the first half of FY2019 through a series of workshops and presentations across APA’s operations Australia-wide. The external rollout of APA’s commitment to customers took place throughout July and August 2019 on the east coast, with the launch for Western Australian customers in October 2019. 10. Sustainability APA believes that climate change is one of the most significant issues facing the energy industry and the Australian community in general. We also believe that natural gas and our diversified energy asset portfolio will play an important role in the shift to a lower carbon future. APA also recognises and is working to address the challenges in the energy industry to restore trust, ensure reliability of energy supply whilst also driving improved affordability and reduced emissions. For APA sustainability means: — We are active in helping to displace more carbon-intensive options – like coal or oil – both in Australia and overseas; — We are proactive in continuing to grow and build our portfolio of renewable energy assets such as wind and solar; — We will investigate, develop and invest in solutions to support renewable energy with firming capacity; — We will explore, collaborate and actively support the design, testing and commercialisation of cleaner energy sources (such as hydrogen and renewable methane) where it makes sense to do so; — We put our customers at the centre of what we do; — We operate our assets safely and efficiently whilst also understanding, measuring and ultimately looking to reduce our impact on the environment; and — We engage with all our stakeholders – customers and consumers, employees, contractors, investors, landowners, communities, regulators and policy makers – regularly and honestly. APA initiated an enterprise wide environmental, social and governance (ESG) review and improvement program in FY2018 and progressed in FY2019 to assess our current capabilities in respect of ESG criteria, and to identify improvements to both our capabilities and disclosures. Key elements of the program include: — Assessing climate risk utilising the Task Force on Climate-related Financial Disclosures (TCFD) including analysis of three divergent climate related scenarios to identify climate related risks and opportunities for APA over the next ten years; — A review of APA’s environmental management practise to ensure APA is meeting or exceeding environmental regulatory compliance; and — Reviewing and implementing improvements in the processes and systems to gather and verify data for greenhouse gas reporting. This is a multi-year improvement program. In terms of reporting on FY2019 progress and outcomes, a comprehensive Sustainability Report has been prepared as a complement to this Directors’ Report. It is available on APA’s website (www.apa.com.au) under both the About APA/Sustainability section and Investors/Reports and Presentations sections. Sustainability is a whole of company responsibility, championed by APA’s Board who are supported by the Audit and Risk Management Committee and the Executive Risk Management Committee. The FY2019 Sustainability Report details APA’s approach to climate change governance; identification of material financial and non-financial risks against TCFD; our performance and initiatives in relation to our customers, our people and safety, the environment and communities and suppliers. Included in the Directors’ Report below is a summary of APA’s Health and Safety Reporting and Environmental and Compliance Reporting. From the scenario analysis and risk assessment undertaken, APA is confident that our business is physically and financially resilient to climate related transitional and physical risks for at least the next ten years. The business will continue to monitor and assess emerging risks and opportunities in relation to climate change. As we mature in the use of TCFD, we anticipate that the time horizon used for future scenario analysis will be extended beyond ten years to be more consistent with the long-lived nature of our assets. Natural gas and gas peaking plants serve a critical role now and into the future in supporting the integration of renewable energy into Australia’s National Electricity Market and continuing to displace more carbon intensive fossil fuels such as black and brown coal and oil. APA believes Australia should leverage its current and future investments in gas and gas related infrastructure to deliver long term, reliable, secure and cost-effective carbon reductions. APA is committed to providing stakeholders with improved metrics to fairly assess the management of climate related impacts and more detailed work on appropriate metrics and targets will commence in FY2020. APA GROUP — ANNUAL REPORT 2019 — 35 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 10.1 Health and safety reporting APA aspires to a zero harm workplace for its employees and contractors. In FY2019, the Total Reportable Injury Frequency Rate (TRIFR) was 5.98, down from 8.94 in FY2018. The TRIFR metric includes employees and contractors. The reduction in injuries can be attributed to the increased focus placed on Health and Safety during the year. Activities such as APA’s active monitoring program requires our leaders to engage with employees on Health and Safety topics and the continued use of ‘lessons learned’ communications arising from incident investigations to help further prevent injuries and incidents. Importantly, there were no fatalities of employees or contractors in FY2019 (FY2018: nil). APA’s current Health, Safety and Environment (HSE) Strategic Plan has been 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. The HSE Plan consists of seven strategic themes: Strategic Theme Planned Outcomes Total Reportable Injury Frequency Rate (TRIFR) 15 10.41 10 5 0 7.5 8.94 5.98 FY16 FY17 FY18 FY19 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. Fitness for Work Healthy employees promoting APA as a great place to work resulting in improved efficiencies Environment Management Improved environmental compliance & awareness achieved across APA Contractor Mangement Improved contractor performance & reduction in contractor incidents HSE Leadership & Behaviours Leaders are uncompromising & engage employees and contractors in HSE conversations and support behaviours Safety Days Safety Days contribute to educating our workforce on HSE risks & become a hub for sharing HSE information Fatal Risk Protocols Fatal Risk Protocols are well understood & all risk controls implemented Safeguard Improvements Safeguard HSE Management System is well understood & consistently applied across all of APA Culture Compliance Each strategic theme includes detailed implementation plans. An example of this in action was the revision of APA’s Alcohol and Drug Policy under the Fitness for Work theme as well as developing and implementing a new Alcohol and Other Drugs protocol which now includes random alcohol testing at APA sites. Increasing the profile of these important health and safety issues through education at work can also help positive impacts flow on to our people in their lives outside of APA. The use of contractors in APA is an essential part of our extensive and diversified business. While we have seen some improvement of the Health and Safety metrics in FY2019 for Contractors, we will continue to keep a focus on improving performance in this area. During the year we have conducted Contractor Safety performance reviews directly with some of our contractors to discuss and work to improve safety performance. This forum also provides an opportunity for contractors to provide direct feedback to APA on its systems and processes. During the reporting period, APA also commenced initial Health and Safety culture assessments within the Transmission and Networks businesses to understand the level of safety culture maturity of work teams. These culture assessments resulted in the development of plans with each team, identifying the actions they will take to further progress their safety performance. Some of the common themes to arise from the assessments included action plans to improve both the timely reporting of incidents and ensuring timely closure of corrective actions arising from incident investigations and audits. The safety culture maturity assessment program will continue throughout FY2020 as APA recognises this is an area of importance to further improve our overall safety culture and performance. As part of APA’s continuous focus on safety, we have refreshed our Fatal Risk Protocol Awareness program addressing our nine Fatal Risk Protocols (FRP) including driving, confined spaces and working at heights. One of the initiatives developed and implemented during the reporting year included using ‘storytelling’ methods and videoing some of our leaders reliving either actual or near fatal risk events that may have resulted during their career, and the personal impact on them. The FRP program also includes a follow-up brief training and assessment program to ensure that employees understand the key risk preventive measures documented in our FRP’s. This program has been a big success at APA with our employees providing a lot of positive feedback as it generates extensive discussions throughout the company. Each year APA employees drive over 16 million kilometres travelling into remote and isolated parts of Australia. Since the introduction of the In-Vehicle Monitoring System to all of our Transmission vehicle fleet in FY2017, we are now using this data to help us to further improve driver safety performance. An example is the development of a driver safety scorecard that provides drivers with their individual driver safety performance score, which also recognises good driver safety performance. This performance scorecard provides drivers with the opportunity to self-correct any potential unsafe driving practices such as speeding and allows leaders to have meaningful discussions with employees. The introduction of the driver safety scorecard has seen a marked improvement of driver safety performance. 36 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 10.1 Health and safety reporting (continued) Process Safety ~ empowering employees to operate safely APA has grown significantly since listing in June 2000 with 6 employees and around 7,000 kilometres of pipeline interests and/or ownership. Today, APA is hugely different in terms of size and diversity of the energy infrastructure within its portfolio. With more than 1,800 employees across mainland Australia, the business now owns and/or operates assets in excess of $21 billion of assets across mainland Australia. What hasn’t changed however, is APA’s commitment to Zero Harm for all employees and contractors. Therefore, there was a need to develop a comprehensive framework to manage process safety. Process safety is where the necessary processes, systems and behaviours are in place to empower APA employees and contractors to operate assets safely, such that there is no major accident event as a result of an energy or harmful substance release. During the reporting period, APA began a roll out of process safety principles and systems across the business. These included: — Updating of APA’s HSE management system and fatal risk protocols — Development and improvement of a range of key processes and systems — Training in process safety fundamentals A pilot roll out of the APA process safety fundamentals workshop was completed at key locations in FY2019 to determine if the right approach was being undertaken to ensure maximum benefit and learnings. Following positive feedback from the pilot workshops, training programs have commenced for all who work with or support APA’s Transmission and Midstream assets. This segment of the program is due for completion at the end of 1st quarter 2020. Plans are in place to roll out the programs across the Networks and Power businesses in FY2021. Ongoing improvements are on foot to ensure the systematic management of process safety risks is also underway. For further information on APA’s health and safety initiatives, please refer to APA’s FY2019 Sustainability Report. 10.2 Environmental compliance and reporting APA operates its assets under a number of approved environmental regulatory instruments within relevant federal, state and territory jurisdictions. Collaboration between APA’s Technical & Regulatory and Environment & Heritage Team 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 requirements of the relevant regulatory departments. APA received one regulatory notice relating to environmental compliance during the reporting period as a result of the late submission of the annual National Pollutant Inventory (NPI) report for Daandine Power Station. APA complies with all periodic and ad hoc federal, state and territory environmental reporting obligations. 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 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 FY2018 as reported under NGER compliance, are set out in the table below. During the reporting period, APA worked with the Clean Energy Regulator (CER) to conduct a quality review of APA’s current and historic emissions reporting figures. As a result of that review, FY2018 and FY2017 Scope 1 and 2 emissions and energy consumption figures have changed from those reported in our previous disclosures. The changes are due to identified unit and accounting errors, now rectified in APA’s emissions reporting processes and agreed with the Clean Energy Regulator. Scope 1 (1) CO2 emissions (tonnes) Scope 2 (2) CO2 emissions (tonnes) Energy consumption (3) (GJ) FY2018 FY2017 Change 1,205,766 1,241,632 178,445 367,387 25,777,203 26,793,268 (2.9)% (51.4)% (3.8)% 1) Scope 1: emissions associated directly with APA facilities, such as company vehicles, ‘fuel combustion’ and fugitive emissions from gas pipelines. 2) Scope 2: are indirect emissions such as consumption of purchased electricity/fuel not generated by the facility but used under its operations or electricity line loss. 3) Energy Consumption is referring to the total calculation of all energy consumed and produced by APA across all facilities. APA GROUP — ANNUAL REPORT 2019 — 37 Process Safety Fundamental Expectations1. Always report process safety risk and participate in the solution.2. Always report and investigate process safety incidents.3. Always follow safety critical procedures and permit to work.4. Always operate with safety critical devices armed unless authorised to deviate.5. Always operate within safe operating limits.6. Always respond to alarms and prioritise during abnormal operation.7. Always act and report harmful substance releases.8. Always obtain authorisation before modifying assets.FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 10.2 Environmental compliance and reporting (continued) The significant reduction in Scope 2 emissions from FY2017 to FY2018 is almost entirely attributable to line loss from the Directlink Interconnector. Whilst the CER has confirmed their satisfaction with the Scope 2 data, APA is undertaking additional work to understand the reasons for the variance, including investigating operational trends as well as the integrity of line loss raw data. 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. FY2019 data will be submitted in October 2019. For further information on APA’s environmental management strategy and initiatives, please refer to APA’s FY2019 Sustainability Report. 11. 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 Divisions and both internal and where appropriate, external, experts. The Risk Management System brings together the principles and processes to ensure risk is effectively identified, managed and monitored. It comprises three elements covering Risk Management Policy and Risk Appetite; Risk Management Enablers providing for governance, a strong risk culture, technology support and ongoing training; and the Risk Management Framework which sets our key risk management processes. The Risk Management System is aligned to the international risk standard ISO 31000. All other functional risk frameworks align to the 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 likelihood 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 and APA’s website at https://www.apa.com.au/about-apa/our-organisation/corporate-governance/. APA Group Board APA Group Audit & 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 Executive Risk Management Committee 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 APA Risk Management – Review current and emerging material risks – Review key risks and compliance policies – Review insurance arrangements – Review risk strategy and framework – Approve crisis management plan – Promote a risk aware culture 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 Risk – People, Safety & Environment Risk – Process Risk – Treasury Risk – Project Risk 38 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 11.1 Key risks Type of Risk Description Key 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 (in Australia versus other countries), relative to competing energy sources and new technologies or gas swap contracts, may reduce demand levels for services on APA's assets and may adversely affect APA’s contracted revenue and the carrying value of APA’s assets. Gas supply risk Gas seen as unacceptable as a fossil fuel 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. Shift in consumer sentiment due to community and environmental focus on gas being unacceptable as a fossil fuel rather than viewed as a fuel to support a cleaner energy future. This may adversely affect APA’s contracted revenue and the carrying value of APA’s assets. Counterparty risk The failure of a counterparty to meet its contractual commitments to APA, whether in whole or in part, could reduce future anticipated revenue, unless and until APA is able to secure an alternative customer. — 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 pro-active management of business development opportunities. — Ensure costs and pricing associated with the provision of services remain competitive and provide value to the market. — Asset management plans aligned with capacity contracting strategy. — Monitoring commodity markets, export outlook and gas market developments for throughput impacts. — Flexible services supporting the needs of customers, including gas fired generators. — Long term gas storage / transportation agreements. — Development of new and innovative services that provide flexibility. — Recontracting strategy and market monitoring. — Knowledge and monitoring of gas reserves to identify potential opportunities. — Leverage knowledge and understanding of advances in the transportation of alternate fuels utilising existing gas infrastructure. — Develop strategies to broaden exposure to markets which favour gas. — Extend and refine strategies on alternate fuel / infrastructure consistent with APA’s outlook on future energy mix. — Portfolio of investment grade credit rated customers. — Strong counterparty credit due diligence with customer credit exposures closely monitored. — Contractual credit support arrangements in place. APA GROUP — ANNUAL REPORT 2019 — 39 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 11.1 Key risks (continued) Type of Risk Description Contract renewal risk Reputation risk Climate Risk Due to a range of factors, APA may not be 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 transition impacts of climate change including increases in temperature, sea levels, and the frequency of adverse climatic events including fires, storms, floods and droughts. Key Management Actions to Mitigate Risks — Recontracting strategy in place with close monitoring of contract renewal portfolio. — Monitoring of emerging gas supply alternatives and power generation market developments to identify new 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). — Identified climate transition risks together with impacts on energy infrastructure asset revenues based on temperature scenarios and a time horizon of 10 years. 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 banking and debt capital markets maintained. — Risk limits set by the Board and 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. Foreign exchange risks Investment risk Credit rating risks APA is subject to currency fluctuations in relation 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. 40 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 11.1 Key risks (continued) Type of Risk Description Key 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 Information technology and cyber 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 including the physical risks associated with climate change. 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 impacting liquidated damages, 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. — APA’s information and technology assets are managed in accordance with recognised industry standards across hardware, software, applications and communication systems. — Cyber security standards are applied consistently across APA information and technology systems, including those managed by third party vendors, with standards continually assessed against new threats and vulnerabilities. — I&T information and technology systems including SCADA control systems, 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 climate change regulations, 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, safety and environment compliance. APA GROUP — ANNUAL REPORT 2019 — 41 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 12. Directors 12.1 Information on Directors and Company Secretary See pages 06 to 07 for information relating to the qualifications and experience of Directors and the Company Secretary. 12.2 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 Michael Fraser Robert Wheals Steven Crane James Fazzino Debra Goodin Shirley In't Veld Peter Wasow Company Period of directorship Aurizon Holdings Limited Since February 2016 — — nib holdings limited SCA Property Group Since September 2010, Chair since October 2011 Since December 2018 Incitec Pivot Limited July 2005 to November 2017 Senex Energy Limited oOh!media Limited Atlas Arteria Limited Ten Network Holdings Limited Since May 2014 Since November 2014 Since September 2017 August 2016 to November 2017 Northern Star Resources Limited Since September 2016 Asciano Limited DUET Group November 2010 to August 2016 August 2013 to May 2017 Oz Minerals Limited Alcoa Australia Limited Alumina Limited Since November 2017 January 2014 to July 2017 September 2011 to May 2017 12.3 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 three 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 (1) Steven Crane James Fazzino Debra Goodin Shirley Int’d Veld Peter Wasow Russell Higgins (2) Patricia McKenzie (3) A 17 14 17 6 17 17 17 11 11 B 17 14 17 6 17 17 17 11 10 A — 4 — — 4 4 — 2 B — 3 — — 4 4 — 2 A 4 — 4 1 4 — 4 3 — B 4 — 4 1 4 — 4 3 — A — — — 2 4 4 — 2 2 B — — — 2 4 4 — 2 1 A 3 — 1 — 3 — — 2 — B 3 — 1 — 3 — — 2 — A) Number of meetings held during the time the Director held office or was a member of the committee during the financial year. B) Number of meetings attended. 1) Michael McCormack retired as a Director on 5 July 2019. 2) Russell Higgins AO retired as a Director on 20 February 2019. 3) Patricia McKenzie retired as a Director on 8 March 2019. 42 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 12.4 Directors’ securityholdings The aggregate number of APA securities held directly, indirectly or beneficially by Directors or their related entities at 30 June 2019 is 683,693 (2018: 800,118 (1)). The following table sets out Directors’ relevant interests in APA securities as at 30 June 2019: Directors Michael Fraser Michael McCormack Steven Crane Debra Goodin James Fazzino (2) Shirley Int’d Veld Peter Wasow Russell Higgins AO (3) Patricia McKenzie (4) Fully paid securities as at 1 July 2018 Securities acquired Fully paid Securities securities as at 30 June 2019 disposed 102,942 350,000 130,000 23,000 — 25,000 15,000 129,939 24,237 800,118 — — — — 31,751 — 6,000 — — 37,751 — — — — — — — — — — 102,942 350,000 130,000 23,000 31,751 25,000 21,000 — — 683,693 1) At 1 July 2018 the aggregate number of APA securities held directly or beneficially by Directors or their related entities included 129,939 securities held by Russell Higgins AO who retired on 20 February 2019 and 24,237 securities held by Patricia McKenzie who retired on 8 March 2019. The aggregate number of APA Securities held directly or beneficially by the current Directors or their related entities as at 30 June 2019 is 683,693. 2) James Fazzino was appointed as a Director effective 21 February 2019. He held nil securities on appointment. 3) Russell Higgins AO retired as a Director on 20 February 2019. He held 129,939 securities on retirement. 4) Patricia McKenzie retired as a Director on 8 March 2019. She held 24,237 securities on retirement. 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. 13. 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. 14. 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. APA GROUP — ANNUAL REPORT 2019 — 43 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES 15. Remuneration Report The Remuneration Report is attached to and forms part of this report. 16. Auditor 16.1 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 110. 16.2 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. Information Required for Registered Schemes 17. 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. 18. 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. 19. 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/. 20. 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, 21 August 2019 Debra Goodin Director 44 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationremuneration report. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Letter from the Chairman of the People and Remuneration Committee Dear Securityholders, I am pleased to present APA Group’s Financial Year 2019 (FY2019) Remuneration Report (Report). While the Report covers the FY2019 reporting period, I also wanted to highlight some of the changes to the APA leadership that have taken place early in the new financial year and provide an overview to the changes arising from a review of APA’s executive remuneration strategy. APA operates in a rapidly changing business environment and the Board considers the attraction and retention of world class executives as key to the company’s success. Mick McCormack led APA since 2005, playing a pivotal role in its success and laying the foundation for APA’s performance over the longer term. With the announcement of Mick’s retirement, the Board conducted a global external and internal search for his replacement, reflecting the Board’s commitment to appointing an executive of the highest calibre. In early July 2019, Rob Wheals took up the position of APA’s Chief Executive Officer and Managing Director. Throughout the year, the Board embarked on a thorough review of its executive reward framework. The result of this review is a number of changes to APA’s remuneration strategy for FY2020 and beyond. The details of these changes are provided within the Report and include: — The introduction of a greater relative weighting to the long term incentive; — A short term incentive deferral plan; and — An equity based performance rights plan. These initiatives reflect the feedback from our stakeholders concerning the need to ensure that remuneration outcomes are appropriately aligned with our performance over the longer term. They are underpinned by a commitment to creating long term sustainable value for our Securityholders and supporting our customers and the communities in which we operate. Peter Wasow Chairman – People and Remuneration Committee 21 August 2019 Individuals covered by this Remuneration Report 1. The Remuneration Report for APA for FY2019 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 Key  Management Personnel (KMP): — Non-executive Directors (NEDs) – current and former; and — Executive Key Management Personnel (KMP). Name NEDs Michael Fraser Steven (Steve) Crane James Fazzino Debra (Debbie) Goodin Shirley In’t Veld Peter Wasow Russell Higgins AO Patricia McKenzie Executive KMP Role Chairman Director Director Director Director Director Director (former) Director (former) Michael (Mick) McCormack Chief Executive Officer/Managing Director (CEO/MD) Peter Fredricson Ross Gersbach Chief Financial Officer (CFO) Chief Executive Strategy and Development Robert (Rob) Wheals Group Executive Transmission Term as NED/KMP in 2019 Full year Full year Part year (1) Full year Full year Full year Part year (2) Part year (3) Full year Full year Full year Full year 1) Appointed 21 February 2019. 2) Retired 20 February 2019. 3) Retired 8 March 2019. APA GROUP — ANNUAL REPORT 2019 — 45 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationremuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 2. Executive Summary 2.1 FY2019 Remuneration highlights The table below provides a snapshot of the outcomes under the relevant remuneration frameworks. APA’s financial performance FY2015 to FY2019 Normalised financial results (4) FY2015 FY2016 FY2017 FY2018 FY2019 Earnings Before Interest Tax Depreciation and Amortisation(EBITDA)($m) 822.3 1,330.5 1,470.1 1,518.5 1,573.8 Profit after tax ($m) Operating cash flow per security (cents) (5) Distribution per security (cents) (6) Closing security price at 30 June ($) 203.9 179.5 236.8 264.8 288.0 56.3 38.0 8.24 77.1 41.5 9.24 87.1 43.5 9.17 90.7 45.0 9.85 85.8 47.0 10.80 Fixed pay Some 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. 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 The focus of APA’s variable remuneration is to reflect management’s contribution to APA’s business outcomes during the performance period. The average total remuneration was down 3.8% on FY2018. t i o n a r e e t o t al remun Avera g -3.8% e K M se for Exe c u t i v a e r c i n P Short term incentive 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 FY2019, OCFPS performance was assessed at 111.2% out of a maximum of 150%. This provides the total opportunity to which the individual executive performance outcomes are applied. Long term incentive Reflecting the link between organisational performance and executive reward, APA achieved a relative percentile rating of 59.5%, which equated to a grant of 77.3% of eligible reference units under the Relative TSR performance hurdle. The internal hurdle, EBITDA/ Funds Employed (FE), achieved an outcome of 119.5%. This means that 98.4% of the total LTI opportunity will be awarded in respect of the FY2019 financial year. FY2018 79.0% FY2019 73.1% STI outcome as % maximum 120 90 60 30 0 (30) 0 20 40 60 80 100 JUN 14 JUN 15 JUN 16 JUN 17 JUN 18 JUN 19 APA ASX/S&P 200 Utilities ASX/S&P 100 APA Market Cap Ranking in ASX100 Minimum security holding requirements The Directors, CEO/MD and CFO met the minimum security holding requirement, while the remaining Executive KMP continued to progress towards the expected level for this requirement. Non-executive Director fees Non-executive Director (NED) fees had remained unchanged since FY2017. In FY2019, a review of the NED fees against the market was undertaken. This analysis considered NED fees for organisations of a comparable market capitalisation and commercial ‘footprint’, and an assessment of the level of fee required to attract and retain talented individuals. Following this review, the Board determined to apply a moderate increase of 2% to NED fees, excluding the Chairman and retiring members, effective 1 January 2019. No changes have been made to Committee fees. 4) Normalised financial results are the statutory financial results excluding significant items. The Board considers these measures to best reflect the core earnings of APA. 5) The number of securities used for the calculation of operating cash flow per security from FY2015 to FY2018 has 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 has been further adjusted by an adjustment factor of 1.0360 to reflect the discounted rights offer issued between 23 December 2014 and 25 January 2015. 6) Represents the total distribution applicable to the financial year. 46 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationremuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 2.2 FY2019 Remuneration The table below summarises the actual remuneration that the current executive KMP became entitled to in respect of services provided in FY2019. These amounts were either paid during the year or will be paid subsequently to the end of the financial year. Name M McCormack P Fredricson R Gersbach R Wheals Fixed pay (7) $ STI (8) $ LTI vested (9) $ 2,005,000 1,649,920 926,000 945,000 850,000 510,970 497,220 480,670 1,527,167 474,360 484,120 394,190 Total $ 5,182,087 1,911,330 1,926,340 1,724,860 This table supplements, and is different to, the Statutory Remuneration table in section 8.1, which presents the accounting expense for both vested and unvested awards in accordance with the Australian Accounting Standards. 2.3 Looking ahead to Financial Year 2020 (FY2020) The Board undertook an extensive review of its executive reward framework over the last 12 months. The objective being to ensure that the executive team is rewarded for focusing on what they can influence and how they can effectively execute APA’s business strategy. Performance outcomes should also reflect the expectations of Securityholders. This goal is achieved through a significant element of remuneration being at risk, largely delivered through equity, by setting challenging STI measures and by ensuring that LTI performance measures encourage the delivery of long term value creation to APA’s Securityholders. The specific content of these changes is detailed below. It should be noted that these changes are effective 1 July 2019 and do not impact the delivery of remuneration outcomes for the FY2019 performance period. As part of the transition to the new executive remuneration framework, APA will operate two LTI plans for FY2020. Pay Mix The appointment of a new CEO/MD provided an opportunity to consider how the balance between fixed and variable pay was aligned to APA’s longer term business model. As part of the broader review, the pay mix for the incoming CEO/MD was weighted more towards longer term performance and value creation for Securityholders. Fixed pay We will continue to set fixed pay levels with reference to comparable external benchmarks. Short term incentive (STI) From FY2020 we are moving from a 100% cash based STI plan to a proportion of the STI award now being delivered in deferred securities. Under the terms of the new STI plan, executives will be required to defer a third of their STI into APA securities for at least two years until such time as the executive achieves the minimum securityholding requirement. Once that requirement is met the executive can receive their STI as 100% cash. The purpose of introducing a deferred element to the STI is to enhance the alignment between the interests of Securityholders and the executives by building the security holdings of executives. Consistent with prior financial years, balanced scorecards will be established for each Executive KMP, covering key performance indicators across financial and risk management, strategic, people and culture, safety and environment with measures for target and stretch outcomes in FY2020. Long term incentive (LTI) FY2020 will see the implementation of a new LTI plan. Under this new plan we are moving from a cash- settled LTI plan to an equity-settled performance rights plan. The Board continues to believe that the LTI plan provides the most effective link between executive retention and alignment with the creation of longer term Securityholder value. Accordingly, effective 1 July 2019, the Executive KMP will be eligible to participate in an equity-settled performance rights plan. The purpose of moving from a cash-settled LTI plan to an equity-settled one is to drive the longer term outlook for executives by aligning executive and Securityholder interests, whilst continuing to attract, motivate and retain leadership talent. Performance will be assessed over a three-year performance period, and vesting of performance rights will occur over the following three years, i.e. one third at the end of year three, one third at the end of year four and the outstanding third at the end of year five. 7) 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. 8) STI refers to performance achieved in FY2019 and is paid in September 2019. 9) LTI vested refers to the cash amount to be paid in September 2019, based on the VWAP of $11.0155 and number of reference units that vested in August 2019 as outlined in section 8.3. APA GROUP — ANNUAL REPORT 2019 — 47 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information remuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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; — Ensure an appropriate component of remuneration is linked to the creation of value for our investors; and — Promote the right behaviour and culture for the organisation to grow and perform. 3.1 Remuneration overview for FY2019 The following timeline illustrates the time frame for the assessment and delivery of fixed remuneration and variable reward under the current plans. Jul 16 Jul 17 Jul 18 Jul 19 Jul 20 Jul 21 Jul 22 Jul 23 Fixed Pay Fixed pay for following year assessed August 2019 STI performance STI Award based on performance 1 July 2018 to 30 June 2019 Paid September 2019 LTI – allocation performance period 1/3 vesting (after 2 years) 1/3 vesting (after 1 year) 1/3 vesting (after 3 years) 3.2 Remuneration structure for FY2019 The graphs below provide an overview of the pay mix for Executive KMP. Each remuneration element is expressed as a percentage of the target total reward opportunity. 30% 25% CEO/MD 40% Other Executive KMP 50% 30% 25% Fixed pay STI LTI Fixed pay STI LTI 48 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationremuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 3.2 Remuneration structure for FY2019 (continued) 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. 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 ‘gate opener’ for the payment of the STI is determined by the Group’s Operating Cash Flow per Security (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. Under the current LTI plan, 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. 4. FY2019 Executive Incentive Plans and Outcomes 4.1 Short term incentive plan The diagram below outlines the STI plan design for FY2019. r e i f i d o m d n a r e n e p o 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 & Risk Management Strategic Safety & environment People & culture 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 gate opener performance set by the Board is met. If the gate opener 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. APA GROUP — ANNUAL REPORT 2019 — 49 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information remuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 FY2019 STI outcomes – CEO/MD The Board reviewed the CEO/MD’s performance in light of APA’s performance in FY2019, taking into account his performance against the key performance indicators (KPIs) in his STI scorecard, and determined that the STI outcome is 91.9% of his Target. This year’s STI scorecard outcome for the CEO/MD is higher than FY2018. FY2019 STI Scorecard outcomes – CEO/MD Scorecard Areas KPI M McCormack Commentary Financial Deliver Operating Cash Flow per Security (OCFPS) targets Weighting 50% Operating Cash Flow per Security (OCFPS) fully achieved Delivery of capital projects Outcome 95.8% Delivery of capital projects largely achieved Strategic Regulatory Compliance Management Weighting 30% Outcome 80% Regulatory Compliance Management largely achieved Safety & Environment Total Recordable Injury Frequency Rate (TRIFR) Environmental Management Plan (EMP) People & Culture Key people retention Diversity & Inclusion Weighting 10% Outcome Weighting 10% Outcome Total Recordable Injury Frequency Rate (TRIFR) target exceeded 100% Delivery of Environmental Management Plan (EMP) fully achieved for FY2019 Retention target achieved 100% Diversity & Inclusion plans and targets achieved Scorecard measures for the other Executive KMP reflect the priorities of the relevant area of the business as well as APA as a whole. FY2019 STI scorecard outcomes for the Executive KMP ranged between 87.9% and 95.0% of Target (i.e. 100%). However, 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. 50 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationremuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 FY2019 performance outcomes – Executive KMP Detailed below are the individual scorecard outcomes for 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 contribution to APA’s business outcomes. FY2019 STI Scorecard outcomes Scorecard Areas P Fredricson R Gersbach R Wheals Financial & Risk Management Deliver Operating Cash Flow Per Security (OCFPS) targets Maintain BBB/Baa2 ratings Divisional Risk Management Deliver OCFPS targets Delivery of capital projects Weighting 50% Weighting 45% Deliver OCFPS targets Delivery of capital projects Achieve budget Transmission revenue targets Divisional Risk Management Weighting 45% Outcome 100% Outcome 93.1% Outcome 97.8% Strategic Capital Management Capacity Trading & Auction (CT&A) delivery Regulatory Compliance Management Regulatory Compliance Management, Customer, Safety, Operations & Resource Management, Capacity Trading & Auction (CT&A) delivery Weighting 35% Outcome 85.7% Weighting 30% Outcome 80% Weighting 25% Outcome 88% Safety & Environment Total Recordable Injury Frequency Rate (TRIFR) Total Recordable Injury Frequency Rate (TRIFR) Total Recordable Injury Frequency Rate (TRIFR) Transmission Operations Safety plan Environmental Management Plan (EMP) delivery Weighting 5% Outcome Weighting 5% Outcome 100% Weighting 15% Outcome 100% 93.3% People & Culture Leadership & Succession Next generation IT strategic plan Orbost operational readiness Key people retention Diversity & Inclusion Customer Centricity program Weighting 10% Outcome 75% Weighting 20% Outcome Weighting 15% Outcome 85% 100% FY2019 STI outcomes – Executive KMP The table below provides an overview of the STI outcomes for FY2019, 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 111.2% out of a maximum of 150%). In recognition of the strong leadership and performance of the Executive during the defence of the CKI bid, which was not adequately recognised in individual scorecards, the Board has granted an additional 5% of maximum opportunity to the final STI outcomes of each Executive KMP. Executive KMP M McCormack P Fredricson R Gersbach R Wheals STI earned STI forfeited % of maximum opportunity (10) $ earned % of maximum opportunity $ foregone 73.1% 73.6% 70.2% 75.4% 1,649,920 510,970 497,220 480,670 26.9% 26.4% 29.8% 24.6% 605,705 183,530 211,530 156,830 10) The STI earned as % of maximum opportunity includes the additional 5% Board discretion. APA GROUP — ANNUAL REPORT 2019 — 51 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information remuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 4.2 Long term incentive plan 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 FY2019. Jul 16 Jul 17 Jul 18 Jul 19 Jul 20 Jul 21 Jul 22 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 Less than 50 percentile 0% of eligible reference units Relative TSR EBITDA/FE Between 50 percentile and 82.5 percentile Sliding scale between 0% and 150% of eligible reference units Less than 10.844% 0% of eligible reference units Greater than 10.844% Sliding scale between 80% and 150% of eligible reference units FY2019 LTI outcomes Eligible executives received cash-settled reference units with an allocation date of August 2019 (vesting in August and paid in September over the three following years of 2020, 2021 and 2022 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 FY2016 FY2017 FY2018 FY2019 Performance assessment LTI awarded % of Relative TSR (50%) EBITDA/FE (50%) maximum allocation 85.3 73.4 0.0 51.5 62.9 83.2 63.6 79.7 74.1 78.3 31.8 65.6 Below is a summary of LTI allocations relating to FY2019 based on performance against the hurdles over the three-year performance period. These units were allocated in August 2019. Executive KMP M McCormack P Fredricson R Gersbach R Wheals Number of reference units allocated Potential value of allocation yet to vest ($) (11) 134,325 41,358 42,207 37,962 1,479,657 455,579 464,931 418,170 11) The potential value of the allocation has been estimated based on the cash award valuations at the allocation date. 52 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information remuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 5. Other Remuneration Elements 5.1 Contractual arrangements Remuneration arrangements for Executive KMP are formalised in individual employment agreements. Termination arrangements, in addition to normal statutory entitlements, are summarised in the table below. Contract type Notice period CEO/MD – outgoing (12) Permanent 12 months’ notice without cause by either APA or CEO/MD APA may provide payment in lieu of notice Additional payments on termination without cause Payments on termination with cause Restraint payment By APA: Nil By CEO/MD for Good Reasons – Restraint payment Executive KMP, other than CEO/MD Permanent Six months’ notice without cause by either APA or KMP By APA: termination payment of 13 weeks’ pay (13) Nil APA may provide payment in lieu of notice By KMP: Nil Mr McCormack retired on 5 July 2019 and in line with his Employment Agreement, the calculation of the payment in lieu of service is equal to 105% of the CEO/MD’s fixed pay for the period not worked plus 105% of his STI and LTI opportunities (pro-rated for the period not worked). The LTI component is paid out over three years after termination. Mr McCormack would also be entitled to a “restraint” payment for agreeing not to work for a competitor for a further period of 12 months for which $5.3 million has been accrued as at 30 June 2019. This payment is equal to 105% of the CEO/MD’s fixed pay plus 105% of his STI opportunity for 12 months. The LTI component (also at 105%) is paid out over three years after termination. The remuneration arrangements for the incoming CEO/MD, Rob Wheals, for FY2020 were disclosed in the announcement of his appointment on 13 May 2019. 5.2 Additional provisions The table below summarises additional provisions as they relate to the remuneration of Executive KMP for FY2019. Provision STI LTI Malus / Clawback The Board in its discretion may determine that some, or all, of an Executive KMP's STI and/or LTI awards be forfeited or be subject to a clawback in the event of misconduct or of a material misstatement in the year-end financial statements in the preceding three years. Cessation of employment If a participant resigns or is dismissed Change of control (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). 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. 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. 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 alignment of the interests of Directors, Executive KMP and investors. 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 Holding Policy in 2016. These security holdings have to be acquired from post-tax income as APA does not currently have an equity-settled LTI (this will change in the new LTI plan in FY2020). As at 30 June 2019: — 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. 12) The notice period of 12 months refers to outgoing CEO/MD, Mick McCormack. 13) Both the payment in lieu and the 13 weeks’ termination payments are calculated using the KMP’s fixed pay. The 13 weeks’ termination payment is inclusive of any statutory redundancy pay. 14) Subsequently appointed Executive KMP have three years from their date of appointment to meet the minimum security ownership requirement. APA GROUP — ANNUAL REPORT 2019 — 53 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationremuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 5.4 Sign-on / loans / termination payments provided to Executive KMP APA did not pay any sign-on payments to Executive KMP during FY2019. No loans have been made to any Executive KMP and/or related parties. No termination payments have been made to Executive KMP during FY2019. Mr McCormack’s retirement, announced on 13 December 2018, was effective on 5 July 2019. Mr McCormack received a termination payment (before withholding taxes and superannuation obligation) of $6,592,545 at the time his employment ceased. This included his fixed pay entitlements, accrued statutory leave entitlements, and payments in lieu of notice and restraint including the STI components. As Mr McCormack’s last date of employment falls in FY2020, the details of his termination payment, in addition to outstanding LTI contractual entitlements, will be reported in the FY2020 Report. 6. Non-executive Directors 6.1 Determination of Non-executive Director fees The Board seeks to attract and retain high calibre Non-executive Directors (NEDs) 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; — An additional fee for serving as Chairman of a committee; 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 at 30 June 2019 is $2,500,000 (inclusive of the applicable superannuation guarantee levy). This has not changed since 2017. 6.3 Director fees While NED fees had remained unchanged since 2017, effective 1 January 2019, a moderate increase of 2% was applied to NED member fees. The fee increase does not apply to the Chairman and retiring members and no changes have been made to Committee fees. Fees (inclusive of superannuation) Board Audit and Risk Management Committee Health, Safety and Environment Committee People and Remuneration Committee Nominations Committee Effective 1 January 2019 Chairman $000 Member $000 511.4 47.9 39.9 39.9 177.6 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 security holding is to be held throughout their tenure as NEDs and is a requirement of their employment agreement. As at 30 June 2019, all NEDs met this requirement. 54 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information remuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 purpose of the Committee is to oversee the development of APA’s people and remuneration strategies and frameworks to support the achievement of APA’s business objectives. Specifically, the Committee will ensure there is a robust remuneration and reward system that aligns employee, investor and customer interests, promotes a positive culture and facilitates effective attraction, retention and development of a diverse and talented workforce. 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 to the Board any adjustment of Directors’ fees, including Committee fees, for APA; — Annually reviewing and assessing APA’s performance and remuneration strategy and frameworks, including making recommendations to the Board regarding whether APA’s remuneration policies are aligned with its core values, purpose, strategic direction and risk appetite; — Recommending remuneration for the CEO/MD and all executives reporting to the CEO/MD, including considering whether there is a robust performance assessment process in place and, in consultation with the Audit and Risk Management Committee, whether proposed remuneration outcomes are appropriate in light of relevant risk outcomes and corporate culture; — Recommending the short and long term performance objectives for the CEO/MD and all executives reporting to the CEO/ MD, and assessment of performance against those objectives; — Developing and recommending the appointment, retention and termination policy and procedures for the CEO/MD; — Recommending the ‘at-risk’ elements of remuneration and performance targets for APA’s financial performance as they relate to incentives, including all awards made under APA’s long term incentive plan; — Reviewing and recommending changes to the contract terms of the CEO/MD or to any aspect of their remuneration not specifically addressed elsewhere in the Charter; — Approving, and providing to the Board for its noting prior to implementation, any changes to the contract terms of any member of the Executive Committee, or to any aspect of their remuneration not specifically addressed elsewhere in the Charter; — Reviewing and approving people strategies and frameworks to ensure that they support APA’s business objectives over the short and longer terms, enabling APA to attract, develop, retain and motivate employees who deliver outstanding operational performance; — Reviewing and recommending APA’s diversity policy, and assessing the effectiveness of practices and initiatives with respect to gender and other diversity in the workforce; — Recommending to the Board measurable objectives for achieving greater diversity across APA and, on an annual basis, reviewing and reporting to the Board on APA’s progress against them; — Reviewing and making recommendations to the Board in relation to whether there is any gender or other inappropriate bias in remuneration outcomes for directors, executives or other employees; — Reviewing executive and people leader development and senior succession planning (excluding CEO/MD succession which is the responsibility of the Nomination Committee); and — Overseeing the development of people and culture programs including corporate values and the Code of Conduct, which support a high performance environment and provide alignment with business strategy and requirements. 7.2 Composition of the Committee The members of the Committee, all of whom are independent NEDs, are: — Peter Wasow (Chairman); — Steve Crane; — Shirley In’t Veld; and — Patricia McKenzie (15) The CEO/MD and nominated senior executives attend meetings of the Committee by invitation. The Committee met four times during the year. 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 FY2019, the following remuneration information was obtained and considered by the Committee: — Ernst & Young provided remuneration benchmarking information and assisted with remuneration governance; — KPMG provided remuneration benchmarking information and reviewed the executive remuneration framework; 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. 15) Retired 8 March 2019. APA GROUP — ANNUAL REPORT 2019 — 55 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationremuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 8. Statutory Tables The following tables outline the amounts recognised as an expense in the respective years, determined in accordance with the relevant accounting standards. 8.1 Executive KMP Statutory Remuneration (16) M McCormack (20) 2019 2018 P Fredricson 2019 2018 R Gersbach 2019 2018 R Wheals 2019 2018 Total Remuneration 2019 2018 Short-Term Employment Benefits $ Post- Employment $ LTI Plans $ Salary (17) Awarded STI (18) Super- Security-Based Payments (19) annuation Total $ 1,980,000 1,930,000 1,649,920 1,708,690 25,000 25,000 1,515,047 1,479,646 5,169,967 5,143,336 901,000 878,000 918,334 904,931 510,970 532,960 497,220 535,330 825,000 755,000 480,670 503,680 25,000 25,000 26,666 20,049 25,000 25,000 469,591 472,995 1,906,561 1,908,955 479,246 488,139 1,921,466 1,948,449 400,124 381,368 1,730,794 1,665,048 4,624,334 3,138,780 101,666 2,864,008 10,728,788 4,467,931 3,280,660 95,049 2,822,148 10,665,788 16) This table outlines the total remuneration earned by Executive KMP during FY2018 and FY2019, calculated in accordance with the relevant accounting standard, AASB 2: Share-based Payments (AASB 2). 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 any 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, AASB 2 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 FY2019, based on an estimated VWAP of $11.0155. 20) Mr McCormack’s retirement, announced on 13 December 2018, was effective on 5 July 2019. Mr McCormack’s termination payments (before withholding taxes and superannuation obligation) are disclosed in sections 5.1 and 5.4 of this Report. 56 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information remuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 8.2 NED Statutory Remuneration Disclosure Financial Year M Fraser FY2019 FY2018 S Crane FY2019 FY2018 D Goodin FY2019 FY2018 S In’t Veld (21) FY2019 FY2018 P Wasow (22) FY2019 FY2018 J Fazzino (23) FY2019 R Higgins AO (24) FY2019 FY2018 P McKenzie (25) FY2019 FY2018 L Bleasel AM (26) FY2018 J Fletcher (27) FY2018 Total FY2019 FY2018 21) Appointed 19 March 2018. 22) Appointed 19 March 2018. 23) Appointed 21 February 2019. 24) Retired 20 February 2019. 25) Retired 8 March 2019. 26) Retired 27 October 2017. 27) Retired 21 February 2018. Short-term employment benefits Post- employment benefits Fees Superannuation $ $ Total $ 467,000 377,667 200,600 208,125 222,500 211,775 203,507 56,252 218,850 62,527 44,400 35,900 19,050 19,775 21,150 20,125 19,362 5,355 20,750 5,930 511,400 413,567 219,650 227,900 243,650 231,900 222,869 61,607 239,600 68,457 72,455 6,880 79,335 144,800 217,200 134,919 195,400 13,733 20,600 12,843 18,600 158,533 237,800 147,762 214,000 152,129 14,464 166,593 144,800 13,733 158,533 1,664,631 158,168 1,822,799 1,625,875 154,482 1,780,357 APA GROUP — ANNUAL REPORT 2019 — 57 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information remuneration report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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. Allocation date Opening balance at 1 Jul 2018 Units allocated in 2019 Cash settled reference units paid Closing balance at 30 Jun 2019 Units subject to allocation by the Board in Aug 2019 Reference units allocated that have not yet vested or been paid and the months in which they will vest Aug 19 Aug 20 Aug 21 Aug 22 M McCormack 2015 P Fredricson R Gersbach R Wheals 2016 2017 2018 2019 Total 2015 2016 2017 2018 2019 Total 2015 2016 2017 2018 2019 Total 2015 2016 2017 2018 2019 Total 62,871 103,872 188,742 (62,871) (51,936) 51,936 (62,914) 125,828 71,364 71,364 21,354 32,758 58,077 22,531 33,426 59,271 16,152 26,598 48,477 21,975 22,437 18,981 (21,354) (16,379) (19,359) (22,531) (16,713) (19,757) (16,152) (13,299) (16,159) 16,379 38,718 21,975 16,713 39,514 22,437 13,299 32,318 18,981 51,936 62,914 23,788 62,914 23,788 44,775 134,325 23,788 44,775 44,775 138,638 131,477 68,563 44,775 16,379 19,359 7,325 19,359 7,325 7,325 41,358 13,786 13,786 13,786 43,063 40,470 21,111 13,786 16,713 19,757 7,479 19,757 7,479 7,479 42,207 14,069 14,069 14,069 43,949 41,305 21,548 14,069 13,299 16,159 6,327 16,159 6,327 6,327 37,962 12,654 12,654 12,654 35,785 35,140 18,981 12,654 8.4 Security holdings The following table sets out the relevant interests of current NEDs and Executive KMP in APA securities: Year ended 30 June 2019 Non-executive Directors M Fraser S Crane J Fazzino (28) D Goodin S In’t Veld P Wasow Executive KMP M McCormack P Fredricson R Gersbach R Wheals Opening Balance at 1 July 2018 Securities Acquired Securities Disposed Closing Balance at 30 June 2019 102,942 130,000 — 23,000 25,000 15,000 350,000 48,500 21,691 33,883 — — 31,751 — — 6,000 — — — 5,000 — — — — — — — — — — 102,942 130,000 31,751 23,000 25,000 21,000 350,000 48,500 21,691 38,883 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. 28) Appointed 21 February 2019. 58 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of profit or loss and other comprehensive income. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Note 2019 $000 2018 $000 4 4 5 5 5 5 6 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 (loss)/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 on cash flow hedges taken to equity (Loss)/gain on associate hedges taken to equity Income tax relating to items that may be reclassified subsequently Other comprehensive income for the year (net of tax) Total comprehensive income for the year Profit attributable to: 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 Earnings per security Basic and diluted (cents per security) 7 2,428,949 2,364,798 23,222 21,924 2,452,171 2,386,722 (213,522) (611,358) (421,198) (500,020) (235,034) (6,060) 464,979 (176,966) 288,013 (11,418) 3,425 (7,993) 74,347 (448,940) (8,540) 114,951 (268,182) (276,175) 11,838 222,943 65,070 288,013 (53,232) 65,070 11,838 2019 24.4 (214,339) (578,916) (445,307) (515,515) (197,545) (5,206) 429,894 (165,055) 264,839 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 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. APA GROUP — ANNUAL REPORT 2019 — 59 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of financial position. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES AS AT 30 JUNE 2019 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 2019 $000 2018 $000 354,947 249,962 68,039 30,963 13,592 717,503 130,131 502,161 263,829 9,796,072 1,183,604 2,809,761 30,866 100,643 251,720 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 14,716,424 14,778,317 15,433,927 15,227,226 302,082 444,502 152,782 94,841 12,320 381,676 329,219 139,401 83,629 20,922 1,006,527 954,847 3,230 9,865,813 264,703 544,013 89,663 60,581 5,089 9,321,377 128,510 558,442 71,951 60,183 10,828,003 10,145,552 11,834,530 11,100,399 3,599,397 4,126,827 21 3,103,806 3,288,123 (599,347) 100,663 (331,165) 105,412 2,605,122 3,062,370 964,219 30,056 994,275 — 994,275 3,599,397 1,030,176 34,228 1,064,404 53 1,064,457 4,126,827 Equity attributable to unitholders of APT Investment Trust 22 Other non-controlling interest Total non-controlling interests Total equity The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 60 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of changes in equity. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 9 3 8 4 6 2 , ) 0 1 7 4 7 1 ( , 0 3 4 2 5 , 9 5 5 2 4 1 , , ) 5 9 2 0 9 4 ( , 6 1 0 5 0 5 ) 0 6 1 , 1 1 ( 4 2 5 2 , — — — — — — — — , 7 2 8 6 2 1 , 4 3 5 ) 4 6 1 , 2 ( — , 7 2 8 6 2 1 , 4 3 5 , 3 6 6 4 2 1 , 4 3 5 , 3 1 0 8 8 2 , ) 1 5 5 4 9 3 ( — 6 7 3 8 1 1 , 8 3 8 , 1 1 — — — — — 3 8 1 , 8 7 9 3 , 3 5 l a t o T 0 0 0 $ 0 0 0 $ t s e r e t n I g n i l l o r t n o c 8 4 — — — — — — — — 8 4 8 4 — 8 4 — — — — 1 8 5 ) 7 5 2 ( , 7 9 3 9 9 5 3 , — — — — — — ) 5 0 9 6 3 5 ( , ) 3 5 ( ) 9 4 ( - n o n r e h t O t s e r e t n i g n i l l o r t n o c - n o n r e h t O T P A t s u r T t n e m t s e v n I T P A 0 0 0 $ i d e n a t e R i s g n n r a e r e h t O 0 0 0 $ d e u s s I l a t i p a C 0 0 0 $ t n e m t s e v n I i d e n a t e R t s u r T 0 0 0 $ 0 0 0 $ i s g n n r a e d e u s s I l a t i p a C 0 0 0 $ t s u r T e n i l i e p P n a i l a r t s u A e h t f o t n e r a p 0 0 0 $ s r e n w o o t l e b a t u b i r t t A 0 0 0 $ i d e n a t e R i s g n n r a e 0 0 0 $ i g n g d e H e v r e s e R n o i t a u a v e R l d e u s s I 0 0 0 $ e v r e s e R 0 0 0 $ l a t i p a C t e s s A , 8 4 6 7 6 9 2 , 4 0 8 0 6 , ) 2 4 4 6 1 2 ( , 9 6 6 8 , , 7 1 6 4 1 1 , 3 1 — — — — — — — — 1 1 — 1 — — — — ) 1 ( — — — — 4 — — — — — — — — 4 4 — 4 — — — — — ) 4 ( — — — — — — — 9 4 0 8 6 , 9 4 0 8 6 , 9 4 0 8 6 , 9 4 0 8 6 , — — — — , 2 8 4 0 1 0 , 1 8 9 1 , 4 3 4 8 2 6 7 9 , 0 9 7 6 9 1 , 0 9 7 6 9 1 , — ) 0 1 7 4 7 1 ( , 8 8 5 , 1 ) 8 9 2 6 7 1 ( , 0 3 4 2 5 , ) 6 7 4 ( 6 0 9 2 5 , 0 1 5 4 7 , 2 0 9 7 9 1 , ) 2 9 3 3 2 1 ( , — ) 5 4 7 2 ( , 4 3 2 4 2 1 , — — — ) 5 4 7 2 ( , ) 5 1 4 8 ( , — 4 2 5 2 , 4 3 2 4 2 1 , , 2 8 7 0 8 3 — — — , ) 6 1 6 5 3 1 ( ) 9 1 0 8 6 ( , ) 7 9 5 7 6 ( , , ) 9 7 6 4 5 3 ( ) 4 9 2 3 5 1 ( , — — — — — — — — — — — — — — — — r e h t o f o s t n e n o p m o c o t g n i t a e r x a t e m o c n l I r a e y e h t r o f e m o c n i i e v s n e h e r p m o c l a t o T e m o c n i i e v s n e h e r p m o c e m o c n i i e v s n e h e r p m o c r e h t O 7 1 0 2 y u J 1 l t a e c n a a B l r a e y e h t r o f t i f o r P ) 5 8 3 , 1 0 2 ( ) 8 e t o N ( i s n o i t u b i r t s d f o t n e m y a P , 2 8 7 0 8 3 r e f f o t n e m e l t i t n e r e d n u d e u s s i s e i t i r u c e S ) 5 1 4 8 ( , 4 2 5 2 , s t s o c e u s s i y t i r u c e s o t g n i t a e r x a T l s e i t i r u c e s f o t s o c e u s s I , 4 0 4 4 6 0 , 1 8 2 2 4 3 , 6 7 1 , 0 3 0 , 1 , 4 0 4 4 6 0 , 1 8 2 2 4 3 , 6 7 1 , 0 3 0 , 1 , 0 7 3 2 6 0 3 , , 0 7 3 2 6 0 3 , , 2 1 4 5 0 1 ) 4 3 8 9 3 3 ( , 9 6 6 8 , 3 2 1 , 8 8 2 3 , 8 1 0 2 e n u J 0 3 t a e c n a a B l , 2 1 4 5 0 1 ) 4 3 8 9 3 3 ( , 9 6 6 8 , 3 2 1 , 8 8 2 3 , 8 1 0 2 y u J 1 l t a e c n a a B l — — — ) 4 6 1 , 2 ( ) 4 6 1 , 2 ( — — — ) a ( s d r a d n a t s g n i t n u o c c a n i s e g n a h c f o t c a p m I , 6 0 2 0 6 0 3 , 8 4 2 3 0 1 , ) 4 3 8 9 3 3 ( , 9 6 6 8 , 3 2 1 , 8 8 2 3 , 8 1 0 2 y u J 1 l l t a e c n a a b d e t s u d A j ) 3 6 ( — — — ) 3 6 ( — ) 4 9 1 ( 8 5 — — ) 6 3 1 , 5 3 1 ( ) 2 4 2 9 6 ( , ) 4 9 8 5 6 ( , ) 6 1 7 , 1 0 4 ( ) 5 3 5 7 1 2 ( , — — — — 0 7 0 5 6 , 0 7 0 5 6 , — — 0 7 0 5 6 , 0 7 0 5 6 , — — — — — , 4 0 4 4 6 0 , 1 8 2 2 4 3 , 6 7 1 , 0 3 0 , 1 — — , 3 4 9 2 2 2 , 3 4 9 2 2 2 — , ) 1 5 5 4 9 3 ( ) 8 1 4 , 1 1 ( ) 3 3 1 , 3 8 3 ( 6 7 3 8 1 1 , 5 2 4 3 , 1 5 9 4 1 1 , ) 2 3 2 3 5 ( , 0 5 9 4 1 2 , ) 2 8 1 , 8 6 2 ( — — — — — — — — — — — — — — — — — r a e y e h t r o f e m o c n i i e v s n e h e r p m o c l a t o T e m o c n i i e v s n e h e r p m o c r e h t O e m o c n i i e v s n e h e r p m o c r a e y e h t r o f t i f o r P i i s g n n r a e d e n a t e r o t r e f s n a r T ) 4 9 1 ( 8 5 ) 1 8 1 , 4 8 1 ( s t s o c e u s s i y t i r u c e s o t g n i t a e r x a T l i s n o i t u b i r t s d f o t n e m y a P s e i t i r u c e s f o t s o c e u s s I , 5 7 2 4 9 9 6 5 0 0 3 , , 9 1 2 4 6 9 2 2 1 , 5 0 6 2 , , 3 6 6 0 0 1 , ) 6 1 0 8 0 6 ( 9 6 6 8 , , 6 0 8 3 0 1 , 3 9 1 0 2 e n u J 0 3 t a e c n a a B l l a i t i n i n o t c e f f e l e v i t a u m u c e h t g n e b i , 8 1 0 2 y u J 1 l i t a s a s g n n r a e d e n a t e r o t n o i i l l i . m 2 2 $ f o e g r a h c a n i d e t l u s e r i s h T i . s s a b e v i t c e p s o r t e r d e i f i d o m a n o s r e m o t s u C h t i w s t c a r t n o C m o r f e u n e v e R 5 1 B S A A d e t p o d a s a h p u o r G A P A ) a i . s e t o n g n y n a p m o c c a e h t h t i w n o i t c n u n o c n j i l d a e r e b d u o h s y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o c e v o b a e h T . d r a d n a t s e h t y b d e t t i m r e p s a d e t a t s e r t o n e r a s t l u s e r e v i t a r a p m o c e h T . ) 0 3 e t o N o t r e f e r ( d r a d n a t s e h t f o n o i t a c i l p p a APA GROUP — ANNUAL REPORT 2019 — 61 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of cash flows. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 intangible assets Loans advanced to related parties Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Proceeds from issue of securities Payments of security issue costs Payment of debt issue costs Proceeds from early settlement of derivatives Distributions paid to: Unitholders of APT Unitholders of non-controlling interests - APTIT Securityholders of other non-controlling interests Note 2019 $000 2018 $000 2,666,095 (1,142,419) 22,450 1,469 8,825 (470,509) (73,784) 2,635,344 (1,111,969) 18,841 1,774 9,967 (473,243) (49,087) 1,012,127 1,031,627 (581,384) (875,030) 652 (318) (122,002) 663 (1,161) (282) (703,052) (875,810) 1,669,706 (1,175,854) — (864) (11,955) 1,157 (401,716) (135,136) (53) 309,718 (761,733) 505,016 (10,554) (1,581) — (354,679) (135,616) — Net cash used in financing activities (54,715) (449,429) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial year Unrealised exchange losses on cash held 254,360 100,643 (56) Cash and cash equivalents at end of financial year 18 354,947 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. (293,612) 394,501 (246) 100,643 62 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of cash flows. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Reconciliation of profit for the year to the net cash provided by operating activities Profit for the year 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 Amortisation of hedging loss Changes in assets and liabilities: Trade and other receivables Inventories Other assets Trade and other payables Provisions Other liabilities Income tax balances 2019 $000 288,013 (583) (23,222) 22,452 611,358 16,858 7,241 6,846 6,923 (2,429) 2,228 (17,294) 11,199 (20,647) 103,184 2018 $000 264,839 (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 Net cash provided by operating activities 1,012,127 1,031,627 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. APA GROUP — ANNUAL REPORT 2019 — 63 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 Operating Assets and Liabilities 9. Receivables 10. Payables 11. Property, plant and equipment 12. Goodwill and intangibles 13. Impairment of non-financial assets 14. Provisions 15. Other non-current assets 16. Employee superannuation plans 17. Leases 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 25. Commitments and contingencies 26. Director and Executive Key Management Personnel remuneration 27. Remuneration of external auditor 28. Related party transactions 29. Parent entity information 82 83 94 97 98 99 100 103 103 103 104 105 30. Adoption of new and revised Accounting Standards 105 31. Events occurring after reporting date 108 64 65 66 68 70 71 73 73 74 75 75 76 77 78 78 79 80 64 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 2019 was authorised for issue in accordance with a resolution of the directors on 21 August 2019. 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 2019 for APA Group is that current liabilities exceed current assets by $289.0 million (2018: $505.9 million) primarily as a result of current borrowings of $444.5 million and $152.8 million (AUD equivalent) of cash flow hedge liabilities. APA Group has access to sufficient available committed, un-drawn bank facilities of $1,550.0 million as at 30 June 2019 (2018: $868.8 million) to meet the repayment of current borrowings on due date. The Directors continually monitor APA Group's working capital position, including forecast working capital requirements and have ensured that there are appropriate refinancing strategies and adequate committed funding facilities in place to accommodate debt repayments as and when they fall due. Foreign currency transactions Both the functional and presentation currency of APA Group and APT is Australian dollars (A$). 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. Critical accounting judgements and key sources of estimation uncertainty In the process of applying the Group’s accounting policies, a number of judgements and estimates have been made. Judgements and estimates which are material to the financial statements are found in the following disclosures: — Property, plant and equipment (note 11) — Impairment of non-financial assets (note 13) — Fair value of financial instruments (note 19(c)) Judgements and estimates require assumptions to be made about highly uncertain external factors such as: discount rates; probability factors; the effects of inflation; commercial contract lives and renewals; market supply-and-demand conditions; changing technology; timing of occurrence; input costs; political and social trends; and climate change. As such the actual outcomes may differ as a result of these judgements and assumptions. APA GROUP — ANNUAL REPORT 2019 — 65 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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, includes all of APA Group’s wholly or majority owned gas pipelines, gas storage assets, gas compression and processing assets and gas-fired and renewable energy power generation assets; — Asset Management, provides commercial, operating services and/or asset maintenance services to its energy investments and third parties for appropriate fees; and — Energy Investments, includes APA Group’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. Reportable segments 2019 Segment revenue (a) Energy Asset Infrastructure Management $000 $000 Energy Investments $000 Other $000 Consolidated $000 Revenue from contracts with customers 1,899,071 94,398 — Equity accounted net profits Pass-through revenue Other income Finance lease and investment interest income — 27,881 4,775 1,305 393,317 391 — — 23,222 1,933,032 488,106 Total segment revenue Other interest income Consolidated revenue Segment result Earnings before interest, tax, depreciation and amortisation ("EBITDA") Share of net profits of joint ventures and associates using the equity method Finance lease and investment interest income Corporate costs Total EBITDA Depreciation and amortisation Earnings before interest and tax ("EBIT") Net interest cost (b) Profit before tax Income tax expense Profit for the year — — — — — — — — — 1,993,469 23,222 421,198 5,166 6,515 2,449,570 2,601 2,452,171 1,624,093 23,222 6,515 — — 5,210 28,432 23,222 5,210 — (80,074) (80,074) 28,432 (80,074) 1,573,756 — — 28,432 (80,074) (611,358) 962,398 (497,419) 464,979 (176,966) 288,013 1,571,139 52,954 — — 1,305 — 1,572,444 (600,248) 972,196 — — — 52,954 (11,110) 41,844 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. 66 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 3. Segment information (continued) Reportable segments (continued) 2019 Segment assets and liabilities Segment assets Energy Asset Infrastructure Management $000 $000 Energy Investments Consolidated $000 $000 13,938,973 183,669 132,993 14,255,635 Carrying value of investments using the equity method — — 263,829 Unallocated assets (a) Total assets Segment liabilities Unallocated liabilities (b) Total liabilities 263,829 914,463 15,433,927 376,598 60,707 — 437,305 11,397,225 11,834,530 a) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts ("FECs") and equity forwards. b) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts. 2018 Segment revenue (a) Energy Asset Infrastructure Management $000 $000 Energy Investments $000 Other $000 Consolidated $000 Revenue from contracts with customers 1,801,285 108,533 Equity accounted net profits Pass-through revenue Other income Finance lease and investment interest income — — 44,265 401,042 1,220 1,454 4 — — 21,924 — — 1,144 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 1,848,224 509,579 23,068 1,495,642 66,204 — — 1,454 — — — — 21,924 1,144 — (67,894) (67,894) 1,497,096 (567,925) 66,204 (10,991) 23,068 (67,894) — — Earnings before interest and tax ("EBIT") 929,171 55,213 23,068 (67,894) Net interest cost (b) Profit before tax Income tax expense Profit for the year 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. APA GROUP — ANNUAL REPORT 2019 — 67 — — — — — — — — — 1,909,818 21,924 445,307 1,224 2,598 2,380,871 5,851 2,386,722 1,561,846 21,924 2,598 1,518,474 (578,916) 939,558 (509,664) 429,894 (165,055) 264,839 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 3. Segment information (continued) Reportable segments (continued) 2018 Segment assets and liabilities Segment assets Energy Asset Infrastructure Management $000 $000 Energy Investments Consolidated $000 $000 13,995,163 212,521 10,967 14,218,651 Carrying value of investments using the equity method — — 271,597 Unallocated assets (a) Total assets Segment liabilities Unallocated liabilities (b) Total liabilities 271,597 736,978 15,227,226 440,276 64,829 — 505,105 10,595,294 11,100,399 a) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts and equity forwards. b) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts. 4. Revenue Disaggregation of revenue Revenue is disaggregated below by state, business unit and geography. 2019 Energy Infrastructure Queensland New South Wales Victoria South Australia Western Australia Northern Territory Energy Infrastructure Transmission $000 Power Generation $000 Total $000 960,933 173,594 144,380 3,004 288,997 30,301 246,174 1,207,107 — — — 51,688 — 173,594 144,380 3,004 340,685 30,301 Energy Infrastructure revenue from contracts with customers 1,601,209 297,862 1,899,071 Asset Management revenue from contracts with customers Pass-through revenue Other income Operating revenue Interest income Interest income from related parties Finance lease income Finance income Total Revenue Share of net profits of joint ventures and associates using the equity method 94,398 421,198 5,166 2,419,833 2,601 5,210 1,305 9,116 2,428,949 23,222 2,452,171 68 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 4. Revenue (continued) Disaggregation of revenue (continued) 2018 (a) Energy Infrastructure Queensland New South Wales Victoria South Australia Western Australia Northern Territory Energy Infrastructure Transmission $000 Power Generation $000 Total $000 923,800 166,243 153,166 2,925 263,585 32,861 229,175 1,152,975 — — — 29,530 — 166,243 153,166 2,925 293,115 32,861 Energy Infrastructure revenue from contracts with customers 1,542,580 258,705 1,801,285 Asset Management revenue from contracts with customers Pass-through revenue Other income Operating revenue Interest income Interest income from related parties Finance lease income Finance income Total Revenue Share of net profits of joint ventures and associates using the equity method 108,533 445,307 1,224 2,356,349 5,851 1,144 1,454 8,449 2,364,798 21,924 2,386,722 a) 2018 disclosure aligned with 2019 disclosure format, reflective of AASB 15 Revenue from Contracts with Customers requirements. Revenue is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange for the provision of services or for the transferring of goods to a customer (the performance obligations) under a contract. APA Group recognises revenue when control of a product or service is transferred to the customer. Amounts disclosed as revenue are net of duties, goods and services tax (“GST”) and other taxes paid, except where the amount of GST incurred is not recoverable from the taxation authority. Given the nature of APA Group’s services there is no significant right of return or warranty provided. Revenue from contracts with customers is derived from the major business activities as follows: — Energy Infrastructure revenue from contracts with customers, is derived from the transportation, processing and storage of gas and other related services (transmission revenue), and the generation of electricity and other related services (power generation revenue). Revenue from contracts with customers may either be identified as separate performance obligations or a series of distinct performance obligations that are substantially the same, have the same pattern of transfer and are therefore treated as a single performance obligation that is satisfied over time. This includes both firm and interruptible services. The consideration is volume based and is recognised as revenue in a manner that depicts the transfer based on volume of output to the customer. This method most accurately depicts the progress towards satisfaction of the performance obligation of the services provided, as the customer simultaneously receives and consumes the benefits of APA Group’s service and obtains value as each volume of output is transported by APA Group. The amount billed corresponds directly to the value of the performance to date; — Asset Management revenue from contracts with customers, is derived from the provision of commercial services, operating services, asset management services and/or asset maintenance services to APA Group's energy investments and other third parties. APA Group applies the practical expedient to recognise revenue at the amount to which APA Group has a right to invoice; and — Pass-through revenue, is revenue from contracts with customers for which no margin is earned, and is recognised when the services are provided. APA Group applies the practical expedient to recognise revenue at the amount to which APA Group has a right to invoice. APA Group is determined to be the principal in these relationships. Other types of revenue is recognised as follows: — Interest income, which is recognised as it accrues and is determined using the effective interest method; — Dividend income, 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. APA GROUP — ANNUAL REPORT 2019 — 69 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 4. Revenue (continued) Contract liabilities – unearned revenue Where amounts have been received in advance of fulfilling the contract obligation these amounts are deferred in the balance sheet as unearned revenue until the performance obligation is fulfilled. Where the period between the payment by the customer and the fulfilment of the obligation is expected to exceed one year any amounts associated with the finance component of this deferred revenue is recognised as interest expense. Contract assets – accrued revenue Contract assets primarily relate to APA Group’s right to consideration for work completed but not billed at the reporting date. These amounts are known as accrued revenue and are disclosed in Note 9. Accrued revenue is transferred to trade receivables when the rights become unconditional. This usually occurs when APA Group issues an invoice to the customer. Accounting for costs to obtain contracts APA Group generally expenses costs to obtain contracts as they are incurred, as they tend to be incurred whether the contract is obtained or not (e.g. staff salaries, professional fees etc.). Future Revenues from Remaining Performance Obligations As at 30 June 2019, future contracted Energy Infrastructure revenues extending through to 2050 are approximately $22.2 billion, of which $1.8 billion is expected to be recognised in 2020. These amounts relate to Energy Infrastructure revenue from long term contracts with highly credit worthy counterparties. Future contracted Energy Infrastructure revenues outlined above are in nominal 2019 dollars escalated by CPI. Variable revenues, potential future revenues from new contracts, contract renewals or extensions, and revenues from potential new assets or expansions where a contract does not currently exist with a customer are not included. As such, the future contracts revenues described above represent only part of APA Group's forecast revenues for FY2020 and beyond. Information about major customers Included in revenues arising from energy infrastructure of $1,899.1 million (2018: $1,801.3 million) are revenues of approximately $708.6 million (2018: $689.4 million) which arose from sales to APA Group's top three customers. 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 Loss 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 (c) 2019 $000 428,370 182,988 611,358 27,881 393,317 421,198 509,864 7,631 7,749 525,244 (31,468) 493,776 47 6,197 500,020 14,264 1,944 16,208 3,823 25,555 189,448 235,034 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 a) The average interest rate applying to drawn debt is 5.53% p.a. (2018: 5.65% 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. c) Employee benefit expense of $64.5 million (2018: $67.2 million) is recharged as pass-through revenue and presented as part of other operating costs – pass-through. 70 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 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 Deferred tax expense relating to the origination and reversal of temporary differences 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 2019 $000 2018 $000 (72,138) 104 (104,932) (54,536) 612 (111,131) (176,966) (165,055) 464,979 429,894 (139,494) (128,968) 19,521 (58,403) 84 20,415 (58,319) 19 (178,292) (166,853) 105 853 104 264 — 690 612 496 (176,966) (165,055) 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 $177.0 million (2018: $165.1 million). An income tax provision of $32.0 million (2018: $33.8 million) has been recognised after installments made during the year and 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: 2019 Gross deferred tax liabilities Property, plant and equipment Deferred expenses Other Gross deferred tax assets Provisions Cash flow hedges Security issue costs Deferred revenue Investments equity accounted Defined benefit obligation Tax losses Opening balance $000 Charged to income $000 Charged to equity $000 Closing balance $000 (903,769) (54,803) (233) (85,886) (713) (66) (958,805) (86,665) 43,391 141,235 3,831 13,748 1,705 (497) 196,950 400,363 5,249 858 (2,327) (144) (98) 11 (21,816) (18,267) — — — — — 112,124 58 927 2,827 3,425 — 119,361 119,361 (989,655) (55,516) (299) (1,045,470) 48,640 254,217 1,562 14,531 4,434 2,939 175,134 501,457 (544,013) APA GROUP — ANNUAL REPORT 2019 — 71 Net deferred tax liability (558,442) (104,932) FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance Income tax (continued) 6. Deferred tax balances (continued) 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 Opening balance $000 Charged to income $000 Charged to equity $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 Closing balance $000 (903,769) (54,803) (497) (233) (959,302) 43,391 141,235 3,831 13,748 1,705 196,950 400,860 (558,442) 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: — initial recognition of goodwill; — initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and — 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. 72 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 7. Earnings per security Basic and diluted earnings per unit attributable to the parent Basic and diluted earnings per unit attributable to the non-controlling interest Basic and diluted earnings per stapled security 2019 cents 18.9 5.5 24.4 2018 cents 17.3 6.0 23.3 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 unitholders of the parent Net profit attributable to unitholders of the non-controlling interest Net profit attributable to stapled securityholders for calculating basic and diluted earnings per security 2019 $000 222,943 65,070 2018 $000 196,790 68,049 288,013 264,839 2019 No. of securities 000 2018 No. of securities 000 Adjusted weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security 1,179,894 1,136,875 8. Distributions Recognised amounts Final FY2018 distribution paid on 12 September 2018 (2018: Final FY2017 distribution paid on 13 September 2017) Profit distribution – APT (a) Capital distribution – APT Profit distribution – APTIT (a) Capital distribution – APTIT Interim FY2019 distribution paid on 13 March 2019 (2018: Interim FY2018 distribution paid on 14 March 2018) Profit distribution – APT (b) Capital distribution – APT Profit distribution – APTIT (a) Capital distribution – APTIT Total distributions recognised Profit distributions Capital distributions 2019 cents per security 2019 Total $000 2018 cents per security 2018 Total $000 8.93 9.03 2.90 3.14 24.00 9.50 6.58 2.97 2.45 105,412 106,513 34,228 37,022 283,175 112,123 77,668 35,014 28,872 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 21.50 253,677 21.00 234,004 24.30 21.20 45.50 286,777 250,075 536,852 19.86 24.14 44.00 221,313 268,982 490,295 a) Profit distributions were unfranked (2018: unfranked). b) Interim profit distributions were 7.47 cents per security franked and 2.03 cents per security unfranked (2018: 5.83 cents per security franked and 2.47 cents per security unfranked). APA GROUP — ANNUAL REPORT 2019 — 73 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 8. Distributions (continued) Unrecognised amounts Final FY2019 distribution payable on 11 September 2019 (a) (2018: Final FY2018 distribution paid on 12 September 2018) Profit distribution – APT (b) Capital distribution – APT Profit distribution – APTIT (c) Capital distribution – APTIT a) Record date 28 June 2019. b) Final profit distributions are to be fully franked (2018: fully franked). c) Profit distributions were unfranked (2018: unfranked). 2019 cents per security 2019 Total $000 2018 cents per security 2018 Total $000 8.53 10.44 2.55 3.98 25.50 100,663 123,153 30,056 47,002 300,874 8.93 9.03 2.90 3.14 24.00 105,412 106,513 34,228 37,022 283,175 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. Franking account balance Income tax payable Adjusted Franking account balance 2019 $000 (5,943) 32,005 26,062 2018 $000 3,228 33,734 36,962 The adjusted franking account balance will be reduced by $43.1 million (FY2018: $45.2 million) following the payment of the final distribution payable on 11 September 2019 (FY2018: 12 September 2018). On 31 July 2019, APA Group made a franking deficit tax payment of $5.9 million. This represents a prepayment of the final income tax payment due for FY2019. Operating Assets and Liabilities 9. Receivables Trade receivables Accrued Revenue Loss allowance Trade receivables Receivables from associates and related parties Finance lease receivables (Note 17) Interest receivable Other debtors Current Finance lease receivables (Note 17) Loan receivable - related party Non-current 2019 $000 26,080 198,816 (10) 224,886 23,373 1,246 378 79 2018 $000 27,991 198,324 (1,494) 224,821 25,252 1,480 88 79 249,962 251,720 12,794 117,337 130,131 14,030 — 14,030 At 30 June 2019, APA Group had a secured amortising loan receivable from SEA Gas of $122.3 million. This facility has been extended at arm's length terms maturing September 2021. 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. 74 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 10. Payables Trade payables (a) Income tax payable Other payables Current Other payables Non-current 2019 $000 39,934 32,005 230,143 302,082 3,230 3,230 2018 $000 41,392 33,754 306,530 381,676 5,089 5,089 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 Balance at 30 June 2018 248,717 10,660 10,651,086 Gross carrying amount Balance at 1 July 2017 Additions Disposals Transfers Additions Disposals Transfers Balance at 30 June 2019 Accumulated depreciation Balance at 1 July 2017 Disposals Depreciation expense (Note 5) — (1) 12,988 261,704 (39,161) — (7,184) Disposals Depreciation expense (Note 5) Balance at 30 June 2019 Net book value As at 30 June 2018 As at 30 June 2019 — (7,544) (53,889) 202,372 207,815 Freehold land and buildings – at cost $000 Leasehold improvements – at cost $000 Plant and equipment – at cost $000 242,733 10,167 10,351,003 Work in progress – at cost $000 229,407 905,622 — 856,378 503,500 — Total $000 10,833,310 937,602 (4,071) — 11,766,841 532,845 (951) — 702 — 5,282 — — 493 272,876 (278,651) 31,278 (4,071) 29,345 (950) — — 127 812,782 (825,897) 10,787 11,492,263 533,981 12,298,735 (3,029) (1,640,955) — (923) 3,874 (387,797) — (967) 882 (419,859) (4,919) (2,443,855) — — — — — — — (1,683,145) 3,874 (395,904) (2,075,175) 882 (428,370) (2,502,663) 6,708 5,868 8,626,208 9,048,408 856,378 533,981 9,691,666 9,796,072 Balance at 30 June 2018 (46,345) (3,952) (2,024,878) 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. APA GROUP — ANNUAL REPORT 2019 — 75 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 11. Property, plant and equipment (continued) 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. Physical, economic and environmental factors are taken into consideration in assessing the useful lives of the assets, including but not limited to asset condition and obsolescence, technology changes, commercial contract lives and renewals, global and regional gas supply-and-demand, and climate change based on TCFD scenario testing to 2030. 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 — gas transportation systems — meters 30 – 50 years; 10 – 50 years; 10 – 80 years; 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 Balance at end of financial year 2019 $000 2018 $000 1,183,604 1,183,604 1,183,604 1,183,604 Allocation of goodwill to cash-generating units Goodwill has been allocated for impairment testing purposes to individual cash-generating units. The East Coast Grid is an interconnected pipeline network that includes, inter alia, the Wallumbilla Gladstone, Moomba Sydney, Roma Brisbane, Carpentaria Gas and South West Queensland pipelines and the Victorian Transmission System. Since the acquisition of the South West Queensland Pipeline to complete the formation of APA’s East Coast Grid in December 2012, APA has installed facilities to enable bi-directional transportation of gas to meet the demand of our major customers who now typically operate portfolios of gas supply and demand. Through the provision of multi-asset services, bi-directional transportation, capacity trading and gas storage and parking facilities, APA’s East Coast Grid delivers options for customers to choose from, and move gas between, more than 40 receipt points and over 100 delivery points on the east coast of Australia. The East Coast Grid is categorised as an individual cash-generating unit. The carrying amount of goodwill allocated to cash-generating units that are significant individually or in aggregate is as follows: Asset Management business Energy Infrastructure East Cost Grid Diamantina Power Station Other energy infrastructure (a) 21,456 21,456 1,060,681 1,060,681 43,104 58,363 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. 76 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 12. Goodwill and intangibles (continued) Allocation of goodwill to cash-generating units (continued) Contract and other intangibles Gross carrying amount Balance at beginning of financial year Acquisitions / additions Balance at end of financial year Accumulated amortisation and impairment Balance at beginning of financial year Amortisation expense (Note 5) Balance at end of financial year 2019 $000 2018 $000 3,590,960 3,589,799 318 1,161 3,591,278 3,590,960 (598,529) (182,988) (415,517) (183,012) (781,517) (598,529) 2,809,761 2,992,431 APA Group holds various third party operating and maintenance contracts. The combined gross carrying amount of $3,591.3 million amortises over terms ranging from one to 20 years. Useful life is determined based on the underlying contractual terms. Amortisation expense is not a cash item, and is included in the line item of depreciation and amortisation expense in the statement of profit or loss and other comprehensive income. Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Intangible assets acquired in a business combination are identified and recognised separately from goodwill and are initially recognised at their fair value at the acquisition date and subsequently at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over the estimated useful life of each asset. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effects of any changes in estimate being accounted for on a prospective basis. 13. Impairment of non-financial assets APA Group tests property, plant and equipment, intangibles and goodwill for impairment at least annually or whenever there is an indication that the asset may be impaired. Assets other than goodwill that have previously reported an impairment are reviewed for possible reversal of the impairment at each reporting period. If the asset does not generate independent cash inflows and its value in use cannot be estimated to be close to its fair value, the asset is tested for impairment as part of the cash-generating unit (CGU) to which it belongs. Assets are impaired if their carrying value exceeds their recoverable amount. The recoverable amount of an asset or CGU is determined as the higher of its fair value less costs of disposal or value-in-use. Determining whether identifiable intangible assets and goodwill are impaired requires an estimation of the value-in-use or fair value of the cash-generating units. The calculations require APA Group to estimate the future cash flows expected to arise from cash-generating units and suitable discount rates in order to calculate the present value of cash-generating units. These estimates and assumptions are reviewed on an ongoing basis. The recoverable amounts of cash-generating units are determined based on value-in-use calculations. These calculations use cash flow projections based on a five year financial business plan and thereafter a further 15 year financial model inclusive of appropriate terminal values. 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. (2018: 1.0% 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. APA GROUP — ANNUAL REPORT 2019 — 77 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 13. Impairment of non-financial assets (continued) Critical accounting judgements and key sources of estimation uncertainty – impairment of assets (continued) 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 7.75% p.a. (2018: 8.25% p.a.) for Energy Infrastructure assets other than Wallumbilla Gladstone Pipeline segment (WGP) and 7.75% p.a. (2018: 8.25% p.a.) for Asset Management. In relation to WGP segment of the Energy Infrastructure assets, the debt financing that was specifically raised to fund the acquisition is utilised to determine the pre-tax discount rate of 6.50% p.a. applicable to this asset (2018: 6.50% p.a.). These assumptions have been determined with reference to historic information, current performance and expected changes taking into account external information such as discount rates, the effects of inflation, climate change based on TCFD scenario testing to 2030, the outlook for global and regional market gas supply-and-demand conditions, contract renewals, and input costs. Such estimates may change as new information becomes available. 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 2019 $000 86,625 8,216 94,841 33,672 55,991 89,663 33,126 7,042 46,137 320 86,625 9,695 13,852 10,125 33,672 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 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 78 — APA GROUP — ANNUAL REPORT 2019 2019 $000 20,607 6,010 4,057 192 30,866 2018 $000 20,607 6,010 6,693 192 33,502 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 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 2019. 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 (income)/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 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 2019 $000 1,955 (11) 1,944 136,487 (146,282) 4,057 (13,852) 2018 $000 2,234 46 2,280 135,620 (133,959) 6,693 (5,032) 133,959 134,804 1,955 5,312 744 15,837 (11,044) (481) 146,282 2,234 5,369 786 5,138 (13,873) (499) 133,959 135,620 135,029 5,323 4,420 1,905 744 (11,044) (481) 5,323 6,726 2,128 786 (13,873) (499) 136,487 135,620 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. APA GROUP — ANNUAL REPORT 2019 — 79 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 16. Employee superannuation plans (continued) Defined benefit plans (continued) Key actuarial assumptions used in the determination of the defined benefit obligation is a discount rate of 3.1% gross of tax (2018: 4.1%), based on the corporate bond yield curve published by Milliman, an expected salary increase rate of 3.0% (2018: 3.0%), and pension indexation rate of 2.0% (2018 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 $7,080,000 (increase by $7,891,000). — If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $1,957,000 (decrease by $1,822,000). — If the expected pension indexation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by $5,635,000 (decrease by $5,121,000). 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 to 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 $1.9 million in contributions to the defined benefit plans during the year ending 30 June 2020. 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) 2019 $000 2,411 8,063 11,121 21,595 21,595 (7,555) 14,040 1,246 12,794 14,040 2018 $000 2,775 8,763 12,832 24,370 24,370 (8,860) 15,510 1,480 14,030 15,510 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. 80 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 17. Leases (continued) 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 2019 $000 14,638 34,688 16,477 65,803 2018 $000 13,641 36,487 22,437 72,565 Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time patterns in which economic benefits from the leased asset are consumed. Operating lease incentives are recognised as a liability when received and released to the statement of profit or loss on a straight line basis over the lease term. Capital Management APA Group's objectives when managing capital are to safeguard its ability to continue as a going concern whilst 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 credit ratings through maintaining sufficient flexibility to fund organic growth and investment from internally generated and retained cash flows, debt funding and, where appropriate, additional equity. 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 2019 and 2018 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's Funds From Operations to Net Debt exceed the levels S&P and Moody's consider appropriate for APA's BBB/Baa2 credit rating. Funds From Operations to Net Debt is a leverage metric that measures cash flows generated by the business that are available to service debt (note: each rating agency calculates credit metrics slightly differently using their own proprietary methods). Creditworthiness improves as the percentage of Funds From Operations to Net Debt increases (and vice versa). 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. APA GROUP — ANNUAL REPORT 2019 — 81 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 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) Other financial liabilities Less: unamortised borrowing costs Non-current borrowings Total borrowings Net debt 2019 $000 354,703 244 354,947 (433,550) (10,952) (444,502) 2018 $000 99,277 1,366 100,643 (318,373) (10,846) (329,219) (9,841,174) (9,089,991) — (200,000) (65,379) 40,740 (73,458) 42,072 (9,865,813) (9,321,377) (10,310,315) (9,650,596) (9,955,368) (9,549,953) a) Represents USD denominated private placement notes of US$199 million, CAD medium term notes (MTN) of C$300 million, JPY MTN of ¥ 10,000 million, GBP MTN of £1,350 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$143 million of AUD denominated private placement notes and AUD MTN of A$500 million (2018: Includes USD denominated private placement notes of US$185 million and A$68 million of AUD denominated private placement notes). 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. Reconciliation of net debt 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 Cash and cash equivalents $000 Borrowings due within 1 year $000 Borrowings due after 1 year $000 Net debt $000 394,501 (293,612) (246) — — (126,858) (9,573,907) (9,306,264) 137,015 (13,298) (326,078) — 315,000 (384,758) 326,078 (3,790) 158,403 (398,302) — (3,790) Net debt as at 30 June 2018 100,643 (329,219) (9,321,377) (9,549,953) Net debt as at 1 July 2018 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 100,643 254,360 (56) — — (329,219) (9,321,377) (9,549,953) 325,854 (41,699) (399,438) — (819,706) (122,836) 399,438 (1,332) (239,492) (164,591) — (1,332) Net debt as at 30 June 2019 354,947 (444,502) (9,865,813) (9,955,368) 82 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 18. Net debt (continued) Financing facilities available Total facilities Guaranteed senior notes (a) Bank borrowings (b) Facilities used at balance date Guaranteed senior notes (a) Bank borrowings (b) Facilities unused at balance date Guaranteed senior notes (a) Bank borrowings (b) 2019 $000 2018 $000 10,274,724 1,550,000 9,408,364 1,068,750 11,824,724 10,477,114 10,274,724 — 9,408,364 200,000 10,274,724 9,608,364 — 1,550,000 1,550,000 — 868,750 868,750 a) Represents USD denominated private placement notes of US$199 million, CAD medium term notes (MTN) of C$300 million, JPY MTN of ¥ 10,000 million, GBP MTN of £1,350 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$143 million of AUD denominated private placement notes and AUD MTN of A$500 million (2018: Includes USD denominated private placement notes of US$185 million and A$68 million of AUD denominated private placement notes). 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. 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, operational risk and climate change. APA Group's ARMC ensures there is an appropriate Risk Management Policy for the management of treasury risk and compliance with the policy through the review of monthly reporting to the Board from the Treasury department. APA Group's activities generate financial instruments comprising of cash, receivables, payables and interest bearing liabilities which expose it to various risks as summarised below: a) Market risk including currency risk, interest rate risk and price risk; b) Credit risk; and c) Liquidity risk. Treasury as a centralised function provides APA Group with the benefits of efficient cash utilisation, control of funding and its associated costs, efficient and effective management of aggregated financial risk and concentration of financial expertise, at an acceptable cost and manages risks through the use of natural hedges and derivative instruments. APA Group does not engage in speculative trading. All derivatives have been transacted to hedge underlying or existing exposures and have adhered to the ARMC approved Treasury Risk Management Policy. a) Market risk APA Group's market risk exposure is primarily due to changes in market prices such as interest and foreign exchange rates. APA Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including: — FECs 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 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 an electricity contract for difference. There has been no change to the nature of the market risks to which APA Group is exposed or the manner in which these risks are managed and measured. APA GROUP — ANNUAL REPORT 2019 — 83 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) a) Market risk (continued) 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. 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 FECs. 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. 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: 2019 US Dollar (USD) (a) Japanese Yen (JPY) Canadian Dollar (CAD) British Pound (GBP) Euro (EUR) Swedish Krona (SEK) 2018 US Dollar (USD) (a) 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 12,458 — — — — — 12,458 3,143 — — — — — 3,143 — — — — — — — — — — — — — — (4,558,603) 327,588 (935,003) (5,153,560) (132,196) 132,196 (326,675) 326,675 (2,442,600) 2,442,600 (2,187,895) 2,187,895 — — — — 267 3,031 41,429 — — 267 3,031 41,429 (9,647,969) 5,416,954 (890,276) (5,108,833) (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) a) Foreign currency denominated borrowings to manage the currency risk associated with foreign currency denominated revenue and receivables. 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 FECs on a rolling basis with the objective being to lock in the AUD gross cash flows and manage liquidity. For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and underlying) of the foreign exchange forward contracts and their corresponding hedged items are the same, APA Group performs a qualitative assessment of effectiveness and it is expected that the value of the forward contracts and the value of the corresponding hedged items will systematically change in opposite directions in response to movements in the underlying exchange rates. The main source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and APA Group's own credit risk on the fair value of the forward contracts, which is not reflected in the fair value of the hedged item attributable to changes in foreign exchange rates. The effect of credit risk does not dominate the value changes that result from that economic relationship. 84 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) a) Market risk (continued) The following table details the forward foreign exchange currency contracts outstanding at reporting date: Cash flow hedges Contract Value 2019 Foreign currency Forecast revenue and associated receivable Average exchange rate $ < 1 year $000 1 - 2 years $000 2 - 5 years $000 Fair value $000 Pay USD / receive AUD Forecast capital purchases Pay AUD / receive USD Pay AUD / receive EUR Pay AUD / receive SEK Pay AUD / receive GBP USD 0.7169 319,697 364,587 253,313 (11,874) USD EUR SEK GBP 0.7124 0.6018 5.7712 0.5431 (2,594) (942) (7,217) (267) — (1,522) (30,528) — — (567) (3,684) — 35 (1) (3,818) (5) 308,677 332,537 249,062 (15,663) 2018 Forecast revenue and associated receivable Pay USD / receive AUD Forecast capital purchases Pay AUD / receive USD Pay AUD / receive EUR Pay AUD / receive SEK Pay AUD / receive DKK USD 0.6528 137,462 — USD EUR SEK DKK 0.7596 0.6821 5.7572 5.1321 (27,515) (17,039) (2,087) (4,102) (140) (77) (7,045) — — — (1,795) (34,212) — 15,957 734 1,706 (3,142) 387 86,719 (7,262) (36,007) 15,642 As at reporting date, APA Group has entered into FECs to hedge net US exchange rate risk arising from anticipated future transactions with an aggregate notional principal amount of $937.6 million (2018: $137.5 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 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. The following table details the cross currency swap contract principal payments due as at the reporting date: Cash flow hedges 2019 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 2007 USPP Notes 2009 USPP Notes 2012 CAD Medium Term Notes 2012 US144A 2012 GBP Medium Term Notes 2015 EUR Medium Term Notes 2017 US144A 2019 GBP Medium Term Notes 2019 JPY Medium Term Notes AUD/JPY 75.2220 Pay USD / receive foreign currency 2015 EUR Medium Term Notes 2015 GBP Medium Term Notes USD/EUR USD/GBP 0.9514 0.6773 AUD/USD 0.8068 — AUD/USD AUD/CAD AUD/USD AUD/GBP AUD/EUR AUD/USD AUD/GBP 0.7576 1.0363 1.0198 0.6530 0.6183 0.7668 0.5388 (98,997) (289,494) — — — — — — — — (388,491) — — — — — — — — — — — — (153,694) — — (735,438) — — — — — (535,988) (1,132,141) — — — — — — (1,108,503) (742,390) (132,940) (973,587) (1,262,415) (2,021,273) (4,755,823) APA GROUP — ANNUAL REPORT 2019 — 85 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) a) Market risk (continued) Cash flow hedges (continued) 2018 Pay AUD / receive foreign currency Foreign currency Exchange rate $ Less than 1 year $000 1 - 2 years $000 2 - 5 years $000 More than 5 years $000 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 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) 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 movements in foreign exchange rates in relation to principal and interest payments arising from these foreign currency borrowings as well as future revenues. Foreign currency sensitivity analysis The analysis below shows the effect on profit and total equity of retranslating cash, receivables, payables and interest- bearing liabilities denominated in USD, JPY, CAD, GBP and EUR into AUD, had the rates been 20 percent higher or lower than the relevant year end rate, with all other variables held constant, and taking into account all underlying exposures and related hedges. A sensitivity of 20 percent has been selected and represents management's assessment of the possible change in rates taking into account the current level of exchange rates and the volatility observed both on an historical basis and on market expectations for possible future movements. — There would be no impact on net profit as all foreign currency exposures are fully hedged (2018: nil); and — Equity reserves would decrease by $1,296.4 million with a 20 percent depreciation of the A$ or increase by $864.7 million with a 20 percent increase in foreign exchange rates (2018: decrease by $1,272.0 million or increase by $849.4 million respectively). Interest rate risk APA Group's interest rate risk is derived predominately from borrowings subject to 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 $354.9 million as at 30 June 2019 (2018: $100.6 million). Cross currency swap and interest rate swap contracts Cross currency swap and interest rate swap contracts have the economic effect of converting borrowings from floating to fixed rates and/or fixed rate foreign currency to fixed or floating AUD rates on agreed notional principal amounts enabling APA Group to mitigate the risk of cash flow exposures on variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the yield curves at reporting date. The average interest rate is based on the drawn debt balances at the end of the financial year. There is an economic relationship between the hedged item and the hedging instrument. Based on APA Group's qualitative assessment of effectiveness, it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite directions in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these hedge relationships is the effect of the counterparty and APA Group's own credit risk on the fair value of the interest rate swap contracts, which is not reflected in the fair value of the hedged item attributable to the change in interest rates and difference in timing of the future cash flows. The effect of credit risk does not dominate the value changes that result from that economic relationship. 86 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) a) Market risk (continued) Cross currency swap and interest rate swap contracts (continued) 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 2019 % p.a. 2018 % p.a. 2019 $000 2018 $000 2019 $000 2018 $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) 5.42 — 4.37 4.08 7.30 8.05 5.14 5.11 388,491 — 247,062 388,491 44,604 — 2,021,273 1,884,033 260,645 4,755,823 3,766,638 (133,801) 1,036 11,950 338,786 24,031 7,165,587 6,286,224 171,448 375,803 a) This amount includes a notional amount of USD 1.6 billion (2018: 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. The following tables detail before tax information of APA Group (excluding share of hedge reserves of associates) regarding derivative financial instruments outstanding at the end of the reporting period, their related hedged items and the effectiveness of the hedging relationships. Fair value of hedge instrument Fair value of hedge item Reserve balance 2019 $000 2018 $000 2019 $000 2018 $000 2019 $000 2018 $000 Foreign exchange risk Hedging foreign currency borrowings 171,448 375,802 (169,821) (383,757) 533,795 309,599 (cross currency swap) Hedging revenue and associated (218,137) (116,552) 218,137 116,552 218,137 116,552 receivables (foreign currency borrowings) Hedging revenue and associated (11,873) 15,957 11,889 (15,966) 11,873 (15,696) receivables (FECs) Hedging capital purchases (FECs) (3,790) (314) 3,800 337 3,756 308 (62,352) 274,893 64,005 (282,834) 767,561 410,763 Hedge ineffectiveness gain / (loss) 2019 $000 2018 $000 Foreign exchange risk Hedging foreign currency borrowings (cross currency swap) 1,033 Hedging revenue and associated receivables (FECs) Hedging capital purchases (FECs) — (34) 999 3,970 261 (6) 4,225 Balance relating to discontinued cash flow hedges 2019 $000 28,217 — — 28,217 2018 $000 — — — — APA GROUP — ANNUAL REPORT 2019 — 87 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) a) Market risk (continued) Cross currency swap and interest rate swap contracts (continued) Interest rate risk Hedging US$ denominated borrowings (interest rate swap) Electricity price risk Hedging electricity contract (contract for difference) Hedge ineffectiveness gain / (loss) Balance relating to discontinued cash flow hedges 2019 $000 2018 $000 2019 $000 2018 $000 — — — — 52,912 52,912 57,150 57,150 Fair value of hedge instrument Fair value of hedge item Reserve balance 2019 $000 2018 $000 2019 $000 2018 $000 2019 $000 2018 $000 — — (6,536) (6,536) — — 6,536 6,536 — — 6,536 6,536 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 over the short term. 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 $nil or increase by $nil (2018: decrease by $2,000,000 or increase by $2,000,000); and — equity reserves would increase by $54,170,000 with a 100 basis point decrease in interest rates or decrease by $35,640,000 with a 100 basis point increase in interest rates (2018: increase by $40,738,000 or decrease by $31,154,000 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 as APA Group has no unhedged floating rate borrowings outstanding at the end of the financial year. The increase/decrease in equity reserves is based on 1.00% p.a. increase/decrease in the yield curve at the reporting date. The increase in sensitivity in equity is due to the increase in the notional value of cross currency swaps. 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 – electricity price APA Group is exposed to electricity price risk arising from a contract for difference in an electricity sales 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. Credit risk management 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. 88 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) b) Credit risk (continued) Overview of APA Group's exposure to credit risk The carrying amount of financial assets recorded in the financial statements, net of any collateral held or bank guarantees held by the Group (which will cause a financial loss to APA Group due to failure to discharge an obligation by the counterparties), represents APA Group's maximum exposure to credit risk in relation to those assets. In order to minimise credit risk, APA Group categorised exposures according to their degree of risk of default. APA Group's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. APA Group's current credit risk grading framework comprises the following categories: — Performing – the counterparty has a low risk of default and does not have any past-due amounts; — Doubtful – amount is >30 days past due or there has been a significant increase in credit risk since initial recognition; and — Write-off – there is evidence indicating that the debtor is in severe financial difficulty and APA Group has no realistic prospect of recovery. The table below details the credit quality of APA Group's financial assets. 2019 External credit rating Internal credit rating ECL method (a) Cash and cash equivalents and cash on deposit A- (Standard & Poor's)/ A3 (Moody's) or higher Performing 12-month ECL Trade receivables Finance lease receivables Contract assets Loans advanced to related parties Redeemable preference shares (GDI) N/A N/A N/A N/A N/A — (b) Lifetime ECL (simplified approach) — (b) Lifetime ECL (simplified approach) — (b) Lifetime ECL (simplified approach) Performing Performing 12-month ECL 12-month ECL a) Lifetime ECL represents the expected credit losses (ECL) that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. b) For trade receivables, finance lease receivables and contract assets, APA Group has applied the simplified approach in AASB 9 to measure the loss allowance at lifetime ECL. APA Group determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision matrix. Note 9 includes further details on the loss allowance for these assets respectively if any. There is no material ECL for any of the financial assets listed in the table above. 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 2019 has been determined to be immaterial and no liability has been recorded (2018: $nil). c) Liquidity risk APA Group has a policy of dealing with liquidity risk which requires an appropriate liquidity risk management framework for the management of APA Group's short, medium and long-term funding and liquidity management requirements. Liquidity risk is managed by maintaining adequate cash reserves and banking facilities, by monitoring and forecasting cash flow and where possible, by arranging liabilities with longer maturities to more closely match the underlying assets of APA Group. Detailed in the table following are APA Group's remaining contractual maturities for its non-derivative financial liabilities. The table is presented based on the undiscounted cash flows of financial liabilities taking account of the earliest date on which APA Group can be required to pay. The table includes both interest and principal cash flows. APA GROUP — ANNUAL REPORT 2019 — 89 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) c) Liquidity risk (continued) The table below shows the undiscounted Australian dollar cash flows associated with the AUD and foreign currency denominated notes, cross currency interest rate swaps and fixed interest rate swaps in aggregate. 2019 Unsecured financial liabilities Trade and other payables Unsecured bank borrowings (a) Denominated in A$ Other financial liabilities Denominated in US$ Other financial liabilities (b) Guaranteed Senior Notes (c) Denominated in A$ 2007 Series G 2007 Series H 2010 AUD Medium Term Notes 2016 AUD Medium Term Notes Denominated in US$ 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 2015 EUR Medium Term Notes (b) 2019 GBP Medium Term Notes 2019 JPY Medium Term Notes Average interest rate % p.a. Maturity Less than 1 year $000 1 - 5 years $000 More than 5 years $000 — — — — 7.45 7.45 7.75 3.75 6.14 8.86 3.88 4.20 5.00 4.25 4.25 4.25 3.50 1.38 2.00 3.13 1.03 15 May 22 15 May 22 22 Jul 20 20 Oct 23 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 18 Jul 31 13 Jun 34 302,082 — — — — — 4,285 12,207 5,961 8,327 29,023 24,757 6,002 4,617 23,250 7,500 92,586 71,220 311,625 226,250 11,354 176,433 — 857,911 — — — — — — — 104,797 49,661 65,835 21,375 58,715 299,179 39,351 56,713 35,077 42,794 28,519 5,668 263,342 1,633,528 85,501 662,867 234,894 1,313,477 — — 158,159 555,663 226,539 1,602,172 67,183 171,174 — 1,101,968 134,564 995,090 22,471 189,188 a) Bank facilities mature or expire on 19 December 2019 ($100 million limit), 18 May 2020 ($150 million limit), 19 December 2020 ($100 million limit), 16 May 2022 ($50 million limit), 18 July 2022 ($150 million limit), 30 June 2023 ($500 million limit) and 31 December 2023 ($500 million limit). b) Facilities are denominated in or fully swapped by way of cross currency swap into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at 30 June 2019. These amounts are fully hedged by forward exchange contracts or future US$ revenues. c) Rates shown are the coupon rate in the currency of issuance. 1,175,101 3,141,082 8,084,671 90 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) c) Liquidity risk (continued) 2018 Unsecured financial liabilities Trade and other payables Unsecured bank borrowings (a) Denominated in A$ Other financial liabilities Denominated in US$ 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) Average interest rate % p.a. Maturity Less than 1 year $000 1 - 5 years $000 More than 5 years $000 — 3.07 381,676 — 6,114 204,419 — — — — 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 4,798 13,883 8,570 7,903 29,578 29,367 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 — — — — 203,750 — — — — — 249,932 1,612,832 81,147 649,400 235,087 1,371,999 299,179 157,727 — 595,446 215,008 1,574,423 1,103,923 — 162,458 1,086,471 1,179,851 4,491,797 7,132,258 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 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 $1,000 million syndicated bank facility came into effect on 2 July 2018. The two tranches of this facility mature on 30 June 2023 and 31 December 2023 respectively. b) Facilities are denominated in or fully swapped by way of cross currency swap into US$. 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 in the currency of issuance. 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. APA GROUP — ANNUAL REPORT 2019 — 91 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) c) Liquidity risk (continued) Fair value measurements recognised in the statement of financial position The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. — Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. — Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). — Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Transfers between levels of the fair value hierarchy occur at the end of the reporting period. There have been no transfers between the levels during 2019 (2018: 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 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 sales 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. 92 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) Fair value hierarchy 2019 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 Contract for difference Financial liabilities measured at fair value Cross currency interest rate swaps used for hedging Forward foreign exchange contracts used for hedging Contract for difference 2018 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 Reconciliation of Level 3 fair value measurements Opening balance Revaluation Settlement Closing balance Level 1 $000 Level 2 $000 Level 3 $000 Total $000 — — — — — — — — — — — — — — — — — — 2,245 527,857 10,209 — 540,311 356,409 25,872 — 382,281 2,045 592,244 29,130 623,419 800 215,641 13,486 — 229,927 — — — 2,144 2,144 — — 402 402 — — — — — — — 6,536 6,536 2019 $000 6,536 (3,708) (4,570) (1,742) 2,245 527,857 10,209 2,144 542,455 356,409 25,872 402 382,683 2,045 592,244 29,130 623,419 800 215,641 13,486 6,536 236,463 2018 $000 — 6,536 — 6,536 APA GROUP — ANNUAL REPORT 2019 — 93 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 19. Financial risk management (continued) Fair value measurements of financial instruments measured at amortised cost The financial liabilities included in the following table are fixed rate borrowings. Other debts held by APA Group are floating rate borrowings and amortised cost as recorded in the financial statements approximate their fair values. 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) 2019 $000 2018 $000 2019 $000 2018 $000 426,115 500,000 132,196 326,675 4,275,027 2,442,600 2,187,895 730,049 500,000 — 308,496 4,057,344 1,694,492 2,129,801 460,583 530,459 134,944 327,014 4,489,354 2,602,390 2,255,715 10,290,508 9,420,182 10,800,459 768,992 528,646 — 312,539 3,992,019 1,768,993 2,108,339 9,479,528 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 Assets Liabilities Derivatives at fair value: Contract for difference Equity forward contracts Derivatives at fair value designated as hedging instruments: Cross currency interest rate swaps – cash flow hedges Foreign exchange contracts – cash flow hedges Interest rate swaps – cash flow hedges Financial item carried at amortised cost: Redeemable preference share interest Current Derivatives – at fair value: Contract for difference Equity forward contracts Indexed revenue contracts 2019 $000 — 1,513 61,664 4,577 — 285 68,039 2,144 732 — 2018 $000 — 1,236 24,903 29,101 — 285 55,525 — 809 — Derivatives at fair value designated as hedging instruments: Cross currency interest rate swaps - cash flow hedges 483,253 580,249 Foreign exchange contracts - cash flow hedges 5,632 29 2019 $000 402 — 141,860 10,520 — — 2018 $000 6,094 — 120,551 10,656 2,100 — 152,782 139,401 — — 3,459 245,892 15,352 442 — 3,767 121,471 2,830 Financial items carried at amortised cost: Redeemable preference shares Non-current 10,400 502,161 10,400 591,487 — — 264,703 128,510 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. 94 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 20. Other financial instruments (continued) Recognition and measurement Classification of financial assets Debt instruments that meet the following conditions are subsequently measured at amortised cost: — The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and — The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (FVTOCI): — The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and — The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. By default, all other financial assets are subsequently measured at fair value through profit or loss (FVTPL). Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss to the extent they are not part of a designated hedging relationship. Derivatives that APA Group does not elect to apply hedge accounting to or do not meet the hedge accounting criteria, are classified as 'financial assets/liabilities' for accounting purposes and accounted for at FVTPL. Further information about the classification and measurement of financial instruments is provided in Note 30 under AASB 9 'Financial Instruments'. Fair value measurement For information about the methods and assumptions used in determining the fair value of financial instruments refer to Note 19. 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 relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, APA Group expects the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements: — there is an economic relationship between the hedged item and the hedging instrument; — the effect of credit risk does not dominate the value changes that result from that economic relationship; and — the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that APA Group actually hedges and the quantity of the hedging instrument that APA Group actually uses to hedge that quantity of hedged item. If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, APA Group adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again. 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. APA GROUP — ANNUAL REPORT 2019 — 95 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 20. Other financial instruments (continued) Recognition and measurement (continued) Cash flow hedges The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the cash flow hedge reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the 'finance costs' line item. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect other comprehensive income. Furthermore, if APA Group expects that some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss. APA Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in cash flow hedge reserve is reclassified immediately to profit or loss. Accounting for the forward element of forward contracts and foreign currency basis spreads of financial instruments APA Group designates the full change in the fair value of a forward contract (i.e. including the forward elements) as the hedging instrument for all of its hedging relationships involving forward contracts. APA Group separates the foreign currency basis spread from a financial instrument and excludes it from the designation of that financial instrument as the hedging instrument. Changes in the value of the undesignated aligned foreign currency basis spread associated with cross currency interest rate swaps are deferred in other comprehensive income. Cash flow hedge and cost of hedging reserve The cash flow hedge reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction impacts the profit or loss, or is included directly in the initial cost or other carrying amount of the hedged non-financial items. The cost of hedging reserve represents the effect of the changes in fair value of the forward currency basis spread of a financial instrument when the foreign currency basis spread of a financial instrument is excluded from the designation of that financial instrument as the hedging instrument (consistent with APA Group's accounting policy to recognise non-designated component of foreign currency derivative in equity). The changes in fair value of the foreign currency basis spread of a financial instrument, in relation to a time-period related hedged item accumulated in the cash flow hedging reserve, are amortised to profit or loss on a rational basis over the term of the hedging relationship. Balance at beginning of financial year Gain/(loss) recognised taken to equity: 2019 $000 2018 $000 (339,834) (216,442) Gain/(loss) arising on changes in fair value of hedging instruments (464,643) (202,054) Changes in fair value of foreign currency basis spread during the year Share of hedge reserve of associate Income tax related to changes in fair value Transferred to profit or loss: (Gain)/ loss reclassified to profit or loss - hedged item has affected profit or loss (Gain)/ loss arising on changes in fair value of foreign currency basis spread Income tax related to amounts reclassified to profit or loss 15,719 (8,540) 137,239 52,945 21,402 (22,304) (76,753) 8,632 81,053 66,495 27,405 (28,170) Balance at end of financial year (608,016) (339,834) The foreign currency basis spread balance at the beginning of the financial year is ($93.3 million) and at the end of the financial year is ($51.2 million) in 2019 (2018: ($43.9 million) and ($93.3 million) respectively). 96 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 20. Other financial instruments (continued) Recognition and measurement (continued) Hedge ineffectiveness Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. In hedges of foreign currency capital equipment purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of APA Group or the derivative counterparty. Hedge ineffectiveness for cross currency interest rate swaps is assessed using the same principles as for hedges of foreign currency capital equipment purchases. It may occur due to the credit value/debit value adjustment on the swap contracts which is not matched by the debts. Impairment of financial assets In relation to the impairment of financial assets, it is no longer necessary for a credit event to have occurred before credit losses are recognised. APA Group applies an ECL model to account for ECL and changes in those ECL at each reporting date to reflect changes in credit risk since initial recognition of a financial asset. APA Group recognises a loss allowance for ECL on investments in debt instruments that are measured at amortised cost, for example, loans advanced to related parties and trade receivables. No impairment loss is recognised for investments in equity instruments. For trade receivables, finance lease receivables and contract assets, APA Group applies the simplified approach to assessing ECL. Under the simplified approach, ECL on these financial assets is estimated using a provision matrix. This matrix is based on APA Group’s historical credit losses and reasonable and supportable information that is available without undue cost. The amount of ECL under either approach is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. APA Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account. Aside from the additional disclosure requirements in Note 19, the history of collection rates and forward-looking information that is available without undue cost or effort shows that APA Group does not have an expected loss on collection of debtors or loans. Significant increase in credit risk An actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating. Definition of default When there is a breach of financial covenants by the debtor. Write-off policy APA Group writes off a financial asset when all reasonable attempts at recovery have been taken and failed e.g. debts that are considered irrecoverable, or where the cost of recovery is uneconomic, must be written off as a bad debt. 21. Issued capital Units 2019 $000 2018 $000 1,179,893,848 securities, fully paid (2018: 1,179,893,848 securities, fully paid) (a) 3,103,806 3,288,123 2019 No. of units 000 2019 $000 Movements Balance at beginning of financial year 1,179,894 3,288,123 Securities issued under entitlement offer Capital distributions paid (Note 8) Issue costs of securities Tax relating to security issue costs — — — — — (184,181) (194) 58 2018 No. of units 000 1,114,307 65,587 — — — 2018 $000 3,114,617 380,782 (201,385) (8,415) 2,524 Balance at end of financial year 1,179,894 3,103,806 1,179,894 3,288,123 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. APA GROUP — ANNUAL REPORT 2019 — 97 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 provided by/(used in) investing activities Distributions paid to non-controlling interests Net cash used in financing activities 2019 $000 2018 $000 813 774 993,487 1,063,708 994,300 1,064,482 25 25 78 78 994,275 994,275 1,064,404 1,064,404 65,082 (12) 65,070 65,070 65,790 69,409 (135,136) (135,199) 68,061 (12) 68,049 68,049 68,852 (54,725) (135,616) (14,127) 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 Issue costs of units Distribution – capital return (Note 8) Reserves: Retained earnings: Balance at beginning of financial year Net profit attributable to APTIT unitholders Distributions paid (Note 8) 98 — APA GROUP — ANNUAL REPORT 2019 994,275 1,064,404 — 53 994,275 1,064,457 1,030,176 — (63) (65,894) 976,284 124,234 (2,745) (67,597) 964,219 1,030,176 — — 34,228 65,070 (69,242) 30,056 34,198 68,049 (68,019) 34,228 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Group Structure 22. Non-controlling interests (continued) Other non-controlling interest Issued capital: Balance at beginning of financial year Distribution – capital return Reserves: Balance at beginning of financial year Transfer to retained earnings Retained earnings: Balance at beginning of financial year Net profit attributable to other non-controlling interest Transfer from reserves Distribution paid 2019 $000 2018 $000 4 (4) — 1 (1) — 48 — 1 (49) — 4 — 4 1 — 1 48 — — — 48 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 2019 2018 Ownership interest % Energy Infrastructure Investments Energy infrastructure Gas transmission Gas transmission Australia Australia Australia Power generation (wind) 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 2019 $000 2018 $000 Investment in joint ventures and associates using the equity method 263,829 271,597 Joint Ventures Aggregate carrying amount of investment APA Group's aggregated share of: Profit from continuing operations Other comprehensive income Total comprehensive income Associates 239,243 242,768 18,630 (4,405) 14,225 17,105 9,039 26,144 Aggregate carrying amount of investment 24,586 28,829 APA Group's aggregated share of: Profit from continuing operations Other comprehensive income Total comprehensive income 4,592 (4,135) 457 4,819 (407) 4,412 APA GROUP — ANNUAL REPORT 2019 — 99 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Group Structure 23. Joint arrangements and associates (continued) 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 (a) Gas pipeline operation - Western Australia Mid West Pipeline (b) Gas pipeline operation - Western Australia Output interest 2019 % 88.2 50.0 2018 % 88.2 50.0 a) On 17 August 2004, APA acquired a direct interest in the Goldfields Gas Transmission joint operations as part of the SCP Gas Business acquisition. b) Pursuant to the joint venture agreement, APA Group receives a 70.8% share of operating income and expenses. Interest in joint arrangements A joint arrangement is an arrangement whereby two or more parties have joint control. Joint control is the contractually agreed sharing of control such that decisions about the relevant activities of the arrangement (those that significantly affect the returns) require the unanimous consent of the parties sharing control. APA Group has two types of joint arrangements: Joint ventures: A joint arrangement in which the parties that share joint control have rights to the net assets of the arrangement. Joint Ventures are accounted for using the equity accounting method; and Joint operations: A joint arrangement in which the parties that share joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement. In relation to its interest in a joint operation, APA Group recognises its share of assets and liabilities, revenue from the sale of its share of the output and its share of any revenue generated from the sale of the output by the joint operation and its share of expenses. These are incorporated into APA Group’s financial statements under the appropriate headings. 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) 100 — APA GROUP — ANNUAL REPORT 2019 Country of registration/ incorporation Ownership interest 2019 % 2018 % 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 96 100 100 100 100 100 100 100 100 100 100 100 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Group Structure 24. Subsidiaries (continued) Name of entity 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 (b),(c) APA Pipelines Investments (BWP) Pty Limited (b),(c) APA Power Holdings Pty Limited (b),(c) APA Power PF Pty Limited (b),(c) APA Reedy Creek Wallumbilla Pty Limited (b),(c) 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),(d) APA Sub Trust No 2 (b),(d) APA Sub Trust No 3 (b),(d) 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),(d) 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) Country of registration/ incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia United States — — — Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia — Australia Australia Australia Australia Ownership interest 2019 % 2018 % 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 APA GROUP — ANNUAL REPORT 2019 — 101 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Group Structure 24. Subsidiaries (continued) Name of entity 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),(d) EPX Holdco Pty Limited (b),(c) EPX Member Pty Limited (b),(c) EPX Trust (b),(d) Ethane Pipeline Income Financing Trust (b),(d) Ethane Pipeline Income Trust (b),(d) Gasinvest Australia Pty Ltd (b),(c) GasNet A Trust (d) GasNet Australia Investments Trust (d) GasNet Australia Trust (b),(d) Goldfields Gas Transmission Pty Ltd (b) Gorodok Pty. Ltd. (b),(c) Griffin Windfarm 2 Pty Ltd (b) Moomba to Sydney Ethane Pipeline Trust (b),(d) 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) Country of registration/ incorporation Ownership interest 2019 % 2018 % 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 96 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 96 100 100 100 100 100 100 100 100 100 100 100 100 a) Australian Pipeline Trust is the head entity within the APA tax-consolidated group. b) These entities are members of the APA tax-consolidated group. c) These wholly-owned subsidiaries have entered into a deed of cross guarantee with APT Pipelines Limited pursuant to ASIC Corporations Instrument 2016/785 and are relieved from the requirement to prepare and lodge an audited financial report. d) These trusts are unincorporated and not required to be registered. e) Amadeus Gas Trust terminated on 28 June 2019. 102 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 2019 and 30 June 2018. 26. Director and Executive Key Management Personnel 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 2019 $000 2018 $000 172,774 8,596 181,370 287,506 2,293 289,799 52,233 52,586 2019 $ 1,664,631 158,168 2018 $ 1,625,875 154,482 1,822,799 1,780,357 3,629,920 25,000 1,515,047 5,169,967 6,992,766 3,638,690 25,000 1,479,646 5,143,336 6,923,693 Remuneration of Executive Key Management Personnel (a) The aggregate remuneration of Executive Key Management Personnel of APA Group is set out below: Short-term employment benefits Post-employment benefits Cash settled security-based payments Total remuneration: Executive Key Management Personnel 7,763,114 101,666 2,864,008 7,748,591 95,049 2,822,148 10,728,788 10,665,788 a) The remuneration for the Chief Executive Officer and Managing Director, Michael (Mick) McCormack, is included in both the remuneration disclosure for Directors and Executive Key Management Personnel. 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) 2019 $ 2018 $ 694,900 19,700 506,700 — 734,800 19,300 544,915 9,091 1,221,300 1,308,106 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 (debt raisings and FY2018 included equity raising) and procedures in relation to ASIC Regulatory Guide 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. APA GROUP — ANNUAL REPORT 2019 — 103 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 $4,696,351 (2018: $4,717,014) 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: 2019 SEA Gas Energy Infrastructure Investments EII 2 GDI (EII) 2018 SEA Gas Energy Infrastructure Investments EII 2 GDI (EII) Dividends from related parties $000 9,551 4,466 3,732 4,701 Sales to related parties $000 7,809 39,198 1,020 53,654 22,450 101,680 5,975 3,841 3,253 5,772 18,841 3,853 46,671 764 62,053 113,341 Purchases from related parties $000 — — — — — — — — — — Amount owed by related parties $000 122,626 7,627 335 10,123 140,710 311 15,486 47 7,417 23,261 Amount owed to related parties $000 — — — — — — — — — — At year end, APA Group had a loan receivable from SEA Gas of $122.3 million (2018: $0.3 million). 104 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 2019 $000 2018 $000 2,533,019 707,803 3,240,822 130,337 130,337 2,695,971 731,861 3,427,832 132,313 132,313 3,110,485 3,295,519 3,103,806 3,288,123 6,679 7,396 3,110,485 3,295,519 216,818 216,818 147,408 147,408 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 (2018: $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) Adoption of AASB 9 ‘Financial Instruments’ In the current year, APA Group has applied AASB 9 'Financial Instruments' (as revised) and the related consequential amendments to other Accounting Standards for the first time. AASB 9 'Financial Instruments' (AASB 9) introduces new requirements for 1) the classification and measurement of financial assets and financial liabilities, 2) general hedge accounting and 3) impairment for financial assets. Details of these new requirements as well as their impact on APA Group’s consolidated financial statements are described below. APA Group has applied AASB 9 in accordance with the transition provisions set out in AASB 9. Classification and measurement of financial assets The date of initial application (i.e. the date on which APA Group has assessed its existing financial assets and financial liabilities in terms of the requirements of AASB 9) is 1 July 2018. Accordingly, APA Group has applied the requirements of AASB 9 to instruments that have not been derecognised as at 1 July 2018. All recognised financial assets that are within the scope of AASB 9 are required to be measured subsequently at amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Specifically: — Debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at amortised cost; — Debt investments that are held within a business model whose objective is both to collect the contractual cash flows and to sell the debt instruments, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at FVTOCI; — All other debt investments and equity investments are subsequently measured at FVTPL. APA GROUP — ANNUAL REPORT 2019 — 105 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Other 30. Adoption of new and revised Accounting Standards (continued) Adoption of AASB 9 ‘Financial Instruments’ (continued) In the current year, APA Group has not designated any debt investments that meet the amortised cost or FVTOCI criteria as measured at FVTPL. Debt instruments that are subsequently measured at amortised cost or at FVTOCI are subject to impairment. APA Group reviewed and assessed its existing financial assets as at 1 July 2018 based on the facts and circumstances that existed at that date and concluded that the initial application of AASB 9 has had the following impact on APA Group’s financial assets as regards their classification and measurement: — Financial assets classified as held-to-maturity and loans and receivables under AASB 139 that were measured at amortised cost continue to be measured at amortised cost under AASB 9 as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding; — Financial assets that were measured at FVTPL under AASB 139 continue to be measured as such under AASB 9. None of the classifications of financial assets have had any impact on APA Group’s financial position, profit or loss, other comprehensive income or total comprehensive income for either period. Classification and measurement of financial liabilities One change introduced by AASB 9 in the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability designated as FVTPL attributable to changes in the credit risk of the issuer. Specifically, AASB 9 requires that the changes in the fair value of the financial liability that is attributable to changes in the credit risk of that liability be presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss, but are transferred to retained earnings when the financial liability is derecognised. Previously, under AASB 139, the entire amount of the change in the fair value of the financial liability designated as FVTPL was presented in profit or loss. This change in accounting policy has had no impact on the classification and measurement of APA Group’s financial liabilities. General hedge accounting The new general hedge accounting requirements retain the three types of hedge accounting: cash flow hedges, fair value hedges and net investment hedges. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been replaced with the principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about APA Group’s risk management activities have also been introduced. In accordance with AASB 9’s transition provisions for hedge accounting, APA Group has applied the AASB 9 hedge accounting requirements prospectively from the date of initial application on 1 July 2018. APA Group’s qualifying hedging relationships in place as at 1 July 2018 also qualified for hedge accounting in accordance with AASB 9 and were therefore regarded as continuing hedging relationships. No rebalancing of any of the hedging relationships was necessary on 1 July 2018. As the critical terms of the hedging instruments match those of their corresponding hedged items, all hedging relationships continue to be effective under AASB 9’s effectiveness assessment requirements. APA Group has also not designated any hedging relationships under AASB 9 that would not have met the qualifying hedge accounting criteria under AASB 139. AASB 9 requires hedging gains and losses to be recognised as an adjustment to the initial carrying amount of non-financial hedged items (basis adjustment). In addition, transfers from the hedging reserve to the initial carrying amount of the hedged item are not reclassification adjustments under AASB 1 Presentation of Financial Statements and hence they do not affect other comprehensive income. Hedging gains and losses subject to basis adjustments are categorised as amounts that will not be subsequently reclassified to profit or loss in other comprehensive income. This is consistent with APA Group's practice prior to the adoption of AASB 9. Consistent with prior periods, APA Group has continued to designate the change in fair value of the entire forward contract, i.e. including the forward element, as the hedging instrument in APA Group’s cash flow hedge relationships. Since the AASB 9 hedge accounting requirements apply prospectively from the date of initial application (i.e. 1 July 2018), the comparative figures have not been restated. The application of the AASB 9 hedge accounting requirements has had no impact on the results and financial position of APA Group for the current and/or prior periods. 106 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Other 30. Adoption of new and revised Accounting Standards (continued) Adoption of AASB 9 ‘Financial Instruments’ (continued) The table below illustrates the classification and measurement of financial assets and financial liabilities under AASB 9 and AASB 139 at the date of initial application, 1 July 2018. Category Original category under AASB 139 New measurement category under AASB 9 Cash and cash equivalents and cash on deposit Loans and receivables Financial assets at amortised cost Trade and other receivables Loans and receivables Financial assets at amortised cost Equity forward contracts Financial assets/liabilities at FVTPL Financial assets/liabilities at FVTPL Foreign currency contracts, interest rate swaps and cross currency interest rate swaps Derivatives designated as hedging instruments at fair value Derivatives designated as hedging instruments at fair value Loans advanced to related parties Held-to-maturity investments investments Financial assets at amortised cost Redeemable preference shares (GDI) Held-to-maturity investments investments Financial assets at amortised cost Trade and other payables Financial liabilities at amortised cost Financial liabilities at amortised cost Borrowings Financial liabilities at amortised cost Financial liabilities at amortised cost Impairment of financial assets In relation to the impairment of financial assets, it is no longer necessary for a credit event to have occurred before credit losses are recognised. AASB 9 requires an expected credit loss model as opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires APA Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. Specifically, AASB 9 requires APA Group to recognise a loss allowance for ECL on loans and receivables. Aside from loans and receivables, APA Group does not currently hold any debt instruments or guarantee contracts as covered by the scope of the impairment section. In particular, AASB 9 requires APA Group to measure the loss allowance for a financial instrument at an amount equal to the lifetime ECL if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. In the event the credit risk on a financial instrument has not increased significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), APA Group is required to measure the loss allowance for that financial instrument at an amount equal to 12 months ECL. AASB 9 also requires a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances. APA Group applies the simplified approach to assessing ECL for trade receivables, finance lease receivables and contract assets. As at 1 July 2018, APA Group reviewed and assessed its existing financial assets and amounts due from customers for impairment. APA Group used reasonable and supportable information that is available without undue cost or effort in accordance with the requirements of AASB 9 to determine the credit risk of the respective items at the date they were initially recognised. It compared that to the credit risk as at 1 July 2017 and 1 July 2018. Based upon this assessment, aside from the additional disclosure requirements, this change has not had a material impact to APA Group’s accounts. The history of collection rates and forward-looking information that is available without undue cost or effort shows that APA Group does not have an expected loss on collection of debtors or loans. Details of the applicable accounting policies are set out in Note 20. Adoption of AASB 15 ‘Revenue from Contracts with Customers’ APA Group has adopted AASB 15 'Revenue from Contracts with Customers' (AASB 15) from 1 July 2018. AASB 15 replaced AASB 118 'Revenue' and AASB 111 'Construction Contracts' and related interpretations. AASB 15 applies to all revenues arising from contracts with customers unless the contracts are within the scope of other standards. The standard establishes a comprehensive framework for determining whether revenue is recognised and if so, the timing and amount of revenue recognition based on the core principle being that an entity should recognise revenue at an amount that reflects the consideration it expects to be entitled to in exchange for fulfilling its performance obligations to a customer. The Group’s accounting policies for its revenue streams are disclosed in detail in Note 4. Apart from providing more extensive disclosures of the Group’s revenue transactions, the application of AASB 15 has no significant impact on the financial position and financial performance of APA Group. APA Group adopted AASB 15 on a modified retrospective basis, therefore the new standard has been applied only to contracts that remain in force at 1 July 2018. As permitted by the standard comparative results are not restated. The cumulative effect on initial application was a charge of $2.2 million to opening retained earnings, an increase in unearned revenue of $3.1 million and an increase in deferred tax assets of $0.9 million at 1 July 2018. This adjustment is a result of AASB 15’s requirement to separately recognise interest expense from revenue from contracts with customers where the period between the payment by the customer and the fulfilment of the obligation gives rise to a significant financing component. APA GROUP — ANNUAL REPORT 2019 — 107 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Other 30. Adoption of new and revised Accounting Standards (continued) Adoption of AASB 15 ‘Revenue from Contracts with Customers’ (continued) APA Group may receive cash from customers as a contribution to constructing or connecting the customer to the network as part of ongoing access to gas transportation services. A significant financing component has been identified in some such contracts, as a result of the length of time between when the customer pays for the service and when APA Group fulfils the performance obligation. The effects of financing have been presented as interest expense separately from revenue from contracts with customers, with the accumulative adjustment at 1 July 2018 recognised in retained earnings as outlined previously. Discussions on the updated accounting policies can be found in Note 4. 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 AASB 16 'Leases' Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January 2019 30 June 2020 AASB 16 'Leases' APA Group has chosen not to early adopt AASB 16 'Leases' in preparing these consolidated financial statements. AASB 16 'Leases' (AASB 16) is effective for annual periods beginning on or after 1 January 2019. AASB 16 replaces AASB 117 'Leases' and related interpretations. Early adoption is permitted for entities that apply AASB 15 at or before the date of initial application of AASB 16. APA Group will apply AASB 16 in the financial year beginning 1 July 2019 (financial year ended 30 June 2020). Under AASB 16, APA Group’s accounting for leases as a lessee will result in the recognition of a right-of-use (ROU) asset as a new category within property, plant and equipment 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 and low value 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. APA Group’s accounting for leases as a lessor remains unchanged under AASB 16. Previously under AASB 117 'Leases', operating leases were off-balance sheet, APA Group recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised. APA Group has materially completed the assessment of the impact of the adoption of AASB 16 on the consolidated financial statements as at 1 July 2019. This assessment covered a variety of scenarios based on the various transition options and practical expedients applied. APA Group plans to adopt the modified retrospective approach on transition with no restatement of the comparative information. Under this approach, the lease liability is measured at present value of future lease payments on the initial date of application, being 1 July 2019. For leases other than motor vehicles, the lease asset is measured as if AASB 16 has been applied from the commencement of the lease with any difference between the lease asset and the liability recognised as an adjustment to opening retained earnings. For motor vehicle leases the lease asset equals the lease liability with nil impact on opening retained earnings. AASB 16 provides for a number of practical expedients for transition. In accordance with these expedients APA Group has elected to: exempt leases with a remaining term of less than 12 months from 1 July 2019; apply discount rates to a portfolio of assets with similar characteristics; use hindsight to determine the lease term; and continue to apply the existing definition of a lease under current accounting standards ('grandfather'). On transition, APA Group expects to recognise ROU assets of approximately $63 million and approximately $76 million lease related liability. The net effect of the recognised lease liabilities and ROU asset, adjusted for deferred tax and for deferred lease liabilities existent on transition will be reflected in opening retained earnings. APA Group does not 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. The actual impacts of adopting the standard may change as the new accounting policies are subject to change until APA Group presents its first financial statements that include the date of initial application. 31. Events occurring after reporting date On 21 August 2019, the Directors declared a final distribution of 25.50 cents per security ($300.9 million) for APA Group. This is comprised of a distribution of 18.97 cents per unit from APT and a distribution of 6.53 cents per unit from APTIT. The APT distribution represents a 8.53 cents per unit fully franked profit distribution and 10.44 cents per unit capital distribution. The APTIT distribution represents a 2.55 cent per unit profit distribution and a 3.98 cents per unit capital distribution. Franking credits of 3.66 cents per security will be allocated to the franked profit distribution. The distribution will be paid on 11 September 2019. 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. 108 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information declaration by the directors of australian pipeline limited. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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, 21 August 2019 Debra Goodin Director APA GROUP — ANNUAL REPORT 2019 — 109 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationauditor’s independence declaration. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES TO AUSTRALIAN PIPELINE LIMITED AS RESPONSIBLE ENTITY FOR AUSTRALIAN PIPELINE TRUST Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia DX: 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au 21 August 2019 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 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. DELOITTE TOUCHE TOHMATSU A V Griffiths Partner Chartered Accountants Sydney, 21 August 2019 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 145 110 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information 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 2019, 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 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 2019 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. Liability limited by a scheme approved under Professional Standards Legislation Member of Deloitte Asia Pacific Limited and the Deloitte Network 146 APA GROUP — ANNUAL REPORT 2019 — 111 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information independent auditor’s report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How the scope of our audit responded to the Key Audit Matter Derivative transactions and balances including the application of hedge accounting Our procedures performed in conjunction with our Treasury specialists included, but were not limited to:  Understanding management’s controls over the recording of derivative transactions and the application of hedge accounting,   On a sample basis, 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, Testing on a sample basis the application of hedge accounting (including hedge effectiveness and measurement of ineffectiveness), and evaluating on a sample basis, in particular for WGP, that the derivative financial instruments qualified for hedge accounting in accordance with the AASB 9 Financial Instruments.  We also assessed the appropriateness of the disclosures in Notes 18 and 19 to the financial statements. As at 30 June 2019, the Group has variable and fixed rate borrowings totalling $10.3 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 increasing 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 complex arrangements. 147 112 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information independent auditor’s report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST Key Audit Matter How the scope of our audit responded to the Key Audit Matter Goodwill Impairment Our procedures included, but were not limited to: As at 30 June 2019 the Group’s balance sheet includes goodwill of $1.2 billion allocated across several cash generating units (CGUs) as disclosed in Note 12. The assessment of the recoverable amount of the Group’s goodwill balance requires the exercise of significant judgement in respect of factors such as future contract renewals, contracting of spare capacity, forecast operating and maintenance costs, discount rates, as well as economic assumptions such as inflation.  Understanding the appropriateness of management’s controls over the evaluation of the carrying value of the Group’s goodwill to determine any asset impairments,  Challenging in conjunction with our corporate finance specialists the Group’s assumptions and estimates used to determine the recoverable amount of a sample of CGUs, including those relating to: o forecast revenue by reference to: expected future contract renewals expected 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 management’s 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, Evaluating management’s 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. We also assessed the appropriateness of the disclosures in Note 12 to the financial statements. 148 APA GROUP — ANNUAL REPORT 2019 — 113 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information independent auditor’s report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST 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 2019, 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 Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. 149 114 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationindependent auditor’s report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE 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 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. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report of Australian Pipeline Limited as responsible entity of Australian Pipeline Trust included in pages 45 to 58 of the Directors’ Report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Australian Pipeline Limited for the year ended 30 June 2019, has been prepared in accordance with section 300A of the Corporations Act 2001. 150 APA GROUP — ANNUAL REPORT 2019 — 115 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationindependent auditor’s report. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES TO THE UNITHOLDERS OF AUSTRALIAN PIPELINE TRUST Responsibilities The directors have voluntarily presented the Remuneration Report of the Responsible Entity of Australian Pipeline Trust which has been prepared in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU A V Griffiths Partner Chartered Accountants Sydney, 21 August 2019 151 116 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationdirectors’ report. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES APT Investment Trust and its Controlled Entities (ARSN 115 585 441) Directors’ Report for the year ended 30 June 2019 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 2019. 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 and since the year end are: Current Directors: Michael Fraser Robert (Rob) Wheals Steven (Steve) Crane James Fazzino Debra (Debbie) Goodin Shirley In’t Veld Peter Wasow Former Directors: Russell Higgins AO Patricia McKenzie First appointed 1 September 2015 Chairman: 27 October 2017 Chief Executive Officer and Managing Director: 6 July 2019 1 January 2011 21 February 2019 1 September 2015 19 March 2018 19 March 2018 7 December 2004 (Retired as a Director 20 February 2019) 1 January 2011 (Retired as a Director 8 March 2019) Michael (Mick) McCormack Chief Executive Officer: 1 July 2005 and Managing Director: 1 July 2006 (Retired as CEO and Managing Director 5 July 2019) The Company Secretary of the Responsible Entity during the year and since the year end is Nevenka Codevelle. 2. Principal Activities The Consolidated Entity operates as an investment and financing entity within the APA Group. 3. State of Affairs Rob Wheals commenced as APA’s new Chief Executive Officer and Managing Director with effect from 6 July 2019 following Mick McCormack’s retirement on 5 July 2019. 4. Subsequent Events On 21 August 2019, the Directors declared a final distribution of 6.53 cents per unit ($77.1 million). The distribution represents a 2.55 cents per unit profit distribution and 3.98 cents per unit capital distribution. The distribution is expected to be paid on 11 September 2019. 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 ended 30 June 2019 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 $65.1 million (FY2018: $68.0 million) for the year ended 30 June 2019 and total revenue of $65.1 million (FY2018: $68.1 million). APA GROUP — ANNUAL REPORT 2019 — 117 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES 6. Distributions Distributions paid to Securityholders during the financial year were: APTIT profit distribution APTIT capital distribution Total Final FY2018 distribution paid 12 September 2018 Interim FY2019 distribution paid 3 March 2019 Cents per security Total distribution $000 Cents per security Total distribution $000 2.90 3.14 6.04 34,228 37,022 71,250 2.97 2.45 5.42 35,014 28,872 63,886 On 21 August 2019, the Directors declared a final distribution for APTIT for the financial year of 6.53 cents per security which is payable on 11 September 2019 and will comprise the following components: APTIT profit distribution APTIT capital distribution Total Final FY2019 distribution payable 11 September 2019 Cents per security Total distribution $000 2.55 3.98 6.53 30,056 47,002 77,058 Distribution information is presented on an accounting classification basis. The APA Group Annual Tax Statement (to be released in September 2019) and Annual Tax Return Guide will provide the classification of distribution components for the purposes of preparation of Securityholder income tax returns. To assist APA Securityholders who wish to submit their annual tax return prior to receiving their annual APA Tax Statement in mid September, APA has developed an online tax estimator tool. The Estimator tool will generate Pro Forma Tax Return Inputs based on information entered by Securityholders and therefore should be considered “indicative only” compared to the confirmed accurate information contained in APA’s Annual Tax Statement. The Tax Estimator will be available under the Investor section on APA’s website following confirmation by the Board via an ASX release of the final FY2019 distribution (https://www.apa.com.au/investors/my-securities/apa-annual-tax-statement-estimator/). 7. Directors 7.1 See pages 06 to 07 for information relating to qualifications and experience of the Directors and the Company Secretary. Information on Directors and Company Secretary 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 Period of directorship Company Michael Fraser Robert Wheals Steven Crane James Fazzino Debra Goodin Shirley In't Veld Peter Wasow Aurizon Holdings Limited Since February 2016 — nib holdings limited SCA Property Group — Since September 2010, Chair since October 2011 Since December 2018 Incitec Pivot Limited July 2005 to November 2017 Senex Energy Limited oOh!media Limited Atlas Arteria Limited Ten Network Holdings Limited Since May 2014 Since November 2014 Since September 2017 August 2016 to November 2017 Northern Star Resources Limited Asciano Limited DUET Group Since September 2016 November 2010 to August 2016 August 2013 to May 2017 Oz Minerals Limited Alcoa Australia Limited Alumina Limited Since November 2017 January 2014 to July 2017 September 2011 to May 2017 118 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES 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 three 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 (1) Steven Crane James Fazzino Debra Goodin Shirley Int’d Veld Peter Wasow Russell Higgins (2) Patricia McKenzie (3) A 17 14 17 6 17 17 17 11 11 B 17 14 17 6 17 17 17 11 10 A — 4 — — 4 4 — 2 B — 3 — — 4 4 — 2 A 4 — 4 1 4 — 4 3 — B 4 — 4 1 4 — 4 3 — A — — — 2 4 4 — 2 2 B — — — 2 4 4 — 2 1 A 3 — 1 — 3 — — 2 — B 3 — 1 — 3 — — 2 — A) Number of meetings held during the time the Director held office or was a member of the committee during the financial year. B) Number of meetings attended. 1) Michael McCormack retired as a Director on 5 July 2019. 2) Russell Higgins AO retired as a Director on 20 February 2019. 3) Patricia McKenzie retired as a Director on 8 March 2019. 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 2019 is 683,693 (2018: 800,118 (1)). The following table sets out Directors’ relevant interests in APA securities as at 30 June 2019: Directors Michael Fraser Michael McCormack Steven Crane Debra Goodin James Fazzino (2) Shirley Int’d Veld Peter Wasow Russell Higgins AO (3) Patricia McKenzie (4) Fully paid securities as at 1 July 2018 Securities acquired Fully paid Securities securities as at 30 June 2019 disposed 102,942 350,000 130,000 23,000 — 25,000 15,000 129,939 24,237 800,118 — — — — 31,751 — 6,000 — — 37,751 — — — — — — — — — — 102,942 350,000 130,000 23,000 31,751 25,000 21,000 — — 683,693 1) At 1 July 2018, the aggregate number of APA securities held directly or beneficially by Directors or their related entities included 129,939 securities held by Russell Higgins AO who retired on 20 February 2019 and 24,237 securities held by Patricia McKenzie who retired on 8 March 2019. The aggregate number of APA Securities held directly or beneficially by the current Directors or their related entities as at 30 June 2019 is 683,693. 2) James Fazzino was appointed as a Director effective 21 February 2019. He held nil securities on appointment. 3) Russell Higgins AO retired as a Director on 20 February 2019. He held 129,939 securities on retirement. 4) Patricia McKenzie retired as a Director on 8 March 2019. She held 24,237 securities on retirement. 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. APA GROUP — ANNUAL REPORT 2019 — 119 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information directors’ report. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES 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. 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 139. 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, 21 August 2019 Debra Goodin Director 120 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationconsolidated statement of profit or loss and other comprehensive income. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 2019 $000 65,082 (12) 65,070 — 65,070 2018 $000 68,061 (12) 68,049 — 68,049 65,070 68,049 65,070 65,070 68,049 68,049 65,070 68,049 6 2019 5.5 2018 6.0 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. APA GROUP — ANNUAL REPORT 2019 — 121 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of financial position. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES AS AT 30 JUNE 2019 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 2019 $000 2018 $000 8 8 11 9 13 813 774 6,925 986,562 993,487 7,737 1,055,971 1,063,708 994,300 1,064,482 25 25 78 78 994,275 1,064,404 964,219 30,056 1,030,176 34,228 994,275 1,064,404 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 122 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of changes in equity. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Balance at 1 July 2017 Profit for the year Total comprehensive income for the year Issue of units under entitlement offer Issue cost of units Distributions to unitholders Balance at 30 June 2018 Balance at 1 July 2018 Profit for the year Total comprehensive income for the year Issue cost of units Distributions to unitholders Balance at 30 June 2019 Note 13 13 7 13 7 Issued capital $000 976,284 — — 124,234 (2,745) (67,597) Retained earnings $000 34,198 68,049 68,049 — — (68,019) Total $000 1,010,482 68,049 68,049 124,234 (2,745) (135,616) 1,030,176 34,228 1,064,404 1,030,176 — — (63) (65,894) 964,219 34,228 65,070 65,070 — (69,242) 30,056 1,064,404 65,070 65,070 (63) (135,136) 994,275 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. APA GROUP — ANNUAL REPORT 2019 — 123 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information consolidated statement of cash flows. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 Receipts from/(advances to) related parties Net cash provided by/(used in) 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 2019 $000 26,833 37,523 1,167 333 (66) 2018 $000 27,979 39,349 1,167 369 (12) 65,790 68,852 69,409 69,409 — (63) (135,136) (135,199) — — — (54,725) (54,725) 124,234 (2,745) (135,616) (14,127) — — — 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. 124 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 Operating Assets and Liabilities 8. Receivables 9. Payables 10. Leases 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 Executive Key Management Personnel remuneration 17. Remuneration of external auditor 18. Related party transactions 19. Parent entity information 125 126 126 127 127 127 128 128 129 129 130 131 132 132 133 133 133 134 135 20. Adoption of new and revised Accounting Standards 135 21. Events occurring after reporting date 137 APA GROUP — ANNUAL REPORT 2019 — 125 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 2019 was authorised for issue in accordance with a resolution of the directors on 21 August 2019. 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. 126 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 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 Finance lease income – related party Other revenue Other Total revenue Expenses Audit fees Total expenses 2019 $000 2018 $000 26,833 26,833 37,523 393 37,916 333 65,082 27,979 27,979 39,350 430 39,780 302 68,061 (12) (12) (12) (12) Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity expects to be entitled. 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 2019 cents 5.5 2018 cents 6.0 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 2019 $000 2018 $000 65,070 68,049 2019 No. of units 000 2018 No. of units 000 Adjusted weighted average number of ordinary units used in the calculation of basic and diluted earnings per unit 1,179,894 1,136,875 APA GROUP — ANNUAL REPORT 2019 — 127 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Financial Performance 7. Distributions Recognised amounts Final FY2018 distribution paid on 12 September 2018 (2018: Final FY2017 distribution paid on 13 September 2017) Profit distribution (a) Capital distribution Interim FY2019 distribution paid on 13 March 2019 (2018: Interim FY2018 distribution paid on 14 March 2018) Profit distribution (a) Capital distribution Total distributions recognised Profit distributions (a) Capital distributions (Note 13) Unrecognised amounts Final FY2019 distribution payable on 11 September 2019 (b) (2018: Final FY2018 distribution paid on 12 September 2018) Profit distribution (a) Capital distribution a) Profit distributions unfranked (2018: unfranked). b) Record date 28 June 2019. 2019 cents per unit 2019 Total $000 2018 cents per unit 2018 Total $000 2.90 3.14 6.04 2.97 2.45 5.42 5.87 5.59 11.46 2.55 3.98 6.53 34,228 37,022 71,250 35,014 28,872 63,886 69,242 65,894 135,136 30,056 47,002 77,058 3.07 3.69 6.76 3.03 2.38 5.41 6.10 6.07 12.17 2.90 3.14 6.04 34,198 41,107 75,305 33,821 26,490 60,311 68,019 67,597 135,616 34,228 37,022 71,250 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 2019 $000 813 813 6,925 6,925 2018 $000 774 774 7,737 7,737 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. 128 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Operating Assets and Liabilities 9. Payables Other payables 2019 $000 25 2018 $000 78 Trade and other payables are recognised when the Consolidated Entity becomes obliged to make future payments resulting from the purchase of goods and services. Trade and other payables are stated at amortised cost. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. GST receivable or GST payable is only recognised once a tax invoice has been issued or received. 10. Leases Finance leases Leasing arrangements – receivables Finance lease receivables relate to the lease of a pipeline lateral. There are no contingent rental payments due. Finance lease receivables Not longer than 1 year Longer than 1 year and not longer than 5 years Longer than 5 years Minimum future lease payments receivable (a) Gross finance lease receivables Less: unearned finance lease receivables Present value of lease receivables Included in the financial statements as part of: Current receivables (Note 8) Non-current receivables (Note 8) 2019 $000 1,167 4,669 3,502 9,338 9,338 (1,600) 7,738 813 6,925 7,738 2018 $000 1,167 4,669 4,669 10,505 10,505 (1,994) 8,511 774 7,737 8,511 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. APA GROUP — ANNUAL REPORT 2019 — 129 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 11. Other financial instruments Non-current Advance to related party Investments carried at cost: Investment in related party (a) 2019 $000 2018 $000 879,183 948,592 107,379 986,562 107,379 1,055,971 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. Classification of financial assets Debt instruments that meet the following conditions are subsequently measured at amortised cost: — The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and — The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income (FVTOCI): — The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and — The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. By default, all other financial assets are subsequently measured at fair value through profit or loss (FVTPL). Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss to the extent they are not part of a designated hedging relationship. Derivatives that the Consolidated Entity does not elect to apply hedge accounting to or that do not meet the hedge accounting criteria, are classified as 'financial assets/liabilities' for accounting purposes and accounted for at FVTPL. Further information about the classification and measurement of financial instruments is provided in Note 20 under AASB 9 'Financial Instruments'. 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 The impairment of financial assets is no longer necessary for a credit event to have occurred before credit losses are recognised. The Consolidated Entity applies an expected credit loss (ECL) model to account for ECL and changes in the ECL at each reporting date to reflect changes in credit risk since initial recognition of the financial asset. The Consolidated Entity recognises a loss allowance for ECL on investments in debt instruments that are measured at amortised cost, for example, loans advanced to related parties and receivables. For finance lease receivables, the Consolidated Entity applies the simplified approach to assessing ECL. Under the simplified approach, ECL on these financial assets is estimated using a provision matrix. This matrix is based on the Consolidated Entity’s historical credit losses and reasonable and supportable information that is available without undue cost. The amount of ECL under either approach is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Consolidated Entity recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account. Aside from the additional disclosure requirements, the history of collection rates and forward-looking information that is available without undue cost or effort shows that the Consolidated Entity does not have an expected loss on collection of debtors or loans. 130 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 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 and climate change. 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 $5,974,000 or decrease by $5,917,000 (2018: increase by $6,023,000 or decrease by $5,968,000 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 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. Credit risk management 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 the risk of loss. For financial investments or market risk hedging, the Consolidated Entity'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 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 ARMC. These limits are regularly reviewed by the Board. Overview of the Consolidated Entity's exposure to credit risk 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 $25,000 (2018: $78,000), all of which are due in less than 1 year (2018: less than 1 year). APA GROUP — ANNUAL REPORT 2019 — 131 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Capital Management 13. Issued capital Units 2019 $000 2018 $000 1,179,893,848 units, fully paid (2018: 1,179,893,848 units, fully paid) (a) 964,219 1,030,176 Movements Balance at beginning of financial year Issue of units under entitlement offer Issue cost of units Capital distributions paid (Note 7) Balance at end of financial year 1,179,894 a) Fully paid units carry one vote per unit and carry the right to distributions. 2019 No. of units 000 2019 $000 2018 No. of units 000 1,179,894 1,030,176 — — — — (63) (65,894) 964,219 1,114,307 65,587 — — 1,179,894 1,030,176 2018 $000 976,284 124,234 (2,745) (67,597) 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 Country of registration Output interest 2019 % 2018 % GasNet Australia Investments Trust Australia 100 100 132 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Other 15. Commitments and contingencies The Consolidated Entity had no material contingent assets, liabilities and commitments as at 30 June 2019 and 30 June 2018. 16. Director and Executive Key Management Personnel 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 2019 $ 1,664,631 158,168 2018 $ 1,625,875 154,482 1,822,799 1,780,357 3,629,920 25,000 1,515,047 5,169,967 6,992,766 3,638,690 25,000 1,479,646 5,143,336 6,923,693 Remuneration of Executive Key Management Personnel (a) The aggregate remuneration of Executive Key Management Personnel of the Consolidated Entity is set out below: Short-term employment benefits Post-employment benefits Cash settled security-based payments Total remuneration: Executive Key Management Personnel 7,763,114 101,666 2,864,008 7,748,591 95,049 2,822,148 10,728,788 10,665,788 a) The remuneration of the Chief Executive Officer and Managing Director, Michael (Mick) McCormack, is included in both the remuneration disclosure for Directors and Executive Key Management Personnel. 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) 2019 $ 6,100 5,800 — 11,900 2018 $ 6,000 5,700 15,990 27,690 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). APA GROUP — ANNUAL REPORT 2019 — 133 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Other 18. Related party transactions a) Equity interest in related parties Details of the percentage of ordinary securities held in subsidiaries are disclosed in Note 14. b) Responsible Entity – Australian Pipeline Limited The Responsible Entity is wholly owned by APT Pipelines Limited (2018: 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 $813,000 are owing from a subsidiary of APT for amounts due under a finance lease arrangement (2018: $774,000); — non-current receivables totalling $6,925,000 are owing from a subsidiary of APT for amounts due under a finance lease arrangement (2018: $7,737,000); and — non-current receivables totalling $879,183,000 (2018: $948,592,000) are owing from a subsidiary of APT for amounts due under inter-entity loans. Australian Pipeline Limited Management fees of $1,142,000 (2018: $1,152,000) 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 $1,142,000 (2018: $1,152,000) were reimbursed by APT. 134 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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 2019 $000 2018 $000 813 774 993,487 1,063,708 994,300 1,064,482 25 25 78 78 994,275 1,064,404 964,219 30,056 — 1,030,176 34,228 — 994,275 1,064,404 65,070 — 65,070 68,049 — 68,049 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) Adoption of AASB 9 ‘Financial Instruments’ In the current year, the Consolidated Entity has applied AASB 9 Financial Instruments (as revised) and the related consequential amendments to other Accounting Standards for the first time. AASB 9 introduces new requirements for 1) the classification and measurement of financial assets and financial liabilities and 2) impairment for financial assets. Details of these new requirements as well as their impact on the Consolidated Entity’s consolidated financial statements are described below. The Consolidated Entity has applied AASB 9 in accordance with the transition provisions set out in AASB 9. Classification and measurement of financial assets The date of initial application (i.e. the date on which the Consolidated Entity has assessed its existing financial assets and financial liabilities in terms of the requirements of AASB 9) is 1 July 2018. Accordingly, the Consolidated Entity has applied the requirements of AASB 9 to instruments that have not been derecognised as at 1 July 2018. All recognised financial assets that are within the scope of AASB 9 are required to be measured subsequently at amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Specifically: — Debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at amortised cost; — Debt investments that are held within a business model whose objective is both to collect the contractual cash flows and to sell the debt instruments, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at FVTOCI; — All other debt investments and equity investments are subsequently measured at FVTPL. In the current year, the Consolidated Entity has not designated any debt investments that meet the amortised cost or FVTOCI criteria as measured at FVTPL. APA GROUP — ANNUAL REPORT 2019 — 135 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Other 20. Adoption of new and revised Accounting Standards (continued) Adoption of AASB 9 ‘Financial Instruments’ (continued) Debt instruments that are subsequently measured at amortised cost or at FVTOCI are subject to impairment. The Consolidated Entity reviewed and assessed its existing financial assets as at 1 July 2018 based on the facts and circumstances that existed at that date and concluded that the initial application of AASB 9 has had the following impact on the Consolidated Entity’s financial assets as regards their classification and measurement: — Financial assets classified as held-to-maturity and loans and receivables under AASB 139 that were measured at amortised cost continue to be measured at amortised cost under AASB 9 as they are held within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding; — Financial assets that were measured at FVTPL under AASB 139 continue to be measured as such under AASB 9. None of the classifications of financial assets have had any impact on the Consolidated Entity’s financial position, profit or loss, other comprehensive income or total comprehensive income for either period. Classification and measurement of financial liabilities One change introduced by AASB 9 in the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability designated at FVTPL attributable to changes in the credit risk of the issuer. Specifically, AASB 9 requires that the changes in the fair value of the financial liability that is attributable to changes in the credit risk of that liability be presented in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss, but are transferred to retained earnings when the financial liability is derecognised. Previously, under AASB 139, the entire amount of the change in the fair value of the financial liability designated at FVTPL was presented in profit or loss. This change in accounting policy has had no impact on the classification and measurement of the Consolidated Entity’s financial liabilities. The table below illustrates the classification and measurement of financial assets and financial liabilities under AASB 9 and AASB 139 at the date of initial application, 1 July 2018. Category Receivables Original category under AASB 139 New measurement category under AASB 9 Loans and receivables Financial assets at amortised cost Loans advanced to related parties Held-to-maturity investments Financial assets at amortised cost Trade and other payables Financial liabilities at amortised cost Financial liabilities at amortised cost Impairment of financial assets In relation to the impairment of financial assets, it is no longer necessary for a credit event to have occurred before credit losses are recognised. AASB 9 requires an expected credit loss model as opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires the Consolidated Entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. Specifically, AASB 9 requires the Consolidated Entity to recognise a loss allowance for ECL on loans and receivables. Aside from loans and receivables, the Consolidated Entity does not currently hold any debt instruments or guarantee contracts as covered by the scope of the impairment section. In particular, AASB 9 requires the Consolidated Entity to measure the loss allowance for a financial instrument at an amount equal to the lifetime ECL if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. In the event the credit risk on a financial instrument has not increased significantly since initial recognition (except for a purchased or originated credit-impaired financial asset), the Consolidated Entity is required to measure the loss allowance for that financial instrument at an amount equal to 12 months ECL. AASB 9 also requires a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances. The Consolidated Entity applies the simplified approach to assessing ECL for lease receivables. As at 1 July 2018, the Consolidated Entity reviewed and assessed its existing financial assets, loans advanced to related parties and amounts due from customers for impairment using reasonable and supportable information that is available without undue cost or effort in accordance with the requirements of AASB 9 to determine the credit risk of the respective items at the date they were initially recognised, and compared that to the credit risk as at 1 July 2017 and 1 July 2018. Based upon this assessment, aside from the additional disclosure requirements, this change has not had a material impact to the Consolidated Entity’s accounts. The history of collection rates and quality of counterparties shows that the Consolidated Entity does not have an expected loss on collection of debtors or loans. Details of the applicable accounting policies are set out in Note 11. 136 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationnotes to the consolidated financial statements. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 Other 20. Adoption of new and revised Accounting Standards (continued) Adoption of AASB 15 ‘Revenue from Contracts with Customers’ The consolidated entity has adopted AASB 15 Revenue from Contracts with Customers (“AASB 15”) from 1 July 2018. AASB 15 replaced AASB 118 Revenue and AASB 111 Construction Contracts and related interpretations. AASB 15 applies to all revenues arising from contracts with customers unless the contracts are within the scope of other standards. The standard establishes a comprehensive framework for determining whether revenue is recognised and if so, the timing and amount of revenue recognition based on the core principle being that an entity should recognise revenue at an amount that reflects the consideration it expects to be entitled to in exchange for fulfilling its performance obligations to a customer. As the revenue of the Consolidated Entity is limited to interest earned on inter-entity loans, distribution revenue and finance lease income, AASB 15 does not have any impact on the Consolidated Entity. The Consolidated Entity’s accounting policies for its revenue streams are disclosed in Note 4. 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 AASB 16 'Leases' Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January 2019 30 June 2020 AASB 16 'Leases' The Consolidated Entity has chosen not to early adopt AASB 16 'Leases' in preparing these consolidated financial statements. AASB 16 'Leases' (AASB 16) is effective for annual reporting periods beginning on or after 1 January 2019. AASB 16 replaces AASB 117 'Leases' and related interpretations. 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 21 August 2019, the Directors declared a final distribution for the 2019 financial year of 6.53 cents per unit ($77.1 million). The distribution represents a 2.55 cents per unit unfranked profit distribution and 3.98 cents per unit capital distribution. The distribution will be paid on 11 September 2019. 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. APA GROUP — ANNUAL REPORT 2019 — 137 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information declaration by the directors of australian pipeline limited. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2019 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, 21 August 2019 Debra Goodin Director 138 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationauditor’s independence declaration. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES TO AUSTRALIAN PIPELINE LIMITED AS RESPONSIBLE ENTITY FOR 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 21 August 2019 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 2019, 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, 21 August 2019 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 177 APA GROUP — ANNUAL REPORT 2019 — 139 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information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 financial report of APT Investment Trust (the “consolidated entity”), which comprises the consolidated statement of financial position as at 30 June 2019, 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 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 2019 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 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 Asia Pacific Limited and the Deloitte Network 178 140 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationindependent auditor’s report. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES TO THE UNITHOLDERS OF APT INVESTMENT TRUST Other Information The directors of APT Investment Trust (“the Directors”) 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 2019, 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. 179 APA GROUP — ANNUAL REPORT 2019 — 141 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information independent auditor’s report. continued. APT INVESTMENT TRUST AND ITS CONTROLLED ENTITIES TO THE UNITHOLDERS OF APT INVESTMENT TRUST   Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the consolidated entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the consolidated entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.  Obtain sufficient appropriate audit evidence regarding the financial information or business activities within the consolidated entity to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the consolidated entity audit. We remain solely responsible for our audit opinion. 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. DELOITTE TOUCHE TOHMATSU A V Griffiths Partner Chartered Accountants Sydney, 21 August 2019 180 142 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information additional information. Additional information required by the Listing Rules of the Australian Securities Exchange Limited and not provided elsewhere in this report (the information is applicable as at 16 August 2019). No. of securities 278,881,130 206,889,750 150,042,188 93,014,761 30,586,418 21,562,451 10,882,525 6,966,101 6,063,005 5,631,958 4,894,714 4,040,000 3,381,771 3,360,429 3,026,564 2,500,000 2,077,766 1,920,000 1,608,410 1,477,357 % 23.64 17.53 12.72 7.88 2.59 1.83 0.92 0.59 0.51 0.48 0.41 0.34 0.29 0.28 0.26 0.21 0.18 0.16 0.14 0.13 Twenty largest holders 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 Argo Investments Limited BNP Paribas Noms Pty Ltd HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited BKI Investment Company Limited Australian Foundation Investment Company Limited HSBC Custody Nominees (Australia) Limited-GSCO ECA AMP Life Limited HSBC Custody Nominees (Australia) Limited Australian Foundation Investment Company Limited Milton Corporation Limited BNP Paribas Nominees Pty ltd Buttonwood Nominees Pty Ltd Navigator Australia Ltd 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 838,807,298 71.09 No. of holders % No. of securities 137 7,657 9,813 28,818 27,888 0.18 10.30 13.20 38.78 37.53 871,610,743 152,950,506 69,823,458 74,427,629 11,100,957 % 73.87 12.96 5.92 6.31 0.94 74,313 100.00 1,179,893,848 100.00 1,759 holders hold less than a marketable parcel of securities (market value less than $500 or 48 securities based on a market price on 16 August 2019 of $10.49). Substantial holders By notice dated 14 June 2019, BlackRock Group advised that it had an interest in 70,905,193 stapled securities, as at 12 June 2019. 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 09 March 2018. 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 of hands, each holder has one vote. On a poll, each holder has one vote for each dollar of the value of the total interests they have in the scheme. On-market buy-back There is no current on-market buy-back. APA GROUP — ANNUAL REPORT 2019 — 143 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information five year summary. Financial Performance (Statutory) 2019 2018 2017 2016 2015 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 Funds From Operations to Net Debt Funds From Operations to Interest Weighted average number of securities (4) 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 (7) $m $m $m $m $m $m $m $m $m $m $m $m $m 2,452.2 2,031.0 1,573.8 (611.4) 962.4 (497.4) (177.0) 288.0 — 2,386.7 1,941.4 1,518.5 2,326.4 1,888.3 1,470.1 2,094.3 1,656.0 1,330.5 (578.9) (570.0) (520.9) 939.6 (509.7) (165.1) 264.8 — 900.1 (513.8) (149.5) 236.8 — 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) 559.9 356.0 203.9 288.0 264.8 236.8 15,433.9 15,227.2 15,045.9 14,842.7 14,652.9 9,352.1 3,599.4 8,810.4 4,126.8 9,249.7 3,978.2 9,037.3 4,029.1 8,642.8 4,382.7 $m 1,012.1 1,031.6 973.9 862.4 562.2 cents cents cents % times 24.4 85.8 47.0 10.8 3.0 23.3 90.7 45.0 10.7 3.0 21.2 87.1 43.5 10.8 3.0 16.0 77.1 41.5 9.5 2.7 m 1,179.9 1,136.9 1,118.5 1,118.5 56.1 (5) 56.3 38.0 6.5 (6) 2.8 999.4 (5) $m $m $m $m $m $m $m $m $m $m 1,010.1 149.4 114.0 2.1 19.2 277.8 53.0 28.4 962.2 147.1 124.6 2.6 22.9 237.6 66.2 23.1 925.4 149.5 123.0 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 (80.1) (67.9) (66.7) (86.7) — — — — 340.1 120.8 130.2 1.9 18.0 212.6 49.5 21.8 (73.6) 1.0 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 FY2015 to FY2018 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 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) June 2015 FFO to Net Debt was affected by the $3.7 billion worth of USD denominated debt raised to Wallumbilla Gladstone Pipeline. 7) Australian Gas Networks Limited sold in August 2014. 144 — APA GROUP — ANNUAL REPORT 2019 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information investor information. Calendar of events Final distribution FY2019 record date Final distribution FY2019 payment date Annual meeting Interim results announcement Interim distribution FY2020 record date Interim distribution FY2020 payment date 1) Subject to change. Annual Meeting Details Date: Thursday, 24 October 2019 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 28 June 2019 11 September 2019 24 October 2019 18 February 2020 (1) 31 December 2019 (1) 11 March 2020 (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 receive annual tax statements with the final distribution in September. Payment to Securityholders residing in Australia and New Zealand will be made only by direct credit into an Australian or New Zealand bank account. Securityholders with enquires should contact the APA Group registry. 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. APA’s Annual Report content is printed on Revive Laser 100% recycled paper and the cover pages are printed on ecoStar 100% recycled paper. Revive Laser is Australian made, manufactured from Forest Stewardship Council (FSC) Recycled certified fibre and certified carbon neutral by the Department of Environment, under the National Carbon Offset Standard (NCOS). Revive Laser is manufactured by an ISO 14001 certified mill and no chlorine bleaching occurs in the recycling process. ecoStar is an environmentally responsible paper made carbon neutral. 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. APA GROUP — ANNUAL REPORT 2019 — 145 FY2019 in Review I Chairman’s Report I Managing Director’s Report I APA Board & Senior Management I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Informationenergy. connected. 

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