APA
Annual Report 2020

Plain-text annual report

celebrating. 20 years 2020 a leading Australian energy infrastructure business.20 annual report. 2020 APA GROUP I ANNUAL REPORT 2020 A 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. established June 2000. we strengthen communities through responsible energy The world is changing as are people’s attitudes. Technology developments are providing new ways of operating and opening up new horizons and opportunities. It’s a very exciting time to be in the energy space. As we begin our third decade, APA is a leading energy infrastructure business with the vision to be world class in energy solutions. We will be at the forefront of the responsible energy transformation leveraging our existing portfolio and skills and investing in future technologies. In doing so, we will strengthen communities for the benefit of future generations. Responsible energy means taking a long term view and creating value for all our stakeholders – customers, investors, the environment and communities, authorities and our employees. We will measure our success based on the success we deliver to our stakeholders. Celebrating 20 years. Front cover: Wallumbilla Gas Hub facilities in Queensland. This Page: During FY2020, APA donated this state of the art TATRA fire truck to the Shire of Dandaragan in Western Australia, where APA's renewable energy precinct is located. Back cover (top): Badgingarra Wind and Solar Farms in Western Australia. Back cover (bottom): Raj Kallath, Infrastructure Project Manager and Michael Fox, Mechanical Engineer, inspecting the Reedy Creek to Wallumbilla pipeline in Queensland, post construction. 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. 20 years. delivering responsible energy. contents. FY2020 in Review 02 Chairman’s Report 04 Managing Director’s Report 06 APA Group Board 07 APA Group Executive Leadership 08 2020 Highlights Australian Pipeline Trust ARSN 091 678 778 10 Directors’ Report 48 Remuneration Report 63 Consolidated Financial Statements APT Investment Trust ARSN 115 585 441 123 Directors’ Report 127 Consolidated Financial Statements 147 Additional Information 148 Five Year Summary 149 Investor Information APA GROUP I ANNUAL REPORT 2020 01 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 chairman’s report. This year marks the 20th anniversary of APA’s listing on the ASX and it is pleasing to report it also marks 20 years of growth in distributions to Securityholders with Total Securityholder Returns of 2,203% (1) since listing in June 2000. FY2020 will be remembered as a very tough year for Australia and continues to be challenging into FY2021. At APA, Rob Wheals and his team have responded exceptionally well to the many challenges faced during the year, including bushfires, extreme weather events and the COVID-19 crisis. The Board is particularly pleased that they have done so with an absolute focus on our responsibilities to our customers, the communities in which we operate and our people. FY2020 Results APA’s long running growth strategy and low risk business model have underpinned the performance of the business through both good years, and in challenging years such as FY2020. Our strong balance sheet and long- term contracts have helped safeguard APA’s earnings against the market volatility impacting many companies this year, and our business has delivered solid FY2020 results. Importantly, we delivered 50.0 cents per security distribution for FY2020, an increase of 6.4% on FY2019, with the additional benefit of 7.31 cents per security of franking credits. Our distribution policy has always had long term sustainability at its core. So it is pleasing to demonstrate that APA’s approach has again delivered growing returns to our investors, in a year when there has been much disruption. Total revenue (excluding pass-through revenue) in FY2020 increased by $98.5 million to $2,129.5 million, an increase of 4.8% on the previous year (FY2019: $2,031.0 million). Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 5.1% to $1,653.9 million which was towards the upper end of the revised EBITDA guidance range of $1,635 million to $1,655 million (revised 21 April 2020). Whilst the mix of long term take or pay contracts and regulated revenues underpins our revenue base, investment in new energy infrastructure assets in recent years has delivered the pleasing earnings increase. Net profit after tax increased 10.1% to $317.1 million. Operating cash flow increased by 8.3% or $83.8 million to $1,095.9 million compared to the previous year (FY2019: $1,021.1 million). Similarly, operating cash flow per security increased 8.3%, or 7.1 cents, to 92.9 cents per security (FY2019: 85.8 cents per security). Consistent Strategy, Refreshed Perspective Growing the business and doing so in a sustainable manner has long been our strategy. With this approach, we have not only grown the size of the business and returns to investors, but we have also expanded our business to include complementary energy infrastructure. Michael Fraser. Chairman. Societal demand for new energy technologies is increasing and APA is well positioned to play an important role in the energy transformation that is underway. The Board endorsed APA’s refreshed Purpose, Vision, and Operating Model during this reporting period. Our Purpose of strengthening communities through responsible energy has never been so pertinent. APA is one of Australia’s largest companies, providing essential services to ensure the ongoing supply of gas and electricity for Australians. The refreshed operating structure recently implemented by Rob Wheals provides a solid foundation for APA’s continued success going forward, providing the capacity for innovation, scalability and agility needed to manage the changing nature of the energy landscape. This will help us achieve our Purpose to strengthen communities through responsible energy, and our Vision to become world class in energy solutions. Energy infrastructure requires a long- term perspective - investing today to deliver benefits to the economy, society and our customers in future years. We continue to see significant opportunities within Australia in our core skillset of energy infrastructure; particularly gas and renewables. We are also investing in new technologies and energy sources. 1) Achieved securityholder returns of 16.8% per annum on an annual compounding basis since listing on 13 June 2000 through to 21 August 2020. 02 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Assets owned and/or operated by APA ~$22 billion EBITDA increased 5.1% on FY2019 $1,654 million Distribution per security increased 6.4% 50 cents 20 years delivering responsible energy. Whatever Australia’s future energy mix, APA will be at the forefront of responsible energy generation and delivery. We continue to investigate gas infrastructure investment opportunities in North America with the focus on ensuring that anything we acquire is the right fit for our low risk business model. We have also continued to advance our scenario analysis in alignment with the Task Force on Climate-Related Disclosure recommendations that was commenced last year. The results of this analysis will be published in early October. The work has included extending the horizon to 2050 and resilience testing our existing portfolio against a range of divergent scenarios, including limiting climate change to 1.5C degrees. During the year, we published APA’s first Climate Change Position Statement which affirms our stance on climate change and support for a global transition to a lower carbon future. We know our actions of today will impact future generations and therefore we must take a responsible approach to the delivery of energy solutions, now and into the future. Board Addition During the year we welcomed Rhoda Phillippo as a Non-Executive Director to APA’s Board. Rhoda’s extensive and diverse background in energy, telecommunications and IT will further strengthen the Board and complement its skillset. Annual Meeting I recently wrote to Securityholders advising of the need to hold a virtual annual meeting in 2020 due to the government restrictions and guidelines as a result of the coronavirus pandemic. Access will be both online and via the telephone and you will be able to view, listen, vote and ask questions. We will provide further detailed information as we get closer to the 22 October 2020 annual meeting date. A dedicated information page on APA’s website has also been set up at https://www.apa.com.au/ investors/annual-meeting. FY2021 Outlook Looking ahead, we are confident that APA is in a strong position financially and operationally. Although APA is an essential part of the energy supply chain, no business is entirely immune from an economic downturn. APA is successful when our customers are strong. While our capacity contracts and regulated revenues mean that our business is somewhat resilient through economic cycles, APA’s revenues are still subject to recontracting decisions by customers, throughput volumes on certain assets, the timing of customer FID decisions, as well as lower CPI across the contracts portfolio. Further, APA’s current operating plan for FY21 only includes around $10 million of EBITDA contribution from the Orbost Gas Processing Plant under the recently announced Transition Agreement with Cooper Energy. This assumes Practical Completion is not achieved until the end of the financial year. In this context, APA expects EBITDA for the full year to 30 June 2021 to be within the range of $1,625 million to $1,665 million. Total distributions for FY2021 are expected to be substantially in line with FY2020 distributions, with franking credits which may be allocated, depending on the amount of cash tax APA will pay during the year. Finally, on behalf of the Board, I wish you the very best of health both physically and mentally, as we support each other through these extraordinary times. At APA, the safety and well- being of all the people we deal with, including our Securityholders, is our highest priority. Thank you for your ongoing support. Michael Fraser Chairman APA GROUP I ANNUAL REPORT 2020 03 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. FY2020 has been a year like no other. Resilience and adaptability have been key for both people and businesses. Our success and growth over 20 years as a publicly listed business has always been about adapting to new challenges and opportunities, with a strong focus on our customers’ needs. Rob Wheals. Chief Executive Officer and Managing Director. Disappointingly we have had an increase in recordable injuries this year. This is not satisfactory, and we are focussed on putting in place more measures to prevent future injuries. Performance and Growth Despite the testing times experienced in FY2020, APA has continued to deliver steady and solid results as detailed by the Chairman in his Report. The 5.1% increase year on year in EBITDA was possible because of contributions from a number of new energy-infrastructure assets, as well as solid performance from all our existing assets. APA’s Orbost Gas Processing Plant was due to be commercially operating in FY2020. We continue to work very closely with our customer and technology partner to have this asset contributing revenue  in the near term. We expect that the economic consequence of the global pandemic and depressed oil prices will cause delays to some near term investment decisions. But to ensure reliable, affordable and secure energy into the future, the industry must take a long-term view and continue to invest in new energy infrastructure projects. Working closely with our customers, APA continues to see over $4 billion of domestic growth opportunities over the next five to ten years. Of this, as much as $1 billion of projects are in active discussion with customers for decisions and/or delivery over the next two to three years. The Australian Energy Market Operator is forecasting a 2023 winter gas supply shortfall in the south eastern market. Amongst other gas supply solutions, this is likely to require additional gas transportation from northern markets to the south. We continue to see opportunities for cost efficient capacity expansion of APA’s interconnected East Coast Grid, which would deliver the additional transportation capacity as required. We are also working with customers on new gas supply sources, both from new gas fields and LNG regasification projects. In Western Australia, the organic growth of our pipeline and power generation infrastructure continues to gain momentum. We are securing new customers seeking both gas as a reliable and efficient energy source, as well as renewable energy. In terms of our growth plans in North America, we continue to look for suitable opportunities. As we have articulated previously, we will only proceed if an investment meets our criteria. The Energy Transition Roadmap Energy transformation is well underway both globally and in Australia. The shift away from coal has been significant. With an ageing suite of coal generators still producing 60-70% of electricity in Australia, there are both opportunities and challenges in navigating Australia’s energy transformation. Our Purpose and Vision This year we articulated our Purpose – we strengthen communities through responsible energy. We also defined our Vision – to be world class in energy solutions. This means that APA is recognised for integrity and credibility, for our leadership in responsible energy, for our strong governance and for our continued focus on our customers. Further, we want APA to be a place where people are proud to work, an organisation that is known for its operational, safety and environmental performance. I have been a very proud employee of APA for more than 11 years. My first year as your CEO and Managing Director has only enhanced my pride and enthusiasm for our business and what we can contribute to society in the years to come. Safety is paramount Safety is our number one priority. This financial year we experienced the additional challenges that came with the bushfires across eastern Australia and the global coronavirus pandemic. Fortunately our people were unharmed and our assets undamaged in the bushfires. Our business adapted quickly and successfully to the new and challenging operating conditions necessary in the pandemic. Our people have been a credit to the company in this crisis. 04 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 20 years focused on our customers’ needs. $1.7 billion $1,096 million invested in new energy infrastructure from FY2017-FY2020 Operating cash flow increased 8.3% on FY2019 Financial contributions, local employment opportunities, student work experience, leadership mentoring and equipment donations are some of the ways we provide support to regional communities where most of our infrastructure is located. As a business, we donated over $200,000, in addition to personal contributions from our employees, to help get communities back on their feet following the devastating bushfires earlier this year. I was both humbled and impressed by the compassion and initiative demonstrated by the APA  team. Working together is common practice at APA. And from an energy industry perspective, we have been doing just that with our active involvement in the Energy Charter. APA was a founding member of this initiative. It aims to deliver better energy outcomes for Australians through an aligned approach throughout the energy supply chain. FY2020 saw the delivery of the first Independent Accountability Report and the development of a number of coordinated “Better Together” initiatives aimed at delivering tangible, improved customer and consumer outcomes. Renewable penetration has increased, and battery cost and technologies have improved. However, current available technology alone will not be able to support the 24/7 electricity load in the near to medium term. We continue to believe gas will be an important part of the mix to ensure energy reliability going forward. APA has been working on its own energy roadmap as we take a holistic approach to decarbonisation. We are ensuring the new Transformation and Technology division has the right resources in place to investigate and invest in new technologies and new energy opportunities that will ultimately leverage and complement our existing expertise. Whatever the energy mix, APA, as a leading Australian energy infrastructure company, will continue to adapt and innovate to be at the forefront of world class, responsible energy solutions. Customer and Community Engagement Our business is successful when we meet our customers’ needs as well as work with and respect the communities in which we operate. Indigenous heritage, landholder and environmental sensitivities are key considerations in APA’s planning and operations. Ensuring we engage effectively with our stakeholders to deliver value for them as well as our customers is an area of enhanced focus at APA. Looking ahead My Executive Leadership Team has had some changes over the course of FY2020, to reflect the new operating model. Hannah McCaughey joined in March 2020 to head up the Technology and Transformation division. Hannah leads a group that is focused on exploring new energy opportunities as well as internal transformation projects including IT. We have also welcomed Julian Peck as Group Executive Strategy and Commercial. The role was made vacant due to Ross Gersbach moving to Houston to spearhead our US acquisition strategy. Julian has an investment banking background and will lead a newly formed team that focuses on developing and executing our corporate strategy as well as commercial opportunities with our customers I also recently announced the appointment of Adam Watson as Chief Financial Officer (CFO) commencing in mid-November. Adam has been CFO with Transurban for six years and has extensive experience across a range of financial disciplines and transactions in ASX-listed companies. Adam will take over the reins from Peter Fredricson, APA’s long-serving CFO who will retire in December 2020. Peter has been an excellent CFO and his astute capital markets guidance in particular has supported our business growth. On behalf of the company and our investors, I’d like to thank Peter for his outstanding contribution to APA’s success. With this refreshed management team, APA remains in a strong position to execute and deliver on our strategy of continued growth in this evolving energy market. Rob Wheals Chief Executive Officer and Managing Director APA GROUP I ANNUAL REPORT 2020 05 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. 2 3 4 5 6 7 8 1 1 Michael Fraser BCom FCPA MAICD Independent Chairman Appointed 1 September 2015 Appointed Chairman 27 October 2017 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. 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. 2 Robert (Rob) Wheals BCom CA GAICD Chief Executive Officer and Managing Director Appointed 6 July 2019 Rob has more than 25 years’ experience in Australia and internationally in energy infrastructure and telecommunications, across roles in operations, finance, commercial, strategy, infrastructure investments and M&A, as well as regulatory. Rob joined APA in 2008 as General Manager Commercial to manage the commercial function of APA's transmission business, which includes over 15,000 kilometres of gas transmission pipelines, storage and processing facilities. In 2012, Rob was appointed Group Executive Transmission, responsible for approximately 85% of APA's earnings before interest, tax, depreciation and amortisation. 4 6 In this role, Rob was responsible for the commercial, operational and safety performance of APA Group's transmission and gas storage assets. Rob has a deep understanding of the Australian energy market and the challenges facing Australia today and into the future, in particular the challenge of balancing sustainable lower emissions energy with reliable and affordable energy for end users. Prior to joining APA, Rob was General Manager of Strategy at AAPT in Sydney. Rob has a Bachelor of Commerce Degree, is a Chartered Accountant and a Graduate Member of the Australian Institute of Company Directors. 3 Steven (Steve) Crane BCom FAICD SF Fin Independent Director Appointed 1 January 2011 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. James Fazzino BEc (Hons) FCPA 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, a director of Rabobank Australia Limited and Tassal Group Limited. He is also a Co-convenor of the Male Champions of Change 2015 Group, Vice Chancellors Fellow at La Trobe University and Adjunct Professor at La Trobe Business School. He was formerly the Managing Director and Chief Executive Officer of Incitec Pivot 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. 5 Debra (Debbie) Goodin BEc FCA MAICD Independent Director Appointed 1 September 2015 Debbie is an experienced Non-Executive Director and Chair of Board Audit and Risk and Remuneration Committees. She is currently a Director of ASX-listed companies Senex Energy Limited and Atlas Arteria Limited, and Chairs the Audit and Risk Committees for each of these companies. She is also a Director and Audit Committee Chair of Australia Pacific Airports Corporation Limited as an IFM owner's representative. She was formerly a Director of oOh!media Limited and 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. 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, Alumina Limited and NBN Co Limited. She was formerly Deputy Chair of CSIRO, 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 Limited, 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. 7 Rhoda Phillippo MSc Telecommunications Business GAICD Independent Director Appointed 1 June 2020 Rhoda has considerable experience in the telecommunications, IT and energy sectors. Rhoda is currently a Non-Executive Director with Pacific Hydro, Datacom, where she is the Chair of the Remuneration Committee and Transformation Committee, Agility CIS, and an alternate Director for Perth Airport on behalf of the Future Fund. She is formerly a Non- Executive Director of Vocus Group Ltd and LINQ, Chairman of Snapper Services in New Zealand and Deputy Chair of Kiwibank in New Zealand. Rhoda spent much of her career in the telecommunications industry in the United Kingdom, New Zealand and Australia in senior management positions before joining Optimation, in New Zealand, as Chief Executive Officer. Rhoda later joined HRL Morrison & Co and, during this time, was Managing Director of Lumo Energy for two years. Rhoda is a member of the Health, Safety and Environment Committee and a member of the People and Remuneration Committee. 8 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. 06 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 executive leadership 2 3 4 5 6 7 8 9 10 3 5 7 9 1 1 Julian Peck BCom Group Executive Strategy and Commercial Effective 20 August 2020 Julian will be responsible for delivering APA’s customer experience, all business development and commercial contracting activities, co-ordination of corporate strategy development, as well as undertaking corporate development and merger and acquisition activities. Prior to joining APA, Julian held senior leadership positions in investment banking, with over 20 years’ experience specialising in the infrastructure, utility and power sectors. 10 Adam Watson BBus FCPA GAICD Chief Financial Officer Effective mid-November 2020 Adam will be responsible for all financial aspects of APA Group, including accounting and financial reporting, financial compliance and governance, taxation, treasury, balance sheet management, capital strategy, corporate real estate and procurement, investor relations and APA’s corporate model and analysis. Adam has over 20 years’ experience in executive and senior leadership roles in the transport, logistics and resources industries, based in Australia, China and the United States. Nevenka Codevelle BCom LLM GAICD Group Executive Governance and Externa Affairs and Company Secretary Nevenka is responsible for APA Group's Governance and External Affairs division. The division comprises company secretarial and legal, group risk, compliance and insurance, external affairs and reputation, sustainability and community, and economic regulation and external policy development. Nevenka has been with APA Group since February 2008, during which time she has held the roles of General Counsel and Company Secretary. From 2017, Nevenka also led the Energy Charter, an energy industry- wide initiative to improve customer outcomes. Nevenka has over 25 years' experience in Australia and internationally in energy and other infrastructure industries. Prior to joining APA, Nevenka was a senior policy advisor with the National Competition Council and senior lawyer in law firms in Australia and overseas. 2 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, corporate real estate and procurement, investor relations and APA’s corporate model and analysis. 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. In December 2019, Peter indicated his intention to retire from APA Group by December 2020. Ross Gersbach BBus President North American Development Ross is responsible for progressing APA Group’s investment strategy in North America, and is based in Houston, Texas. Prior to relocating in 2019, Ross was Chief Executive Strategy and Corporate Development. In this role he was responsible for enhancing APA Group's portfolio of assets to complement the value of its infrastructure, including APA Group's investments in midstream gas infrastructure, and the operation and development of these assets. Ross was a director of APA Group from 2004, before joining the management team in April 2008. 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. Ross has extensive commercial experience and has managed a portfolio of infrastructure assets in the natural gas and electricity distribution network sector, as well as a portfolio of power generation assets. 4 Kevin Lester BEng MIEAust CPEng EngExec 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. 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. Darren Rogers BEng MEng MBA GAICD Group Executive Operations Darren is responsible for the safe operations, maintenance, asset management, and in- year revenue and cost responsibility of APA’s portfolio of Transmission, Power, Networks and Midstream infrastructure assets. This includes over 15,000 kilometres of transmission pipelines; solar and wind farms; and gas storage, processing and distribution. Darren joined APA Group in 2017 as General Manager Asset Management for Transmission before becoming Group Executive Transmission in 2019. Aside from his experience at APA, Darren has performed senior executive roles in commercial, asset management and operations, leading large and complex divisions and across these companies. 6 8 Hannah McCaughey BArts LLB (Hons) LLM Group Executive Transformation and Technology Hannah is responsible for APA Group’s Transformation and Technology division, which enables APA to effectively respond to the disruptive forces of decarbonisation, decentralisation and digitisation. The division drives the identification of emerging energy market opportunities while delivering business transformation, continuous improvement initiatives and technology solutions. Prior to joining APA Group in March 2020, Hannah performed senior executive roles in infrastructure and utilities, and has led multiple whole-of-business transformations focused on delivering better customer outcomes and sustainable operational excellence. Craig Stallan BEng GAICD Acting Group Executive Strategy and Commercial 1 October 2019 to 19 August 2020 Craig has been responsible for APA’s corporate strategy, business development, mergers and acquisition, and customer relationship management during the period of secondment in his Acting Group Executive role. In addition, Craig oversees commercial contract management governance, commercial contract negotiations and commercial risk management for APA’s Transmission, Power and Midstream businesses. Prior to joining APA, Craig performed senior executive roles in commercial, operations and projects, leading large and complex divisions in the oil and gas industries. Craig will take up the role of General Manager Strategy and Development effective 20 August 2020 with the commencement of Julian Peck as Group Executive Strategy and Commercial. APA GROUP I ANNUAL REPORT 2020 07 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 highlights. EBITDA $1,654 Operating cash flow $1,096 million 5.1% on FY2019 million 8.3% on FY2019 Distribution 50c per security 20 years of consistent increase delivering consistent returns Energy infrastructure revenue 90% take or pay/regulated Strong balance sheet ~$2,500 million cash and committed undrawn debt facilities Construction of Reedy Creek Wallumbilla Pipeline in Queenland. 08 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information delivering responsible energy. normalised (1) business performance 9 2 1 , 2 1 3 0 2 , 1 4 9 , 1 8 8 8 , 1 2 3 0 , 1 2 1 0 , 1 4 7 9 6 9 0 , 1 6 5 6 , 1 . 9 2 9 . 7 0 9 1 . 7 8 . 8 5 8 . 5 3 5 4 . 1 4 1 . 7 7 . 0 0 5 . 0 7 4 . 0 5 4 . 8 4 1 . 0 5 1 . 2 5 1 . 0 6 1 . 4 5 1 4 5 6 , 1 4 7 5 , 1 8 1 5 , 1 2 6 8 0 7 4 , 1 1 3 3 , 1 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 0 2 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 0 2 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 0 2 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 0 2 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 0 2 Y F 6 1 Y F 7 1 Y F 8 1 Y F 9 1 Y F 0 2 Y F EBITDA ($m) Operating cash flow (2) ($m) Revenue excluding pass‑through (3) ($m) Operating cash flow per security (4) (cents) Distributions per security (cents) Total assets ($b) financial results Revenue Revenue excluding pass-through (3) EBITDA Profit after tax Operating cash flow (2) Financial position Total assets Total drawn debt (5) Total equity Financial ratios Operating cash flow per security (cents) Earnings per security (cents) Distribution per security (cents) Distribution payout ratio (%) FFO/Debt (%) FFO/Interest (times) 30 June 2020 30 June 2019 Changes 2,590.6 2,129.5 1,653.9 317.1 1,095.9 16,007.2 9,983.6 3,223.9 92.9 26.9 50.0 53.8 12.2 3.3 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 10.7 3.0 5.6% 4.8% 5.1% 10.1% 8.3% 3.7% 6.8% (10.4%) 8.3% 10.2% 6.4% (1.8%) 14.0% 10.0% 1) Normalised financial results exclude significant items. 2) Operating cash flow = net cash from operations after interest and tax payments. 3) Pass-through revenue is revenue on which there is no margin earned and is offset by corresponding pass-through costs. 4) 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 FY2018 to FY2016 have been adjusted to account for that rights issue. 5) APA’s liability to repay debt at relevant due dates of the drawn facilities. This amount represents current and non-current borrowings as per balance sheet and is adjusted for deferred borrowing costs, the effect of unwinding of discount, unrealised foreign exchange differences reported in equity and deducting other financial liabilities that are reported as part of borrowings in the balance sheet. APA GROUP I ANNUAL REPORT 2020 09 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Directors’ Report 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 2020. 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 Rhoda Phillippo Peter Wasow 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 1 June 2020 19 March 2018 Former Directors: Michael (Mick) McCormack Retired as Chief Executive Officer and Managing Director: 5 July 2019 The Company Secretaries of the Responsible Entity during the year and since the year end are Nevenka Codevelle and Amanda Cheney (from 25 February 2020). 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. On 20 December 2019, APA’s Chief Financial Officer (CFO), Peter Fredricson indicated his intention to retire from his position remaining until December 2020 at the latest to support the new CFO during the transition period. 3. Subsequent Events The following events have occurred subsequent to the period end: On 26 August 2020, the Directors declared a final distribution of 27.0 cents per security ($318.6 million) for APA Group, an increase of 5.9%, or 1.5 cents per security over the previous corresponding period (2H FY2019: 25.5 cents per security). This is comprised of a distribution of 20.27 cents per security from APT and a distribution of 6.73 cents per security from APTIT. The APT distribution represents an 8.53 cents per security fully franked profit distribution and an 11.74 cents per security capital distribution. The APTIT distribution represents a 2.09 cents per security profit distribution and a 4.64 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 16 September 2020. On 12 August 2020, APA announced that Adam Watson would join APA as the new CFO, commencing mid November 2020. 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 2020 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. 4.2 APA overview APA is a leading Australian energy infrastructure business developing, owning and operating energy infrastructure. It owns and/or operates around $22 billion of energy infrastructure assets across Australia and operates these with a skilled workforce of around 1,900 people. APA has a diverse portfolio of over 15,000 kilometres (6) 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 29,500 kilometres of gas mains and pipelines, and more than 1.4 million gas consumer connections. 6) Owned and/or operated by APA. 10 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. About APA (continued) 4.2 APA overview (continued) 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 almost 27-fold to $13.1 billion (7), and it has achieved securityholder returns of 16.8%(8) per annum on an annual compounding basis since listing on 13 June 2000 through to 21 August 2020. 4.3 APA’s strategy APA has maintained a consistent strategy of continued growth for two decades. It has been a successful strategy based on sustainable growth and investment discipline. 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 — Investigation of technology transformation of energy — Maintain APA’s financial strength APA’s strategy of investing in energy infrastructure remains relevant today as we continue to see ongoing demand from our customers for energy infrastructure solutions, including new energy opportunities arising from the trend towards net zero emission energy and the development of new technologies to support this aspiration. We have been able to build out into new growth areas and gain a sizeable position in renewables and an entry point into mid-stream, while scoping a North American entry opportunity. These moves have provided us with optionality to build and grow new businesses over the next phase of APA’s strategy. We are in the middle of a dynamic shift in the energy landscape in Australia and across most developed economies. In particular, the drive towards decarbonisation is creating a structural shift in energy policy, composition and investment. In this context, our business is benefiting from the shift away from high carbon intensive coal fired power generation, but it also has optionality through the expected significant growth in variable renewable energy. The future of energy will not be defined by any one solution but will be a combination of energy sources and technologies to balance the demands of reliability, sustainability and affordability. APA considers that natural gas plays an essential role in providing secure and reliable electricity by supporting the integration of variable 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. Decarbonisation, Decentralisation and Digitisation The inclusion of the new Technology and Transformation function within APA’s operating model is aimed at enabling APA to effectively respond to the disruptive forces and opportunities of decarbonisation, decentralisation, and digitisation. This function will drive the identification of emerging market opportunities whilst delivering business transformation, continuous improvement initiatives and technology solutions within our day to day business. As part of our growth strategy, we are pro-actively looking at how our energy infrastructure can be effectively part of a decarbonised future. We are exploring new technologies and how we can adapt our infrastructure and expertise to accommodate new energy such as renewable methane and hydrogen (refer to Section 7 Capital and Investment Expenditure for information on APA’s renewable methane pilot project). We are also exploring carbon capture utilisation and sequestration (CCUS) technologies and have joined with ClimateWorks Australia to collaborate with researchers, customers, peers and other Australian companies wanting to develop responsible and viable net zero emissions pathways to support climate change strategies. We are also looking at how energy storage technology such as batteries can complement renewables and support gas in the important firming role that it will play in Australia’s energy future. North America strategy update APA has continued to explore potential offshore growth opportunities in APA’s core sector of gas distribution and transmission, focussing on North America. These types of operations are at the lower end of the risk spectrum and are consistent with the risk profile of APA’s existing business in Australia. APA has an office in Houston USA with a team of three full time employees including executive lead Ross Gersbach who relocated from Australia to Houston during the reporting period. APA’s corporate office in Sydney provides support to the Houston team. APA remains focussed on North American opportunities for two key reasons – the abundance of low-priced natural gas, and the continued growth in natural gas demand in that market. Low cost natural gas has resulted in significant new demand for power generation to replace coal, growing industrial demand and natural gas for LNG export markets. The depth of the U.S. gas infrastructure market and strong growth-oriented fundamentals continue to lead APA to the view that there should be attractive natural gas infrastructure opportunities to pursue. 7) Market capitalisation as at 21 August 2020. 8) 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 I ANNUAL REPORT 2020 11 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. About APA (continued) 4.3 APA’s strategy (continued) North America strategy update (continued) APA’s experience to date has revealed a preference for the following asset characteristics: 1 2 3 4 5 6 7 Commercial environment — Regulated and/or contracted businesses — Supportive regulatory environment — Geographic advantages and availability of follow on transactions Operational alignment — Existing operational expertise that fits with current APA businesses Organisational structure — Transparent and quantifiable performance record and/or existing infrastructure management team with proven track record Credit Financial returns Investment size — Supportive of credit rating targets based on S&P/Moody’s criteria — Limited counterparts risk — Acceptable IRR — OCF accretive in first full year of ownership — Appropriate size for initial investment — Meaningful but not “betting” the company Environmental impacts — Compatible with long-term energy transition objectives We are fully cognisant and respectful of the movement towards decarbonisation in the U.S. and globally. However, in the U.S. there is no single federal policy around emissions reduction control and the diverse climatic and political variations across regions of the U.S. mean that a single solution/approach is unlikely to work nationwide. Residential and commercial emissions generated from local distribution companies (LDC’s – gas distribution) are relatively low, less than 10% of total U.S. carbon emissions, compared to power generation, transportation and agriculture. Together with cold climate, the replacement of coal generation and the high cost of electrification, we continue to see investment opportunities for APA in a number of regions. APA already plays a significant role in the energy value chain. Our vision is to be world class in energy solutions, and we see our purpose as strengthening communities through responsible energy. To ensure we were set up for future success with capacity for innovation, scalability and agility to manage the changing nature of the energy landscape, we undertook a 360-degree review of APA’s operating model during FY2020. The checkpoints for the review included: — Ensuring the capability, structures and processes to achieve operational excellence in managing all our assets; — Ensuring APA can navigate industry disruption and evolution by availing itself with new technology and new energy solutions; — Addressing stakeholder needs, in particular our customers and communities where we operate; — Leading in responsible energy solutions for the benefit of society and the environment, our customers, investors and employees; and — Making APA an effective organisation and great place to work where accountabilities are clear, collaboration across teams is easy, and our people feel empowered to make decisions for the benefit of all our stakeholders. Our customers remain at the centre of what we do – the red dot in APA’s logo reminds us to keep the customer front and centre to ensure we deliver energy solutions for our customers that they value and do so safely and reliably. APA’s new operating model focuses on the successful delivery of six strategic imperatives that we will need to excel in, to deliver on our purpose and our ‘world-class’ vision: Operational Excellence Optimising asset management and efficiency to achieve holistic and world class operational excellence, safety and environmental performance. Customer Centric Our customers are at the centre of everything we do. We will listen to our customers and work with them in pursuing new opportunities, adding value and delivering their energy needs responsibly. People & Culture We value the potential, capability and wellbeing of all our people. We will grow and develop their skills and expertise and enable them to meet the needs of our customers. We will also hold ourselves to high ethical standards and the APA values, ensuring our integrity and credibility. Financial Strength We constantly evaluate growth opportunities and cost efficiencies within our risk appetite, while maintaining a strong balance sheet with access to global debt and equity capital markets based on minimum investment grade credit ratings of Baa2 (Moody’s) and BBB (S&P). Growth & Innovation We will continue to grow our energy infrastructure portfolio to meet our customers’ needs – exploring and investing in new and emerging technologies where appro- priate. We will actively pursue acquisitions that add value to our business. Stakeholder Relationships We will engage constructively with regulators, governments and other stakeholders to help shape policy that facilitates responsible delivery of energy for the benefits of all. We will ensure the communities in which we operate and impact, benefit from what we do. 12 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. About APA (continued) 4.3 APA’s strategy (continued) North America strategy update (continued) The new organisation structure has been designed to support the delivery of the six strategic imperatives. The structure consists of both business units to build and operate our assets safely and efficiently, and corporate functions to support the business units and focus on strategy and governance. Business Units: Execution Corporate Functions: Govern & Support Infrastructure Development Operations North American Development People, Safety & Culture Finance Governance & External Affairs Transformation & Technology Strategy & Commercial As a result of the new structure, a number of changes to the Executive Leadership Team reporting to CEO and Managing Director Rob Wheals occurred during FY2020. Notable changes included: — Ross Gersbach relocating to APA’s Houston USA office in September 2019 to take up the role of President North American Development; — Hannah McCaughey commenced with APA in March 2020 to lead the new Transformation and Technology function; — In June 2020, Julian Peck who commenced 20 August 2020, was announced as APA’s Group Executive Strategy and Commercial; — Operations will now oversee the safe and efficient operation of all APA’s assets and investments across transmission, power generation, networks and mid-stream classes; — Expansion of the original Governance, Risk and Legal function to encompass Sustainability and Community, External Affairs and Reputation, Economic Regulatory and External Policy. 4.5 APA’s roadmap Underpinning APA’s refreshed vision and purpose and long-term 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). 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 customers’ needs. Effective decision-making is at the core of successful strategy execution and APA’s Decision Compass sets out clear guiding principles for all our employees, empowering them to make good decisions with confidence, so we can successfully execute APA’s strategy. 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’ll do – Know our reputation matters Put simply, The APA Way really defines how we do things at APA. It ensures 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. A third aspect to APA’s roadmap which was launched externally in August 2019 is APA’s Customer Promise. This is a commitment to our customers as to what they can expect from APA. Refer to Section 6.1 for further information on APA’s Customer Promise. During the reporting period, APA also revised its Whistleblower Policy to reflect legislative changes effective 1 July 2019 which expanded protections for whistelblowers. APA’s Whistleblower Policy can be viewed on APA’s website here: (https://www.apa.com.au/globalassets/documents/governance-docs/ conduct-policies/apa-whistleblower-policy.pdf). APA GROUP I ANNUAL REPORT 2020 13 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. About APA (continued) 4.6 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, gas 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. On the map below detailing 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 4 6 3 7 12 9 10 11 35 34 33 31 16 13 32 35 15 14 14 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 4.6 APA assets and operations (continued) Energy Investment and Asset Management (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 ~260 km of gas mains, ~3,900 gas consumer connections 1,847 km 12,000 tonnes 12 km / 68 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 19.3 MW Energy Investment 30 GDI (EII) Ownership interest Detail 20% Gas distribution: Allgas Gas Network ~3,800 km of gas mains, ~115,000 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 (30 MW) 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 (132 MW), SA Nil Gas distribution: ~25,500 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 commissioning. APA GROUP I ANNUAL REPORT 2020 15 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. FY2020 has been a challenging year for businesses and society as a whole. In Australia, much of the country endured ongoing drought; eastern Australia experienced a devastating and severe bushfire season followed by an extreme rainfall event; and then we all started to feel the full impact of the global COVID-19 pandemic. In addition, a number of APA’s customers have also been impacted by the significant global oil price collapse during 2H FY2020, which has had the flow-on effect of decelerating and/or deferring decision timeframes on some projects under development, impacting APA’s capital expenditure expectations and planning timeframes. The impact of these combined and unprecedented events on many individuals, businesses, our economy, wildlife and our landscape has been severe. Fortunately, for APA, the long-term stable nature of our contracts and revenues, and strong balance sheet fundamentals, combined with the remoteness of our asset footprint, have limited the impact on both our physical operations and financial performance for FY2020. As a provider of essential services of gas transportation and energy generation, the demand and requirement for APA’s services has continued throughout these events, and we have been able to operate at normal levels, albeit adapting our procedures to the various challenging conditions throughout the reporting period. Our focus throughout the year has been keeping our assets running safely and reliably at all times in accordance with our Customer Promise and ensuring the safety of our people and communities. APA has delivered a sound result for FY2020 with EBITDA reported of $1,653.9 million which is within the revised EBITDA guidance range of $1,635 million to $1,655 million. The FY2020 EBITDA result represents an increase of 5.1% or $80.1 million over the previous corresponding period EBITDA of $1,573.8 million. On 21 April 2020, APA updated the market with a reduction in its earnings guidance as a result of delays in commissioning the Orbost Gas Processing Plant in Victoria. Excluding this new asset, APA’s overall business continued to perform solidly during the reporting period and in-line with expectations, despite the significant social, economic and environmental challenges in play within Australia and globally. Total revenue (excluding pass-through revenue) in FY2020 increased by $98.5 million to $2,129.5 million, an increase of 4.8% on the previous corresponding period (FY2019: $2,031.0 million). Increased revenues and EBITDA were primarily attributable to: — Full year contributions from growth assets commissioned in FY2019 including the Darling Downs Solar Farm (QLD), Badgingarra Wind Farm (WA), Yamarna Gas Pipeline (WA), Gruyere Power Station (WA), and Agnew Lateral (WA); — Part year contribution from Badgingarra Solar Farm (WA); — Continued reliable and steady operation of all assets, managing risks and operating the assets efficiently; and — Reduction in corporate costs. The increases were offset by the Orbost Gas Processing Plant commercial operation delays and associated costs and less favourable exchange rate for revenues from the Wallumbilla Gladstone Pipeline. Operating cash flow increased by 8.3% or $83.8 million to $1,095.9 million compared to the previous year (FY2019: $1,012.1 million). Similarly, operating cash flow per security increased 8.3%, or 7.1 cents, to 92.9 cents per security (FY2019: 85.8 cents per security). On 26 August 2020, the Directors announced a final distribution of 27.0 cents per security, which takes APA’s distributions in respect of the financial year to a total of 50.0 cents per security. This represents an increase of 6.4% or 3.0 cents, over FY2019 distributions of 47.0 cents. Franking credits of 3.66 cents per security will be allocated to the final distribution reflecting tax paid by APA and resulting in the FY2020 franking credits totalling 7.31 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 20 years the company has been listed, and distributions have consistently grown each year. 16 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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) The following table provides a summary of key financial data for FY2020. 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) Notes: Numbers in the table may not add up due to rounding. 1) Pass-through revenue is revenue on which no margin is earned. 30 June 2020 $000 30 June 2019 $000 2,590,621 461,155 2,452,171 421,198 2,129,466 2,030,973 1,653,919 (651,566) 1,002,353 (497,337) 505,016 (187,910) 317,106 1,573,756 (611,358) 962,398 (497,419) 464,979 (176,966) 288,013 Changes $000 138,450 39,957 98,493 80,163 % 5.6% 9.5% 4.8% 5.1% (40,208) (6.6%) 39,955 82 40,037 4.2% 0.0% 8.6% (10,944) (6.2%) 29,093 10.1% 1,095,943 1,012,127 83,816 92.9 26.9 50.0 53.8% 1,179,894 85.8 24.4 47.0 54.8% 1,179,894 8.3% 8.3% 10.2% 6.4% 7.1 2.5 3.0 (1.0%) (1.8%) — — 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. APA GROUP I ANNUAL REPORT 2020 17 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance 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 2020 $000 30 June 2019 $000 Changes $000 % Revenue (1) Energy Infrastructure East Coast: Queensland East Coast: New South Wales East Coast: Victoria East Coast: South Australia East Coast: Northern Territory Western Australia Energy Infrastructure total Asset Management Energy Investments Other non-contract 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 East Coast: Northern Territory Western Australia Asset Management Energy Investments Corporate costs Total EBITDA 1,204,705 1,207,108 (2,403) (0.2%) 183,251 145,664 3,143 31,649 405,310 173,594 144,380 3,004 30,301 340,685 1,973,722 1,899,072 112,367 35,741 4,975 94,398 28,432 6,470 2,126,805 2,028,372 461,155 2,661 421,198 2,601 1,007,891 1,010,063 160,751 101,927 2,294 19,889 337,055 149,362 113,992 2,051 19,171 277,805 9,657 1,284 139 1,348 5.6% 0.9% 4.6% 4.4% 64,625 19.0% 74,650 17,969 7,309 3.9% 19.0% 25.7% (1,495) (23.1%) 98,433 39,957 60 4.9% 9.5% 2.3% 5.6% (2,173) (0.2%) 11,389 7.6% (12,065) (10.6%) 243 718 59,250 57,362 10,386 7,312 11.8% 3.7% 21.3% 3.6% 19.6% 25.7% 2,590,621 2,452,171 138,450 Energy Infrastructure total 1,629,807 1,572,444 63,343 35,741 (74,972) 52,954 28,432 (80,074) (3) (5,102) (6.4%) 1,653,919 1,573,756 80,163 5.1% Notes: 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. 6.1 Customer Focus APA has evolved and grown as our customers’ operations have evolved and grown. Our customers are broad – from a wide range of businesses that pay our invoices directly, through to households that are connected to the networks we operate. Our customers are the reason APA exists and therefore they are the epicentre of what we do. In the first half of the reporting year, APA launched externally its Customer Promise initiative throughout Australia. We have made the commitment to all customers that we will listen to understand; enable our people to respond; and do what we say we'll do. These commitments were developed not only with our own people but in consultation and collaboration with our customers. The Customer Promise is supported by the Red Dot Program, which comprises specific initiatives aimed at improving our customers’ experience and overall customer outcomes. 18 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.1 Customer Focus (continued) Customer engagement initiatives undertaken during the financial year include: — Voice of Customer surveys, which provided insights into overall customer satisfaction, the health of our business relationships and areas for strategic improvement; — Holding transmission customer forums in July 2019 to provide updates on Gas Day Harmonisation changes and APA’s progress with responding to issues they raised in our Transmission Customer Survey; and — Post-deal surveys to help understand our customers’ experience of contract negotiation and execution. APA has also been actively engaging with customer and consumer groups to better understand their issues and their perspectives. During the first half of the reporting period, we set up on a voluntary basis, our first stakeholder reference group, to get consumer and stakeholder group views on the proposed access arrangements for the Amadeus Gas Pipeline. We are currently doing the same for the Roma Brisbane Pipeline access arrangement and will continue that approach for regulatory reset processes for our other regulated pipelines. APA’s networks business worked with retailers to develop a number of initiatives to support consumers and small businesses, including through the Energy Charter. APA has also reduced payment terms for small suppliers and regional businesses to help support them during this time. We will also be exploring community support initiatives through our community connect program. Flexibility adds value to our service offerings APA’s East Coast Grid and Integrated Operations Centre allows APA to quickly react to short term customer requests and provide fast commercial solutions, particularly for changing circumstances at the LNG plants in Gladstone. We’re able to recalculate asset operating conditions and capacities, update our control systems and alarms, reprioritise maintenance and project work and implement changes safely. Customers can use the Roma Brisbane Pipeline western haul service, Wallumbilla compression, South West Queensland Pipeline park/loan service or other transport services towards the southern states, all at short notice. Key for customers is flexibility but it means Operations has to spring into action and make sure we can deliver the service reliably. The Energy Charter This significant whole of industry initiative was launched in January 2019 following collaboration by a number of Australian energy businesses together with an end user consultative group across 2018. The purpose of the Energy Charter is to progress the culture and solutions required to deliver a more affordable, reliable and sustainable energy system for all Australians in line with community expectations. APA was a founding member of the energy industry's Energy Charter which now has 19 signatories from across the energy supply chain. Signatories are required to disclose annually to an independent Accountability Panel, their performance against each of the five Energy Charter principles. The Accountability Panel issued its first Panel Review report during the reporting period and made a number of recommendations. Signatories are also involved in a number of #BetterTogether initiatives, aimed at delivering tangible customer outcomes through coordinated action across the supply chain. This includes streamlining connection processes, delivering fee relief and service support for customers in vulnerable circumstances and improved stakeholder engagement. One of the #BetterTogether initiatives involves APA, together with other pipeline operators establishing a customer engagement initiative to determine what additional or more insightful pipeline disclosures are required in response to issues raised under the Pipeline Transparency Regulatory Impact Statement. Industry working together The COVID-19 pandemic created a unique and difficult operating environment for many APA customers this year. We responded in line with our commitments under the Energy Charter, particularly Principle 5: We will support customers in vulnerable circumstances. Activities included: — Commercial, industrial and small retail transmission customers were contacted for a quick pulse check to understand COVID-19 impacts and how APA might be able to assist; — Provided targeted financial assistance for customers in vulnerable circumstances, including temporary discounts, credit term extensions and alternative prudential arrangements; and — Offered additional gas market and systems training to help customers optimise their gas portfolios against changing market dynamics. APA GROUP I ANNUAL REPORT 2020 19 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.2 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. 90.0% 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 92.8% (excluding pass- through) and 94.3% of group EBITDA (before corporate costs) during FY2020. Revenue (excluding pass-through revenue) was $1,973.7 million, an increase of 3.9% on the previous year (FY2019: $1,899.1 million). EBITDA (before corporate costs) increased by 3.6% on the previous year to $1,629.8 million (FY2019: $1,572.4 million). The flexible nature of APA’s contracts, both in terms of interconnected multi-assets and multi services, means that individual asset earnings can fluctuate over the assets that make up APA’s East Coast and West Coast grids. This flexibility gives customers more options to better manage their energy needs in Australia’s very dynamic gas market. They can source gas from in excess of 60 receipt points over the 7,600 km interconnected East Coast Grid, and this optionality and flexibility is highly valued by our customers. Eastern Australia In FY2020, EBITDA for APA’s assets in the east coast states was $1,292.8 million, generally in line with FY2019 EBITDA of $1,294.6 million. As current southern gas supplies decline, APA has seen material year on year increases in flows on the Berwyndale Wallumbilla Pipeline, South West Queensland Pipeline and Moomba Sydney Pipeline from Queensland gas being transported south into New South Wales and Victoria. This increased demand has provided opportunities for APA in the form of short-term transportation arrangements, particularly over winter months and in recent months, strong residential demand due to many people working remotely from their homes during the COVID-19 pandemic. Queensland earnings remained steady and consistent with FY2019 (EBITDA FY2020: $1,007.9 million, FY2019: $1,010.1 million). The South West Queensland Pipeline had higher revenue due to favourable weather in southern states causing more Queensland gas to be transported to southern states. Queensland also benefited from the first full year contribution from the Darling Downs Solar Farm. The short-term contract with Incitec Pivot transporting gas from the Mereenie basin in the Northern Territory to the Incitec Pivot plant at Gibson Island some 3,300 km away in Queensland, ended during FY2020. From 1 April 2020, Incitec Pivot commenced sourcing gas locally in Queensland which resulted in a reduction in revenue on APA’s Carpentaria Gas Pipeline and South West Queensland Pipeline. There was also lower revenue from the Wallumbilla Gladstone Pipeline due to less favourable AUD/USD exchange rates in FY2020 compared with FY2019. New South Wales had a strong result driven by higher variable services and capacity increases (EBITDA FY2020: $160.8 million, FY2019: $149.4 million). During FY2020, APA undertook capital improvement works on the Moomba Sydney Pipeline (MSP) to increase maximum operating pressures. The MSP is a pivotal asset in APA’s East Coast Grid and highly utilised. It has also added capacity for customers during the peak winter season, of up to 23 TJ/day to Sydney or 20 TJ/day to Melbourne. APA commenced a new two-year agreement with AGL Energy Limited (AGL) on APA’s East Coast Grid. The agreement commenced on 1 January 2020 and is a multi-asset and multi-service agreement, replacing an expiring contract. Victorian Transmission System revenues increased due to favourable weather conditions which drove higher industrial and domestic gas consumption, with a small impact in April to June from more people working from home as a result of COVID-19. The Dandenong LNG Storage Facility benefitted from new storage contracts that commenced during the reporting period. Victorian EBITDA (FY2020: $101.9 million, FY2019: $114.0 million) takes into account costs associated with commercial commissioning of the Orbost Gas Processing Plant (OGPP). Orbost Gas Process Plant – supplying gas to East Coast gas market The OGPP has supplied 3.5 PJ into the East Coast gas market since commencement of commissioning in March 2020. In doing so, the OGPP has to this point demonstrated a maximum daily nomination of 53 TJ/d and completed stability testing to a level of 45 TJ/d. However, practical completion is yet to be achieved due to foaming in the sulphur recovery unit that is constraining the full stable processing capacity below 68 TJ/d. With involvement of the OGPP technology provider, root cause analysis in respect of the foaming is ongoing. The Transition Agreement with Cooper Energy announced on 20 August outlines the terms for the parties to work together to complete the commissioning of the OGPP. The agreement supplements the existing agreements between the parties and sets aside potential claims and entitlements available to either party. Importantly, the agreement provides certainty for all stakeholders on the pathway to commencing Sole term gas supply agreements and practical completion of the OGPP. This involves, amongst other things, implementation of OGPP modifications, including the Phase 2 works to improve plant performance to expected levels as well as the continuation of root cause analysis as outlined above. The agreement also provides for the sharing of revenues and costs, including the Phase 2 works, between the parties from 1 July 2020. The Transition Agreement will expire on the earlier of the date of Practical Completion or 1 May 2021 (unless extended). Phase 2 plant works are currently planned to commence in the December 2020 quarter, subject to supply chain and COVID-19 restrictions, with resumption of production expected in the latter half of that quarter. The cost of the Phase 2 works has not been finalised, however current indications suggest capital costs of around $15 million. 20 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.2 Energy Infrastructure (continued) Western Australia Western Australia had the greatest increase in earnings with EBITDA increasing by 21.3% to $337.1 million. Western Australia had first full year contributions from a number of new assets completed in FY2019 including the Agnew Lateral, Yamarna Gas Pipeline, Gruyere Power Station and the Badgingarra Wind Farm. The Badgingarra Solar Farm also commenced commercial operations in September 2019. Western Australia’s strong results were also further supported by an increase in gas volumes from miners on the Goldfields Gas and Eastern Goldfields Pipelines; consistent winds at the Emu Downs Wind Farm; and a new two-year storage agreement on the Mondarra Gas Storage and Processing Facility. The Mondarra facility also provided market security in February 2020 when Cyclone Damien impacted gas supply from the north. Mondarra secures Perth’s gas supply Tropical Cyclone Damien crossed the North-West coast on 8 February 2020, causing a significant loss of gas supply into the Grid from the North West Shelf. Customers were facing the prospect of ‘curtailment’ for their customers across the following days. Gas was urgently needed from APA’s Mondarra Gas Storage Facility for the Dampier Bunbury Pipeline to meet normal power supply needs. This is exactly the sort of ‘gas supply insurance’ that Mondarra was developed for following the Varanus Island incident in 2008 which caused an energy supply crisis in Perth for several months. APA’s Commercial Operations team worked closely with the Mondarra Storage Facility Controllers to run compressors at maximum capacity and publish revised schedules and ensure normal daily requirements for customers were also met. Curtailment was averted and power supplies continued uninterrupted. in Western Australia Mondarra Gas Storage Facility, Western Australia Energy Infrastructure Revenue by State Energy Infrastructure EBITDA by State A$ m 1,600 1,200 800 400 0 90% A$ m 80% 1,200 70% 800 60% 400 50% 0 FY17 FY18 FY19 FY20 FY17 WA NT SA VIC NSW QLD EBITDA margin WA NT SA FY18 VIC FY19 FY20 NSW QLD APA GROUP I ANNUAL REPORT 2020 21 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.2 Energy Infrastructure (continued) Western Australia (continued) Energy Infrastructure EBITDA by Asset FY20 FY19 FY18 FY17 0 200 400 600 800 1,000 1,200 1,400 1,600 A$ m Wallumbilla Gladstone Pipeline South West Queensland Pipeline Roma Brisbane Pipeline Carpentaria Gas Pipeline Diamantina Power Station Darling Downs Solar Farm Other Qld assets Moomba Sydney Pipeline and other NSW pipelines Victorian Systems SESA Pipeline and other SA assets Amadeus Gas Pipeline Goldfields Gas Pipeline Eastern Goldfields Pipeline Emu Downs Wind and Solar Farms Pilbara Pipeline System Mondarra Gas Storage and Processing Facility Other WA assets Gruyere Power Station Badgingarra Wind and Farms APA’s value proposition APA offers investors a solid value proposition that brings together a combination of high quality energy infrastructure, continued organic growth and a low risk business model. In FY2020, 90% of Energy Infrastructure revenue (excluding pass-through) was from contracted and regulated revenues. Specifically, 79.1% 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 9.1% 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 8.0% of total FY2020 Energy Infrastructure revenue. Supporting APA’s cash flow stability is the company’s contract profile, which has a revenue weighted average contract tenor remaining of around 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. FY2020 Energy Infrastructure by Revenue Type Capacity charge revenue: 79.1% Regulated revenue: 8.0% Contracted fixed revenue: 2.9% Throughput charge & other variable revenue: 9.1% Flexible short term services: 0.6% Other: 0.3% ~90% Take or pay/regulated 22 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.2 Energy Infrastructure (continued) APA’s value proposition (continued) APA manages its counterparty risk in a variety of ways. One aspect is to consider customers’ credit ratings. During FY2020, 93.0% 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 graphs below. FY2020 Energy Infrastructure Revenues by Counterparty Credit Rating FY2020 Energy Infrastructure Revenues by Customer Industry Segment A- rated or better: 43.7% BBB and BBB+: 37.3% Investment Grade: 12.0% Not rated: 6.8% Sub-investment grade: 0.2% ~93% Investment grade Energy: 47.5% Utilities: 24.9% Resources: 23.6% Industrials & Others: 3.9% Diverse Sources of revenue Notes: 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. Capacity Trading and Auction Platform The capacity trading and auction platform commenced across eastern Australia on 1 March 2019. The daily auction facility of contracted but un-nominated capacity on APA assets has sold 35.0 PJ during FY2020 (16.1 PJ during 2H FY2020). This is the equivalent of facilitating transport for 8.9 PJ (3.7 PJ for 2H FY2020) of gas on APA pipelines from Queensland to southern markets. The additional liquidity from this non-firm service that has been added into the market during the winter months is a positive outcome. Since its launch and through to 30 June 2020, there has been negligible firm primary capacity that has been exchange traded on APA’s assets. It should be noted, however, that APA continues to see shippers contracting for firm transport arrangements in order to manage their own business risk profiles. 6.3 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) (9), 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 increased by $18.0 million or 19.0% to $112.4 million (FY2019: $94.4 million) and EBITDA increased by $10.4 million or 19.6% to $63.3 million (FY2019: $53.0 million). This was due to higher haulage revenue due to colder weather and an outperformance in the incentive fee achieved for Network services in FY2020 partly offset by reduced Customer Contribution activity in FY2020. Asset Management increased as a result of the AASB 16 accounting impact and incentive fee outperformance in FY2020, not achieved in FY2019. APA’s Queensland Networks team completed the construction and commissioning of the Murrarie looping project in Brisbane. The project involved construction of a 1.75 km pipeline, of which 936 metres was horizontally drilled under the Brisbane river. This second gas pipe supply into the Brisbane area, reduces the potential risk for over 100,000 customers in Brisbane. The project was undertaken on behalf of our customer Australian Gas Networks (AGN). In Melbourne, also on behalf of AGN, APA significantly progressed the replacement of ageing gas mains and services. Despite the COVID-19 restrictions, the work is well progressed by APA and ahead of schedule. 9) 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. APA GROUP I ANNUAL REPORT 2020 23 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.3 Asset Management (continued) 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 FY2020 were $8.5 million compared to $11.7 million in FY2019. The long-term average per annum of customer contributions over the last five years remains at approximately $12 million per annum. APA continues to expect annual swings in customer contributions, as these are driven by customer requirements. The Asset Management segment continues to see strong demand for gas connections in new housing developments in Victoria, with an observed slowing in South Australia and Queensland of gas connections growth compared to previous years. Asset Management Revenue Asset Management EBITDA A$ m 100 80 60 40 20 0 A$ m 60 50 40 30 20 10 0 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 One-off Customer Contributions Underlying Asset Management Revenue One-off Customer Contributions Underlying Asset Management EBITDA Note: From FY2017 onwards, DPS and the Ethane Pipeline became fully owned assets and are managed within APA’s Energy Infrastructure segment and therefore no asset management fees earnt. Customer Contributions A$ m APA Operated Gas Networks Statistics 1.50 (million) (km) 30,000 15 10 5 0 Average ~$12m p.a. 1.45 1.40 1.35 1.30 29,000 28,000 27,000 FY16 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 Gas consumer connections (LHS) Networks managed (RHS) 24 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.4 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 25.7% for the reporting period to $35.7 million (FY2019: $28.4 million) largely due to increased equity income received from SEAGas and Energy Infrastructure Investments. CORPORATE SERVICES ~3,800 km Allgas gas distribution network in Queensland with ~115,000 connections Marubeni Corporation State Super CORPORATE SERVICES OPERATIONAL MANAGEMENT Gas-fired power generation 71 MW MM Midstream Investments Osaka Gas Gas processing facilities 45 TJ/day Electricity transmission cables 244 km Gas pipelines totaling 786 km CORPORATE SERVICES OPERATIONAL MANAGEMENT Energy Investments Revenue & EBITDA A$ m 30 20 10 0 FY17 FY18 FY19 FY20 APA GROUP I ANNUAL REPORT 2020 25 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Performance and Operational Review (continued) 6.5 Corporate Costs Corporate costs for FY2020 were $75.0 million compared to $80.1 million for the previous corresponding period. Corporate costs decreased due to FY2019 one-off items not repeated in FY2020. 1,500 A$ m 1,200 Corporate costs (net of one-off costs) over the last four years (2017 to 2020) have increased 12.5% in-line with EBITDA (net of one-off costs) which increased 12.4% for the same period. This increase is due to additional cost from compliance reviews, general increase in insurance cost and other regulatory requirements in recent years. 900 600 300 0 (1) (2) % 8 6 4 2 0 FY15 FY16 FY17 FY18 FY19 FY20 Corporate costs (LHS) EBITDA (LHS) Corporate costs/EBITDA (3 ) (RHS) 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. 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 FY2020 was $427.1 million (FY2019: $581.3 million). There were no acquisitions undertaken in FY2020 and therefore no investment expenditure. Capital and investment expenditure for FY2020 is detailed in the table below. Capital and investment expenditure (1) Growth expenditure Regulated Non-regulated Queensland Description of major projects 30 Jun 2020 ($ million) 30 Jun 2019 ($ million) Western Outer Ring Main (WORM); Warragul looping; Victorian Transmission System, Roma Brisbane Pipeline and Goldfields Gas Pipeline Access Arrangement allowed expenditure 46.5 30.6 Darling Downs Solar Farm and Thomson Power Station New South Wales Moomba Sydney Pipeline southern haul reliability and capacity expansion Victoria Orbost Gas Processing Plant and Crib Point Pakenham Pipeline Western Australia and Northern Territory Goldfields and Eastern Goldfields expansion, Badgingarra Wind and Solar Farms, Warrego Pressure Regulation Customer contribution projects and others Predominantly small pipeline relocation projects 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 Notes: Numbers in the table may not add up due to rounding. 31.9 16.8 158.7 19.1 14.7 241.1 287.7 109.5 29.9 427.1 — 427.1 17.8 15.6 175.2 192.7 30.9 432.2 462.8 93.5 24.9 581.3 — 581.3 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. 26 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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) Growth project expenditure in FY2020 of $287.7 million (FY2019: $462.8 million) was largely related to the following projects during the year: — Orbost Gas Processing Plant (VIC): Delays arising during construction as well as from the bushfire threat and resulting poor air quality, resulted in a later than anticipated start to the commencement of commissioning of the OGPP in March 2020. The plant has since then supplied 3.5 PJ into the market and has completed a stability test to a level of 45 TJ/d. However, practical completion is yet to be achieved due to foaming in the sulphur recovery unit that is constraining the full stable processing capacity below 68 TJ/d. A Transition Agreement with Cooper Energy announced on 20 August 2020 provides a pathway to practical completion of the OGPP, including sharing of revenue and costs, including costs associated with the proposed Phase 2 works. — Crib Point Pakenham Pipeline project (VIC): Since June 2018, APA has had in place a Development Agreement and associated Gas Transportation Agreement with AGL Energy for the development and construction of a ~55 km transmission pipeline connecting AGL’s proposed LNG import terminal facilities to APA’s Victorian Transmission System and the east coast domestic gas market. AGL and APA completed the required studies and prepared and submitted an Environment Effects Statement (EES) for the Gas Import and Pipeline Project during the reporting period. Additionally, APA has continued with engineering, approvals and discussions and execution of option agreements with affected landowners along the proposed pipeline alignment during FY2020. — Moomba Sydney Pipeline southern haul reliability and capacity expansion (NSW/VIC): Increased operating pressures on sections of the Moomba Sydney Pipeline, compressor and engine overhauls and improved critical control systems at Bulla Park, Young and Culcairn achieved during FY2020 to provide greater reliability and additional capacity of up to 23 TJ/day to Sydney or 20 TJ/day to Melbourne. — Thomson Power Station (QLD): Initial project works commenced for the 18 MW reciprocating engine power station. The new power station will supplement generation from APA’s Diamantina/Leichhardt Power Stations for the Mount Isa region. Construction is expected to be completed by end Q2 FY2021. Additional engines for a 6 MW expansion were secured in Q4 FY2020, with the expansion portion of the project to be completed by Q4 FY2021. — Beyondie Sulphate of Potash project (WA): APA is constructing a new metering station for Kalium Lakes Limited in order to supply gas from the Goldfields Gas Pipeline to the customer’s mine site. Engineering and procurement are complete and project completion is expected Q2 FY2021. — Lake Way Gas Pipeline (WA): Engineering and procurement for a 23 km greenfields lateral off the Goldfields Gas Pipeline to the Salt Lake Potash mine commenced in 2H FY2020. The project is expected to be complete in Q3 FY2021. — Capricorn Metals (WA): APA will build a new 56 km lateral off the northern section of the Goldfields Gas Pipeline (GGP) to Capricorn’s proposed Karlawinda mine. Gas will be transported approximately 500 km along the GGP then 56 km along the Karlawinda Gas Pipeline. Design works for the lateral are well underway with completion targeted for Q1 2021. — Murrin Murrin lateral looping project (WA): Design and procurement has been completed for the looping of 13.5 km of the pipeline with project completion expected in Q2 FY2021. — Darling Downs Solar Farm (QLD), Badgingarra Solar Farm (WA) and Eastern Goldfields Pipeline (WA): minor site works completed in 1H FY2020. — Gruyere Power Station (WA): APA’s Gruyere Power Station has been fully operational and supplying power to our customer Gruyere Gold Mines since January 2019, with first gold pour taking place in June 2019. Minor site works and testing continued during the reporting period. Reliability testing under full load was successfully completed in March 2020. Early works for an expansion of the power station commenced in 4Q FY2020. — Western Outer Ring Main (WORM) project (VIC): The Victorian Department of Environment, Land, Water and Planning advised on 23 December 2019 that the project will require an Environmental Effects Statement (EES). Engineering and approvals work including landholder liaison and studies required for the EES commenced during the reporting period. Completion is therefore not expected until at least June 2022. Growth capital expenditure is fully underwritten through long-term contractual arrangements or has regulatory approval through a relevant access arrangement. — Renewable methane project (QLD): This is a pilot project looking at the commercial viability of generating renewable methane using water and carbon dioxide captured from the air. ARENA funding of $1.1 million was secured in FY2020 and engineering and procurement processes have commenced. APA GROUP I ANNUAL REPORT 2020 27 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 receives ARENA funding for renewable methane project In May 2020, the Australian Renewable Energy Agency (ARENA) announced $1.1 million of funding for the renewable methane pilot project being developed by APA with partner Southern Green Gas. The potential carbon neutral project is investigating whether it is possible on an industrial scale to create methane using solar-generated electricity, water and CO2 from the atmosphere. As Australian and global communities look to de-carbonise their economies, APA is working to understand and anticipate the long-term implications for Australia’s energy industry and our business. APA’s purpose is to strengthen communities through responsible energy and therefore it is important to ensure that any transition to a lower carbon future should be both cost effective whilst also ensuring energy reliability. APA is excited at being involved in this cutting-edge potential carbon neutral energy generation process. Renewable methane creation process Renewable Energy Electricity generated from solar Carbon Dioxide is extracted from the air Water is captured from air utilising renewable energy of the sun Oxygen released Electrolyser uses energy to split water into H2 and O2 Hydrogen Methanation reactor causes → 2H2O + CO2 4H2 Methanation Hydrogen and CO2 are combined to create renewable methane and water Water Methane APA Grid Water extracted from methanation is recycled for use in electrolyser Water Stay-in-business (SIB) capex increased to $109.5 million in FY2020 from $93.5 million in FY2019. 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. Other technology capital expenditure reflects the continuing growth of the business and regulatory changes over the last three years. In FY2020, APA invested $29.9 million (FY2019: $24.9 million) in I&T related solutions, services and infrastructure. 28 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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) Other project updates: — Western Slopes Pipeline (NSW): In January 2017, APA announced it had signed a development agreement and associated Gas Transportation Agreement with a subsidiary of Santos Limited, for APA to develop the proposed ~460 km Western Slopes Pipeline (WSP) in northern NSW. The pipeline will connect the Santos Narrabri Gas Project (NGP – subject to final investment decision) to APA’s Moomba Sydney Pipeline and the east coast domestic gas market, potentially supplying NSW homes, small businesses, major industries and electricity generators with up to half the state’s natural gas needs. The NSW Department of Planning issued their assessment report on the NGP to the Independent Planning Commission (IPC) in June 2020. The IPC has conducted public hearings on the project and a determination on the NGP is expected in September 2020. The WSP project has been on hold during FY2020 whilst the Santos NGP is proceeding through its approval process. — Dandenong Power Station Project (VIC): APA’s proposed 220 MW gas-fired power generation project was selected by the Federal Government as one of two shortlisted projects in the Government’s Underwriting New Generation Investments (UNGI) program to progress to agreement of key terms under the program. APA is continuing discussions with potential customers to ascertain demand and market pricing as part of determining feasibility. — Emperor Energy (VIC): APA entered into a non-binding Memorandum Of Understanding (MOU) with Emperor Energy Limited in October 2019 and proceeded, in May 2020, to enter into a Binding Agreement to progress with the pre-Front End Engineering Design (Pre-FEED) for the provision of midstream infrastructure and services related to gas potentially produced from the Judith Gas Field in the offshore Gippsland Basin, Victoria. The Pre-FEED study is expected to be completed 4Q CY2020. Should the project proceed, APA’s involvement includes building, owing, operating and maintaining a new 90 TJ/d gas processing train; 40 km sub-sea pipeline; and 12 km pipeline from the gas processing train to the market. — Comet Ridge & Vintage Energy (QLD): During FY2019, APA entered into a MOU with Comet Ridge Limited and Vintage Energy Limited to investigate a potential pipeline route to connect Queensland’s Galilee Basin to gas markets. The proposed 240 km Galilee Moranbah Pipeline and associated infrastructure would be built, owned and operated by APA, connecting gas sources in the Galilee Basin to Moranbah in Central Queensland. Moranbah is the gas processing and distribution hub for northern Bowen Basin gas resources. During FY2020, APA completed various studies, assessments, field surveys and stakeholder engagement under the Survey Licence granted in July 2019. — Blue Energy (QLD): An MOU remains in place to investigate pipeline route options in both the Bowen and Galilee Basins. APA continues to engage with all resource holders in the Bowen Basin to progress the efficient development for delivery to the East Coast Gas Grid. Despite the challenges faced by our customers in FY2020 with the double impact of a falling oil price and the COVID-19 pandemic, APA has visibility of as much as $1 billion of organic growth projects that remain in active discussion with customers for delivery over the next two to three years, and more than $4 billion of prospective and active projects over the next five to ten years. This organic growth includes the ongoing expansions of APA’s East and West Coast grids. The growth is also driven by our customers projects in the power and midstream sectors. APA continues to work with our customers to assess any opportunity to expand and/or extend our existing network as required by the market. In response to the gas supply shortfall forecast by AEMO in Victoria around 2023, APA has investigated expansion of its East Coast Grid, principally involving the Moomba Sydney Pipeline system and South West Queensland Pipeline. These pipelines are lightly compressed, and pre-FEED work currently underway has identified that additional capacity could quickly and efficiently be delivered through the staged installation of compression facilities. Capital and investment expenditure A$ m 800 600 875.5 581.3 400 377.5 427.1 200 0 FY17 FY18 FY19 FY20 Acquisitions & other investment cash flows Growth capex SIB & other IT capex Beyond 2023, APA is working closely with a number of upstream producers that are exploring frontier resources in the Northern Territory, Queensland and New South Wales as listed in the identified projects above. Pipelines from these opportunities have the potential to connect to APA’s East Coast Grid through existing gas hubs at Moomba or Wallumbilla, or directly to the Moomba Sydney Pipeline and/or South West Queensland Pipeline. The most cost-effective, efficient and quickest way of getting new gas supplies to market is to connect to nearby existing pipeline infrastructure which the 7,600 km East Coast Grid facilitates. APA GROUP I ANNUAL REPORT 2020 29 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Financing Activities 8.1 Capital Management As at 30 June 2020, APA had 1,179,893,848 securities on issue. This is unchanged from 30 June 2019. 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 from Standard & Poor’s and Moody’s, respectively. As at 30 June 2020, APA had $2.5 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 2020 APA had $9,983.6 million ($9,352.1 million as at 30 June 2019) of committed drawn debt facilities, with an additional $1,300 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 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 6.4 years as at 30 June 2020. APA debt maturity profile and diversity of funding sources (1) $1,600m $1,200m $800m $400m 0 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 2020. 2) USD denominated obligations translated to AUD at the prevailing rate at inception (USD144A – AUD/USD=0.7879, Euro & Sterling MTNs at 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 2020, 100% (30 June 2019: 100%) of interest obligations on gross borrowings were either hedged into or issued at fixed interest rates for varying periods extending out to 2035. Financing activities for APA during the financial year were focussed on pre-funding maturing debt and enhancing APA’s liquidity position in the face of uncertainties created with COVID-19. In April 2020, APA issued €600 million (A$1,017.8 million) of 10.2 year fixed rate Notes from its Euro Medium Term Note Programme. Since the end of FY2020, APA has repaid: — $300.0 million of Australian Medium Term Notes at maturity (22 July 2020). Through its FY2020 financing activities, APA has been able to extend the average tenor of its debt facilities and lower the average cost of its debt portfolio in difficult market conditions. The diverse debt portfolio and the strong BBB/Baa2 credit ratings enable APA to raise appropriate amounts of debt from the global debt capital markets in a timely and efficient manner to support growth and its existing operations. APA acquired the Wallumbilla Gladstone Pipeline in June 2015, with revenues denominated in USD from the 20-year foundation contracts. Tariffs are escalated in January each year by US CPI, with operating costs 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 around 4.61%. This USD debt is being managed as a “designated hedge” for those virtually certain US dollar denominated revenues. 30 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Financing Activities (continued) 8.1 Capital Management (continued) APA has hedged the US dollar denominated Wallumbilla Gladstone Pipeline revenues receivable to March 2022 at the rates in the table below. Period FY2020 FY2021 FY2022 (to March 2022) Average forward USD/AUD exchange rate 0.7192 0.7199 0.7099 A large portion of the net revenue from April 2022 onwards remains in the designated hedge relationship with the remaining US$3 billion in debt and as such, when that revenue is received and hedged, it will be recognised in the statement of profit or loss at those future rates. 8.2 Interest costs Net interest costs decreased in FY2020 by $0.1 million to $497.3 million (FY2019: $497.4 million). The 0.02% decrease in FY2020 relative to FY2019 is primarily due to the repayment of higher cost debt offsetting lower capitalised interest and higher average drawn debt throughout FY2020 compared to FY2019. The average interest rate (including credit margins) applying to drawn debt was 5.33% for FY2020 (FY2019: 5.53%), reflective of the partial year impact of the new lower interest cost attributable to the €600 million (A$1,017.8 million) of 10.2 year fixed rate Euro Medium Term Notes. 8.3 Credit ratings APT Pipelines Limited, the borrowing entity of APA, maintained the following two investment grade credit ratings during the FY2020 financial year: — BBB long-term corporate credit rating assigned by Standard & Poor’s (S&P) in June 2009, and last confirmed on 17 February 2020; and — Baa2 long-term corporate credit rating (outlook Stable) assigned by Moody’s Investors Service (Moody’s) in April 2010, and last confirmed on 20 February 2020. APA calculates the Funds From Operations (FFO) to Interest to be 3.3 times (FY2019: 3.0 times) and FFO to Net Debt to be 12.2% for FY2020 (FY2019: 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 12.2% and FFO to Interest of 3.3 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 12% for the past three years and we expect this to continue for FY2021. 8.4 Income tax Income tax expense for the financial year of $187.9 million results in an effective income tax rate of 37.2%, compared to 38.1% 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 and imputation credit tax offsets, income tax of $85.3 million will be payable in respect of the year ended 30 June 2020 (FY2019: $72.1 million). The cash tax payable results in an effective tax paid rate of 16.9% in FY2020 compared to 15.4% in FY2019. With PAYG instalments of $54.4 million having already been paid, a tax provision of $30.9 million has been recognised. APA has provided a Tax Transparency Report, which includes a reconciliation of profit to income tax payable on APA’s website at https://www.apa.com.au/investors/my- securities/tax-information/. 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” as 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 FY2020 distribution (https://www.apa.com.au/investors/my-securities/apa-annual- tax-statement-estimator/). APA GROUP I ANNUAL REPORT 2020 31 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Financing Activities (continued) 8.5 Distributions Distributions paid to Securtyholders during the financial year were: Final FY2019 distribution paid 11 September 2019 Interim FY2020 distribution paid 11 March 2020 Cents per security Total distribution $000 Cents per security Total distribution $000 8.53 — 10.44 2.55 3.98 100,663 — 123,153 30,056 47,002 25.50 300,874 3.66 43,142 8.52 2.93 6.66 2.40 2.49 23.00 3.65 100,488 34,650 78,530 28,335 29,372 271,375 43,066 APT franked profit distribution APT unfranked profit distribution APT capital distribution APTIT profit distribution APTIT capital distribution Total Franking credits allocated On 26 August 2020, the Directors declared a final distribution for APA for the financial year of 27.0 cents per security which is payable on 16 September 2020. Franking credits of 3.66 cents per security will be allocated to the APT franked profit distribution. The FY2020 final distribution comprises the following components: APT franked profit distribution APT capital distribution APTIT profit distribution APTIT capital distribution Total Franking credits allocated Final FY2020 distribution payable 16 September 2020 Cents per security Total distribution $000 8.53 11.74 2.09 4.64 27.00 3.66 100,666 138,528 24,686 54,692 318,572 43,143 As a result, the total distribution applicable to the year ended 30 June 2020 is 50.0 cents per security, a 6.4% increase over the total distribution of 47.0 cents per security applicable to the year ended 30 June 2019. Franking credits allocated for the year ended 30 June 2020 distribution totalled 7.31 cents per security. The Distribution Reinvestment Plan remains suspended. 32 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Financing Activities (continued) 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 7.7% (10). APA’s total securityholder return since listing in June 2000 on the ASX, is 2,203% (11), a compound annual growth rate of 16.8%. APA total securityholder returns since listing (June 2000) to 21 August 2020 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 Aug 20 APA total securityholder return Utilities accumulation index S&P/ASX 200 accumulation index 8.7 Guidance for 2021 financial year Looking ahead, we are confident that APA is in a strong position financially and operationally. Although APA is an essential part of the energy supply chain, no business is entirely immune from an economic downturn. APA is successful when our customers are strong. While our capacity contracts and regulated revenues mean that our business is somewhat resilient through economic cycles, APA’s revenues are still subject to recontracting decisions by customers, throughput volumes on certain assets, the timing of customer FID decisions, as well as lower CPI across the contracts portfolio. Further, APA’s current operating plan for FY21 only includes around $10 million of EBITDA contribution from the Orbost Gas Processing Plant under the recently announced Transition Agreement with Cooper Energy. This assumes Practical Completion is not achieved until the end of the financial year. In this context, APA expects EBITDA for the full year to 30 June 2021 to be within the range of $1,625 million to $1,665 million. Total distributions for FY2021 are expected to be substantially in line with FY2020 distributions, with franking credits which may be allocated, depending on the amount of cash tax APA will pay during the year. Net interest cost is expected to be in a range of $490 million to $500 million. EBITDA ($ millions) Net interest cost ($ millions) FY2021 guidance FY2020 actual $1,625 to $1,665 $490 to $500 $1,653.9 $497.3 10) Figures quoted are sourced from Refinitiv Eikon and measured as at 30 June 2020. 11) Indexed from 13 June 2000, the date of APA’s listing on the ASX. APA GROUP I ANNUAL REPORT 2020 33 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Economic Regulatory Matters Gas pipelines in Australia are regulated by the Australian Energy Regulator (AER) or, the Economic Regulation Authority of Western Australia (ERA). 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. There are 2 frameworks under the NGR: 1) Scheme pipelines (NGR Parts 8-12) subject to either: — full regulation, where the AER or ERA must approve a full access arrangement that sets out reference tariffs, terms and conditions. Pipeline users can opt for non-regulated services on full regulation pipelines; or — light regulation, where pipeline owners must publish services and prices and comply with information provision requirements to support negotiations or alternatively seek regulatory approval for a limited access arrangement. A regulatory negotiate-arbitrate mechanism is available in the case of access disputes. 2) Non-Scheme pipelines (NGR Part 23) – The Part 23 regime came into effect from August 2017 and provides for additional information disclosure and a commercial negotiate-arbitrate mechanism as part of a dispute resolution framework. The map below shows APA pipelines by regulation type: APA Pipelines (owned and/or operated) – By Regulation Type Full regulation pipelines Light regulation pipelines Non-scheme pipelines Partly full regulation / non-scheme pipelines Regulatory resets The diagram below outlines the scheduled regulatory reset dates for pipelines owned and operated by APA. During FY2020, approximately 8.0% of APA’s Energy Infrastructure revenues were revenues that are subject to regulated outcomes. Calendar year 2021 2022 2023 2024 2025 Amadeus Gas Pipeline Roma Brisbane Pipeline Victorian Transmission System Goldfields Gas Pipeline Current regulatory period Next regulatory period Key regulatory matters addressed during the reporting year included: Goldfields Gas Pipeline access arrangement In December 2019, the Western Australian Economic Regulation Authority released a final decision on revisions to the Access Arrangement for the Goldfields Gas Pipeline, for the period 1 January 2020 to 31 December 2024. The final decision applies to the covered (regulated) capacity which is 109 TJ/d of a total pipeline capacity of 202.5 TJ/d. The final tariff increased by approximately 9% as a result of removing the regulator’s adjustment in the 2015 – 2019 access arrangement which took account of the delay in that final decision. As the current decision was made on time there is no requirement for such an adjustment. 34 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Economic Regulatory Matters (continued) Amadeus Gas Pipeline 2021-2026 access arrangement – consumer engagement As noted in Section 6.1, APA established the Amadeus Gas Pipeline Consumer Reference Group as part of the regulatory process for review of the 2021-2026 Amadeus Gas Pipeline access arrangement. Under the existing arrangement approved in 2016, APA was required to submit further revisions on 1 July 2020, which are expected to have effect for a period of five years from 1 July 2021. Consumer engagement ahead of that submission provided APA with better insights from people served by the pipeline and helped shape our proposal to the Australian Energy Regulator (AER). Further information on consumer engagement for the Amadeus Gas Pipeline can be found on APA’s website https://www.apa.com.au/about-apa/ our-projects/. Energy Industry developments COAG Energy Council Regulation Impact Statement (RIS) At the end of October 2019, the Council of Australian Governments (COAG) Energy Council released for consultation its RIS “Options to improve gas pipeline regulation”. This RIS process addresses the Energy Council’s initiative in August 2018 to consider further improvements to the regulatory framework and the mandated review of Part 23 of the NGR. The RIS outlined four options for reform including a ‘no change’ option. APA has been active in the consultation process, including suggesting a hybrid option that draws upon elements from the RIS and the existing National Gas Law and Rules. Under APA’s hybrid option, all pipelines would be subject to regulation with the minimum level being Part 23 of the National Gas Rules. The negotiate-arbitrate model would be retained, with an exemption for greenfield pipelines. All existing pipelines would retain their current regulated status at the start of the new scheme. The current test applying the existing Form of Regulation factors in s16 of the National Gas Law would then be utilised to determine which pipelines should move from “lighter” Part 23 regulation to “heavier” full regulation or vice versa. APA believes this hybrid option addresses concerns about regulatory coverage of pipelines by ensuring the appropriate form of regulation while harmonising the level of information available across all regulatory classes of pipelines. Submissions on the RIS closed on 17 January 2020. Senior officials from government and statutory authorities are reviewing and assessing the submissions with the Final RIS expected to be published in FY2021. In August 2019, the COAG Standing Committee of Officials (SCO) released ‘Measures to improve transparency in the gas market: Regulation Impact Statement for consultation’ (Consultation RIS). The RIS presents options to improve transparency in the eastern and northern Australian gas markets. APA supports COAG’s vision for a transparent gas market. APA is seeking to ensure the right balance of transparency without increasing costs and risks to consumers and the gas industry and ensuring alignment with existing information disclosure requirements under Corporations Law, the ASX Listing rules, and confidentiality provisions of our customer agreements. 10. Sustainability Doing business sustainably is about operating in a way that creates value and supports growth without compromising our integrity, social or environmental responsibilities. It makes organisations resilient, so they thrive particularly in changing times. APA is here for the long-term, so during FY2020, we strengthened our sustainability capabilities, activities and reporting to reflect its vital role in APA’s future. APA has released a separate FY2020 Sustainability Report which is available on APA’s website (https://www.apa.com.au/ about-apa/sustainability/). Contained in the Directors’ Report as below, is an overview of our sustainability approach and key compliance metrics for health and safety, environment and emissions. Every day, APA’s decisions impact our customers, investors, workforce, communities and the environment and contribute to our future state, so we must always act responsibly. For APA, sustainability is simple: it’s how we do business and contribute to society responsibly – now, and into the future. To help us do this, we are making sustainability an integral part of how APA does business by: — being part of Australia’s successful transition to a lower-carbon future; — keeping customers front of mind; — caring for our people and communities; — maintaining Australia’s environment and heritage; — building ongoing relationships with community stakeholders; and — promoting responsible procurement practices. To help support APA’s refreshed Vision, Purpose, Culture and operating structure, we took an important step in our responsible energy journey in late FY2020 by creating a dedicated Sustainability and Community function and team. The changes reflect our acknowledgement of societal views, expectations and the vital role that sustainability and community play in delivering APA’s purpose, vision and responsible energy promise. We will be developing a comprehensive Sustainability Roadmap in FY2021. This will set the sustainability direction for APA and help us to continually improve our sustainability performance and disclosure. APA GROUP I ANNUAL REPORT 2020 35 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Sustainability (continued) 10.1 Climate Change APA takes the science of climate change seriously and supports a global transition to a lower-carbon future. We are taking steps to understand and manage the risks and opportunities presented by climate change to our business. The challenge for the energy industry is to reduce carbon emissions while maintaining the reliable, affordable and secure energy supply that people want and need. APA is well-placed to support Australia’s successful transition over time to a lower-carbon future. APA is continuing to take steps to understand and demonstrate our commitment to addressing the complex challenge presented by climate change. Key activities we conducted this year were: — Publishing APA’s first Climate Change Position Statement, available on APA’s website (https://www.apa.com.au/about- apa/sustainability/climate-change/). This affirms APA’s stance on climate change by succinctly communicating our approach and supporting our purpose of strengthening communities through responsible energy; — We developed a preliminary Carbon Management Plan as a step towards operationalising consideration for climate risks. The plan puts a focus on four main areas: Greenhouse gas emissions reporting and analysis, emissions reductions, greenhouse gas offsets, and climate scenario analysis; — Continued our Task Force on Climate-Related Financial Disclosures (TCFD)-aligned Climate Scenario Analysis by extending the time horizon of transition risks to 2050 and testing the resilience of all of our existing assets against more extreme climate scenario pathways, including a 1.5C scenario. As we move into FY2021 our focus areas will be: — Developing a Climate Change Policy with a view to expanding and further articulating our approach and commitment; — Evolving the Carbon Management Plan and integrate it into our broader Climate Change Management Plan and Sustainability Roadmap; and — Publishing outcomes from the TCFD-aligned Climate Scenario Analysis expected to be released early October. For more information, including climate indicators, see the Climate Change Chapter of APA’s FY2020 Sustainability Report. APA Emissions APA’s main sources of direct emissions are from gas fired power stations (49%), combustion of natural gas in compressor stations (16%) and fugitive emissions associated with natural gas pipelines (11%), making up 76% of total emissions. The National Greenhouse and Energy Report (NGER) applies to assets under APA’s operational control, which includes gas transmission/distribution pipelines, power stations, renewable generation facilities (including wind farms and solar farms), gas storage, gas processing, electricity transmission interconnectors and corporate offices. APA voluntarily engaged the services of an independent auditor (registered under the Act) to assess compliance of its FY2019 NGER data. Zero non-compliances were noted however a number of improvement recommendations were made. These will be addressed in the Energy and Emissions Improvement Program which is a focus area for FY2021. Provision of the audit report to the CER resulted in dialogue and a minor update to FY2019 results reported at 1H FY2020. In addition, APA was selected to be part of the CER’s audit program for FY2019 reporting. The audit is expected to be complete in Q1 FY2021. APA’s summary of Scope 1 and 2 emissions and energy consumption for FY2019 as reported under NGER compliance, are set out in the table below: Scope 1 (1) CO2 emissions (tonnes) Scope 2 (2) CO2 emissions (tonnes) Energy consumption (3) (GJ) FY2019 (audited) (4) FY2018 Change 1,228,015 1,205,766 176,980 178,445 27,802,229 25,777,203 1.8% (0.8%) 7.9% 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 energy consumed across all facilities within APA’s operational control. 4) Variation in data from APA’s original FY2019 NGER Report is due to amendments to the Report and re-submission. Key changes include a) reallocation of Murraylink line loss (Scope 2) between Vic and SA and subsequent application of different emission factors and b) changes to fugitive emissions on the Goldfields Gas Pipeline. APA’s Scope 1 emissions have increased primarily due to an overall increase in gas combustion for power generation at Diamantina Power Station, and by compressors on the South West Queensland Pipeline (SWQP) and the Goldfields Gas Pipeline (GGP). APA’s Scope 2 emissions decreased slightly in FY2019. This is primarily due to a reduction in electricity consumption on the SWQP compared to FY2018. 36 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Sustainability (continued) 10.2 Health, Safety, Environment and Heritage (HSEH) Following is an overview of key HSEH compliance information. For further detail on APA’s HSEH initiatives and practices, please refer to APA’s FY2020 Sustainability Report, available on APA’s website. In a year of many challenges – bushfires, cyclones and COVID-19 to name a few – APA’s efforts towards zero harm have also had its challenges. A critical activity for FY2020 was the development and launch in September 2019 of a new three-year HSEH Strategic Plan FY2020 – FY2022. Created with significant cross-functional involvement and ownership, the Strategic Plan for APA focuses on the following key themes: HSEH Strategic Framework: FY2020 – FY2022 Caring for people, communities, the environment and our assets HSEH leadership and culture Creating a proactive HSEH culture with empowering leadership and strong enabling behaviours Contractor management Critical to operational excellence - accountable, streamlined, performing Health and wellbeing Caring for the whole person – at work and beyond Technology systems and analytics Increasing efficiency and simplicity of HSEH processes, data and analytics Environment and heritage management Delivering on our responsibilities to the environment and communities - past, present and future Process safety Clear ownership by the business and integrated processes to support operational excellence The objective of the strategic plan is to empower our people to deliver ‘world class’ HSEH performance over the next three years. Health and Safety FY2020 has seen inconsistent Health and Safety results across the business. Our lag indicators, in particular in relation to the safety performance of our contractors, show a disappointing decrease from FY2019 performance. On a normalised collective basis, Health and Safety performance has plateaued and remains in line with our 5-year average. Throughout the reporting year however, there were a number of highlights: — No Work Health and Safety regulatory penalties; — Two divisions within our operations went 12 months without a lost time injury; — APA employee safety continued on its improvement path; and — Management interactions exceeded target delivering closer alignment with our contractor community. Total reportable injury frequency rate (TRIFR) Lost time injury frequency rate (LTIFR) 13.53 10.41 7.65 20 15 10 5 0 8.95 7.50 5.8 10.77 8.94 6.34 8.05 5.98 3.72 15.63 9.09 3.82 2.0 1.5 1.0 0.5 0 1.33 1.06 0.75 FY16 FY17 FY18 FY19 FY20 FY16 2.11 1.76 1.35 1.70 1.21 0.82 0.86 0.77 0.62 FY18 FY19 FY20 0.75 0.52 0.31 FY17 APA overall Employee Contractor APA overall yee ContractorEmplo Note: TRIFR is measured as the number of lost time and medically treated injuries sustained per million hours worked. Data includes both employees and contractors. Note: LTIFR is measured as the number of lost time injuries per million hours worked. As mentioned, our lag indicators reveal a clear gap between employee and contractor safety performance. Employee safety numbers of LTIFR 0.82 and TRIFR 3.82 show continued good progress. Conversely, contractor performance highlights the challenge in front of APA, LTIFR 1.70 and TRIFR 15.63 (target <7.0). Overall the TRIFR rate for APA was 9.09 against a target of <5.5 and the overall LTIFR was 1.21 against a target of <1.0. Importantly, there were no fatalities of employees or contractors in FY2020 (FY2019: nil). APA GROUP I ANNUAL REPORT 2020 37 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Sustainability (continued) 10.2 Health, Safety, Environment and Heritage (HSEH) (continued) Health and Safety (continued) These results were despite significant work being undertaken during FY2020 with our contractor network to understand and improve performance, including the following initiatives: — Quarterly contractor forums, held across Australia; — Senior management engagement sessions with APA’s ten largest contractors to ensure our standards and processes are aligned; — Review of metrics and pre-qualification procurement processes; and — Increased APA on-site supervision of key projects and activities. During FY2020, there was also continued work particularly in our Operations areas on improving line leadership capability development and empowerment which are expected to enhance safety outcomes during FY2021 and beyond. Key learnings from FY2020 have been aggregated and in FY2021 it is intended to continue to work on these initiatives and what we have learnt, as well as increasing our leadership focus and involvement in safety and operational activities to model and drive the right behaviours for the turnaround that is required. COVID-19 Management COVID-19 has been a significant challenge for all businesses across the globe. Given the nature of APA’s work in public areas and engaging with landholders and the community, management of this pandemic was a strong focus for APA management, ensuring a balance between operational outcomes and employee health and wellbeing. There has been increased focus on health and wellbeing during this time through provision of online materials, training and webinars, promotion of Employee Assistance Program, specialist advice for employees, especially those who could not work from home, and increased communications to promote resilience and wellness activities. Refer to Section 11.2 (Covid-19 Crisis Management) for further information on APA’s COVID-19 response and crisis management. Process Safety Process Safety is about ensuring 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. APA is in year three of a dedicated Process Safety improvement program. The roll out of Process Safety is in year three of a multi-year program at APA. FY2020 has seen the delivery of many parts of the program including: — Completion of the initial roll out of Process Safety to the Transmission and Midstream businesses – this includes defining safety critical equipment for sites, roll out to the sites of process safety dossiers and delivery of a Process Safety cultural program; — Completion of the Process Safety Framework and integration in Safeguard, APA’s HSEH management system; — The development and roll out of APA’s Process Safety Fatal Risk Protocol; — Process safety scorecard, tracking key metrics and measures by Executives and the Board; and — Training for field operation staff, engineers and leaders completed, including a new e-Learning module developed for release in FY2021. Metrics around the use of Management of Change and alarm management continued to improve as a result of dedicated improvement programs for each. APA continues to work with several regulators around the country to maintain current Safety Cases for our assets, with the Orbost Gas Plant Safety Case having been submitted and going through the approval process currently. For FY2021, as part of the new Operations Division business plans, program development and roll out of Process Safety to Power and Networks assets will begin. Environment and Heritage compliance APA operates its assets under a number of approved environmental regulatory instruments within relevant federal, state and territory jurisdictions. Progress against core initiatives has enabled APA to initiate a more standardised and streamlined management of environment and heritage risk including: — Environment Management Plan (EMP) Improvement Program: was initiated in FY2018 to standardise and streamline our approach to managing environmental risks and compliance. A target of 9 refreshed EMPs for delivery in FY2020 was set and achieved, bringing the total number of effective EMPs to 22. A target of 10 has been set for FY2021, the final year of the program. — Heritage Improvement Program: A gap analysis was completed during the reporting period to articulate areas of heritage practices across APA that either needed improvement or further support and investment. A Heritage Improvement Plan was developed in early 2020 and has identified critical corporate processes, state specific guidance and targeted awareness/training program to be developed and implemented over the next 18 months. Four warning notices across the business were received in the reporting period in relation to regulatory compliance, however none resulted in penalties or fines. Corrective actions are either underway or have been completed. 38 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Sustainability (continued) 10.3 Business Integrity Commonwealth Modern Slavery Act 2018 (MSA) The MSA established a national Modern Slavery Reporting Requirement which applies to all entities based, or operating, in Australia, with an annual consolidated revenue of at least $100 million. Entities are required to report annually on the risks of modern slavery in their operations and supply chains with actions to address those risks. APA is committed to the principles and obligations under the MSA and will not intentionally use suppliers and contractors who engage in exploitative behaviours of modern-day slavery such as child labour, debt bondage and inhumane treatment of employees, and forced or compulsory labour. APA is working on a set of standards to achieve compliance utilising a risk-based approach to the identification of modern slavery risks and artificial intelligence tools to analyse supplier information, with further development of procedures supporting the approach in progress. The initial annual Modern Slavery Statement was required to be submitted by 31 December 2020. However, in April 2020, the Government extended the submission deadline to 31 March 2021 as a result of the COVID-19 pandemic. Further detail is contained in APA’s FY2020 Sustainability Report and Code of Conduct, available on APA’s website. Anti-bribery and Corruption In line with APA’s Code of Conduct, relevant legislation, and as part of the transition to the ASX Governance Principles 4th Edition, APA established an Anti-bribery and Corruption Policy in the reporting period. This sets out key requirements to prevent, detect and manage bribery and corruption in all jurisdictions in which APA operates. APA is also closely monitoring the recent Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2019 released on 2 December 2019. If passed, the legislation would bring Australia’s requirements into line with the UK and the US. 11. Risk Management Effective risk management is essential to delivering value for our stakeholders and involves all of our people across the business. APA identifies risks to its business and puts in place controls and strategies to manage any adverse consequences, as well as to maximise any opportunities that arise from these risks. Material risks are reviewed on an ongoing basis by APA’s Executive Team and the Board Audit and Risk Management Committee, together with the relevant Divisions supported by 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 our Risk Management Policy and Risk Appetite; the Risk Management Enablers providing for governance, a strong risk culture, technology support and ongoing training and communication; and the Enterprise Risk Management Framework which sets our approach for the identification, assessment, management and escalation of risks to ensure material risks are managed appropriately. All risk assessments consider a combination of likelihood and consequence based on the Enterprise Risk Management Framework. 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. Further information on this process is provided in APA’s Corporate Governance Statement (refer to Principle 7, https://www.apa.com.au/about-apa/our-organisation/corporate-governance/), and APA’s Sustainability Report (https:// www.apa.com.au/about-apa/sustainability/). APA Risk Management APA Group Board – Review current and emerging material risks – Review key risk & compliance policies – Review insurance arrangements – Review risk strategy and framework – Approve crisis management plan – Promote a risk aware culture APA Group Audit & Risk Management Committee Executive Risk Management Committee – Approve risk strategy, policy and framework – Approve and monitor risk appetite – Approve key risk and compliance policies – Review and monitor current and emerging material risks (financial & non-financial) Group Risk, Compliance & Insurance – Risk & Compliance Frameworks, guidance – Recovery (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 — Physical Security Risk — People Safety & Environment Risk — Process Risk — Treasury Risk — Project Risk APA Divisions – Implement Risk and Compliance Frameworks – Own risks, controls and actions – Own compliance risks and controls – Review and report risk exposures – Apply risk appetite in decisions Independent Review – Internal Audit – External Audit – Third party audits and reviews Divisional Review – Functional risk reviews – Divisional audits and reviews APA GROUP I ANNUAL REPORT 2020 39 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Risk Management (continued) 11.1 Key risks Listed below are a number of material risks that could 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. Type of Risk Description Key Management Actions to Manage 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 APA has a number of significant assets and — Strong regulatory and policy functions, 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. Bypass and competition risk 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 remains competitive and provides value to the market. — Asset management plans aligned with capacity contracting strategy. 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. — 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. Gas supply risk Gas seen as an unacceptable source of energy 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. — 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. Counterparty risk The failure of a counterparty to meet its contractual commitments to APA, whether in whole or in part, could reduce future anticipated revenue, unless and until APA is able to secure an alternative customer. — Portfolio of investment grade credit rated customers. — Strong counterparty credit due diligence with customer credit exposures closely monitored. — Contractual credit support arrangements in place. 40 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Risk Management (continued) 11.1 Key risks (continued) Type of Risk Description Customer contract renewal risk Reputation 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. Changing societal and 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. Climate transition risk APA and its customers may be adversely affected by the transitional impacts of climate change. Key Management Actions to Manage 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). — Sustainable development initiatives. — Industry engagement and implementation of Energy Charter initiatives. — Identification of climate transition risks and undertaking scenario analysis resilience testing of portfolio against a range of recognised transition pathways. — Commitment to disclose in accordance with Task Force on Climate Related Financial Disclosures (TCFD). 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. 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. — 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 is maintained. — Risk limits set by the Board and managed in line with APA’s Treasury Risk  Management Policy. — Derivative instruments used to hedge non-AUD denominated revenue and expenses. — Foreign currency borrowings fully hedged. — Corporate and asset models underpinning investment decisions independently reviewed. — Oversight by APA’s Due Diligence Committee for material investment transactions. — APA’s Capital Management strategy is formulated to ensure the credit ratings are maintained at target levels. — 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. APA GROUP I ANNUAL REPORT 2020 41 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Risk Management (continued) 11.1 Key risks (continued) Type of Risk Description Key Management Actions to Manage 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. Asset operations risk APA is exposed to a number of risks affecting operations including those resulting in equipment failures or breakdowns, pipeline ruptures, employee or equipment shortages, workplace safety issues, environmental damage, contractor defaults, damage by third parties, integration incidents from acquired or newly constructed assets and damage from natural hazards, sabotage or terrorist attacks including the physical risks associated with climate change. — Operations are subject to operational and process safety and environment management programs. — Asset management and maintenance of engineering standards, including integrity monitoring and maintenance programs as part of risk-based asset life cycle management. — Asset operational monitoring through control rooms to manage flows and asset maintenance issues. — Comprehensive insurance arrangements provided as part of asset protection program. Information technology and cyber risk APA's operations rely on a number of information technology systems, applications and business processes utilised in the delivery of business functions, including APA’s customer management system, grid network and integrated operations centre. — 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. — Information and technology systems including SCADA control systems, are subject to regular reviews and independent testing. — Leadership development and capability programs in place. — Expectations of behaviour set out in the APA Code of Conduct. — Recruitment practices in place. — Talent management programs to identify and develop technical and leadership personnel. — Diversity and inclusion programs. — 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. People and culture 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. Expectations on the levels of behaviour expected for employees aligned to our values drive the culture on which leaders are held to account. Construction and development risk 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. 42 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Risk Management (continued) 11.1 Key risks (continued) Type of Risk Description Key Management Actions to Manage Risks 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 Framework 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. Key emerging risks including threats and opportunities for APA include: Risk (threats and opportunities) Approach Threat: Significantly more volatile and extreme weather events impacting above ground asset construction and operations. Above ground asset protection measures in place to minimise impact of extreme weather events with improvements including Bushfire Management Plans covering enhanced awareness, vegetation management and improved communications and training. Property insurance cover in place. Threat: Global economic slowdown impacting investment and opportunities. Continued strong investment opportunities with strong capital management and customer credit monitoring. Opportunity: New fuel sources providing medium to long term sustainable growth opportunities. Proactive investigation of new energies as part of strategy development. Innovation projects into development of new energies. Opportunity: Rise in digitisation including artificial Intelligence and the Internet of Things provides for safer and more efficient operations. Pilot approach to opportunities in place, with tools and capability established. Initial focus on supporting improving efficiency and effectiveness in operations. 11.2 COVID-19 Crisis Management In response to the COVID-19 pandemic and its impact on APA and the broader community, APA’s business continuity plans were activated in February 2020 focusing on maintaining our critical facilities, such as the Integrated Operations Centre (IOC), ensuring our essential field services could be maintained and provision of IT support services more broadly, to facilitate remote working. APA’s overall priority was for the health and safety of our people and continued operations as an essential service provider to our customers and the people of Australia. At this time proactive stakeholder management also commenced with customers, government agencies, regulators and key suppliers; initial operational plans were established, especially for critical sites and processes; and plans for provision of IT services and equipment for employees working from home was prioritised. The APA Crisis Management Team (CMT) was enacted in March 2020 reporting directly to the CEO and Managing Director, with daily check-ins with management representatives across the country. Just over a week later, more than 1,000 normally office-based employees were working remotely from home, whilst our more than 750 field-based employees continued to do their important work. In line with government and health authority requirements across the States and Territories, the CMT worked through APA’s initial response, achieving stability in containment and planning and executing plans for recovery. Key activities have included: — Liaising with regulators, government agencies, industry groups, customers and suppliers; — Determining essential service requirements and authorities/permits for employees including contractors working in APA’s offices and at various field sites and construction projects, including those regularly crossing state borders; — Ensuring all employees across our field sites and offices had COVIDSafe working arrangements in place including access to health sanitisers and other equipment, changes to work practices to provide for social distancing and access to expert health advice; — Implementing split teams for control rooms and in some cases separate rosters and sites to maintain health and ensure continuity of operations; — Significant planning and additional controls to ensure critical maintenance and outage activities can continue to deliver operational stability and reliability; — Ensuring IT capability and capacity was available to all employees working from home and accelerating APA’s workplace digitisation program with modern and secure office platforms. This also included additional cyber security awareness and increased cyber surveillance; and — Significant levels of ongoing communications and resources provided to support our people and assist in maintaining health, safety, and wellbeing for extended periods of time. APA GROUP I ANNUAL REPORT 2020 43 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Risk Management (continued) 11.2 COVID-19 Crisis Management (continued) There have been many challenging issues to deal with, and many successful and positive outcomes from COVID-19, including but not limited to: — No material safety or operational incidents during this time; — Social distancing practices, new travel arrangements and revised operational protocols established to allow all our assets to continue to operate and minimise the risks to the more than 700 employees who are continuing to work on sites or in the field; — Some of APA’s Fly-In Fly-Out employees converted to Drive-in Drive-Out arrangements for over three months to continue to deliver services to remote assets and communities; — Employees have embraced new technology and ways of working to adapt to remote working and continue to be productive to deliver support to our customers, our front-line employees, and investors; — Cross-functional groups have been established to identify and assist our vulnerable customers, distressed suppliers and vulnerable employees; — Technical and leadership training previously only delivered in person has been successfully converted to various digital platforms, allowing skill development to continue and progress; — Establishing special arrangements and protocols to continue to conduct critical maintenance outages including bringing specialists from interstate and overseas, implementing additional quarantine and social distancing to keep people safe; and — Our leaders have stepped up and learnt new skills to continue to lead their teams remotely and demonstrate the innovation, agility and collaboration required in challenging circumstances like these. Most of APA’s offices are now open again (excepting Victoria) with employees returning gradually in a phased and structured way with new physical setups and protocols to ensure health and safety. With increased flexibility arrangements and new technology platforms established, employees and leaders are working to determine the “new normal” in a post COVID-19 world, looking to capture and balance the best of both environments. APA donates masks to Orbost Hospital during COVID-19 pandemic ~ strengthening the communities we are part of APA Operations Coordinator and local resident Megan Humphries (far right), visited the hospital and met with the Orbost Hospital CEO to donate 720 masks on behalf of APA. During the 2019/20 summer bushfire crisis across Eastern Australia, APA’s Orbost Gas Plant in East Gippsland Victoria was severely impacted by the smoke from surrounding fires. The plant had been undergoing a significant refurbishment and upgrade program and was in the initial stages of the commissioning process. Personnel were evacuated from the site due to both threat of fire, road closures and poor air quality. APA implemented an Air Quality Management Plan to return APA employees and contractors back to site as soon as it was safe to do so. One of the safety controls implemented under the plan, was the use of P2 N95 masks for when smoke levels on site reached certain levels. P2 N95 masks filter out particulate matter contained in bushfire smoke, which can cause respiratory irritation. Once the fires and smoke in the area abated, the site had excess stock of the masks. At this time, the COVID-19 pandemic had been declared by the World Health Organisation and personal protective equipment was in short supply globally, and difficult to acquire. As the masks were of a grade also suitable for medical use, Midstream Operations Manager Paul Rice contacted Orbost Hospital to see if they could use the masks. The hospital was extremely appreciative of the donation as they had indeed been struggling to secure P2 masks to protect their medical personnel. 44 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Secretaries See pages 06 to 07 for information relating to the qualifications and experience of Directors and Company Secretary Nevenka Codevelle. Information on APA’s additional Company Secretary, Amanda Cheney, is below: Amanda Cheney LLB (Hons) BArts General Counsel & Company Secretary (Effective 25 February 2020) Amanda has been with APA Group since August 2012 and holds the role of General Counsel and Company Secretary. Amanda has over 18 years' experience in energy and infrastructure industries, having worked as a senior projects lawyer in Australia and Japan. She holds a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia and is a member of the Australian Institute of Company Directors. 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 Period of directorship Company Michael Fraser Aurizon Holdings Limited Since February 2016 Robert Wheals — — Steven Crane James Fazzino Debra Goodin nib holdings limited SCA Property Group Tassal Group Limited Incitec Pivot Limited Since September 2010, Chair since October 2011 Since December 2018 Since May 2020 July 2005 to November 2017 Senex Energy Limited oOh!media Limited Atlas Arteria Limited Ten Network Holdings Limited Since May 2014 Since November 2014 to February 2020 Since September 2017 August 2016 to November 2017 Shirley In't Veld Northern Star Resources Limited Alumina Limited Since September 2016 Since August 2020 Rhoda Phillippo Vocus Group Ltd March 2015 (previously as M2 Group Ltd) to August 2018 Peter Wasow Oz Minerals Limited Alcoa Australia Limited Since November 2017 January 2014 to July 2017 12.3 Directors’ meetings During the financial year, 13 Board meetings, four Audit and Risk Management Committee meetings, four People and Remuneration Committee meetings, four Health, Safety and Environment Committee meetings and four Nomination Committee meetings were held. The following table sets out the number of meetings attended by each Director while they were a Director or a committee member: Directors Michael Fraser Robert Wheals (1) Michael McCormack (2) Steven Crane James Fazzino Debra Goodin Shirley Int’d Veld Peter Wasow Rhoda Phillippo (3) Board People & Remuneration Committee Audit & Risk Management Committee Health Safety & Environment Committee Nomination Committee A 13 13 0 13 13 13 13 13 2 B 13 13 0 12 13 13 13 13 2 A — — — 4 — — 4 4 — B — — — 4 — — 4 4 — A 4 — — 4 4 4 — 4 — B 4 — — 4 4 4 — 4 — A — — — — 4 4 4 — 1 B — — — — 4 4 4 — 1 A 4 — — 4 — 4 — — — B 4 — — 4 — 4 — — — 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) Robert Wheals appointed as a Director on 6 July 2019. 2) Michael McCormack retired as a Director on 5 July 2019. 3) Rhoda Phillippo appointed as a Director on 1 June 2020. APA GROUP I ANNUAL REPORT 2020 45 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 (continued) 12.4 Directors’ securityholdings The aggregate number of APA securities held directly, indirectly or beneficially by Directors or their related entities at 30 June 2020 is 385,260 (2019: 721,576 (1)). The following table sets out Directors’ relevant interests in APA securities as at 30 June 2020: Directors Michael Fraser Robert Wheals (2) Michael McCormack (3) Steven Crane Debra Goodin James Fazzino Shirley Int’d Veld Peter Wasow Rhoda Phillippo (4) Fully paid securities as at 1 July 2019 Securities acquired Fully paid Securities securities as at 30 June 2020 disposed 102,942 38,883 350,000 130,000 23,000 30,751 25,000 21,000 — 721,576 — 7,505 — — 1,179 — — 5,000 — 13,684 — — — — — — — — — — 102,942 46,388 — 130,000 24,179 30,751 25,000 26,000 — 385,260 1) At 30 June 2019 the aggregate number of APA securities held directly or beneficially by Directors or their related entities included 350,000 securities held by Michael McCormack who retired on 5 July 2019. The aggregate number of APA Securities held directly or beneficially by the current Directors or their related entities as at 30 June 2019 was 371,576. 2) Robert Wheals was appointed as a Director on 6 July 2019. He held 38,883 securities on appointment. 3) Michael McCormack retired as a Director on 5 July 2019. He held 350,000 securities on retirement. 4) Rhoda Phillippo was appointed as a Director effective 1 June 2020. She held nil securities on appointment. As at 30 June 2020, Robert Wheals held 217,872 performance rights granted under APA Group’s long-term incentive plan. Each performance right is a right to receive one ordinary stapled security in APA subject to satisfaction of certain performance hurdles. Further information can be found in APA’s Remuneration Report on pages 48 to 62. 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 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. 46 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 115. 16.2 Non-audit services A description of any non-audit services provided during the financial year by the Auditor and the amounts paid or payable to the Auditor for these 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/. 10. 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, 26 August 2020 Debra Goodin Director APA GROUP I ANNUAL REPORT 2020 47 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 letter from the chairman of the people and remuneration committee I am pleased to present APA Group’s Financial Year 2020 (FY2020) Remuneration Report (Report). FY2020 performance Despite the challenging market conditions and operating environment, APA continued to focus on providing our customers with essential services of gas transportation and energy generation during this year. In this context, Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) for FY2020 was $1,654 million, an increase of 5.1% or $80.2 million over FY2019. APA’s liquidity position remains robust and has withstood strong headwinds. APA holds significant cash reserves, has committed undrawn facilities and access to liquid debt capital markets. APA has paid an interim and full year distribution every year for the 20 years since listing, and distributions have grown each year. This year is no different. Our distribution per security of $0.50 for FY2020 represents a 6.4% increase on FY2019. Strategic executive renewal FY2020 was a transitional year for the APA executive team, with a number of Key Management Personnel (KMP) changes and senior leadership appointments. The ongoing focus by the Board to ensure APA is led by talented and capable people was demonstrated by the appointment of Rob Wheals, who commenced as APA’s new Chief Executive Officer and Managing Director on 6 July 2019. Further key executive appointments included: — Ross Gersbach, the former Chief Executive Strategy and Development was appointed to the new role of President North American Development; — Darren Rogers was appointed to the newly created role of Group Executive Operations; and — Hannah McCaughey, formerly from Ausgrid, joined APA in March 2020 as Group Executive Transformation and Technology. In addition to the internal promotions, Julian Peck has been appointed as the Group Executive Strategy and Commercial. He joined us most recently from Morgan Stanley and commenced in August 2020. Adam Watson most recently from Transurban Group will join APA in November 2020 as Peter Fredricson retires as Chief Financial Officer in December 2020. Remuneration changes during FY2020 During the year, the People and Remuneration Committee reviewed APA’s executive remuneration framework and made a number of changes to more effectively link Securityholder outcomes with executive reward, and focus executives on achieving long-term sustainable performance. We value and have listened to Securityholder feedback. In response changes have been made to both the Short Term Incentive (STI) and Long Term Incentive (LTI) plans. The Board recognises that management has far greater capacity to influence long term returns than short term performance. A key design objective therefore was to reduce the proportion of total remuneration paid as a cash short term incentive and to increase the proportion paid as a long term incentive. The new overall design was fully implemented for Mr. Wheals upon his appointment and will be applied for newly hired KMPs. For other executives the new STI and LTI plans were implemented in FY2020 with revisions to overall pay mix to follow in time. In addition, it was considered desirable that more of the total should be paid in equity with holding periods, during which the executive is not able to sell securities that were issued under either the STI or LTI plans. Further detail regarding these changes can be found in section 3.2 of the Remuneration Report. Remuneration outcomes for FY2020 FY2020 presented challenges for APA in dealing with the impact of COVID-19 and an internal refocusing of the Company’s culture on customer and community outcomes. The delay in commissioning of the Orbost Gas Processing Plant has had an impact on company performance and accordingly also on incentive outcomes. The Board has sought to align the experience of Securityholders’ and the level of STI payments. While making these judgements, the Board recognises the performance and contribution of all our people. The ability of the APA team to support our Customer Promise by delivering a significant proportion of Australia’s energy requirements both safely and reliably during what have been unprecedented times is to be applauded. FY2021 remuneration approach We recognise our ongoing success relies on attracting and retaining high performing people. A key focus for FY2021 is to maintain a fair approach to remuneration and ensuring that our executive reward framework supports the achievement of our business strategy, particularly over the longer term. Finally, there were no increases to Non-executive Director (NED) fees for FY2020, and it has been determined not to increase NED fees for the coming year. I hope you find this Remuneration Report informative. We look forward to receiving your support at the 2020 AGM. Peter Wasow People and Remuneration Committee Chairman 48 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Individuals covered by the Remuneration Report 1. The Remuneration Report (the Report) for APA for FY2020 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 KMP – current and former. Name NEDS Role Term as NED/KMP in FY2020 Michael Fraser Chairman Steven (Steve) Crane James Fazzino Debra (Debbie) Goodin Shirley In’t Veld Rhoda Phillippo Peter Wasow Executive KMP Director Director Director Director Director Director Full year Full year Full year Full year Full year Part year (1) Full year Robert (Rob) Wheals Chief Executive Officer and Managing Director (CEO/MD) (2) Full year Peter Fredricson Ross Gersbach Chief Financial Officer (CFO) President North American Development (3) Chief Executive Strategy and Development Darren Rogers Group Executive Operations Michael (Mick) McCormack Former CEO/MD Full year Full year Full year Part year (4) Part year (5) 1) Appointed 1 June 2020. 2) Appointed 6 July 2019. Formerly Group Executive Transmission. 3) Formerly Chief Executive Strategy and Development. Appointed President North America and re-located to the US on 1 October 2019. 4) Appointed 1 November 2019. Formally acting in the role from 13 June 2019. 5) Retired on 5 July 2019. 2. Executive Summary 2.1 APA’s financial performance FY2016 to FY2020 The table below summarises APA’s financial performance from FY2016 to FY2020. Normalised financial results (6) FY2016 FY2017 FY2018 FY2019 FY2020 Earnings Before Interest Tax Depreciation and Amortisation (EBITDA)($m) 1,330.5 1,470.1 1,518.5 1,573.8 1,653.9 Profit after tax ($m) Operating cash flow per security (cents) (7) Distribution per security (cents) Closing security price at 30 June ($) 179.5 236.8 264.8 288.0 77.1 41.5 9.24 87.1 43.5 9.17 90.7 45.0 9.85 85.8 47.0 10.80 317.1 92.9 50.0 11.13 6) Normalised financial results are the statutory financial results excluding significant items. The Board considers these measures to best reflect the core earnings of APA. 7) The number of securities used for the calculation of operating cash flow per security from FY2018 to FY2016 has been adjusted by an adjustment factor of 1.0038 to reflect the discounted rights offer issued in March 2018. Incentive Outcomes STI outcomes The EBITDA STI gate opener was achieved and executive KMP were eligible to receive an STI payment for FY2020. STI performance was assessed against a balanced scorecard of financial and non-financial performance measures. Executive KMP STI outcomes for FY2020 are summarised in the below table. CEO / MD Executive KMP average STI outcome as % of target STI outcome as % of maximum 83.3% 87.2% 55.5% 58.1% APA GROUP I ANNUAL REPORT 2020 49 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 2. Executive Summary (continued) Legacy LTI Plan outcomes APA assesses performance for the purpose of LTI allocation with reference to our relative Total Security holder Return (TSR) and a return on capital measure, APA achieved a relative TSR of 77.2%, which equated to a grant of 91.1% of eligible reference units under the relative TSR performance hurdle. The return on capital hurdle, EBITDA/Funds Employed (FE), achieved a score of 53.3%. Taken together 72.2% of potential LTI was allocated in FY2020. 2,500 TSR 34.4 35.0 35.5 38.0 36.3 32.8 31.0 29.5 28.0 22.0 21.5 21.5 21.5 22.5 24.0 2,000 1,500 1,000 500 0 TSR: 2.201% CGAR: 16.9% pa 43.5 45.0 41.5 Cents 60.0 50.0 50.0 47.0 40.0 30.0 20.0 10.0 0 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 Jun 20 Distributions (RHS) APA TSR (LHS) ASX 100 TSR (LHS) ASX 200 Utilities TSR (LHS) Minimum security holding requirements The Directors (except for Rhoda Phillippo who was appointed during the financial year), CFO and President North American Development met the minimum security holding requirement. The CEO/MD and remaining executive KMP continued to progress towards the expected level for this requirement. NED fees There were no increases to NED fees in FY2020. 2.2 FY2020 remuneration The Actual Remuneration detailed in the table below is different from the statutory remuneration disclosed in Section 8. Statutory remuneration is disclosed in accordance with the Accounting Standards and Corporations Act. The table below applies the following calculations: — Fixed pay as paid during the year — Cash STI awards earned in respect of performance for the year — Deferred STI awards from prior years which have vested in the year — LTI which has vested under the historical LTI plan Termination and leave payments are excluded in this table. Executive KMP R Wheals P Fredricson R Gersbach Fixed pay $ (8) Other $ (9) STI vested from prior years deferred Cash STI $ (10) equity $ (11) $1,586,413 $950,000 — — $529,061 $393,775 $969,000 $376,897 $422,969 (13) LTI vested $ (12) Total $ $392,089 $2,507,563 $451,560 $1,759,335 $460,877 $2,229,743 $62,027 (14) $720,316 — — — — D Rogers (part year) $506,580 — $151,709 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 Australian Accounting Standards. Note that Cash STI for Mr. Fredricson and Mr. Gersbach has had no deferral applied due to Mr. Fredricson meeting the minimum securityholder requirement and due to USA tax implications for Mr. Gersbach. 8) 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. 9) This includes the value of benefits relating to Mr. Gersbach’s secondment to the USA and includes relocation allowances and assistance as well as cost of living adjustment. Costs are inclusive of USA tax impacts and are split between one-off relocation costs of $161,894 (48%) and $172,618 (52%) on-going costs as well as foreign exchange rate differences for USD fixed pay. 10) Cash STI refers to the cash portion of the STI, relating to performance in FY2020. Payment will be made in September 2020. 11) Deferred STI refers to the equity portion of the STI. Deferred STI was first introduced in FY2020 and consequently no deferred securities vested in FY2020. 12) LTI vested refers to the cash amount to be paid in September 2020, based on the VWAP of $11.1579 and number of reference units that vested in August 2020 as outlined in section 8.4. 13) This is all paid as cash due to the secondment to the USA. 14) This is in relation to allocations made prior to KMP status. 50 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 3. Executive remuneration policy and framework 3.1 Remuneration policy The Board recognises the important role remuneration plays in 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 listed below. Market competitive Provide competitive rewards to attract, motivate and retain highly skilled executives Business strategy Drive delivery of APA’s growth strategy, while maintaining its financial strength Behaviours Drive delivery of HSE strategy; caring for people, communities, the environment and our assets; living the APA values Securityholder alignment Ensure executive performance and behaviours align with the interests of Securityholders 3.2 Executive remuneration framework for FY2020 APA’s remuneration objective is to reward executives at the median of observed total remuneration for selected comparable companies when performance is at target and up to the 75th percentile for above target performance. The following table summarises the executive remuneration structure for FY2020. Performance period N/A Fixed pay STI One year LTI Three years Delivery vehicle Cash salary and other benefits including statutory superannuation Cash (67%) and deferred equity (33%) delivered as restricted securities New plan: Performance rights Legacy plan: Cash-settled Delivery timeframe One year Restricted securities vest at the end of the two-year holding lock period Opportunity Executive KMP roles are benchmarked against external positions in companies with comparable market capitalisation, operating in similar industries and key competitors CEO/MD: Target STI opportunity of 60% of fixed pay and maximum STI opportunity of 90% of fixed pay Executive KMP: Target STI opportunity of 50% of fixed pay and maximum STI opportunity of 75% of fixed pay New plan: Performance rights vest subject to performance in year three. Vested rights are released in equal tranches at the end of years three, four and five Legacy plan: Reference units vest in equal tranches one, two and three years following allocation. CEO/MD: Maximum LTI opportunity of 150% of fixed pay Executive KMP: Maximum LTI opportunity of 75% of fixed pay Minimum security holding requirement The CEO/MD is required to hold securities equal to the value of fixed pay Executive KMP are required to hold securities equal to 50% of fixed pay Transition between legacy LTI plan and new LTI plan FY2020 was the final year of awards allocated under the legacy LTI plan. To facilitate the transition to the new LTI plan, and ensure executives were neither advantaged nor disadvantaged as a result of the new executive remuneration framework, both the legacy and new LTI plans operated during FY2020. Further details regarding both LTI plans can be found in section 3.5 of the Remuneration Report. APA GROUP I ANNUAL REPORT 2020 51 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 3. Executive remuneration policy and framework (continued) 3.3 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 multiple factors, including the skills and experience of the individual, external market positioning and the size and complexity of the role. 3.4 STI plan Design Purpose Description The purpose of the STI plan is to reward executives for their contribution to APA’s short-term performance during the performance period. Performance period One year. Deferral One third of the STI award will be deferred into APA restricted securities for two years and until such time as an executive achieves the minimum security holding requirement. Once the minimum security holding requirement is met executives can receive 100% of the STI as cash. Target and Maximum STI — CEO/MD – 60% at target and a maximum of 90% of fixed pay — Executive KMP – 50% at target and a maximum of 75% of fixed pay Performance measures Performance is assessed against a scorecard of financial measures including EBITDA and growth in invested capital, and non-financial measures including strategic, health, safety & environment and people & culture objectives. Priority Financial performance and financial strength Description — EBITDA — Maintain APA’s financial strength including credit ratings — Effective capital management — Ensure costs are controlled and justifiable Growth & Innovation — Grow our pipeline and midstream portfolio — Expand renewable and gas power generation North America — Explore with a view to securing growth opportunities in our core business of gas transmission and distribution in North America Health, Safety and Environment Customer & Stakeholder Management People & Culture — Improve safety and environmental performance and culture through delivery of HSE strategy. Total Recordable Injury Free Rate (TRIFR) performance for employees and contractors. Environmental Management Plans (EMP) in place — Deliver services to our customers consistent with the APA Customer promise and strengthen stakeholder management — Improve organisational structure and culture to deliver APA purpose and strategic imperatives Board discretion The Board has absolute discretion in relation to assessing performance and determining the amount, if any, of STI awards. 52 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 3. Executive remuneration policy and framework (continued) 3.5 LTI plans To ensure that executives were neither advantaged nor disadvantaged, the implementation of the new LTI plan in FY20, required that eligible executives also participate in a final grant of the former long term instrument. Taken together, both the old and the new schemes ensure that executives will have LTI grants being subject to a continuous set of performance periods. A summary of the new and legacy LTI plan is provided below: Feature Purpose Delivery New LTI plan Legacy LTI plan The LTI focuses on long-term APA performance, aligning the interests of executives with Securityholders by rewarding for the achievement of APA’s long-term business strategy. Performance rights. Cash. Performance period Three-years (forward-looking). Three years (retrospectively). Timing and delivery LTI awards will vest at the end of the performance period and will be released in three equal annual instalments following the end of the three-year performance period. Subject to the satisfaction of performances measures, performance rights will vest to executives for nil exercise price or consideration. Allocation Performance rights are allocated at face value using a 30-day volume weighted average price (VWAP). The LTI grant vests in three equal instalments over the three financial years following the allocation of reference units, with the initial one- third vesting at the end of the first financial year following the first award, one third at the end of the second financial year, and one-third at the end of the third financial year following grant. For example, the first tranche of the FY2020 award will vest in August 2021. Reference units are allocated using a 30-day VWAP. Performance measures Relative TSR (50% weighting) measures the Group’s TSR performance over a three year period relative to a market peer group comprising S&P/ASX 100 companies. Relative TSR vesting schedule Return on Capital (ROC) (50% weighting) is calculated by dividing EBITDA by Funds Employed (FE). The ROC hurdle measures APA Group’s cash flow leverage achieved based on operating assets over a three year performance period. The LTI award vests in accordance with the following scale: Relative TSR percentile ranking % of awards that vest The LTI award vests in accordance with the following scale: Relative TSR percentile ranking % of awards that vest ROC vesting schedule — Below 50th percentile — Between 50th and 82.5th percentile — Nil — Straight line pro-rata vesting between 50% and 150% of eligible reference units The LTI award vests in accordance with the following scale: ROC growth above target (EBITDA/FE) % of awards that vest — Less than 4.69% — 0% of eligible reference units — Between 4.69% — Sliding scale and 6.26% between 80% and 150% of eligible reference units — Below 50th percentile — At 50th percentile — Between 50th and 82.5th percentile — Nil — 50% vesting — Straight line pro-rata vesting between 50% and 100% — At 82.5th — 100% percentile or above The percentage of performance rights comprising the ROC component that vest, if any, will be based on APA Group’s ROC as reflected by the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) divided by it funds employed (which represents the assets of the business used to derive revenue) with reference to the following vesting schedule: ROC (EBITDA/FE) — Less than 11.00% — Equal to 11.00% — Greater than 11.00% up to 11.30% % of awards that vest — 0% — 33% — Straight line pro-rata vesting between 33% and 100% — At or above 11.30% — 100% Retesting Re-testing of LTI awards is not permitted. APA GROUP I ANNUAL REPORT 2020 53 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 3. Executive remuneration policy and framework (continued) 3.5 LTI plans (continued) ROC Component calculation The ROC is calculated as an average over three years, under the new LTI plan it is the average of EBITDA for the current and the following two financial years. The calculation of funds employed is as follows: Total Assets on the balance sheet adjusted for: 1) Deduct: Capital work in progress balances (per Note 11 in the FY2020 Financial Statements). This represents expenditure balances for assets which are under construction as at balance date and are therefore not yet earning revenue; 2) Deduct: Other Financial Instruments Assets Current & Non-Current but excluding Redeemable Preference Share balances (per Note 20 in the FY2020 Financial Statements); 3) Add back: Working capital related to assets under construction; that is, trade creditors and accruals outstanding at balance date relating to capital work in progress. These balances reside in Note 10 in the FY2020 Financial Statements, however are not separately identifiable; and 4) Normalise: Cash balances to $30 million. For example: $1,172.771 million cash was held at 30 June 2020, however this was normalised back to $30 million, therefore, $1,142.771 million was deducted from total assets. Total Assets, and Items (1), (2) and (4) have the most material impact on the measure, and these are all able to be determined separately from the financial statements and notes. Item (3) is unable to be determined from the financial statements and notes but typically has only a minor impact on the measure. The calculation of the three year average (FE) is the average of seven data points as at the June and December half year ends for the current financial year and following two financial years, including the opening balance for the first year. For example, the FY2021 calculation is based on the following balance dates: June 2020, December 2020, June 2021, December 2021, June 2022, December 2022, and June 2023. Note that Items (1) and (2) are not separately disclosed in half year end Financial Statements. However, using the full year Financial Statements balances provides a reasonable approximation of the performance condition outcomes. Calculation of ROC will be determined by the Board and the Board retains discretion to adjust EBITDA and funds employed to account for extraordinary items or otherwise ensure that inappropriate outcomes are avoided. 3.6 Executive remuneration mix The following graphs illustrate the target remuneration mix for APA’s CEO/MD and Executive KMP during FY2020 (15). CEO/MD pay mix @ target Executive KMP pay mix @ target Fixed: 32% STI cash: 13% STI deferred equity: 7% LTI: 48% Fixed: 44% STI cash: 15% STI deferred equity: 7% LTI: 34% 15) Note that LTI is calculated assuming full vesting of LTI at the value per security when first granted 4. FY2020 executive incentive outcomes 4.1 FY2020 STI scorecard outcomes – CEO/MD The Board reviewed the CEO/MD’s performance in light of APA’s performance in FY2020, taking into account his performance against the key performance indicators (KPIs) in his STI scorecard, and determined that the STI outcome is 88.3% of the target and 58.9% of maximum. In light of the Orbost Gas Processing Plant delays the Board exercised its discretion to reduce the overall outcome by 5% to 83.3% and 55.5% of maximum. Scorecard measures Overall FY2020 performance outcomes Adjusted by Board discretion due to Orbost Gas Processing Plant delay Performance outcome as a % of target 88.3% 83.3% Financial – EBITDA (35% weighting) EBITDA is the primary financial measure which we use to measure operational performance at APA. 54 APA GROUP I ANNUAL REPORT 2020 — APA’s FY2020 EBITDA was $1,654m, which was between 27.1% threshold and target. — The result represents growth of 5.1% on prior year performance. 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 4. FY2020 executive incentive outcomes(continued) 4.1 FY2020 STI scorecard outcomes – CEO/MD (continued) Scorecard measures FY2020 performance outcomes Financial – Growth in invested capital (15% weighting) Performance outcome as a % of target Capex encourages the business to grow through new developments and organic growth projects. — Growth capex for FY2020 has been assessed at $152.6m 15.2% which was above target (101%) Strategic (20% weighting) Progress APA’s strategy to grow APA’s portfolio of assets in Australia and the USA. — FY2020 performance assessed at target 20.0% — Substantial progress in the USA strategy in line with the Performance is also assessed against improvement in areas of customer, regulatory and stakeholder engagement. Health, Safety & Environment (10% weighting) Improve the health, safety and environmental performance outcomes and culture, including process safety, measured by key metrics and HSE Strategy progress. Board’s expectations — Improvements in customer initiatives and scores, regulatory outcomes and stakeholder engagement delivered at just below target — Overall performance between threshold and target (65%) 6.5% — FY2020 TRIFR deteriorated and was not achieved — Process safety improvements on track, some metrics not achieved — HSE strategy in place — Environmental performance on track People & Culture (20% weighting) Establish new operating model for APA in line with Group Purpose and Vision, and continue to develop and improve APA culture in line with APA values and D&I strategy. — FY2020 performance was above target 19.5% — A new organisational model implementation well progressed — D&I targets were met and initiatives on track 4.2 FY2020 Performance scorecard 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 been set for each Executive KMP, reflecting the nature of their role and contribution to APA’s business outcomes. In light of the Orbost Gas Processing Plant delays the Board exercised its discretion to reduce the overall outcome for impacted executives by 5%. Scorecard measures FY2020 performance outcomes P Fredricson — Financial & Risk Management (55%) — Strategic (20%) — Safety & Environment (10%) — People & Culture (15%) R Gersbach — Financial & Risk Management (35%) — Strategic (40%) — Safety & Environment (10%) — People & Culture (15%) D Rogers — Financial & Risk Management (40%) — Strategic (20%) — Safety & Environment (20%) — People & Culture (20%) Performance outcome as a % of target 87.9% Board adjusted to 82.9% — APA’s FY2020 EBITDA was $1,654m, which was between threshold and target. — The result represents growth of 5.1% on prior year performance. — New capital management plan in place — Safety and People outcomes in line with CEO/MD outcomes — Substantial progress in the USA strategy in line with the Board’s 92.3% expectations — Commercial and strategy outcomes on target — Safety and People outcomes in line with CEO/MD outcomes Board adjusted to 87.3% — Introduction of operational excellence framework 91.4% — Led organisational model implementation impacting all operations — Mixed safety performance APA GROUP I ANNUAL REPORT 2020 55 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 4. FY2020 executive incentive outcomes (continued) 4.3 FY2020 STI outcomes – Executive KMP The table below provides an overview of the STI outcomes for FY2020. STI earned STI forfeited Executive KMP $ cash $ deferred $ total earned (16) % of maximum opportunity $ foregone % of maximum opportunity R Wheals P Fredricson R Gersbach $529,061 $393,775 $422,969 $264,531 — — D Rogers (part year) $151,709 $75,855 $793,592 $393,775 $422,969 $227,564 55.5% 55.3% 58.2% 60.9% $635,445 $318,725 $303,781 $145,899 44.5% 44.7% 41.8% 39.1% 16) Includes both the cash and deferred components of the STI. 4.4 Legacy LTI plan – FY2020 outcomes A summary of the LTI awards that were tested and/or vested during the FY2020 financial year are outlined below. The FY2020 legacy LTI plan award was tested during the financial year and will vest in three equal tranches over the next three financial years. Year of allocation Relative TSR (50%) LTI awarded % of eligible ROC (50%) reference units FY2020 FY2019 FY2018 FY2017 91.1 51.5 0 73.4 53.3 79.7 63.6 83.2 72.2 65.6 31.8 78.3 Below is a summary of the resulting LTI allocations under the legacy LTI plan relating to FY2020, based on performance against the hurdles over the three-year performance period preceding the grant date. These units were allocated in August 2020 and will be settled in cash at the end of the respective vesting periods. Executive KMP R Wheals (17) P Fredricson (18) R Gersbach (19) D Rogers (part year) (20) Number of reference units allocated Value of allocation yet to vest ($) 42,507 46,125 47,046 24,174 $474,289 $514,658 $524,935 $269,731 17) Calculated on Fixed pay as Group Executive Transmission plus 3% effective 1 July 2019. 18) Calculated on Fixed Pay effective 1 July 2019. 19) Calculated on Fixed Pay effective 1 July 2019. 20) Calculated on Fixed Pay as Group Executive Operations effective 1 November 2019. 4.5 New LTI plan FY2020 was the first year of the awards under the new LTI Plan. Performance for the first award will be assessed at the conclusion of the performance period in June 2022. 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 Permanent Nine months’ notice by either APA or CEO/MD. APA may provide payment in lieu of notice. No notice is required by APA for termination for cause. Additional payments on termination Nine months TFR (instead of a notice period or payment in lieu of notice), where CEO/MD terminates employment due to his redeployment to another role within APA Group or a reduction in his TFR. Termination by APA: termination payment of 13 weeks’ (21) pay Executive KMP, other than CEO/MD Permanent Six months’ notice by either APA or KMP. APA may provide payment in lieu of notice. No notice is required by APA for termination for cause. Termination by KMP: Nil 21) 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. 56 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 5. Other Remuneration Elements (continued) 5.2 Additional provisions The table below summarises additional provisions as they relate to the remuneration of Executive KMP for FY2020: 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 Change of control If a participant resigns or is dismissed (with or without notice), any unpaid STI awards are forfeited. If an employee leaves for any other reason, an STI award may be paid out based on the proportion of the period that has passed and performance at the time of cessation (subject to Board discretion). STI Awards as deferred securities are released on termination. If a participant resigns (and is considered a bad leaver) 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, an STI award will be paid out based on the proportion of the period that has passed at the time of change of control to the extent to which performance conditions have been met. Subject to Board discretion, if a change of control occurs, all previously allocated reference units will vest to the extent to which performance conditions have been met, i.e. tenure. 5.3 Executive KMP Minimum security holding requirement The minimum security holding requirement helps to ensure the alignment of the interests of Executive KMP and Securityholders. Executive KMP (22) are expected to grow their holding to the minimum security ownership requirement within five years from the implementation of the Minimum Security Holding Policy in 2016. For FY2020, the CFO and President North American Development met the minimum security ownership requirement. The CEO/MD and remaining Executive KMP continued to progress towards the expected level for this requirement. Details of Executive KMP security holdings may be found in section 8.5. 5.4 Sign-on / loans / termination payments provided to Executive KMP APA did not pay any sign-on payments to Executive KMP during FY2020. No loans have been made to any Executive KMP and/or related parties. 5.5 Outgoing CEO/MD’s contractual entitlements As flagged in the FY2019 Remuneration Report, Mr McCormack retired 5 July 2019 and was entitled to certain termination payments per the conditions of his contract. The former CEO/MD received a payment totalling $6,592,545 (23). In addition, 131,477 reference units under the Legacy LTI plan with a value of $1,467,007 will be paid in August 2020. Mr. McCormack is also entitled to further reference units due to be paid in August 2021 (139,316 units), August 2022 (115,528 units) and August 2023 (70,753 units) (24). Set out below is a summary of the key components of the former CEO/MDs termination payment. Element Description Statutory entitlements Fixed remuneration for the period worked during FY2020 (1 July 2019 to 5 July 2019). Accrued statutory leave entitlements including annual leave and long service leave. Payment in lieu of notice Payment in lieu of notice 52.5% of annual TFR for the period not worked plus 52.5% of maximum FY2020 STI and LTI opportunities. Restraint Period 105% of TFR and 105% of maximum FY2020 STI and LTI opportunities. Treatment of incentives All unvested deferred STI and LTI at the time of cessation of employment remain on-foot (i.e. subject to the normal payment timetable and performance measures) and continue to be subject to clawback. 22) Subsequently appointed Executive KMP have three years from their date of appointment to meet the minimum security ownership requirement. 23) The payment includes statutory entitlements (fixed pay and other short term benefits) and payment in lieu of notice and payment for the 12 month restraint period (12 months of fixed pay, and STI calculated at 105% of maximum). 24) This equates to a total value of $3,632,979 based on a VWAP of $11.1579. APA GROUP I ANNUAL REPORT 2020 57 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 6. Non-executive Directors 6.1 Determination of Non-executive Director fees The Board seeks to attract and retain high calibre NEDs who are equipped with the diverse skills needed to oversee all functions of APA in an increasingly complex environment. NED fees comprise: — A Board fee; — An additional fee for serving as a Chairman or member of a Board Committee; and — Statutory superannuation contributions. NED 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. NEDs do not receive incentive payments nor participate in incentive plans. One-off ‘per diems’ may be paid in exceptional circumstances. No per-diem payments were made in this or the prior reporting period. 6.2 Aggregate NED fee pool The aggregate NED fee pool as at 30 June 2020 was $2,500,000. This has not changed since 2017. 6.3 Director fees The following table sets out the NED fees for FY2020. The Board has determined there will be no increase to NED fees for FY2021. Board Audit and Risk Management Committee Health, Safety and Environment Committee People and Remuneration Committee Nominations Committee 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 NED Minimum security holding requirement The minimum security holding requirement helps to ensure the alignment of the interests of NEDs and Securityholders. NEDs are expected to hold securities to a value not less than their annual 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 a NED and is a requirement of their appointment. As at 30 June 2020, all NEDs met this requirement (with the exception of Rhoda Phillippo who was appointed 1 June 2020). Details of NED security holdings may be found in section 8.5. 7. Remuneration Governance 7.1 Role of the 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 ensures 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 can be found at the following link https://www.apa.com.au/globalassets/documents/governance-docs/board-and-board-charter-docs/people- remuneration-committee-charter.pdf. 7.2 Composition of the People and Remuneration Committee The members of the Committee, all of whom are independent NEDs, are: — Peter Wasow (Chairman) — Steve Crane — Shirley In’t Veld, and — Rhoda Phillippo – from 1 June 2020 The CEO/MD and nominated senior executives attend meetings of the Committee by invitation. The Committee met four times during the year. 58 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 7. Remuneration Governance (continued) 7.3 Interaction with Audit and Risk Management Committee Consistent with the Charter, the Committee considers whether there has been 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. 7.4 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 FY2020 no recommendations were made by these external advisors regarding remuneration arrangements. APA employs internal remuneration professionals, providing analysis to the Committee and Board. This advice is used as a guide, and does not serve as a substitute for the thorough consideration of the issues by each Director. 8. Statutory Tables 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 (25) Short-Term Employment Benefits Post- Employment Security-based payments STI Salary (26) Cash STI (27) Deferral Awarded Other (28) Superan- nuation Legacy LTI Plan Equity settled LTI Plan (29) Total R Wheals 2020 2019 P Fredricson 2020 2019 R Gersbach (30) 2020 2019 D Rogers (31) 2020 Former KMP M McCormack (32) 1,561,413 529,061 264,531 825,000 480,670 925,000 901,000 393,775 510,970 947,997 918,334 422,969 497,220 — — — — — 376,897 489,913 151,709 75,855 — — — — 25,000 412,639 368,121 3,160,765 25,000 400,124 — 1,730,794 25,000 467,335 109,288 1,920,398 25,000 469,591 — 1,906,561 21,003 26,666 476,891 479,246 111,473 2,357,230 — 1,921,466 16,667 67,433 86,279 887,856 453 1,467,007 25,000 1,515,047 — — 1,508,043 5,169,967 — — — — 2020 2019 40,583 — 1,980,000 1,649,920 — — Total Remuneration 2020 2019 3,964,906 1,497,514 340,386 376,897 88,123 2,891,305 675,161 9,834,292 4,624,334 3,138,780 — — 101,666 2,864,008 — 10,728,788 25) This table outlines the total remuneration earned by Executive KMP during FY2019 and FY2020, calculated in accordance with the relevant accounting standard, AASB 2: Share-based Payments (AASB 2). 26) 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. 27) 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). 28) This includes the value of benefits relating to Mr. Gersbach’ secondment to the USA and includes relocation allowances and assistance as well as cost of living adjustment. Costs are inclusive of USA tax impacts and are split between one-off relocation costs of $161,894 (48%) and $172,618 (52%) on-going costs as well as foreign exchange rate differences for USD fixed pay. 29) For equity settled security-based payments, an expense is recognised equal to the portion of services received based on the fair value of the equity instrument at grant date. 30) Part year Former Chief Executive Strategy and Development, transferred to the US on 1 October 2019. 31) Part year appointed 1 November 2019. 32) Mr McCormack’s retirement, announced on 13 December 2018, was effective on 5 July 2019. Refer Section 5.5 for details of final additional payments. Mr McCormack is entitled to further reference units, due to be paid in August 2021, August 2022 and August 2023, with a total value of $3,632,979 (based on a VWAP of $11.1579). APA GROUP I ANNUAL REPORT 2020 59 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 8. Statutory Tables (continued) 8.2 NED Statutory Remuneration Disclosure (33) Financial Year M Fraser FY2020 FY2019 S Crane FY2020 FY2019 J Fazzino FY2020 FY2019 D Goodin FY2020 FY2019 S In’t Veld FY2020 FY2019 R Phillippo (34) FY2020 P Wasow FY2020 FY2019 Former NED R Higgins AO FY2019 P McKenzie FY2019 Total FY2020 FY2019 Short-term employment benefits Post- employment benefits Fees Superannuation $ $ Total $ 467,032 467,000 202,192 200,600 202,192 72,455 224,110 222,500 216,804 203,507 44,368 44,400 19,208 19,050 19,208 6,880 21,290 21,150 20,596 19,362 511,400 511,400 221,400 219,650 221,400 79,335 245,400 243,650 237,400 222,869 16,545 1,572 18,117 220,457 218,850 20,943 20,750 241,400 239,600 144,800 13,733 158,533 134,919 12,843 147,762 1,549,332 147,185 1,696,517 1,664,631 158,168 1,822,799 33) During 2020 the calculation of Director base fees and superannuation was adjusted. There was no change to total Director fees paid or Director base and committee fees during the year, however the portion of total fees attributed to superannuation reduced. 34) Payment for June was delayed, this amount was paid in July 2020. 60 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 8. Statutory Tables (continued) 8.3 Outstanding awards under new LTI plan The following table sets out the movements in the number of Performance Rights granted to executives, and any amounts vested or forfeit during the financial year. Opening Allocation balance at 1 Jul 2019 Date Performance Rights granted in 2020 Grant date in 2020 Vested Forfeited in 2020 balance on 30 June 2020 Fair value of Face value of Closing performance performance of rights at of rights at grant date (35) grant date (36) $ $ R Wheals 2020 P Fredricson 2020 R Gersbach 2020 D Rogers 2020 — — — — 217,872 13/12/2019 64,682 13/12/2019 65,975 13/12/2019 51,064 13/12/2019 — — — — — — — — 217,872 $1,463,010 $2,400,000 64,682 65,975 51,064 $434,340 $443,022 $712,500 $726,750 $342,895 $562,500 35) Calculated based on fair value of the individual vesting conditions being $4.47, $4.27, and $4.08 for the relative TSR and $9.57, $9.15, and $8.75 for the ROC hurdle vesting conditions for each of the vesting dates being August 2022, August 2023 and August 2024 respectively. This also represents the maximum value of the employee benefit expense as based on the grant date that would be recorded if all rights which remain outstanding at 30 June 2020 satisfied all vesting conditions. 36) Based on a VWAP of $11.0155. 8.4 Outstanding awards under legacy LTI plan The following table sets out the movements in the number of reference units and the number of reference units that have been allocated to executives but have not yet vested have been paid, and the years in which they will vest. Allocation date Opening balance at 1 Jul 2019 Units allocated in 2020 Cash settled reference units paid Closing balance at 30 Jun 2020 Units subject to allocation by the Board in Aug 2020 Reference units allocated that have not yet vested or been paid and the months in which they will vest Aug 20 Aug 21 Aug 22 Aug 23 R Wheals P Fredricson R Gersbach D Rogers 2016 2017 2018 2019 2020 Total 2016 2017 2018 2019 2020 Total 2016 2017 2018 2019 2020 Total 2020 Total Former KMP M McCormack 2016 2017 2018 2019 2020 Total 13,299 32,318 18,981 16,379 38,718 21,975 16,713 39,514 22,437 37,962 41,358 42,207 (13,299) (16,159) (6,327) (16,379) (19,359) (7,325) (16,713) (19,757) (7,479) 16,159 12,654 37,962 19,359 14,650 41,358 19,757 14,958 42,207 51,936 125,828 71,364 (51,936) (62,914) (23,788) 62,914 47,576 134,325 134,325 16,159 6,327 12,654 6,327 12,654 14,169 12,654 14,169 35,140 33,150 26,823 14,169 14,169 42,507 19,359 7,325 13,786 7,325 13,786 15,375 46,125 13,786 15,375 15,375 40,470 36,486 29,161 15,375 19,757 7,479 14,069 7,479 14,069 15,682 14,069 15,682 15,682 41,305 37,230 29,751 15,682 8,058 8,058 8,058 8,058 8,058 8,058 47,046 24,174 62,914 23,788 44,775 23,788 44,775 70,753 212,259 44,775 70,753 70,753 131,477 139,316 115,528 70,753 APA GROUP I ANNUAL REPORT 2020 61 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 8. Statutory Tables (continued) 8.5 Security holdings Year ended 30 June 2019 Opening Balance at 1 July 2019 Securities Acquired Securities Disposed Closing Balance at 30 June 2020 NEDS M Fraser S Crane J Fazzino (37) D Goodin S In’t Veld R Phillippo (38) P Wasow Executive KMP R Wheals P Fredricson R Gersbach D Rogers 102,942 130,000 30,751 23,000 25,000 — 21,000 38,883 48,500 21,691 3,794 — — — 1,179 — — 5,000 7,505 1,000 23,000 — — — — — — — — — — — — 102,942 130,000 30,751 24,179 25,000 — 26,000 46,388 49,500 44,691 3,794 37) Note that a recording error in holding for FY2019 has been corrected and shown as above. 38) Appointed 1 June 2020. 62 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 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 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) Note 2020 $000 2019 $000 4 4 5 5 5 5 6 7 2,559,944 2,428,949 30,677 23,222 2,590,621 2,452,171 (218,010) (651,566) (461,155) (499,998) (249,690) (5,186) 505,016 (187,910) 317,106 (213,522) (611,358) (421,198) (500,020) (235,034) (6,060) 464,979 (176,966) 288,013 (28,103) 8,431 (19,672) (11,418) 3,425 (7,993) 80,184 74,347 (206,864) (448,940) (5,847) 39,758 (92,769) (112,441) 204,665 264,085 53,021 317,106 151,644 53,021 204,665 2020 26.9 (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 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. APA GROUP I ANNUAL REPORT 2020 63 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 Lease liabilities Borrowings Other financial liabilities Provisions Unearned revenue Current liabilities Non-current liabilities Trade and other payables Lease liabilities 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 17 18 20 14 10 17 18 20 6 14 2020 $000 2019 $000 1,172,771 264,137 32,748 34,181 22,101 1,525,938 11,639 581,027 226,380 9,821,955 1,183,604 2,627,279 29,343 354,947 249,962 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 14,481,227 14,716,424 16,007,165 15,433,927 308,764 302,082 13,544 310,613 186,347 89,636 10,753 919,657 4,826 56,333 — 444,502 152,782 94,841 12,320 1,006,527 3,230 — 10,607,382 9,865,813 427,638 594,832 115,905 56,737 264,703 544,013 89,663 60,581 11,863,653 10,828,003 12,783,310 11,834,530 3,223,855 3,599,397 21 2,902,123 3,103,806 (691,465) 100,666 (599,347) 100,663 2,311,324 2,605,122 887,845 24,686 912,531 964,219 30,056 994,275 3,223,855 3,599,397 Equity attributable to unitholders of APT Investment Trust 22 Total equity The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 64 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 s u r T t n e m t s e v n I T P A t s u r T e n i l i e p P n a i l a r t s u A - n o n r e h t O T P A s r e n w o o t l e b a t u b i r t t A e r a h S d e s a B t e s s 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 d e u s s I t s u r T 0 0 0 $ 0 0 0 $ 0 0 0 $ i s g n n r a e l a t i p a C e h t f o t n e r a p 0 0 0 $ 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 s t n e m y a P n o i t a u a v e R l d e u s s I 0 0 0 $ e v r e s e R 0 0 0 $ e v r e s e R 0 0 0 $ l a t i p a C ) 4 6 1 , 2 ( , 7 2 8 6 2 1 , 4 , 3 6 6 4 2 1 , 4 , 3 1 0 8 8 2 , ) 1 5 5 4 9 3 ( — 6 7 3 8 1 1 , 8 3 8 , 1 1 3 5 — 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 — — — — 1 ) 7 5 2 ( 8 5 , 7 9 3 9 9 5 3 , , 7 9 3 9 9 5 3 , ) 0 1 6 8 ( , , 7 8 7 0 9 5 3 , 6 0 1 , 7 1 3 , ) 1 3 6 0 6 1 ( 0 9 1 , 8 4 , 5 6 6 4 0 2 ) 9 4 2 2 7 5 ( , 2 5 6 , 5 5 8 3 2 2 3 , — — — — — — — — — — — — — — — — — — — — — — — — — — ) 5 0 9 6 3 5 ( , ) 3 5 ( ) 9 4 ( 1 — 1 — — — — ) 1 ( — — — — — — — — — — — — — — 4 — 4 — — — — — — — — — — — — — — — — — — ) 4 ( ) 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 ( , — ) 3 6 ( — — — ) 3 6 ( ) 4 9 1 ( 8 5 — — — — — — — — — ) 4 6 1 , 2 ( ) 4 6 1 , 2 ( — , 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 , , 2 1 4 5 0 1 ) 4 3 8 9 3 3 ( , — — — — 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 — — , 6 0 2 0 6 0 3 , 8 4 2 3 0 1 , ) 4 3 8 9 3 3 ( , , 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 ( — — — — — — — — — — — 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 — — ) 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 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 — — — — — — — — — — — — — 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 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 e m o c n i i e v s n e h e r p m o c r e h t O r a e y e h t r o f t i f o r P 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 , 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 y u J 1 l t a e c n a a B l — — — ) 0 1 6 8 ( , ) 0 1 6 8 ( , — — — — ) b ( 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 , 5 7 2 4 9 9 6 5 0 0 3 , , 9 1 2 4 6 9 , 2 1 5 6 9 5 2 , 3 5 0 2 9 , , ) 6 1 0 8 0 6 ( — 9 6 6 8 , , 6 0 8 3 0 1 , 3 9 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 ) 5 6 7 4 3 1 ( , ) 1 9 3 8 5 ( , ) 4 7 3 6 7 ( , ) 4 8 4 7 3 4 ( , ) 1 0 8 5 3 2 ( , — — — — — 1 2 0 3 5 , 1 2 0 3 5 , 1 2 0 3 5 , 1 2 0 3 5 , — — — — 5 8 0 4 6 2 , 5 8 0 4 6 2 , — , ) 1 3 6 0 6 1 ( ) 3 0 1 , 8 2 ( ) 8 2 5 2 3 1 ( , 0 9 1 , 8 4 2 3 4 8 , 8 5 7 9 3 , 4 4 6 , 1 5 1 , 4 1 4 4 4 2 ) 0 7 7 2 9 ( , — — — — — — — — 2 5 6 — — 2 5 6 — — — — — — — — — — 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 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 e m o c n i i e v s n e h e r p m o c r e h t O r a e y e h t r o f t i f o r P ) 3 8 6 , 1 0 2 ( i s n o i t u b i r t s d f o t n e m y a P — s t n e m y a p d e s a b y t i r u c e s d e l t t e s y t i u q E ) x a t y n a f o t e n ( , 1 3 5 2 1 9 6 8 6 4 2 , 5 4 8 7 8 8 , 4 2 3 , 1 1 3 2 , , 6 6 6 0 0 1 , ) 6 8 7 0 0 7 ( 2 5 6 9 6 6 8 , 3 2 1 , 2 0 9 2 , 0 2 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 l y u J 1 i t a s a s g n n r a e d e n a t e r i o t n o 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 . d r a d n a t s e h t f o n o i t a c i l p p a 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 l a i t i n i l n o t c e f f e e v i t a u m u c e h t g n e b i , 9 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 6 8 $ 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 e s a e L 6 1 B S A A d e t p o d a s a h p u o r G A P A ) b . 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 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 APA GROUP I ANNUAL REPORT 2020 65 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 Repayment/(advancement) of loans with related parties Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayments of borrowings Payments of security issue costs Payments of lease principal 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 Net cash provided by/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Unrealised exchange gains/(losses) on cash held Note 2020 $000 2019 $000 2,791,905 2,666,095 (1,212,764) (1,142,419) 62,279 1,272 7,941 (468,070) (86,620) 22,450 1,469 8,825 (470,509) (73,784) 1,095,943 1,012,127 (427,065) (581,384) 485 (253) 652 (318) 122,284 (122,002) (304,549) (703,052) 1,987,812 1,669,706 (1,368,836) (1,175,854) — (13,482) (6,870) 8 (437,484) (134,765) — 26,383 817,776 354,947 48 (864) — (11,955) 1,157 (401,716) (135,136) (53) (54,715) 254,360 100,643 (56) Cash and cash equivalents at end of financial year 18 1,172,771 354,947 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 66 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 Security based payments Changes in assets and liabilities: Trade and other receivables Inventories Other assets Trade and other payables Provisions Other liabilities Income tax balances 2020 $000 317,106 (464) (30,677) 62,279 651,566 14,823 11,007 6,885 652 (19,283) (2,777) (5,997) 5,074 (10,954) (4,851) 101,554 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 Net cash provided by operating activities 1,095,943 1,012,127 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 I ANNUAL REPORT 2020 67 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 88 89 100 103 103 104 106 108 108 109 109 110 30. Adoption of new and revised Accounting Standards 111 31. Events occurring after reporting date 113 68 69 70 72 74 75 77 78 79 79 80 81 82 83 84 84 86 68 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 was authorised for issue in accordance with a resolution of the directors on 26 August 2020. This general purpose financial report has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The financial report has been prepared on the basis of historical cost, except for the revaluation of financial instruments. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) in accordance with ASIC Corporations Instrument 2016/191, unless otherwise stated. Foreign currency transactions Both the functional and presentation currency of APA Group and APT is Australian dollars (A$). All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at that date and resulting exchange differences are recognised in profit or loss in the period in which they arise, unless they qualify for hedge accounting. 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. COVID-19 As a supplier of an essential service of gas transportation and energy generation, APA Group has the benefit of stable operating cash flows. There have been no material impacts on APA Group’s ability to safely and reliably operate its assets and deliver services to its customers as a result of the COVID-19 pandemic. As at 30 June 2020, APA Group had $2,472.8 million in cash and committed un-drawn bank facilities available (2019: $1,904.9 million) to assist in the ongoing funding of the business. APA continues to fund its growth with appropriate levels of equity, cash retained in the business, and debt in order to maintain strong Baa2/BBB credit ratings. The Directors continually monitor APA Group's working capital position, including forecast working capital requirements and have ensured that there are appropriate funding strategies and debt facilities in place to accommodate the funding of capital expenditure and debt repayments as and when they fall due. APA GROUP I ANNUAL REPORT 2020 69 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 Segment revenue (a) Energy Asset Infrastructure Management $000 $000 Energy Investments $000 Other $000 Consolidated $000 Revenue from contracts with customers 1,973,722 112,367 — Equity accounted net profits Pass-through revenue Other income Finance lease and investment interest income — 49,386 3,594 1,176 411,769 205 — — 30,677 — — 5,064 35,741 2,027,878 524,341 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 1,628,631 63,343 — — 1,176 — — — — 1,629,807 (634,808) 63,343 (16,758) 30,677 5,064 — (74,972) 35,741 (74,972) — — — — — — — — — — — 2,086,089 30,677 461,155 3,799 6,240 2,587,960 2,661 2,590,621 1,691,974 30,677 6,240 (74,972) 1,653,919 (651,566) Earnings before interest and tax (“EBIT“) 994,999 46,585 35,741 (74,972) 1,002,353 Net interest cost (b) Profit before tax Income tax expense Profit for the year (497,337) 505,016 (187,910) 317,106 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. 70 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 3. Segment information (continued) Reportable segments (continued) 2020 Segment assets and liabilities Segment assets Energy Asset Infrastructure Management $000 $000 Energy Investments Consolidated $000 $000 13,795,348 198,893 10,685 14,004,926 Carrying value of investments using the equity method — — 226,380 Revenue from contracts with customers 1,899,071 94,398 Unallocated assets (a) Total assets Segment liabilities Unallocated liabilities (b) Total liabilities 2019 Segment revenue (c) Equity accounted net profits Pass-through revenue Other income Finance lease and investment interest income Total segment revenue Other interest income Consolidated revenue Segment result Earnings before interest, tax, depreciation and amortisation (“EBITDA“) Share of net profits of joint ventures and associates using the equity method Finance lease and investment interest income Corporate costs Total EBITDA Depreciation and amortisation Earnings before interest and tax (“EBIT“) Net interest cost (d) Profit before tax Income tax expense Profit for the year 226,380 1,775,859 16,007,165 412,898 110,022 — 522,920 Energy Asset Infrastructure Management $000 $000 12,260,390 12,783,310 Energy Investments $000 Other $000 Consolidated $000 — 27,881 4,775 1,305 — 393,317 391 — 1,933,032 488,106 1,571,139 52,954 — — 1,305 — 1,572,444 (600,248) 972,196 — — — 52,954 (11,110) 41,844 — 23,222 — — 5,210 28,432 23,222 5,210 — — — — — — — — — 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 — (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 a) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, forward 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 FECs. c) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial. d) 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 I ANNUAL REPORT 2020 71 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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, FECs and equity forwards. b) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and FECs. 4. Revenue Disaggregation of revenue Revenue is disaggregated below by state, business unit and geography. 2020 Energy Infrastructure Queensland New South Wales Victoria South Australia Western Australia Northern Territory Energy Infrastructure Transmission $000 Power Generation $000 Total $000 949,385 183,251 145,664 3,143 323,176 31,649 255,320 1,204,705 — — — 82,134 — 183,251 145,664 3,143 405,310 31,649 Energy Infrastructure revenue from contracts with customers 1,636,268 337,454 1,973,722 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 112,367 461,155 3,799 2,551,043 2,661 5,064 1,176 8,901 2,559,944 30,677 2,590,621 72 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 4. Revenue (continued) Disaggregation of revenue (continued) 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 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 I ANNUAL REPORT 2020 73 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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. Included in the unearned revenue are customer upfront contributions on contracts with customers received in advance and government grants received. During the year, the Group recognised $13.2 million (2019: $19.5 million) in revenue from contracts with customers from unearned revenue at the beginning of the financial year. 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 2020, future contracted Energy Infrastructure revenues extending through to 2049 are approximately $19.7 billion, of which $1.7 billion is expected to be recognised in 2021. 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 2020 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 contract revenues described above represent only part of APA Group's forecast revenues for FY2021 and beyond. Information about major customers Included in revenues from contracts with customers arising from Energy Infrastructure of $1,973.7 million (2019: $1,899.1 million) are revenues of approximately $718.8 million (2019: $708.6 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 (Gain)/Loss on derivatives (b) Unwinding of discount on non-current liabilities Unwinding of discount on deferred revenue balances Interest incurred on lease liabilities Finance costs 2020 $000 468,831 182,735 651,566 49,386 411,769 461,155 2019 $000 428,370 182,988 611,358 27,881 393,317 421,198 498,940 507,246 7,366 7,008 513,314 (23,208) 490,106 (2,693) 7,322 2,625 2,638 7,631 7,748 522,625 (31,468) 491,157 47 6,197 2,619 — 499,998 500,020 a) The average interest rate applying to drawn debt is 5.33% p.a. (2019: 5.53% p.a.) excluding amortisation of borrowing costs and other finance costs. b) Represents unrealised gains and losses on the mark-to-market valuation of derivatives, including contract for difference arrangements. 74 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 5. Expenses (continued) Defined contribution plans Defined benefit plans (Note 16) Post-employment benefits Termination benefits Cash settled security-based payments (a) Equity settled security-based payments (a) Other employee benefits Employee benefit expense (b) 2020 $000 16,159 2,348 18,507 1,497 16,442 992 212,252 249,690 2019 $000 14,264 1,944 16,208 3,823 25,555 — 189,448 235,034 a) APA Group provides benefits to certain employees in the form of 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. For equity settled security-based payments, a reserve is recognised equal to the portion of services received based on the fair value of the equity instrument at grant date. b) Employee benefit expense of $70.0 million (2019: $64.5 million) is recharged as pass-through revenue and presented as part of other operating costs – pass-through. 6. Income tax 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 2020 $000 (85,236) 25 2019 $000 (72,138) 104 Deferred tax expense relating to the origination and reversal of temporary differences (102,699) (104,932) 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 (187,910) (176,966) 505,016 (151,505) 15,906 (59,816) 114 464,979 (139,494) 19,521 (58,403) 84 (195,301) (178,292) 5,310 1,038 25 1,018 105 853 104 264 (187,910) (176,966) 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 $187.9 million (2019: $177.0 million). An income tax provision of $30.9 million (2019: $32.0 million) has been recognised after instalments made during the year and partial utilisation of available transferred tax losses (refer to Note 10). APA GROUP I ANNUAL REPORT 2020 75 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 6. Income tax (continued) Deferred tax balances Deferred tax (liabilities)/assets arise from the following: 2020 Gross deferred tax liabilities Property, plant and equipment (a) Deferred expenses Other Gross deferred tax assets Provisions (a) 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 (989,655) (55,516) (299) (75,425) (18,651) (1,083,731) 1,805 168 — — (53,711) (131) (1,045,470) (73,452) (18,651) (1,137,573) 48,640 254,217 1,562 14,531 4,434 2,939 175,134 501,457 (4,475) (800) (517) (862) 2,824 185 (25,602) (29,247) Net deferred tax liability (544,013) (102,699) 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 (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) Net deferred tax liability (558,442) (104,932) a) Amounts charged to equity relate to the deferred tax on the transition adjustment from the adoption of AASB 16 Leases. 22,343 38,933 — — 824 8,431 — 70,531 51,880 — — — — — 112,124 58 927 2,827 3,425 — 119,361 119,361 66,508 292,350 1,045 13,669 8,082 11,555 149,532 542,741 (594,832) (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) 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. 76 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 6. Income tax (continued) Tax consolidation APT and its wholly-owned Australian resident entities formed a tax-consolidated group with effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is APT. The members of the tax-consolidated group are identified at Note 24. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial reports of the members of the tax-consolidated group using the 'separate taxpayer within group' approach, by reference to the carrying amounts in the separate financial reports of each entity and the tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the wholly-owned entities are assumed by the head entity in the tax-consolidated group and are recognised as amounts payable/(receivable) to/(from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts. The head entity recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the assets can be utilised. Nature of tax funding arrangement and tax sharing agreement Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, each of the entities in the tax-consolidated group have agreed to pay a tax equivalent payment to or from the head entity based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the tax-consolidated group. The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member's liability for the tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the tax funding arrangement. 7. Earnings per security Basic and diluted earnings per unit attributable to the parent Basic and diluted earnings per unit attributable to the non-controlling interest Basic and diluted earnings per stapled security 2020 cents 22.4 4.5 26.9 2019 cents 18.9 5.5 24.4 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 2020 $000 264,085 53,021 2019 $000 222,943 65,070 317,106 288,013 2020 No. of securities 000 2019 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 1,179,894 APA GROUP I ANNUAL REPORT 2020 77 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 8. Distributions Recognised amounts Final FY2019 distribution paid on 11 September 2019 (2019: Final FY2018 distribution paid on 12 September 2018) Profit distribution – APT (a) Capital distribution – APT Profit distribution – APTIT (b) Capital distribution – APTIT Interim FY2020 distribution paid on 11 March 2020 (2019: Interim FY2019 distribution paid on 13 March 2019) Profit distribution – APT (c) Capital distribution – APT Profit distribution – APTIT (b) Capital distribution – APTIT Total distributions recognised Profit distributions Capital distributions Unrecognised amounts Final FY2020 distribution payable on 16 September 2020 (d) (2019: Final FY2019 distribution paid on 11 September 2019) Profit distribution – APT (e) Capital distribution – APT Profit distribution – APTIT (b) Capital distribution – APTIT 2020 cents per security 2020 Total $000 2019 cents per security 2019 Total $000 8.53 10.44 2.55 3.98 25.50 11.45 6.66 2.40 2.49 23.00 24.93 23.57 48.50 8.53 11.74 2.09 4.64 27.00 100,663 123,153 30,056 47,002 300,874 135,138 78,530 28,335 29,372 271,375 294,192 278,057 572,249 100,666 138,528 24,686 54,692 318,572 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 21.50 253,677 24.30 21.20 45.50 8.53 10.44 2.55 3.98 25.50 286,777 250,075 536,852 100,663 123,153 30,056 47,002 300,874 a) Profit distributions were fully franked. Resulting in franking credits of 3.66 cents per security (2019: fully franked, franking credits of 3.83 cents per security). b) Profit distributions are unfranked (2019: unfranked). c) Interim profit distributions were 8.52 cents per security franked and 2.93 cents per security unfranked. Resulting in franking credits of 3.65 cents per security (2019: 7.47 cents per security franked and 2.03 cents per security unfranked, franking credits of 3.20 cents per security). d) Record date 30 June 2020. e) Final profit distributions are to be fully franked. Resulting in franking credits of 3.66 cents per security (2019: fully franked, franking credits of 3.66 cents per security). 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 2020 $000 (177) 30,861 30,684 2019 $000 (5,943) 32,005 26,062 The adjusted franking account balance will be reduced by $43.1 million (FY2019: $43.1 million) following the payment of the final distribution payable on 16 September 2020 (FY2019: 11 September 2019). On 31 July 2020, APA Group made a franking deficit tax payment of $0.2 million (FY2019: $5.9 million). This represents a prepayment of the final income tax payment due for FY2020. 78 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 $000 31,313 218,013 (700) 248,626 12,985 1,166 1,340 20 2019 $000 26,080 198,816 (10) 224,886 23,373 1,246 378 79 264,137 249,962 11,639 — 11,639 12,794 117,337 130,131 At 30 June 2020, APA Group had no loan receivable from SEA Gas (2019: $122.3 million). 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. The impact of COVID-19 has been considered in assessing loss allowance. No material impact has been identified to the date of the issuance of these financial statements. 10. Payables Trade payables (a) Income tax payable Other payables Current Other payables Non-current 2020 $000 35,561 30,861 242,342 308,764 4,826 4,826 2019 $000 39,934 32,005 230,143 302,082 3,230 3,230 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. APA GROUP I ANNUAL REPORT 2020 79 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 11. Property, plant and equipment Freehold land and buildings – at cost $000 Leasehold improve- ments – at cost $000 Plant and equipment – at cost $000 Work in progress – at cost $000 ROU land and buildings – at cost (a) $000 ROU plant and equipment – at cost (a) $000 Total $000 Gross carrying amount Balance at 1 July 2018 248,717 10,660 10,651,086 856,378 Additions Disposals Transfers — (1) 12,988 — — 127 29,345 503,500 (950) — 812,782 (825,897) Balance at 30 June 2019 261,704 10,787 11,492,263 533,981 Balance at 1 July 2019 (a) 261,704 10,787 11,492,263 533,981 Additions Disposals Transfers — — 5,514 — — — 32,262 393,660 (1,511) — 210,451 (215,965) — — — — — — — — — — 11,766,841 532,845 (951) — 12,298,735 54,646 3,437 (102) — 7,619 12,361,000 3,400 432,759 (246) (1,859) — — Balance at 30 June 2020 267,218 10,787 11,733,465 711,676 57,981 10,773 12,791,900 Accumulated depreciation Balance at 1 July 2018 (46,345) (3,952) (2,024,878) Disposals — — 882 Depreciation expense (Note 5) (7,544) (967) (419,859) Balance at 30 June 2019 (53,889) (4,919) (2,443,855) Balance at 1 July 2019 (a) (53,889) (4,919) (2,443,855) Disposals — — 1,490 Depreciation expense (Note 5) (7,950) (800) (447,519) Amounts included in the cost of other assets — — — Balance at 30 June 2020 (61,839) (5,719) (2,889,884) — — — — — — — — — — — — — — 51 — — — — — 66 (2,075,175) 882 (428,370) (2,502,663) (2,502,663) 1,607 (9,108) (3,454) (468,831) — (58) (58) (9,057) (3,446) (2,969,945) Net book value As at 30 June 2019 As at 30 June 2020 207,815 205,379 5,868 9,048,408 533,981 — — 9,796,072 5,068 8,843,581 711,676 48,924 7,327 9,821,955 a) APA Group adopted AASB 16 ‘Leases’ on 1 July 2019 and recognised right of use (ROU) assets using the modified retrospective approach as such there is no restatement of the comparative information. 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. The right of use (“ROU”) asset is initially measured at cost comprising the initial measurement of the lease liability (as outlined in Note 17) adjusted for any lease payments made before the commencement date and reduced by any lease incentives received plus initial direct costs incurred in obtaining the lease. Any make good requirements are recognised and measured under AASB 137 Provisions, Contingent Liabilities and Contingent Assets and to the extent that the costs relate to a ROU asset these are included in the related ROU asset. A ROU asset is subsequently measured using the cost model less any accumulated depreciation and any accumulated impairment losses, and adjusted for any remeasurement of the lease liability. The ROU asset is depreciated over the term of the lease. Subsequently, APA Group applies AASB 136 Impairment of Assets to determine whether a ROU asset is impaired and accounts for any impairment as described in Note 13 Impairment of non-financial assets of the annual report for the financial year end 30 June 2020. 80 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 11. Property, plant and equipment (continued) Where the ROU is adjusted due to changes in the lease liability, the depreciation for the ROU asset is adjusted on a prospective basis. Depreciation is provided on property, plant and equipment excluding land. Depreciation is calculated on a straight-line basis depending on the nature of the asset so as to write off the net cost of each asset over its estimated useful life. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated useful lives and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes recognised on a prospective basis. Where the ROU asset is adjusted due to changes in the lease liability, the depreciation for the ROU asset is adjusted on a prospective basis. The depreciation charge for each period is recognised in profit or loss unless it is included in the cost of another asset. 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 — power generation facilities — other plant and equipment 30 – 50 years; 10 – 50 years; 10 – 80 years; 20 – 30 years; 3 – 25 years; 3 – 20 years; — ROU land and buildings 1 – 40 years; and — ROU property, plant and equipment 1 – 4 years. 12. Goodwill and intangibles Goodwill Balance at beginning of financial year Balance at end of financial year 2020 $000 2019 $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 60 receipt points and over 170 delivery points on the east coast of Australia. The East Coast Grid is categorised as an individual cash-generating unit. Goodwill acquired in a business combination is initially measured at cost and subsequently at cost less accumulated impairment. APA GROUP I ANNUAL REPORT 2020 81 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 12. Goodwill and intangibles (continued) Allocation of goodwill to cash-generating units (continued) The carrying amount of goodwill allocated to cash-generating units that are significant individually or in aggregate are as follows: Asset Management business Energy Infrastructure East Coast Grid Diamantina Power Station Other energy infrastructure (a) a) Primarily represents goodwill relating to the Pilbara Pipeline System ($32.6m) and the Goldfields Gas Pipeline ($18.5m). Contract and other intangibles Gross carrying amount Balance at beginning of financial year 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 2020 $000 21,456 2019 $000 21,456 1,060,681 1,060,681 43,104 58,363 43,104 58,363 1,183,604 1,183,604 3,591,278 3,590,960 253 318 3,591,531 3,591,278 (781,517) (182,735) (598,529) (182,988) (964,252) (781,517) 2,627,279 2,809,761 APA Group holds various third party operating and maintenance contracts. The combined gross carrying amount of $3,591.5 million amortises over terms ranging from one to 15 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 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 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. 82 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 13. Impairment of non-financial assets (continued) Critical accounting judgements and key sources of estimation uncertainty – impairment of assets The key estimates and assumptions used in the assessment of impairment include but are not limited to: asset capacity; asset lives; forecast operating costs and margins; gas field reserve estimates; the effect of inflation; discount rates; customer contract terms and renewals; residual value; and asset construction costs. Where the key assumptions for the assessment of new assets such as expected construction costs, expected time to commissioning, expected revenues, expected operating and capital costs at the time of investment differs from the final outcomes, significant variances to the key assumptions may cause triggers for impairment. These assumptions have been determined with reference to historic information, current performance and expected changes taking into account external information such as market inputs on discount rates, the effects of inflation, climate change based on TCFD scenario testing to 2030, the outlook for global and regional gas market supply-and-demand conditions, and internal information such as contract renewals, and forecast input costs. Such estimates may change as new information becomes available. 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. (2019: 7.75% p.a.) for Energy Infrastructure assets and 7.75% p.a. (2019: 7.75% p.a.) for Asset Management. 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 0.3% p.a. (2019: 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 Group has assumed no capacity expansion beyond installed and committed levels; utilisation of capacity is based on existing contracts and renewals, government policy settings and APA Group’s 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. Orbost Gas Processing Plant As part of the April 2020 market update, APA Group flagged that it was yet to complete the performance tests required for the Orbost Gas Processing Plant to meet commercial operations under the agreement with Cooper Energy. APA Group continues to work with Cooper Energy in reaching the plant nameplate capacity of 68 TJ/day. The recoverable amount of the Orbost Gas Processing Plant has been assessed for impairment using a forward-looking discounted cash flow analysis, based on operating at levels up to nameplate capacity over its 25 year technical life from completion of commissioning. The key estimates and assumptions used in the assessment of impairment include: a pre-tax discount rate of 7.75%; plant nameplate processing capacity 68 TJ/day; completed plant construction costs; future re-contracting revenues based on current option agreements; gas field reserve estimates; inflation; forecast operating and capital costs. As at 30 June 2020 the estimated recoverable value of the plant is in excess of its carrying value of $443.9 million. The estimated recoverable value of the plant comprises of the value attributed to the Cooper Energy Sole gas processing agreements and in the order of $90 million of value attributable to future, as yet, uncontracted revenues. The assessment of the recoverable amount represents management's best estimates. Management will continue to assess the progress of the plant against these estimates. Sensitivity analysis of these estimates, holding all other assumptions constant, indicate that a future 15% reduction in the plant’s nameplate capacity could result in a future impairment charge in the order of $65 million; or a future 1% increase to the discount rate could result in a future impairment charge in the order of $27 million. 14. Provisions Employee benefits Other Current Employee benefits Other Non-current 2020 $000 77,878 11,758 89,636 60,082 55,823 115,905 2019 $000 86,625 8,216 94,841 33,672 55,991 89,663 APA GROUP I ANNUAL REPORT 2020 83 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 14. Provisions (continued) 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 2020 $000 21,204 7,132 49,009 533 77,878 8,414 41,052 10,616 60,082 2019 $000 33,126 7,042 46,137 320 86,625 9,695 13,852 10,125 33,672 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 2020 $000 20,607 6,010 2,534 192 29,343 2019 $000 20,607 6,010 4,057 192 30,866 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 2020. The present value of the defined benefit obligations, and the related current service cost and past service cost, were measured using the projected unit credit method. The following sets out details in respect of the defined benefit plans only: Amounts recognised in the statement of profit or loss and other comprehensive income Current service cost Net interest expense/(income) Components of defined benefit costs recognised in profit or loss (Note 5) 84 APA GROUP I ANNUAL REPORT 2020 2020 $000 2,054 294 2,348 2019 $000 1,955 (11) 1,944 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 16. Employee superannuation plans (continued) 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 2020 $000 2019 $000 124,358 (162,876) 2,534 (41,052) 136,487 (146,282) 4,057 (13,852) 146,282 133,959 2,054 4,329 669 21,914 (11,905) (467) 162,876 1,955 5,312 744 15,837 (11,044) (481) 146,282 136,487 135,620 4,035 (6,189) 1,728 669 (11,905) (467) 124,358 5,323 4,420 1,905 744 (11,044) (481) 136,487 Defined contribution plans Contributions to defined contribution plans are expensed when incurred. Defined benefit plans Actuarial gains and losses and the return on plan assets (excluding interest) are recognised immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement, comprising of actuarial gains and losses and the return on plan assets (excluding interest), is recognised in other comprehensive income and immediately reflected in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. The defined benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus in APA Group's defined benefit plans. Any asset resulting from this calculation is limited to the present value of economic benefits available in the form of refunds and reductions in future contributions to the plan. Key actuarial assumptions used in the determination of the defined benefit obligation is a discount rate of 3.0% gross of tax (2019: 3.1%), based on the corporate bond yield curve published by Milliman, an expected salary increase rate of 2.7% (2019: 3.0%), and pension indexation rate of 2.0% (2019 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 $9,627,000 (increase by $10,818,000). — If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $1,875,000 (decrease by $1,766,000). — If the expected pension indexation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by $8,586,000 (decrease by $7,776,000). 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 $3.4 million in contributions to the defined benefit plans during the year ending 30 June 2021. APA GROUP I ANNUAL REPORT 2020 85 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 17. Leases APA Group as a lessee The APA Group lease obligations are primarily related to commercial office leases and motor vehicles. Lease Liability Not longer than 1 year Longer than 1 year but not longer than 5 years Longer than 5 years Minimum future lease payments Less: Future finance cost Present value of the future lease payments Current lease liability Non-current lease liability 2020 $000 15,808 42,671 22,475 80,954 11,077 69,877 13,544 56,333 69,877 APA Group adopted AASB 16 ‘Leases’ using the modified retrospective approach as such there is no restatement of the comparative information. APA Group has no material short-term leases, lease for low-value assets or variable lease payments. At inception of a contract, APA Group assesses whether a lease has been entered into if: — The contract involves the use of an identified asset – the asset may be explicitly or implicitly specified in the contract. Capacity portions of larger assets would be considered an identified asset if the portion is physically distinct or if the portion represents substantially all of the capacity of the asset. An asset is not considered an identified asset if the supplier has the substantive right to substitute the asset throughout the period of use; — APA Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and — APA Group has the right to direct the use of the asset throughout the period of use. APA Group considers itself to have the right to direct the use of the asset only if either: i) APA Group has the right to direct how and for what purpose the identified asset is used throughout the period of use; or ii) The relevant decisions about how and for what purposes the asset is used are predetermined and APA Group has the right to operate the asset, or APA Group designed the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. Where APA Group has determined that a lease exists, a right-of-use asset (disclosed in Note 11) and a corresponding lease liability is recognised at the commencement date of the lease for all leases other than short-term or low-value asset leases. The lease liability is initially measured at the present value of future lease payments at the commencement date, comprising the following: — fixed payments, including in-substance fixed payments; — variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date (e.g. payments which vary due to changes in CPI, or commodity prices); — amounts expected to be payable by the lessee under residual value guarantees, purchase options and termination penalties (where relevant); and — Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). To calculate the present value, the future lease payments are discounted using the interest rate implicit in the lease (“IRIL”), if the rate is readily determinable. If the IRIL cannot be readily determined, the incremental borrowing rate (“IBR”) at the commencement date is used. The IBR is calculated based on the prevailing swap rate for a tenor that closely aligns with the term of the lease and then adjusted for APA Group credit spreads in a currency that matches the currency of the liability. Subsequently, the lease liability is measured in a manner similar to other financial liabilities, at amortised cost using the effective interest rate method. The liability is remeasured to reflect any reassessment of lease payments or lease modifications, or to reflect revised in-substance fixed lease payments. Variable payments other than those included in the measurement of the lease liability above (i.e. those not based on an index or rate) are recognised in the statement of profit or loss in the period in which the event or condition that triggers those payments occur. Short term leases (i.e. where the lease term is less than 12 months) and low-value asset leases are recognised as an expense in the statement of profit or loss on a straight-line basis. Total cash outflow for leases amounted to $16.1 million, excluding payments for short term leases, low-value asset leases and variable payments leases. 86 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 17. Leases (continued) APA Group as a lessor 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) 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) 2020 $000 2,232 7,542 9,410 19,184 (6,379) 12,805 1,166 11,639 12,805 2019 $000 2,411 8,063 11,121 21,595 (7,555) 14,040 1,246 12,794 14,040 a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual. APA Group does not have any operating leases where it is the 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. 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 Baa2/BBB 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 Group. 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. This funding plus operating cash flows are used to maintain and expand APA Group's assets, make distributions to securityholders, repay maturing debt and meet anticipated funding requirements. 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 2020 and 2019 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 minimum threshold levels that Moody's and Standard & Poor's (”S&P”) consider appropriate for APA Group's Baa2/BBB credit ratings. 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). The ability to service debt and therefore 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 I ANNUAL REPORT 2020 87 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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) Other financial liabilities Less: unamortised borrowing costs Non-current borrowings Total borrowings Current lease liabilities Non-current lease liabilities Total lease liabilities Net debt 2020 $000 502,765 670,006 1,172,771 (299,954) (10,659) 2019 $000 354,703 244 354,947 (433,550) (10,952) (310,613) (444,502) (10,591,648) (9,841,174) (55,585) 39,851 (65,379) 40,740 (10,607,382) (9,865,813) (10,917,995) (10,310,315) (13,544) (56,333) (69,877) — — — (9,815,101) (9,955,368) a) Represents USD denominated private placement notes of US$124 million, JPY MTN of ¥10,000 million, GBP MTN of £1,350 million, EUR MTN of €1,950 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 (2019: Includes USD denominated private placement notes of US$75 million and CAD MTN of C$300 million). Refer to Note 19 for details of interest rates and maturity profiles. Reconciliation of net debt Cash and cash equivalents $000 Borrowings Borrowings due after 1 year $000 due within 1 year $000 Net debt as at 1 July 2018 Cash movements 100,643 254,360 (329,219) (9,321,377) 325,854 (819,706) Foreign exchange movements due to fair value changes (56) (41,699) (122,836) Transfer from due after 1 year to due within 1 year Amortisation of deferred borrowing costs — — (399,438) 399,438 — (1,332) Net debt as at 30 June 2019 354,947 (444,502) (9,865,813) Lease Liabilities $000 — — — — — — Net debt $000 (9,549,953) (239,492) (164,591) — (1,332) (9,955,368) Transition at adoption of AASB 16 (a) — — — (74,565) (74,565) Net debt as at 1 July 2019 354,947 (444,502) (9,865,813) (74,565) (10,029,933) Cash movements Non cash changes – leases Foreign exchange movements due to fair value changes Transfer from due after 1 year to due within 1 year Amortisation of deferred borrowing costs 817,776 398,836 (1,017,812) — 48 — — — — 45,666 (33,527) (310,613) 310,659 — (889) 13,482 (8,794) — — — 212,282 (8,794) 12,187 46 (889) Net debt as at 30 June 2020 1,172,771 (310,613) (10,607,382) (69,877) (9,815,101) a) APA Group adopted AASB 16 ‘Leases’ using the modified retrospective approach as such there is no restatement of the comparative information. 88 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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) 2020 $000 2019 $000 10,891,602 1,300,000 10,274,724 1,550,000 12,191,602 11,824,724 10,891,602 10,274,724 — — 10,891,602 10,274,724 — — 1,300,000 1,550,000 1,300,000 1,550,000 a) Represents USD denominated private placement notes of US$124 million, JPY MTN of ¥10,000 million, GBP MTN of £1,350 million, EUR MTN of €1,950 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 (2019: Includes USD denominated private placement notes of US$75 million and CAD MTN of C$300 million). Refer to Note 19 for details of interest rates and maturity profiles. b) Refer to Note 19 for details of interest rates and maturity profiles. 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 approved by the Audit and Risk Committee (“ARMC“) and reviewed by the Board. 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. Risk Sources Financial exposure Risk management framework Market Commercial transactions in foreign currency and funding activities Credit Cash, receivables, interest bearing liabilities and hedging Refer to market risk section. The carrying amount of financial assets recorded in the financial statements, net of any collateral held or bank guarantees held by the Group, represents APA Group's maximum exposure to credit risk in relation to those assets. Liquidity Ongoing business operations, financial market disruptions and new investment opportunities A detailed table shows APA Group's remaining contractual maturities for its non-derivative financial liabilities at the end of this section. The ARMC approves written principles for overall risk management, as well as policies covering specific areas such as liquidity risk, funding risk, foreign currency risk, interest rate risk and credit risk. APA Group's ARMC ensures there is an appropriate Risk Management Policy for the management of treasury risk and compliance with the policy through the review of monthly reporting to the Board from the Treasury department. APA GROUP I ANNUAL REPORT 2020 89 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) 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 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. The table below summarises these risks by nature of exposure and provides information about the risk mitigation strategies being applied: Nature Sources of financial exposure Risk management strategy Foreign exchange 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). Interest rate APA Group's interest rate risk is derived predominately from borrowings subject to floating interest rates. Exchange rate exposures are managed within approved policy parameters utilising foreign currency FECs, cross currency swap contracts (“CCIRS”) and foreign currency denominated borrowings. All foreign currency exposure was managed in accordance with the Treasury Risk Management Policy, 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; — CCIRS to manage the currency risk associated with foreign currency denominated borrowings; and — Foreign currency denominated borrowings to manage the currency risk associated with foreign currency denominated revenue and receivables. 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. Equity price and electricity price APA Group is exposed to price risk arising from its forward purchase contracts over listed equities and electricity price risk arising from a contract for difference in an electricity sales agreement with a customer. The equity price risk is managed by forward purchase contracts held to meet hedging objectives rather than for trading purposes. APA Group does not actively trade these holdings. Electricity price risk is managed with power purchase agreements with creditworthy counterparties. The key assumptions of the commercial contract for difference are provided in the fair value of financial instrument section. 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. Foreign currency risk Foreign currency forward exchange contracts To manage foreign exchange risk arising from future commercial transactions such as forecast capital purchases, revenue and interest payments, APA Group uses 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 (converted to AUD at the spot rate at reporting date): 2020 US Dollar (USD) (a) Japanese Yen (JPY) British Pound (GBP) Euro (EUR) Swedish Krona (SEK) Cash & cash equivalents $000 Total borrowings $000 2,934 (4,530,162) — — — — (134,338) (2,423,481) (3,174,688) — Cross currency swaps $000 224,601 134,338 2,423,481 3,174,688 — Forward exchange contract $000 Net foreign currency position $000 (589,300) (4,891,927) — 127 3,162 25,575 — 127 3,162 25,575 2,934 (10,262,669) 5,957,108 (560,436) (4,863,063) a) The net foreign currency position (comprising USD denominated borrowings and FECs) are used to manage foreign currency risk associated with USD revenue and receivables. 90 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) a) Market risk (continued) Foreign currency forward exchange contracts (continued) 2019 US Dollar (USD) (a) Japanese Yen (JPY) Canadian Dollar (CAD) British Pound (GBP) Euro (EUR) Swedish Krona (SEK) Cash & cash equivalents $000 Total borrowings $000 12,458 (4,558,603) Cross currency swaps $000 327,588 132,196 326,675 Forward exchange contract $000 Net foreign currency position $000 (955,218) (5,173,775) — — 262 2,956 36,690 — — 262 2,956 36,690 — — — — — (132,196) (326,675) (2,442,600) 2,442,600 (2,187,895) 2,187,895 — — 12,458 (9,647,969) 5,416,954 (915,310) (5,133,867) a) The net foreign currency position (comprising USD denominated borrowings and FECs) are used to manage foreign currency risk associated with USD 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 currency) of the FECs 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 FECs 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 FECs, 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. The following table details the FECs outstanding at reporting date: Cash flow hedges 2020 Average contract rate $ Contract Value < 1 year $000 1 – 2 years $000 2 – 5 years $000 Fair value $000 Forecast revenue and associated receivable Sell USD 0.7162 318,735 253,313 — (22,284) Forecast capital purchases Buy USD Buy EUR Buy SEK Buy GBP 2019 0.6500 0.5974 5.7959 0.5259 (4,991) (2,755) (24,697) (135) 286,157 (42) (496) (3,683) — (84) — — — (295) (71) (2,718) (8) 249,092 (84) (25,376) Forecast revenue and associated receivable Sell USD 0.7169 319,697 364,587 253,313 (11,874) Forecast capital purchases Buy USD Buy EUR Buy SEK Buy GBP 0.7124 0.6018 5.7712 0.5431 (2,594) (942) (7,217) (267) — (1,522) (30,528) — — (567) (3,684) — 308,677 332,537 249,062 35 (1) (3,818) (5) (15,663) As at the reporting date, APA Group has entered into FECs to hedge the foreign currency exposure arising from anticipated future transactions, which are designated in cash flow hedge relationships. The hedged anticipated transactions are expected to occur at various dates between one month to two years from reporting date. APA GROUP I ANNUAL REPORT 2020 91 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) a) Market risk (continued) Cross currency swap contracts APA Group enters into cross currency swap contracts to mitigate the risk of adverse movements in foreign exchange rates in relation to principal and interest payments arising from foreign currency borrowings. APA Group receives fixed amounts in the various foreign currencies and pays 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 2020 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 2012 US144A 2012 GBP Medium Term Notes 2015 EUR Medium Term Notes 2017 US144A 2019 GBP Medium Term Notes AUD/USD 0.8068 AUD/USD AUD/GBP AUD/EUR AUD/USD AUD/GBP 1.0198 0.6530 0.6183 0.7668 0.5388 2019 JPY Medium Term Notes AUD/JPY 75.2220 2020 EUR Medium Term Notes AUD/EUR 0.5895 Pay USD / receive foreign currency 2015 EUR Medium Term Notes 2015 GBP Medium Term Notes USD/EUR USD/GBP 0.9514 0.6773 2019 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 AUD/USD AUD/USD AUD/CAD AUD/USD AUD/GBP AUD/EUR AUD/USD AUD/GBP 0.8068 0.7576 1.0363 1.0198 0.6530 0.6183 0.7668 0.5388 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 — — — — — — — — — — — — (98,997) (289,494) — — — — — — — — (388,491) (153,694) — — — (735,438) (535,988) (1,132,141) — — — — — — — — — — — — — — — — — (1,108,503) (742,390) (132,940) (1,017,812) (990,741) (1,284,658) (1,285,835) (1,271,426) (5,277,044) — — — — — — — — — — — — (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) 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. 92 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) a) Market risk (continued) 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, EUR and SEK 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 (2019: nil); and — Equity reserves would decrease by $1,229.6 million with a 20 percent depreciation of the A$ or increase by $820.1 million with a 20 percent increase in foreign exchange rates (2019: decrease by $1,296.4 million or increase by $864.7 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 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 $1,172.8 million as at 30 June 2020 (2019: $354.9 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 cross currency swap and interest rate swap contracts 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 cross currency swap and 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. The following table details the notional principal amounts and remaining terms of the cross currency swap contracts outstanding as at the end of the financial year: Weighted average interest rate Notional principal amount Fair value 2020 % p.a. 2019 % p.a. 2020 $000 2019 $000 2020 $000 2019 $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) — 4.65 4.03 3.66 5.42 — 388,491 — 44,604 — 1,285,835 — (7,622) — 4.37 4.08 1,271,426 2,021,273 382,490 260,645 5,277,044 4,755,823 (354,157) (133,801) 7,834,305 7,165,587 20,711 171,448 a) This amount includes a notional amount of USD 1.6 billion (2019: USD 1.6 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. APA GROUP I ANNUAL REPORT 2020 93 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) a) Market risk (continued) 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 2020 $000 2019 $000 2020 $000 2019 $000 2020 $000 2019 $000 Foreign exchange risk Hedging foreign currency borrowings (cross currency swap) Hedging revenue and associated receivables (foreign currency borrowings) Hedging revenue and associated receivables (FECs) Hedging capital purchases (FECs) 20,711 171,448 (5,088) (169,821) 633,540 533,795 (253,287) (218,137) 253,287 218,137 253,287 218,137 (22,284) (3,092) (11,873) (3,790) 22,326 3,092 11,889 3,800 21,253 3,092 11,873 3,756 (257,952) (62,352) 273,617 64,005 911,172 767,561 Foreign exchange risk Hedging foreign currency borrowings (cross currency swap) Hedging capital purchases (FECs) Interest rate risk Hedging US$ denominated borrowings (interest rate swap) Hedge ineffectiveness gain / (loss) Balance relating to discontinued cash flow hedges 2020 $000 2019 $000 (417) — (417) — — 1,033 (34) 999 — — 2020 $000 17,906 — 17,906 46,289 46,289 2019 $000 28,217 — 28,217 52,912 52,912 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 equity reserves would increase by $15,776,000 with a 100 basis point decrease in interest rates or increase by $4,528,000 with a 100 basis point increase in interest rates (2019: increase by $54,170,000 or decrease by $35,640,000 respectively). This is due to the changes in the fair value of derivative interest instruments. APA Group's profit sensitivity to interest rates remains unchanged 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. 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 key assumptions of the contract for difference are provided in the fair value of financial instrument section. 94 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) 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- (S&P)/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. Overview of APA Group's exposure to credit risk 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. 2020 External credit rating Internal credit rating ECL method (a) Cash and cash equivalents and cash on deposit A- (S&P)/ A3 (Moody's) or higher 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 Performing 12 month ECL — (b) — (b) — (b) Lifetime ECL (simplified approach) Lifetime ECL (simplified approach) 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 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 2020 has been determined to be immaterial and no liability has been recorded (2019: $nil). c) Liquidity risk APA Group has a policy of dealing with liquidity risk which requires an appropriate liquidity risk management framework for the management of APA Group's short, medium and long-term funding and liquidity management requirements. Liquidity risk is managed by maintaining adequate cash reserves and banking facilities, by monitoring and forecasting cash flow and where possible, by arranging liabilities with longer maturities to more closely match the underlying assets of APA Group. Detailed in the table following are APA Group's remaining contractual maturities for its non-derivative financial liabilities. The table is presented based on the undiscounted cash flows of financial liabilities taking account of the earliest date on which APA Group can be required to pay. The table includes both interest and principal cash flows. APA GROUP I ANNUAL REPORT 2020 95 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership I Highlights I Australian Pipeline Trust I Directors’ Report I Remuneration Report Consolidated Financial Statements I APT Investment Trust I Directors’ Report I Consolidated Financial Statements I Additional Information I Five Year Summary I Investor Information notes to the consolidated financial statements. continued. AUSTRALIAN PIPELINE TRUST AND ITS CONTROLLED ENTITIES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 Capital Management 19. Financial risk management (continued) c) Liquidity risk (continued) The table below shows the undiscounted Australian dollar cash flows associated with the AUD and foreign currency denominated notes, cross currency swaps and fixed interest rate swaps in aggregate. 2020 Unsecured financial liabilities Trade and other payables Unsecured bank borrowings (a) Denominated in A$ 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 2012 US 144A 2015 US 144A (b) 2015 US 144A (b) 2017 US 144A Denominated in stated foreign currency 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 2020 EUR 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 3.88 4.20 5.00 4.25 4.25 3.50 1.38 2.00 3.13 1.03 2.00 308,764 — — — — — 3,610 10,924 3,634 8,473 27,355 18,900 6,002 4,617 311,625 7,500 86,584 66,603 — 218,750 11,354 48,854 165,079 809,057 66,995 1,863,295 — — — — — — — 21,752 58,812 87,007 652,794 234,765 1,254,891 39,459 57,606 674,363 — 230,528 1,572,792 50,290 1,182,555 — 43,548 33,595 5,622 28,025 174,190 1,077,836 135,026 22,471 961,033 183,566 157,479 1,234,143 1,116,503 6,146,031 6,959,589 15 May 22 15 May 22 22 Jul 20 20 Oct 23 15 May 22 11 Oct 22 23 Mar 25 23 Mar 35 15 Jul 27 26 Nov 24 22 Mar 30 22 Mar 22 22 Mar 27 18 Jul 31 13 Jun 34 15 Jul 30 a) Bank facilities mature or expire on 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 2020. These amounts are fully hedged by FECs or future US$ revenues. c) Rates shown are the coupon rate in the currency of issuance. 96 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) c) Liquidity risk (continued) 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 1.03 302,082 — — — — — 4,285 12,207 5,961 8,327 29,023 24,757 6,002 4,617 23,250 7,500 11,354 104,797 49,661 65,835 21,375 58,715 299,179 39,351 56,713 35,077 42,794 28,519 5,668 92,586 71,220 311,625 226,250 176,433 — 857,911 — — — — — — — 263,342 1,633,528 85,501 662,867 234,894 1,313,477 — — 158,159 555,663 226,539 1,602,172 67,183 171,174 134,564 22,471 — 1,101,968 995,090 189,188 1,175,101 3,141,082 8,084,671 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 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 FECs 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. 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). APA GROUP I ANNUAL REPORT 2020 97 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) c) Liquidity risk (continued) Fair value measurements recognised in the statement of financial position (continued) Transfers between levels of the fair value hierarchy occur at the end of the reporting period. There have been no transfers between the levels during 2020 (2019: 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 FECs 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 market inputs (yield curves, foreign exchange rates, equity prices and historical inflation indices) 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. Fair value hierarchy 2020 Financial assets measured at fair value Equity forwards designated as fair value through profit or loss Cross currency interest rate swap contracts used for hedging Foreign currency forward exchange contracts used for hedging Contract for difference Financial liabilities measured at fair value Equity forwards designated as fair value through profit or loss Cross currency interest rate swap contracts used for hedging Foreign currency forward exchange contracts used for hedging 98 APA GROUP I ANNUAL REPORT 2020 Level 1 $000 Level 2 $000 Level 3 $000 Total $000 — — — — — — — — — 1,667 557,336 15,236 — 574,239 74 536,625 40,612 577,311 — — — 10,508 10,508 — — — — 1,667 557,336 15,236 10,508 584,747 74 536,625 40,612 577,311 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 19. Financial risk management (continued) c) Liquidity risk (continued) Fair value hierarchy (continued) 2019 Level 1 $000 Level 2 $000 Level 3 $000 Total $000 Financial assets measured at fair value Equity forwards designated as fair value through profit or loss Cross currency interest rate swap contracts used for hedging Foreign currency forward exchange contracts used for hedging Contract for difference Financial liabilities measured at fair value Cross currency interest rate swap contracts used for hedging Foreign currency forward exchange contracts used for hedging Contract for difference Reconciliation of Level 3 fair value measurements — — — — — — — — — 2,245 527,857 10,209 — 540,311 356,409 25,872 — 382,281 Opening balance Revaluation Settlement Closing balance — — — 2,144 2,144 — — 402 402 2020 $000 (1,742) (9,288) 522 (10,508) 2,245 527,857 10,209 2,144 542,455 356,409 25,872 402 382,683 2019 $000 6,536 (3,708) (4,570) (1,742) 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) 2020 $000 2019 $000 2020 $000 2019 $000 322,353 500,000 134,338 — 4,350,348 2,423,481 3,174,688 426,115 500,000 132,196 326,675 4,275,027 2,442,600 2,187,895 351,357 515,311 136,838 — 4,821,607 2,620,897 3,253,322 460,583 530,459 134,944 327,014 4,489,354 2,602,390 2,255,715 10,905,208 10,290,508 11,699,332 10,800,459 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 APA Group's credit risk. These instruments are classified in the fair value hierarchy at level 2. APA GROUP I ANNUAL REPORT 2020 99 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 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 Financial item carried at amortised cost: Redeemable preference share interest Current Derivatives at fair value: Contract for difference Equity forward contracts Indexed revenue contracts 2020 $000 2,813 1,336 18,343 9,971 285 32,748 7,695 331 — Derivatives at fair value designated as hedging instruments: Cross currency interest rate swaps – cash flow hedges 557,336 Foreign exchange contracts – cash flow hedges 5,265 Financial items carried at amortised cost: Redeemable preference shares Non-current 10,400 581,027 2019 $000 — 1,513 61,664 4,577 285 68,039 2,144 732 — 483,253 5,632 10,400 502,161 2020 $000 2019 $000 — — 402 — 159,305 27,042 141,860 10,520 — — 186,347 152,782 — 74 — — 8,090 3,459 405,904 13,570 245,892 15,352 — — 427,638 264,703 Redeemable preference shares relate to APA Group's 20% interest in GDI (EII) Pty Ltd. In December 2011, APA Group sold 80% of its gas distribution network in South East Queensland (Allgas) into an unlisted investment entity, GDI (EII) Pty Ltd. At that date GDI issued 52 million Redeemable Preference Shares (RPS) to its owners. The shares attract periodic interest payments and have a redemption date 10 years from issue. Recognition and measurement 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. Fair value measurement For information about the methods and assumptions used in determining the fair value of financial instruments refer to Note 19. 100 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 20. Other financial instruments (continued) 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. IBOR Replacement Impact The impact of Interbank Offered Rate (IBOR) reform is considered immaterial as all long term borrowings are at fixed rate and AASB has provided relief to continue the application of hedge accounting. APA Group will continue to monitor the development and outcomes of the reform. 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 foreign currency forward exchange contracts and foreign currency basis spreads of financial instruments APA Group designates the full change in the fair value of an FEC (i.e. including the forward elements) as the hedging instrument for all of its hedging relationships involving FECs. 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. APA GROUP I ANNUAL REPORT 2020 101 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 20. Other financial instruments (continued) 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: Loss arising on changes in fair value of hedging instruments Changes in fair value of foreign currency basis spread during the year Share of hedge reserve of associate Amount reclassified to P&L for effective hedges Tax effect Balance at end of financial year 2020 $000 2019 $000 (608,016) (339,834) (183,107) (23,757) (5,848) 80,184 39,758 (464,643) 15,719 (8,540) 74,347 114,935 (700,786) (608,016) The foreign currency basis spread balance at the beginning of the financial year is ($56.2 million) and at the end of the financial year is ($58.2 million) in 2020 (2019: ($93.3 million) and ($56.2 million) respectively). 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. 102 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 21. Issued capital Units 2020 $000 2019 $000 1,179,893,848 securities, fully paid (2019: 1,179,893,848 securities, fully paid) (a) 2,902,123 3,103,806 2020 No. of units 000 2020 $000 2019 No. of units 000 Movements Balance at beginning of financial year 1,179,894 3,103,806 1,179,894 Capital distributions paid (Note 8) Issue costs of securities Tax relating to security issue costs — — — (201,683) — — — — — 2019 $000 3,288,123 (184,181) (194) 58 Balance at end of financial year 1,179,894 2,902,123 1,179,894 3,103,806 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. 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 investing activities Distributions paid to non-controlling interests Net cash used in financing activities The accounting policies of APTIT are the same as those applied to APA Group. 2020 $000 2019 $000 852 911,704 912,556 25 25 912,531 912,531 53,033 (12) 53,021 53,021 53,834 80,931 (134,765) (134,765) 813 993,487 994,300 25 25 994,275 994,275 65,082 (12) 65,070 65,070 65,790 69,409 (135,136) (135,199) APA GROUP I ANNUAL REPORT 2020 103 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Group Structure 22. Non-controlling interests (continued) There are no material guarantees, contingent liabilities or restrictions imposed on APA Group from APTIT's non-controlling interests. APT Investment Trust APT Investment Trust Issued capital: Balance at beginning of financial year 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) 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 2020 $000 912,531 912,531 2019 $000 994,275 994,275 964,219 1,030,176 — (76,374) 887,845 (63) (65,894) 964,219 — — 30,056 53,021 (58,391) 24,686 34,228 65,070 (69,242) 30,056 — — — — — — — — — — — 4 (4) — 1 (1) — 48 — 1 (49) — 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. Ownership interest % Principal activity Country of incorporation 2020 2019 Name of entity Joint ventures: SEA Gas SEA Gas (Mortlake) EII 2 Associates: GDI (EII) 104 APA GROUP I ANNUAL REPORT 2020 Energy Infrastructure Investments Energy infrastructure Gas transmission Gas transmission Power generation (wind) Australia Australia Australia Australia 50.00 50.00 19.90 20.20 50.00 50.00 19.90 20.20 Gas distribution Australia 20.00 20.00 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Group Structure 23. Joint arrangements and associates (continued) Investment in joint ventures and associates using the equity method 226,380 263,829 2020 $000 2019 $000 Joint Ventures Aggregate carrying amount of investment APA Group's aggregated share of: Profit from continuing operations Other comprehensive income Total comprehensive income Associates Aggregate carrying amount of investment APA Group's aggregated share of: Profit from continuing operations Other comprehensive income Total comprehensive income 204,778 239,243 25,863 (4,178) 21,685 18,630 (4,405) 14,225 21,602 24,586 4,814 (1,669) 3,145 4,592 (4,135) 457 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. Carrying value of the investment in joint arrangement and associates are subject to impairment testing if there is objective evidence of impairment. No material indicators identified in the joint arrangements and associates as at the date of the issuance of these financial statements. 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 2020 % 88.2 50.0 2019 % 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. APA GROUP I ANNUAL REPORT 2020 105 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Group Structure 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) APA (BWF Holdco) Pty Ltd (b),(c) APA (EDWF Holdco) Pty Ltd (b),(c) APA (EPX) Pty Limited (b),(c) APA (NBH) Pty Limited (b),(c) APA (Pilbara Pipeline) Pty Ltd (b),(c) APA (SWQP) Pty Limited (b),(c) APA (WA) One Pty Limited (b),(c) APA AIS 1 Pty Limited (b),(c) APA AIS 2 Pty Ltd (b),(c) APA AIS Pty Limited (b),(c) APA AM (Allgas) Pty Limited (b),(c) APA BIDCO Pty Limited (b),(c) APA Biobond Pty Limited (b),(c) APA Country Pipelines Pty Limited (b),(c) APA DPS Holdings Pty Limited (b),(c) APA DPS2 Pty Limited (b),(c) APA East Pipelines Pty Limited (b),(c) APA EE Australia Pty Limited (b),(c) APA EE Corporate Shared Services Pty Limited (b),(c) APA EE Holdings Pty Limited (b),(c) APA EE Pty Limited (b),(c) APA Ethane Pty Limited (b),(c) APA Facilities Management Pty Limited (b),(c) APA Midstream Holdings Pty Limited (b),(c) APA Operations (EII) Pty Limited (b),(c) APA Operations Pty Limited (b),(c) APA Orbost Gas Plant Pty Ltd (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) 106 APA GROUP I ANNUAL REPORT 2020 Country of registration/ incorporation Ownership interest 2020 % 2019 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia United States — — — Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Group Structure 24. Subsidiaries (continued) Name of entity 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) 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 2020 % 2019 % Australia Australia Australia Australia Australia — Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia — Australia Australia — — — Australia — — — Australia Australia Australia — Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 96 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 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. APA GROUP I ANNUAL REPORT 2020 107 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 $000 2019 $000 168,391 11,107 179,498 172,774 8,596 181,370 51,483 52,233 As at 30 June 2020 and 30 June 2019 APA Group had no material contingent liabilities, other than those disclosed above. APA Group had no contingent assets as at 30 June 2020 and 30 June 2019. 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 Equity settled security-based payments Total remuneration: Executive Director (a) Total remuneration: Directors 2020 $ 1,549,332 147,185 1,696,517 2,395,588 25,453 1,879,646 368,121 2019 $ 1,664,631 158,168 1,822,799 3,629,920 25,000 1,515,047 — 4,668,808 5,169,967 6,365,325 6,992,766 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 Equity settled security-based payments Total remuneration: Executive Key Management Personnel 6,179,703 88,123 7,763,114 101,666 2,891,305 2,864,008 675,161 — 9,834,292 10,728,788 a) The remuneration for the former Chief Executive Officer and Managing Director, Michael (Mick) McCormack to 5 July 2019 and current Chief Executive Officer and Managing Director, Rob Wheals from 6 July 2019, are included in both the remuneration disclosure for Directors and Executive Key Management Personnel. In addition Mr McCormack is entitled to his outstanding reference units, due to be paid in August 2021, August 2022 and August 2023, with a total value of $3,632,979 (based on a VWAP of $11.1579). 108 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 27. Remuneration of external auditor Amounts received or due and receivable by Deloitte Touche Tohmatsu for: Audit or review of the financial repors: Group Subsidiaries Total audit or review of the financial reports 2020 $ 2019 $ 691,000 8,100 699,100 679,300 7,800 687,100 Statutory assurance services required by legislation to be provided by the auditor Assurance services in relation to the AER financial reporting requirements (a) 2,170,000 250,000 Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements (b) ASIC Compliance plan audit Financial services licence audit 84,800 20,500 8,100 10,400 19,700 7,800 Total statutory assurance services required by legislation to be provided by the auditor 2,283,400 287,900 Other assurance services (c) Total remuneration of external auditor 106,600 246,300 3,089,100 1,221,300 a) Service provided in FY20 includes one-off procedures covering 7-year historical period. Represent total fees for contracted services, partly incurred at period end. b) Service provided includes Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements (FY2020 includes triennial procedures required under RG231, procedures last undertaken in FY2017). c) Services provided were in accordance with the external auditor independence policy. Other assurance services mainly comprise assurance services in relation to security related transactions (debt raisings). 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; and — payments of distributions. 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 $5,909,078 (2019: $4,696,351) 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. APA GROUP I ANNUAL REPORT 2020 109 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 28. Related party transactions (continued) 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: 2020 SEA Gas Energy Infrastructure Investments EII 2 GDI (EII) 2019 SEA Gas Energy Infrastructure Investments EII 2 GDI (EII) Dividends from related parties $000 49,162 3,055 3,933 6,129 Sales to related parties $000 6,666 45,666 803 53,715 62,279 106,850 9,551 4,466 3,732 4,701 7,809 39,198 1,020 53,654 22,450 101,680 Purchases from related parties $000 86 — — — 86 — — — — — Amount owed by related parties $000 23 7,085 343 5,534 12,985 122,626 7,627 335 10,123 140,710 Amount owed to related parties $000 — — — — — — — — — — At 30 June 2020, APA Group had no loan receivable from SEA Gas (2019: $122.3 million). 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 2020 $000 2019 $000 2,361,345 678,738 2,533,019 707,803 3,040,083 3,240,822 128,854 128,854 130,337 130,337 2,911,229 3,110,485 2,902,123 3,103,806 9,106 6,679 2,911,229 3,110,485 238,228 238,228 216,818 216,818 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 (2019: $nil). Contingent liabilities of the parent entity No contingent liabilities have been identified in relation to the parent entity. 110 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 30. Adoption of new and revised Accounting Standards Standards and Interpretations affecting amounts reported in the current period (and/or prior periods) AASB 16 'Leases' From 1 July 2019, APA Group has adopted AASB 16 ‘Leases’ (AASB 16) that is effective for annual periods that begin on or after 1 July 2019. AASB 16 replaced AASB 117 ‘Leases’ (AASB 117), IFRIC 4 Determining Whether an Arrangement Contains a Lease (IFRIC 4) and other related interpretations. Under AASB 16, APA Group’s accounting for leases as a lessee results in the recognition of a Right-of-Use (ROU) asset and an associated lease liability in the Consolidated Statement of Financial Position, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. The lease liability represents the present value of future lease payments. An interest expense is recognised on the lease liabilities and a depreciation charge is recognised for the ROU assets. There are 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, 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 adopted AASB 16 using the modified retrospective approach. There is 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, and discounted using APA Group’s incremental borrowing rate as of that date. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 3.69%. For leases other than motor vehicles, the ROU asset is measured as if AASB 16 has been applied from the commencement of the lease with any difference between the ROU asset and the liability recognised as an adjustment to opening retained earnings. An adjustment of $8.6 million net of tax was recognised as a debit to opening retained earnings on transition. For motor vehicle leases, the ROU asset is measured at an amount equal to the lease liability with nil impact on opening retained earnings. APA Group has recognised a temporary difference on initial recognition of lease assets and liabilities on adoption of AASB 16. Practical expedients applied In applying AASB 16 for the first time, APA Group has used the following practical expedients permitted by the standard: — The use of a single discount rate to a portfolio of leases with reasonably similar characteristics; — The accounting for operating leases with a remaining lease term of 12 months or less as at 1 July 2019 as short-term leases; — The reliance on the previous assessment whether a contract is or contains a lease, on contracts entered into before 1 July 2019 applying AASB 117 and Interpretation 4; — The reliance on previous assessments of whether leases are onerous (of which there were none); and — The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. Impact on initial adoption of AASB 16 at 1 July 2019 Assets Right-Of-Use assets – Property, plant and equipment Deferred tax assets Total assets recognised on transition Liabilities Current lease liabilities Non-current lease liabilities Derecognition of other liabilities – lease incentive Total liabilities recognised on transition Retained earnings 1 Jul 2019 $000 62,265 3,690 65,955 10,537 66,227 (2,199) 74,565 8,610 APA GROUP I ANNUAL REPORT 2020 111 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 30. Adoption of new and revised Accounting Standards (continued) Standards and Interpretations affecting amounts reported in the current period (and/or prior periods) (continued) AASB 16 'Leases' (continued) The difference between APA Group’s undiscounted non-cancellable operating lease commitments at 30 June 2019 and lease liabilities upon transition are set out below: Operating lease commitments disclosed as at 30 June 2019 Discounted using lessee's incremental borrowing rate at the date of initial application Add: Extension options reasonably certain to be exercised (Less): short-term leases recognised on a straight-line basis as expense (Less): low-value assets recognised on a straight-line basis as expense Lease liabilities as at 30 June 2019 Add: leases commencing on 1 July 2019 Lease liabilities recognised as at 1 July 2019 1 Jul 2019 $000 65,803 59,763 10,987 (1,094) (553) 69,103 7,661 76,764 Impact on the consolidated statement of profit or loss and other comprehensive income The following table sets out the amount of adjustment for each major financial statement line item affected by the application of AASB 16: Decrease in asset operation and management expenses Increase in EBITDA Increase in finance costs Increase in depreciation and amortisation expense Increase in Profit before tax Increase in income tax expense Increase in Profit after tax 2020 $000 16,120 16,120 (2,638) (12,562) 920 (276) 644 APA Group does not have any material expense relating to short-term leases, leases of low-value assets and variable lease payments not included in the measurement of lease liabilities, nor material income from subleasing right-of-use assets. Impact on the statement of cash flows The application of AASB 16 has an impact on the consolidated statement of cash flows of APA Group. Under AASB 16, lessees must present: — Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liabilities as part of the operating activities. APA Group has included these payments as part of payments to suppliers and employees; — Cash paid for the interest portion of lease liabilities as either operating activities or financing activities, as permitted by AASB 107 Statement of Cash Flows. APA Group has included interest paid as part of operating activities, consistent with the presentation of other interest paid; and — Cash payments for the principal portion of lease liabilities, as part of financing activities. Under AASB 117, all lease payments on operating leases were presented as part of cash flows from operating activities. Consequently, the net cash generated by operating activities has increased by $13.5 million and net cash used in financing activities increased by the same amount. Interest payments of $2.6 million continue to be included in net cash generated by operating activities (previously forming part of payments to suppliers and employees, a subcategory of net cash generated by operating activities). AASB 16 does not have any impact on net cash flows. New Accounting policies as a result of adoption of AASB 16 Refer to the accounting policies in Note 11 for ROU assets and Note 17 for lease liabilities. APA Group’s accounting for leases as a lessor remains unchanged under AASB 16. 112 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 30. Adoption of new and revised Accounting Standards (continued) Standards and Interpretations issued not yet adopted At the date of authorisation of the financial statements, the Standards and Interpretations on issue but not yet effective are not expected to have material impact on APA Group's accounting policies or any of the amounts recognised in the financial statements. 31. Events occurring after reporting date On 26 August 2020, the Directors declared a final distribution of 27.00 cents per security ($318.6 million) for APA Group. This is comprised of a distribution of 20.27 cents per unit from APT and a distribution of 6.73 cents per unit from APTIT. The APT distribution represents a 8.53 cents per unit fully franked profit distribution and 11.74 cents per unit capital distribution. The APTIT distribution represents a 2.09 cent per unit profit distribution and a 4.64 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 16 September 2020. As at the time of reporting, the developing and uncertain situation in respect of COVID-19 pandemic continues to be closely monitored by management and the directors of APA Group. Nothing has come to the attention of APA Group that would require adjustment or additional disclosure in these financial statements as a result of any recent COVID-19 developments. 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 I ANNUAL REPORT 2020 113 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 Debra Goodin Director Sydney, 26 August 2020 114 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 26 August 2020 The Directors Australian Pipeline Limited as responsible entity for Australian Pipeline Trust Level 25, 580 George Street Sydney NSW 2000 Dear Directors AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo AAuussttrraalliiaann PPiippeelliinnee LLiimmiitteedd aass rreessppoonnssiibbllee eennttiittyy ffoorr AAuussttrraalliiaann PPiippeelliinnee TTrruusstt In accordance with section 307C of the Corporations Act 2001, we are 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 partners for the audit of the financial statements of Australian Pipeline Trust for the financial year ended 30 June 2020, we declare that to the best of our 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 faithfully DELOITTE TOUCHE TOHMATSU Jamie Gatt Partner Chartered Accountants Taralyn Elliott Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Organisation. APA GROUP I ANNUAL REPORT 2020 115 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee UUnniitthhoollddeerrss ooff AAuussttrraalliiaann PPiippeelliinnee TTrruusstt RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt OOppiinniioonn 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 2020, 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 2020 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. BBaassiiss ffoorr OOppiinniioonn 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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 Organisation. 116 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 KKeeyy AAuuddiitt MMaatttteerrss 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. KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr OOrrbboosstt GGaass PPrroocceessssiinngg PPllaanntt ((OOrrbboosstt)) rreeccoovveerraabbllee aammoouunntt aasssseessssmmeenntt Our procedures, performed in conjunction with our valuation specialists, included, but were not limited to: As at 30 June 2020 the carrying amount of Orbost, included in capital work in progress, as disclosed in Note 11 and Note 13 was $443.9 million. The Orbost project has incurred additional capital costs compared to the original project budget as well as delays in the commissioning of the plant due to technical difficulties. The assessment of the recoverable amount of Orbost requires the exercise of significant judgement in respect of factors such as forecast revenue, inflation rates, forecast operating costs, forecast capital expenditure and discount rates. This is considered a key audit matter due to the significant judgements involved in estimating the recoverable amount. • Understanding the appropriateness of management’s controls over the determination of the recoverable amount; • Challenging the Group’s assumptions and estimates used to determine the recoverable amount, including those relating to: - forecast revenue with reference to: ▪ processing capacity of the plant; ▪ uncontracted capacity; - - - - inflation rates with reference to external data; forecast operating costs; forecast capital expenditure; discount rates with reference to: ▪ external data; ▪ Deloitte developed discount rates; • Testing the mathematical accuracy of the cash flow model; • Agreeing relevant data in the cash flow model to approved budgets and latest forecasts; • Evaluating management’s sensitivity analysis in relation to key assumptions. We also assessed the appropriateness of the disclosures in Note 13 to the financial statements. APA GROUP I ANNUAL REPORT 2020 117 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr 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; • 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 and evaluating that the financial instruments qualified for hedge accounting in accordance with the AASB 9 Financial Instruments; • Testing the hedge effectiveness assessment, taking into consideration the different cash flow profiles of the US Dollar revenue and hedges and the requirement to split the cross currency interest rate swaps; and • Testing that the effective portion of the fair value movement in the US Dollar borrowings and derivatives are appropriately deferred in reserves. We also assessed the appropriateness of the disclosures in Note 19 to the financial statements. KKeeyy AAuuddiitt MMaatttteerr DDeerriivvaattiivvee ttrraannssaaccttiioonnss aanndd bbaallaanncceess iinncclluuddiinngg tthhee aapppplliiccaattiioonn ooff hheeddggee aaccccoouunnttiinngg ffoorr tthhee WWaalllluummbbiillllaa GGllaaddssttoonnee PPiippeelliinnee ((WWGGPP)) As disclosed in Note 19, revenue received in respect of the WGP contract is denominated in US dollars and is contracted to be received until 2035. The Group manages the currency risk on this US dollar revenue by using: • US dollar borrowings (as a natural hedge of future US dollar revenue); • Cross currency interest rate swaps used to convert foreign currency denominated borrowings (in British Pounds and Euros) to US dollars; and • Foreign currency forward contracts to hedge the portion of the exchange rate risk not covered by the US dollar borrowings and cross currency interest rate swaps. The Group applies hedge accounting for the derivatives and US dollar borrowings. The application of hedge accounting in relation to the WGP revenue is complex, as the revenue and the instruments used as hedges have different cash flow profiles. Furthermore, these cross currency interest rate swaps need to be bifurcated into separate currency pairs for the application of hedge accounting. 118 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr EEaasstt CCooaasstt GGrriidd ccaasshh ggeenneerraattiinngg uunniitt ((CCGGUU)) rreeccoovveerraabbllee aammoouunntt aasssseessssmmeenntt Our procedures, performed in conjunction with our valuation specialists, included, but were not limited to: As at 30 June 2020 the carrying amount of goodwill allocated to the East Coast Grid CGU is $1.1 billion, as disclosed in Note 12. • Understanding the appropriateness of management’s controls over the determination of the recoverable amount; The assessment of the recoverable amount of the East Coast Grid’s goodwill requires the exercise of significant judgement to estimate future contract renewals, contracting of spare capacity and discount rates. This is considered a key audit matter due to the significance of the goodwill allocated to this CGU. • Challenging the Group’s assumptions and estimates used to determine the recoverable amount of the East Coast Grid CGU, including with reference to external data. The key estimates and assumptions included: - forecast revenue with reference to: ▪ ▪ ▪ expected future contract renewals; expected contracting of spare capacity; inflation rates; - discount rates with reference to: ▪ external data; ▪ Deloitte developed discount rates; • Assessing historical accuracy of management’s budgeting and forecasting; • Testing the mathematical accuracy of the East Coast Grid cash flow model; • Agreeing relevant data in the cash flow model to approved budgets and latest forecasts; • Evaluating management’s sensitivity analysis in relation to key assumptions. We also assessed the appropriateness of the disclosures in Note 13 to the financial statements. APA GROUP I ANNUAL REPORT 2020 119 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 OOtthheerr IInnffoorrmmaattiioonn 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 2020, 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. RReessppoonnssiibbiilliittiieess ooff tthhee DDiirreeccttoorrss ffoorr tthhee FFiinnaanncciiaall RReeppoorrtt The directors of the Responsible Entity 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. AAuuddiittoorr’’ss RReessppoonnssiibbiilliittiieess ffoorr tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt 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. 120 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. 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, actions taken to eliminate threats or safeguards applied. 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. APA GROUP I ANNUAL REPORT 2020 121 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report of Australian Pipeline Limited as responsible entity of Australian Pipeline Trust included on pages 48 to 62 of the Directors’ Report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Australian Pipeline Limited for the year ended 30 June 2020, has been prepared in accordance with section 300A of the Corporations Act 2001. Responsibilities The directors have voluntarily presented the Remuneration Report of the Responsible Entity of Australian Pipeline Trust 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 Jamie Gatt Partner Chartered Accountants Sydney, 26 August 2020 Taralyn Elliott Partner Chartered Accountants Sydney, 26 August 2020 122 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 Directors’ Report 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 2020. 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: First appointed Current Directors: Michael Fraser Robert (Rob) Wheals Steven (Steve) Crane James Fazzino Debra (Debbie) Goodin Shirley In’t Veld Rhoda Phillippo Peter Wasow Former Directors: 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 1 June 2020 19 March 2018 Michael (Mick) McCormack Retired as Chief Executive Officer and Managing Director: 5 July 2019 The Company Secretaries of the Responsible Entity during the year and since the year end are Nevenka Codevelle and Amanda Cheney (from 25 February 2020). 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. On 20 December 2019, APA’s Chief Financial Officer (CFO), Peter Fredricson indicated his intention to retire from his position remaining until December 2020 at the latest to support the new CFO during the transition period. 4. Subsequent Events On 26 August 2020, the Directors declared a final distribution of 6.73 cents per unit ($79.4 million). The distribution represents a 2.09 cents per unit profit distribution and a 4.64 cents per unit capital distribution. The distribution is expected to be paid on 16 September 2020. On 12 August 2020, APA announced that Adam Watson would join APA as the new CFO, commencing mid November 2020. 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 2020 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 $53.0 million (FY2019: $65.1 million) for the year ended 30 June 2020 and total revenue of $53.0 million (FY2019: $65.1 million). 6. Distributions Distributions paid to Securityholders during the financial year were: APTIT profit distribution APTIT capital distribution Total Final FY2019 distribution paid 11 September 2019 Interim FY2020 distribution paid 11 March 2020 Cents per security Total distribution $000 Cents per security Total distribution $000 2.55 3.98 6.53 30,056 47,002 77,058 2.40 2.49 4.89 28,335 29,372 57,707 APA GROUP I ANNUAL REPORT 2020 123 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 On 26 August 2020, the Directors declared a final distribution for APTIT for the financial year of 6.73 cents per security which is payable on 16 September 2020 and will comprise the following components: APTIT profit distribution APTIT capital distribution Total Final FY2020 distribution payable 16 September 2020 Cents per security Total distribution $000 2.09 4.64 6.73 24,686 54,692 79,378 Distribution information is presented on an accounting classification basis. The APA Group Annual Tax Statement (to be released in September 2020) 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 FY2020 distribution (https://www.apa.com.au/investors/my-securities/apa-annual- tax-statement-estimator/). Information on Directors and Company Secretaries 7. Directors 7.1 See pages 06 to 07 for information relating to qualifications and experience of the Directors and Company Secretary Nevenka Codevelle. Information on APA’s additional Company Secretary Amanda Cheney is below: Amanda Cheney LLB (Hons) BArts General Counsel & Company Secretary (Effective 25 February 2020) Amanda has been with APA Group since August 2012 and holds the role of General Counsel and Company Secretary. Amanda has over 18 years' experience in energy and infrastructure industries, having worked as a senior projects lawyer in Australia and Japan. She holds a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia and is a member of the Australian Institute of Company Directors. 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 Aurizon Holdings Limited Since February 2016 Robert Wheals — — Steven Crane James Fazzino Debra Goodin nib holdings limited SCA Property Group Tassal Group Limited Incitec Pivot Limited Since September 2010, Chair since October 2011 Since December 2018 Since May 2020 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 Shirley In't Veld Northern Star Resources Limited Alumina Limited Since September 2016 Since August 2020 Rhoda Phillippo Vocus Group Ltd March 2015 (previously as M2 Group Ltd) to August 2018 Peter Wasow Oz Minerals Limited Alcoa Australia Limited Since November 2017 January 2014 to July 2017 124 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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. Directors (continued) 7.3 Directors’ meetings During the financial year, 13 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: Directors Michael Fraser Robert Wheals (1) Michael McCormack (2) Steven Crane James Fazzino Debra Goodin Shirley Int’d Veld Peter Wasow Rhoda Phillippo (3) Board People & Remuneration Committee Audit & Risk Management Committee Health Safety & Environment Committee Nomination Committee A 13 13 0 13 13 13 13 13 2 B 13 13 0 12 13 13 13 13 2 A — — — 4 — — 4 4 — B — — — 4 — — 4 4 — A 4 — — 4 4 4 — 4 — B 4 — — 4 4 4 — 4 — A — — — — 4 4 4 — 1 B — — — — 4 4 4 — 1 A 4 — — 4 — 4 — — — B 4 — — 4 — 4 — — — 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) Robert Wheals appointed as a Director on 6 July 2019. 2) Michael McCormack retired as a Director on 5 July 2019. 3) Rhoda Phillippo appointed as a Director 1 June 2020. 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 2020 is 385,260 (2019: 721,576 (1)). The following table sets out Directors’ relevant interests in APA securities as at 30 June 2020: Directors Michael Fraser Robert Wheals (2) Michael McCormack (3) Steven Crane Debra Goodin James Fazzino Shirley Int’d Veld Peter Wasow Rhoda Phillippo (4) Fully paid securities as at 1 July 2019 Securities acquired Fully paid Securities securities as at 30 June 2020 disposed 102,942 38,883 350,000 130,000 23,000 30,751 25,000 21,000 — 721,576 — 7,505 — — 1,179 — — 5,000 — 13,684 — — — — — — — — — — 102,942 46,388 — 130,000 24,179 30,751 25,000 26,000 — 385,260 1) At 30 June 2019 the aggregate number of APA securities held directly or beneficially by Directors or their related entities included 350,000 securities held by Michael McCormack who retired on 5 July 2019. The aggregate number of APA Securities held directly or beneficially by the current Directors or their related entities as at 30 June 2019 was 371,576. 2) Robert Wheals was appointed as a Director on 6 July 2019. He held 38,883 securities on appointment. 3) Michael McCormack retired as a Director on 5 July 2019. He held 350,000 securities on retirement. 4) Rhoda Phillippo was appointed as a Director effective 1 June 2020. She held nil securities on appointment. As at 30 June 2020, Robert Wheals held 217,872 performance rights granted under APA Group’s long term incentive plan. Each performance right is a right to receive one ordinary stapled security in APA subject to satisfaction of certain performance hurdles. Further information can be found in APA’s Remuneration Report on pages 48 to 62. 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. APA GROUP I ANNUAL REPORT 2020 125 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 8. Options Granted In this report, the term “APA securities” refers to stapled securities each comprising a unit in Australian Pipeline Trust stapled to a unit in APT Investment Trust and traded on the Australian Securities Exchange (ASX) under the code “APA”. No options over unissued APA securities were granted during or since the end of the financial year, no unissued APA securities were under option as at the date of this report, and no APA securities were issued during or since the end of the financial year as a result of the exercise of an option over unissued APA securities. Indemnification of Officers 9. During the financial year, the Responsible Entity paid a premium in respect of a contract insuring the Directors and Officers of the Responsible Entity and any APA Group entity against any liability incurred in performing those roles to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits specific disclosure of the nature of the liability and the amount of the premium. Australian Pipeline Limited, in its own capacity and as Responsible Entity of Australian Pipeline Trust and APT Investment Trust, indemnifies each Director and Company Secretary, and certain other executives, former executives and officers of the Responsible Entity or any APA Group entity under a range of deed polls and indemnity agreements which have been in place since 1 July 2000. The indemnity operates to the full extent allowed by law but only to the extent not covered by insurance, and is on terms the Board considers usual for arrangements of this type. Under its constitution, Australian Pipeline Limited (in its personal capacity) indemnifies each person who is or has been a Director, Company Secretary or executive officer of that company. The Responsible Entity has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer or external auditor of the Responsible Entity or any APA Group entity against a liability incurred by such an officer or auditor. 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 143. 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, 26 August 2020 Debra Goodin Director 126 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 $000 53,033 (12) 53,021 — 53,021 2019 $000 65,082 (12) 65,070 — 65,070 53,021 65,070 53,021 53,021 65,070 65,070 53,021 65,070 2020 4.5 2019 5.5 6 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. APA GROUP I ANNUAL REPORT 2020 127 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 $000 2019 $000 8 8 11 9 13 852 813 6,073 905,631 911,704 912,556 25 25 6,925 986,562 993,487 994,300 25 25 912,531 994,275 887,845 24,686 912,531 964,219 30,056 994,275 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 128 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 Balance at 1 July 2019 Profit for the year Total comprehensive income for the year Distributions to unitholders Balance at 30 June 2020 Note 13 7 7 Issued capital $000 1,030,176 — — (63) (65,894) 964,219 964,219 — — (76,374) 887,845 Retained earnings $000 34,228 65,070 65,070 — (69,242) 30,056 30,056 53,021 53,021 (58,391) 24,686 Total $000 1,064,404 65,070 65,070 (63) (135,136) 994,275 994,275 53,021 53,021 (134,765) 912,531 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. APA GROUP I ANNUAL REPORT 2020 129 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 $000 24,373 27,948 1,167 358 (12) 2019 $000 26,833 37,523 1,167 333 (66) Net cash provided by operating activities 53,834 65,790 Cash flows from investing activities Receipts from related parties Net cash provided by investing activities Cash flows from financing activities Payment of unit issue costs Distributions to unitholders Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 80,931 80,931 69,409 69,409 — (134,765) (134,765) (63) (135,136) (135,199) — — — — — — 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. 130 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 assets 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 131 132 133 133 133 133 134 134 135 135 136 137 138 138 139 139 139 139 140 20. Adoption of new and revised Accounting Standards 141 21. Events occurring after reporting date 141 APA GROUP I ANNUAL REPORT 2020 131 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 2020 was authorised for issue in accordance with a resolution of the directors on 26 August 2020. 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. 132 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 3. Segment information The Consolidated Entity has one reportable segment being energy infrastructure investment. The Consolidated Entity is an investing entity within the Australian Pipeline Trust stapled group. As the Trust only operates in one segment, it has not disclosed segment information separately. 4. Profit from operations Profit before income tax includes the following items of income and expense: Revenue Distributions Trust distribution – related party Finance income Interest – related parties Finance lease income – related party Other revenue Other Total revenue Expenses Audit fees Total expenses 2020 $000 2019 $000 24,373 24,373 27,948 355 28,303 357 53,033 26,833 26,833 37,523 393 37,916 333 65,082 (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; and — Finance lease income, which is recognised when receivable. 5. Income tax 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 2020 cents 4.5 2019 cents 5.5 The earnings and weighted average number of units used in the calculation of basic and diluted earnings per unit are as follows: Net profit attributable to unitholders for calculating basic and diluted earnings per unit 2020 $000 53,021 2019 $000 65,070 2020 No. of units 000 2019 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 1,179,894 APA GROUP I ANNUAL REPORT 2020 133 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Financial Performance 7. Distributions Recognised amounts Final FY2019 distribution paid on 11 September 2019 (2019: Final FY2018 distribution paid on 12 September 2018) Profit distribution (a) Capital distribution Interim distribution paid on 11 March 2020 (2019: Interim FY2019 distribution paid on 13 March 2019) Profit distribution (a) Capital distribution Total distributions recognised Profit distributions Capital distributions (Note 13) Unrecognised amounts Final FY2020 distribution payable on 16 September 2020 (b) (2019: Final FY2019 distribution paid on 11 September 2019) Profit distribution (a) Capital distribution a) Profit distributions unfranked (2019: unfranked). b) Record date 30 June 2020. 2020 cents per unit 2020 Total $000 2019 cents per unit 2019 Total $000 2.55 3.98 6.53 2.40 2.49 4.89 4.95 6.47 11.42 2.09 4.64 6.73 30,056 47,002 77,058 28,335 29,372 57,707 58,391 76,374 134,765 24,686 54,692 79,378 2.90 3.14 6.04 2.97 2.45 5.42 5.87 5.59 11.46 2.55 3.98 6.53 34,229 37,022 71,251 35,014 28,872 63,886 69,242 65,894 135,136 30,056 47,002 77,058 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 2020 $000 852 852 6,073 6,073 2019 $000 813 813 6,925 6,925 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 expected credit loss required. None of the above receivables is past due. 134 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Operating Assets and Liabilities 9. Payables Other payables 2020 $000 25 2019 $000 25 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 Consolidated Entity as lessor 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. 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) Less: Future finance income Present value of lease receivables Included in the financial statements as part of: Current receivables (Note 8) Non-current receivables (Note 8) 2020 $000 1,167 4,669 2,335 8,171 (1,246) 6,925 852 6,073 6,925 2019 $000 1,167 4,669 3,502 9,338 (1,600) 7,738 813 6,925 7,738 a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual. The Consolidated Entity does not have any operating leases where it is the 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 I ANNUAL REPORT 2020 135 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 11. Other financial assets Non-current Advance to related party Investment in related party 2020 $000 2019 $000 798,252 107,379 905,631 879,183 107,379 986,562 Investment in related party 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 invested 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 distributions of 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 in B Class units is measured at fair value through profit or loss. The measurement of fair value takes into consideration the fact that the A Class unitholders have discretion over the return of the initial capital invested and the instrument can be called on demand. Therefore, fair value is measured based on the amount that can be called on demand, adjusted for the credit and liquidity risk of GasNet A Trust. As the impact of credit and liquidity risk is not significant, the fair value of the B Class units is not materially different to the amount of capital invested. 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 or does not meet the hedge accounting criteria, are classified as 'financial assets/liabilities' for accounting purposes and accounted at FVTPL. 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. 136 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 11. Other financial assets (continued) 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. The Consolidated Entity applies an expected credit loss (“ECL”) model to account for ECL and changes in these ECL at each reporting date to reflect changes in credit risk since initial recognition of a 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. 12. Financial risk management The Consolidated Entity'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 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. Risk Sources Financial exposure Risk management framework Market Commercial transactions in foreign currency and funding activities Credit Cash, receivables, interest bearing liabilities and hedging Refer to market risk section. The carrying amount of financial assets recorded in the financial statements, net of any collateral held or bank guarantees held by the Consolidated Entity, represents the Consolidated Entity's maximum exposure to credit risk in relation to those assets. Liquidity Payables Refer to liquidity risk section. The Audit and Risk Management Committee (“ARMC“) approves written principles for overall risk management, as well as policies covering specific areas such as liquidity risk, funding risk, foreign currency risk, interest rate risk and credit risk. The Consolidated Entity's ARMC ensures there is an appropriate Risk Management Policy for the management of treasury risk and compliance with the policy through the review of monthly reporting to the Board from the Treasury department. 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 $4,901,000 or decrease by $4,854,000 (2019: increase by $5,974,000 or decrease by $5,917,000 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. APA GROUP I ANNUAL REPORT 2020 137 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Capital Management 12. Financial risk management (continued) 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 (2019: $25,000), all of which are due in less than 1 year (2019: less than 1 year). 13. Issued capital Units 2020 $000 2019 $000 1,179,893,848 units, fully paid (2019: 1,179,893,848 units, fully paid) (a) 887,845 964,219 2020 No. of units 000 2020 $000 2019 No. of units 000 2019 $000 Movements Balance at beginning of financial year 1,179,894 964,219 1,179,894 1,030,176 Issue cost of units Capital distributions paid (Note 7) — — — (76,374) — — Balance at end of financial year 1,179,894 887,845 1,179,894 (63) (65,894) 964,219 a) Fully paid units carry one vote per unit and carry the right to distributions. Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to issued capital from 1 July 1998. Therefore, the Trust does not have a limited amount of authorised capital and issued securities do not have a par value. Group Structure 14. Subsidiaries Subsidiaries are entities controlled by APTIT. Control exists where APTIT has power over an entity, i.e. existing rights that give APTIT the current ability to direct the relevant activities of the entity (those that significantly affect the returns); exposure, or rights, to variable returns from its involvement with the entity; and the ability to use its power to affect those returns. Name of entity Parent entity APT Investment Trust Subsidiary GasNet Australia Investments Trust 138 APA GROUP I ANNUAL REPORT 2020 Ownership interest Country of registration 2020 % 2019 % Australia 100 100 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 15. Commitments and contingencies The Consolidated Entity had no material contingent assets, liabilities and commitments as at 30 June 2020 and 30 June 2019. 16. Director and senior 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 Equity settled security-based payments Total remuneration: Executive Director (a) Total Remuneration: Directors 2020 $ 1,549,332 147,185 1,696,517 2,395,588 25,453 1,879,646 368,121 4,668,808 6,365,325 2019 $ 1,664,631 158,168 1,822,799 3,629,920 25,000 1,515,047 — 5,169,967 6,992,766 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 Equity settled security-based payments Total remuneration: Executive Key Management Personnel 6,179,703 88,123 7,763,114 101,666 2,891,305 2,864,008 675,161 — 9,834,292 10,728,788 a) The remuneration for the former Chief Executive Officer and Managing Director, Michael (Mick) McCormack to 5 July 2019 and current Chief Executive Officer and Managing Director, Rob Wheals from 6 July 2019, are included in both the remuneration disclosure for Directors and Executive Key Management Personnel. In addition Mr McCormack is entitled to his outstanding reference units, due to be paid in August 2021, August 2022 and August 2023, with a total value of $3,632,979 (based on a VWAP of $11.1579). 17. Remuneration of external auditor Amounts received or due and receivable by Deloitte Touche Tohmatsu for: Audit or review of the financial reports Group Total audit or review of the financial reports Statutory assurance services required by legislation to be provided by the auditor ASIC Compliance plan audit Total statutory assurance services required by legislation to be provided by the auditor Total remuneration of external auditor 18. Related party transactions 2020 $ 6,300 6,300 6,000 6,000 12,300 2019 $ 6,100 6,100 5,800 5,800 11,900 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 (2019: 100% owned by APT Pipelines Limited). APA GROUP I ANNUAL REPORT 2020 139 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 18. Related party transactions (continued) 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 $852,000 are owing from a subsidiary of APT for amounts due under a finance lease arrangement (2019: $813,000); — non-current receivables totalling $6,073,000 are owing from a subsidiary of APT for amounts due under a finance lease arrangement (2019: $6,925,000); and — non-current receivables totalling $798,252,000 (2019: $879,183,000) are owing from a subsidiary of APT for amounts due under inter-entity loans. Australian Pipeline Limited Management fees of $1,426,000 (2019: $1,142,000) 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 $1,426,000 (2019: $1,142,000) were reimbursed by APT. 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 2020 $000 2019 $000 852 911,704 912,556 25 25 813 993,487 994,300 25 25 912,531 994,275 887,845 24,686 — 912,531 53,021 — 53,021 964,219 30,056 — 994,275 65,070 — 65,070 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. 140 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 Other 20. Adoption of new and revised Accounting Standards Standards and Interpretations affecting amounts reported in the current period (and/or prior periods) The company has adopted the following new standards on their applicable start date. Standard/Interpretation AASB 16 'Leases' (AASB 16) Effective for annual reporting periods beginning on or after Adoption date 1 January 2019 1 July 2019 AASB 16 replaces AASB 117 'Leases' and related interpretations. As the Consolidated Entity is a lessor only, the new standard does not have a material impact on the consolidated financial statements. The Consolidated Entity’s accounting for leases as a lessor remains unchanged under AASB 16. Standards and Interpretations issued not yet adopted At the date of authorisation of the financial statements, the Standards and Interpretations on issue but not yet effective are not expected to have material impact on the Consolidated Entity's accounting policies or any of the amounts recognised in the financial statements. 21. Events occurring after reporting date On 26 August 2020, the Directors declared a final distribution for the 2020 financial year of 6.73 cents per unit ($79.4 million). The distribution represents a 2.09 cents per unit unfranked profit distribution and 4.64 cents per unit capital distribution. The distribution will be paid on 16 September 2020. As at the time of reporting, the developing and uncertain situation in respect of COVID-19 pandemic continues to be closely monitored by management and the directors of the Consolidated Entity. Nothing has come to the attention of the Consolidated Entity that would require adjustment to or additional disclosure in theses financial statements as a result of any recent COVID-19 developments. 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 I ANNUAL REPORT 2020 141 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 2020 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 Debra Goodin Director Sydney, 26 August 2020 142 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 26 August 2020 The Directors Australian Pipeline Limited as responsible entity for APT Investment Trust Level 25, 580 George Street Sydney NSW 2000 Dear Directors AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo AAuussttrraalliiaann PPiippeelliinnee LLiimmiitteedd aass rreessppoonnssiibbllee eennttiittyy ffoorr AAPPTT IInnvveessttmmeenntt TTrruusstt In accordance with section 307C of the Corporations Act 2001, we are 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 partners for the audit of the financial statements of APT Investment Trust for the financial year ended 30 June 2020, we declare that to the best of our 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 faithfully DELOITTE TOUCHE TOHMATSU Jamie Gatt Partner Chartered Accountants Taralyn Elliott Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Organisation. APA GROUP I ANNUAL REPORT 2020 143 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee UUnniitthhoollddeerrss ooff AAPPTT IInnvveessttmmeenntt TTrruusstt RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt OOppiinniioonn 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 2020, 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 2020 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. BBaassiiss ffoorr OOppiinniioonn 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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 Organisation. 144 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 OOtthheerr IInnffoorrmmaattiioonn 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 2020, 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. RReessppoonnssiibbiilliittiieess ooff tthhee DDiirreeccttoorrss ffoorr tthhee FFiinnaanncciiaall RReeppoorrtt 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. AAuuddiittoorr’’ss RReessppoonnssiibbiilliittiieess ffoorr tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt 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. APA GROUP I ANNUAL REPORT 2020 145 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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, actions taken to eliminate threats or safeguards applied. DELOITTE TOUCHE TOHMATSU Jamie Gatt Partner Chartered Accountants Sydney, 26 August 2020 Taralyn Elliott Partner Chartered Accountants Sydney, 26 August 2020 146 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 20 August 2020). No. of securities 287,140,276 204,953,023 152,943,599 94,230,054 23,736,639 21,944,806 10,882,525 9,833,274 5,770,434 4,891,132 4,868,392 4,040,000 2,711,992 2,625,000 2,077,766 2,037,968 1,980,797 1,914,679 1,900,749 1,833,060 % 24.34 17.37 12.96 7.99 2.01 1.86 0.92 0.83 0.49 0.41 0.41 0.34 0.23 0.22 0.18 0.17 0.17 0.16 0.16 0.16 Twenty largest holders HSBC Custody Nominees (Australia) Limited BNP Paribas Nominees Pty Ltd J P Morgan Nominees Australia Limited Citicorp Nominees Pty Limited Custodial Services Limited National Nominees Limited Argo Investments Limited BNP Paribas Noms Pty Ltd BKI Investment Company Limited HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited Australian Foundation Investment Company Limited Netwealth Investments Limited Australian Foundation Investment Company Limited Milton Corporation Limited HSBC Custody Nominees (Australia) Limited-GSCO ECA National Nominees Limited HSBC Custody Nominees (Australia) Limited BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd AMP Life Limited Total for Top 20 Distribution of holders Ranges 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total 842,316,165 71.39 No. of holders 129 7,492 9,744 30,057 30,070 % 0.17 9.67 12.57 38.79 38.80 No. of securities 870,869,266 150,168,308 69,673,738 77,322,136 11,860,400 % 73.81 12.73 5.91 6.55 1.00 77,492 100.00 1,179,893,848 100.00 1,702 holders hold less than a marketable parcel of securities (market value less than $500 or 44 securities based on a market price on 20 August 2020 of $11.37). Substantial holders By notice dated 10 March 2020, The Vanguard Group Inc. advised that it had an interest in 71,349,836 stapled securities, as at 4 March 2020. 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. Voting rights On a show hands, each holder has one vote. On a poll, each holder has one vote for each dollar of the value of the total interests they have in the scheme. On-market buy-back There is no current on-market buy-back. APA GROUP I ANNUAL REPORT 2020 147 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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) 2020 2019 2018 2017 2016 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 $m $m $m $m $m $m $m $m $m $m $m $m $m 2,590.6 2,129.5 1,653.9 (651.6) 1,002.4 (497.3) (187.9) 317.1 — 317.1 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 (578.9) (570.0) 939.6 (509.7) (165.1) 264.8 — 900.1 (513.8) (149.5) 236.8 — 288.0 264.8 236.8 2,094.3 1,656.0 1,330.5 (520.9) 809.7 (507.7) (122.5) 179.5 — 179.5 16,007.2 15,433.9 15,227.2 15,045.9 14,842.7 9,983.6 3,223.9 9,352.1 3,599.4 8,810.4 4,126.8 9,249.7 3,978.2 9,037.3 4,029.1 $m 1,095.9 1,012.1 1,031.6 973.9 862.4 cents cents cents % times 26.9 92.9 50.0 12.2 3.3 24.4 85.8 47.0 10.7 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 Weighted average number of securities (4) m 1,179.9 1,179.9 1,136.9 1,118.5 1,118.5 EBITDA by Segment (Excluding Significant Items) EBITDA (Continuing businesses) Energy Infrastructure East Coast: Queensland New South Wales Victoria South Australia Northern Territory Western Australia Asset Management Energy Investments Corporate costs Divested businesses $m $m $m $m $m $m $m $m $m $m 1,007.9 1,010.1 160.8 101.9 2.3 19.9 337.1 63.3 35.7 149.4 114.0 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 (75.0) (80.1) (67.9) (66.7) (86.7) — — — — — 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 FY2016 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. 148 APA GROUP I ANNUAL REPORT 2020 20 years of APA I Chairman’s Report I Managing Director’s Report I APA Board & Executive Leadership 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 FY2020 record date Final distribution FY2020 payment date Annual meeting Interim results announcement Interim distribution FY2021 record date Interim distribution FY2021 payment date 1) Subject to change. Annual Meeting Details Date: Thursday, 22 October 2020 Time: 10.00 am To be held as a virtual meeting at https://agmlive.link/APA20 Please refer to the APA Group Notice of Meeting or the APA Group website for information. 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 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. 30 June 2020 16 September 2020 22 October 2020 17 February 2021 (1) 31 December 2020 (1) 10 March 2021 (1) 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. For unclaimed or withheld distribution payments, please contact APA Group's Registry to update you bank account details. Online Information Further information on APA is available at apa.com.au, including: — Results, market releases and news — Asset and business information — Corporate responsibility and sustainability reporting — Securityholder information such as the current APA security price, distribution and tax information. Electronic Communication Securityholders can elect to receive communication electronically by registering their email address with the APA Group registry. Electing to receive annual reports electronically will reduce the adverse impact we have on the environment. Disclaimer: APA Group comprises two registered investment schemes, Australian Pipeline Trust (ARSN 091 678 778) and APT Investment Trust (ARSN 115 585 441), the securities of which are stapled together. Australian Pipeline Limited (ACN 091 344 704) is the responsible entity of Australian Pipeline Trust and APT Investment Trust. Please note that Australian Pipeline Limited is not licensed to provide financial product advice in relation to securities in APA Group. This publication does not constitute financial product advice and has been prepared without taking into account your objectives, financial situation or particular needs. Before relying on any statements contained in this publication, including forecasts and projections, you should consider the appropriateness of the information, having regard to your own objectives, financial situations and needs and seek professional advice if necessary. This publication contains forward looking information, including about APA Group, its financial results and other matters which are subject to risk factors. APA Group believes that there are reasonable grounds for these statements and whilst due care and attention have been used in preparing this publication, certain forward looking statements are made in this publication which are not based on historical fact and necessarily involve assumptions as to future events and analysis, which may or may not be correct. These forward looking statements should not be relied on as an indication or guarantee of future performance. All references to dollars, cents or ‘$’ in this presentation are to Australian currency, unless otherwise stated. EBIT, EBITDA and other “normalised” measures are non-IFRS measures that are presented to provide an understanding of the performance of APA Group. Such non-IFRS information is unaudited, however the numbers have been extracted from the audited financial statements. APA GROUP I ANNUAL REPORT 2020 149 energy. connected. From a gas transmission business in 2000. 

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