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APA GROUP ANNUAL REPORT 2021
CONTENTS
02 Chairman’s Report
04 Managing Director’s Report
06 APA Group Board
07 APA Group Executive Leadership
08 2021 Summary
AUSTRALIAN PIPELINE TRUST (ARSN 091 678 778)
10 Directors’ Report
40 Remuneration Report
56 Consolidated Financial Statements
APT INVESTMENT TRUST (ARSN 115 585 441)
119 Directors’ Report
123 Consolidated Financial Statements
143 Additional Information
144 Five Year Summary
145 Investor Information
We aspire to be world
class in everything we do.
We are APA:
Always Powering Ahead.
OUR
VISION
To be
world class
in energy
solutions
OUR
PURPOSE
To strengthen
communities
through
responsible
energy
APA GROUP ANNUAL REPORT 2021
01
01
Cover image: Julie Mackenzie
has a background in engineering
and works at APA as a Project
Manager, in our Western Australian
Infrastructure Development Division.
Julie has worked at APA for close
to ten years and says she is most
proud of the gender, age and
cultural diversity within her own
team and across APA.
This page: Badgingarra Wind
and Solar farms in WA, photo taken
by employee S Robinson.
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AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
02
CHAIRMAN’S REPORT
We aspire to be world class
in everything we do.
Our success over 21-years has been under-
pinned by our ability to be nimble in our
approach to the ever-changing needs of our
customers, Securityholders and stakeholders.
And as we look ahead, we will continue
to rapidly adapt and respond to changes
in markets and technology.
Michael Fraser Chairman
The challenges of the ongoing global
pandemic have continued to both test
and prove APA’s resilience in FY21.
The solid results we have once again
delivered in a challenging environment,
are testament to the hard work and
commitment of APA’s leadership team
and approximately 2,000 people, who
strive every day to deliver responsible
energy solutions for communities
across Australia.
FY21 Results
Our performance for the period and
confidence in APA’s long-term growth
outlook, enabled the Board to declare
a final distribution of 27 cents, taking the
FY21 distribution to 51 cents per security.
This represents a two per cent increase
on FY20 and a continuation of long term
growth in distributions to Securityholders.
We have a track record of value creation
and our objective is to deliver strong
distributions while maintaining an
appropriate level of funding for growth
and our investment grade credit rating.
In this context the Board has revised
its distribution policy to target a payout
ratio of between 60-70 per cent of
Free Cash Flow from FY22.
Strategy
The continued growth and sustainable
development of APA is a core area of
focus for the Board. Consistent with our
refreshed strategy, we are determined to
capture opportunities presented by the
energy transition, continuing to invest
in gas, electricity and renewable energy
assets while helping to unlock the energy
solutions of tomorrow. This is consistent
with our vision to be world-class in
energy solutions.
We operate in a dynamic environment
and at a time of enormous change as
coal-fired power generation is retired,
renewables penetration increases, and
the energy grid rebalances with natural
gas forecast to continue playing a critical
role in the energy transition.
Indeed, a series of events in the national
energy market in the second half of
this year, including a coal plant outage
in Queensland, flooding at Yallourn
in Victoria impacting coal powered
generation and technical issues that
impacted production at the Longford
gas plant in Victoria, along with a cold
snap, underscored the continued
and critical role of natural gas, and
APA’s gas infrastructure, in rapidly and
flexibly responding to changing energy
market dynamics.
As the energy transition accelerates,
APA is well placed to diversify and deploy
decades of knowledge and capability to
play a leading role in developing the low
emissions technologies of tomorrow, at
scale, and to support a net zero future.
Our success over 21-years has always
been underpinned by our ability to
be nimble in our approach to the
ever-changing needs of our customers,
Securityholders and stakeholders.
And as we look ahead, we will continue
to rapidly adapt and respond to changes
in markets and technology – and we will
be innovative in our approach.
Our microgrid project in Western
Australian, is a good example. Once
complete, our hybrid energy microgrid
at the Gruyere Gold Mine in Western
Australia will reduce the overall carbon
intensity of the power supply to the
mine by about 10 per cent, thanks to
the introduction of complementary
solar generation and battery storage,
alongside the mine’s reliable gas
power supply.
This is a first for APA but demand for
this kind of innovative energy solution
will grow as technology continues to
mature and develop. We are ensuring
we have the skills, capabilities and
experience to respond.
APA GROUP ANNUAL REPORT 2021 03
Assets owned and/or
operated by APA
21+BN
Distribution
per security up 2.0%
51.0
Net zero
While the global pathway to net zero
is uncertain, APA understands the
challenges and opportunities that climate
change presents both for our business
and the world, and the importance of
a lower-carbon future.
In FY21, we announced our ambition
for net zero operations emissions by
2050 and we continue to invest in new
capability to support sustainability and
climate change risk management.
We published our first Climate Change
Resilience Report, with a comprehensive
analysis of our current asset portfolio
under three divergent climate scenarios
to 2050, including a 1.5C pathway.
We also developed a Climate Change
Management Framework and established
an enterprise-wide Net Zero & Climate
Transformation Program to evaluate
and plan our pathway towards our
net zero goal.
In the year ahead, we will publish
transparent, interim targets that will
help guide our way forward towards
our net zero ambition.
Annual Meeting
The outbreak of the Delta strain of
COVID-19 in Sydney and in other parts of
Australia looks set to significantly impact
our original plans to hold this year’s
Annual Meeting in a hybrid format, which
would have allowed Securityholders to
attend virtually or in person.
Accordingly, in the interests of having
planning certainty and to ensure
the health and safety or our people,
Securityholders and guests, the Board
has resolved that we will again hold a
fully virtual meeting for FY21.
With the vaccination program now
gathering pace, we very much look
forward to returning to a more ‘normal’
format in 2022 and appreciate
the understanding and support of
Securityholders.
FY22 outlook
Turning now to APA’s FY22 outlook.
Despite the ongoing challenges of the
pandemic, with our newly refreshed
strategy now in place, the Board is
confident in the strong financial and
operational position of APA.
Rob and the APA team are now very
much in execution mode, supported
by a strong balance sheet and the
right capabilities to ensure APA
achieves its vision to be world class
in energy solutions.
Reflecting that confidence, total
distributions for FY22 are expected to
be 53 cps, 3.9% higher than FY21.
On behalf of the Board, thank you to our
Securityholders, customers, communities
and employees for their ongoing support
of your business and our commitment
to strengthening communities through
responsible energy.
Michael Fraser
Chairman
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
04
MANAGING DIRECTOR’S REPORT
We are APA:
Always Powering Ahead.
As we mark our milestone twenty-first
birthday, we celebrate the successes
that have made APA what it is today and
look to the future with confidence in our
people, our capability and our strategy
to keep APA Always Powering Ahead.
Rob Wheals Chief Executive Officer and Managing Director
Our strategy
June 13 this year marked 21-years since
our business was formed and listed on
the Australian Securities Exchange (ASX).
We marked this milestone with our
refreshed corporate strategy and a
refresh of our branding, bringing to
life the APA initials (“Always Powering
Ahead”) in a new way that reflects our
people, our purpose and our vision –
it demonstrates our collective ambition
to be impactful in everything we do.
Our refreshed strategy is strongly aligned
to our purpose and vision and will
better enable APA to capture the vast
opportunities ahead to grow our business,
as the energy transition accelerates.
This includes investing in contracted
and regulated energy infrastructure in
Australia and North America, leveraging
our infrastructure capabilities into next
generation energy technologies and,
most importantly, ensuring that we are
well placed to respond to the changing
needs of our customers and communities,
while maintaining our investment
discipline and balance sheet strength.
We are now firmly in execution mode,
with the benefit of the strong foundations
we have laid over the past two decades
and the skills and capabilities we have
accumulated over that time, which will
drive our success.
Health, Safety and Wellbeing
While we continue to be future-focused,
the health, safety and wellbeing of
our people will always be our top
priority. While we made meaningful
improvements in our safety record in
FY21, largely due to safety performance
improvement in our contractor workforce,
we still have work to do to ensure that
everyone that attends one of our sites
goes home safely.
The ongoing response to the COVID-19
pandemic, which has included
lockdowns, border closures and health
restrictions that have been necessary to
respond to outbreaks of the virus, has
of course continued to challenge our
people, our business and the nation.
I am enormously proud of how our
people have continued to adapt and
respond to the often rapidly changing
environments in which we work, and
thank them for their commitment and
resilience through it all.
We are actively encouraging all APA staff
to get vaccinated as soon as they can, and
we continue to offer support and flexibility
to our employees so we can help do our
bit to get to the other side of this chapter.
Performance and growth
APA’s success and growth has always
been underpinned by our strong focus on
people, communities and customers.
This year has been no different. APA has
again delivered a solid set of results in
challenging market conditions, confirming
the resilience of APA’s business model.
Total revenue (excluding pass-through
revenue) was up 0.7% compared with
the previous year (FY20: $2129.5 million)
while earnings before interest, tax,
depreciation and amortisation (EBITDA)
of $1,633 million was consistent with our
FY21 guidance but down 1.3% compared
with the prior year (FY20: $1653.9
million). This was in part due to softer
recontracting and investments we
have made in strategic development
opportunities, as well as building our
capability, which we expect will support
ongoing growth into the future.
Net profit after tax, at $3.7 million
(FY20: $317.1 million), was impacted
by significant items including the
$249.3 million non-cash Orbost
impairment charge we disclosed at the
half year and costs associated with our
debt refinancing activities that occurred
in March 2021. The Orbost impairment
charge reflected the increased capital
expenditure and reassessment of the
plant’s future cash flows following
commissioning work during the year.
As we advised Securityholders at our
Investor Day in May, consistent with our
peers, we will be limiting our earnings
guidance only to distributions going
forward, in part owing to the challenges
of providing accounting-based guidance
which can be heavily influenced by
unforeseen changes to accounting
standards and other non-cash impacts
during the year.
Free Cash Flow of $901.9 million was
down 5.7% (FY20: $956.6 million), largely
as a result of non-recurring items that
benefitted the prior period.
The debt refinancing activities delivered a
stronger ongoing balance sheet and has
significantly reduced our ongoing interest
costs, improving our future cash returns.
Our ongoing investment in new
development opportunities is key to
driving sustainable growth. We made
strong progress with our development
pipeline during the year, which has
grown to now exceed $1.3 billion. This
has been driven by a number of projects,
such as our east coast grid expansion
project that will increase capacity by up
to 25 per cent, linking Queensland with
the southern markets.
APA GROUP ANNUAL REPORT 2021 05
1.3BN
Organic growth capex expected
to exceed $1.3 billion over FY22-24,
up from $1.0 billion at 1H21
Through this expansion, APA is playing
a critical role in delivering much needed
additional energy security for southern gas
markets ahead of forecast supply risks.
This year we also announced a significant
new east coast grid transportation
agreement. Importantly, this will support
our customer’s energy needs in the
southern markets, including winter peak
demand and ahead of projected potential
2023 supply risks. Under this agreement
our customer could meet over half of
NSW’s winter demand.
We remain confident about our long
term growth prospects given the role of
gas as a source of timely, cost effective
and secure energy and as an essential
companion to variable renewable energy.
Pathfinder and the energy transition
Gas infrastructure will also be key to
enabling the transportation and delivery
of new clean fuel technologies, like
hydrogen and biogas, as the energy
transition accelerates
In FY21, we announced our Pathfinder
program, through which APA will seek out
opportunities to extend our core business
through innovation, technology and new
energy opportunities – unlocking the
new technology solutions of tomorrow
and repurposing our existing gas
infrastructure.
The first project under the new initiative
is investigating the conversion of a
section of gas pipeline in Western
Australia to be 100 per cent hydrogen-
ready. While there is more work to do,
the early testing results are positive and if
successful, this would make the Parmelia
Gas Pipeline one of only a few existing
gas transmission pipelines in the world,
100 per cent hydrogen-ready.
Together with our ongoing investment
focus in renewable energy, we are
confident in our ability to support the
accelerated deployment of low emissions
technologies and to help to steer
Australia’s energy transition towards
a net zero pathway.
During FY21, we continued to invest in
new capability to support sustainability
and climate risk management to help the
business both respond to and seize the
opportunities from the energy transition.
Importantly, this includes strengthening
our commitment and approach to
sustainability, with a new Sustainability
Roadmap, now in place to guide our
direction, focus and ambition. As part
of this, we have also developed a Net
Zero Climate Management Plan for
net zero operations emissions by 2050.
Customer and community engagement
While we have clearly identified our
pathway to achieving our growth
agenda, listening to our customers
and stakeholders and responding
to their needs is key to our purpose
to strengthen communities through
responsible energy.
We understand that the expectations
of our customers, communities and
Securityholders are also evolving and
we are determined to deliver ever-better
outcomes when it comes to our
environmental, social and governance
performance, consistent with our
purpose and vision.
This year we launched an industry
leading Stakeholder Advisory Panel
initiative, providing a forum for APA to
share what it is doing with stakeholders
and the broader community, as well
as gain insights from them about their
interests, concerns and expectations.
2.2BN
Refinancing activity that
lower interest cost and
strengthened balance sheet
The panel comprises senior
representatives from a range of
high-profile and diverse Australian
organisations and will essentially act
as a sounding board to APA on policy
matters, strategic programmes and
plans as well as identifying additional
matters that panel members consider
of importance to their stakeholders.
We are thrilled with the response to this
initiative and we look forward to taking
the feedback we receive and apply this
to further strengthening our communities
through responsible energy.
Conclusion
This year, we have welcomed Jane
Thomas as our Group Executive
People, Safety and Culture. Jane is an
experienced human resources executive
and business leader, having held senior
roles in large organisations in the
banking, resources and energy sectors.
We also welcomed Adam Watson as our
Chief Financial Officer, whose career has
spanned finance, corporate development,
strategy, technology and customer
operations in the infrastructure, transport,
manufacturing and services sectors.
Finally, I would like to take this opportunity
to thank Securityholders for your ongoing
support for APA. With our new strategy
now in execution, I believe we are in a
very strong position to continue creating
value and growth to ensure APA remains
Always Powering Ahead.
Rob Wheals
Chief Executive Officer and
Managing Director
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
06
APA GROUP BOARD
1
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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.
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 under-
standing 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 Global
Valve Technology Limited
and a Director of SCA
Property Group.
He was formerly Chairman
of nib holdings limited,
Adelaide Managed Funds
Limited and Investa Property
Group Limited and Taronga
Conservation Society
Australia, 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.
4
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
convenor of the Champions
of Change Coalition.
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, Environment and
Heritage Committee.
5
Debra (Debbie) Goodin
BEc FCA MAICD
Independent Director
Appointed 1 September 2015
Debbie is an experienced
Non-Executive Director
and Chairman of both listed
and unlisted corporates.
She is currently a Chairman
of Atlas Arteria Limited,
and a Director and Audit
Committee Chairman of
Australia Pacific Airports
Corporation Limited as an
IFM owner’s representative.
She was formerly a Director
of oOh!media Limited, Senex
Energy Limited and Ten
Network Holdings Limited.
Debbie 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,
Environment and Heritage
Committee and a member of
the Nomination Committee.
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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 Alumina Limited,
Venturex Resources
Limited and NBN Co
Limited. She was formerly
Deputy Chair of CSIRO, a
Non-Executive Director of
Northern Star Resources
Limited, 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,
Environment and Heritage
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 and Datacom.
She is also an advisor to
the Board of Agility CIS,
an energy billing solutions
provider. 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,
Environment and Heritage
Committee and a member
of the People and
Remuneration Committee.
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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. He is formerly a
Non-Executive Director of
Alcoa of Australia Limited,
AWA Brazil Limitada,
AWAC LLC, Alumina
Limited and the privately
held GHD Group.
Peter is the Chair of the
People and Remuneration
Committee and a member
of the Audit and Risk
Management Committee.
APA GROUP ANNUAL REPORT 2021 APA GROUP EXECUTIVE LEADERSHIP
07
2
3
4
5
6
7
8
1
1
Nevenka Codevelle
BCom LLM GAICD
Group Executive
Governance and External
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.
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
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.
Jane joined APA Group
in May 2021, she is a
highly experienced and
respected HR executive
and business leader who
has driven transformational
change in top ASX
companies including
Westpac, Newcrest Mining
and AGL, and in industries
spanning energy, mining,
banking and finance, fast
moving consumer goods,
retail and manufacturing.
8
Adam Watson
BBus FCPA GAICD
Chief Financial Officer
Adam 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
finance, real estate and
procurement, and investor
relations.
Adam has over 20
years’ experience in
executive and senior
leadership roles in the
transport, infrastructure,
manufacturing and
services industries, in
Australia, China and the
United States.
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.
3
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.
4
6
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.
5
Julian Peck
BCom
Group Executive Strategy
and Commercial
Julian is 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.
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.
7
Jane Thomas
BBus LLB (Hons) MPsychol (org)
GAICD Fellow AHRI
Group Executive People,
Safety and Culture
Jane is responsible for
managing APA Group’s
People, Safety and Culture
division. This covers
APA’s health, safety,
environment and heritage
systems; remuneration and
benefits; performance and
organisational capability;
talent management,
learning and leadership
development; workforce
planning and resourcing;
diversity and inclusion;
change management; and
HR admin and reporting.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
08
powering
our way of life
2021 SUMMARY
Secured
600M
In organic growth
opportunities in FY21,
pipeline now exceeds
$1.3bn from FY22 to FY24
2.2BN
Refinancing activity delivering
sustainable Free Cash
Flow accretion and further
strengthening our balance sheet
PATHFINDER
PROGRAM
Launched to deliver
new next generation
energy solutions
SAFETY
PERFORMANCE
Improved our safety
performance and
maintained reliable
operations
EMPLOYER
OF CHOICE
APA recognised
as Top 100
Graduate Employer
NET ZERO
Ambition to
achieve Net Zero
operations emissions by 2050
APA GROUP ANNUAL REPORT 2021 UNDERLYING (1) BUSINESS PERFORMANCE
4
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F
Underlying
EBITDA (2)
($m)
Free cash flow (3)
($m)
Total assets
($b)
Revenue excl.
pass-through (4)
($m)
Free cash flow
per security (5)
(cents)
Distributions
per security
(cents)
FINANCIAL RESULTS
Revenue
Revenue excluding pass-through (4)
Underlying EBITDA (2)
Total reported EBITDA
Profit after tax including significant items
Profit after tax excluding significant items
Free cash flow (3)
Financial position
Total assets
Total drawn debt (7)
Total equity
Financial ratios
Free cash flow per security (cents)
Earnings per security (cents) including significant items
Earnings per security (cents) excluding significant items
Distribution per security (cents)
Distribution payout ratio (%)
FFO/Debt (%)
FFO/Interest (times)
30 June 2021
30 June 2020 (6)
Changes
2,605.0
2,144.5
1,633.0
1,643.0
3.7
281.8
901.9
14,742.9
9,665.8
2,969.2
76.4
0.3
23.9
51.0
66.7
11.3
3.1
2,590.6
2,129.5
1,653.9
1,656.0
311.8
311.8
956.6
15,994.3
9,983.6
3,214.9
81.1
26.4
26.4
50.0
61.7
12.2
3.3
0.6%
0.7%
(1.3%)
(0.8%)
(98.8%)
(9.6%)
(5.7%)
(7.8%)
(3.2%)
(7.9%)
(5.7%)
(98.9%)
(9.5%)
2.0%
8.2%
(7.4%)
(6.1%)
1) Financial results exclude significant items.
2) Underlying Earnings before interest, tax, depreciation, and amortisation ("EBITDA") excludes recurring items arising from other activities, transactions that
are not directly attributable to the performance of APA Group's business operations and significant items.
3) Free cash flow is operating cash flow less SIB capex (SIB capex includes operational assets lifecycle replacement costs and technology lifecycle costs).
4) Pass-through revenue is revenue on which there is no margin earned and is offset by corresponding pass-through costs.
5) On 23 March 2018, APA Group issued 65,586,479 new ordinary securities, resulting in total securities on issue of 1,179,893,848. The weighted average
numbers of securities from FY18 to FY17 have been adjusted to account for that rights issue.
6) FY20 is restated as a result of change in the APA Group's accounting policy following the IFRS Interpretations Committee's ("IFRIC") Agenda Decision
published in April 2021 related to accounting for Software-as-a-Service ("SaaS") arrangements.
7) 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
10
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 2021. 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
First appointed
Michael Fraser
Robert (Rob) Wheals
Steven (Steve) Crane
James Fazzino
Debra (Debbie) Goodin
Shirley In’t Veld
Rhoda Phillippo
Peter Wasow
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
The Company Secretaries of the Responsible Entity during the year and since the year end are Nevenka Codevelle and Amanda Cheney.
2. State of Affairs
On 16 November 2020, Adam Watson commenced as APA’s Chief Financial Officer, as a result of Peter Fredricson’s retirement on
31 December 2020.
3. Subsequent Events
On 25 August 2021, the Directors declared a final distribution of 27.0 cents per security ($318.6 million) for APA Group, consistent
with the previous corresponding period (FY20 final distribution: 27.0 cents per security). This is comprised of a distribution of
18.63 cents per security from APT and a distribution of 8.37 cents per security from APTIT. The APT distribution represents a
18.63 cents per security capital distribution. The APTIT distribution represents a 1.67 cents per security profit distribution and a
6.70 cents per security capital distribution. The distribution is expected to be paid on 15 September 2021.
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 2021 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 Securities Exchange (ASX) listed energy infrastructure business. APA owns and/or manages and operates
a diverse, $21 billion portfolio of gas, electricity, solar and wind assets. Consistent with APA’s purpose to strengthen communities
through responsible energy, APA delivers about half of the nation’s gas use and connects Victoria with South Australia and New
South Wales with Queensland through investments in electricity transmission assets. APA is also one of the largest owners and
operators of renewable power generation assets in Australia, with wind and solar projects across the country.
During the period, APA celebrated its 21st birthday, marking the day that the business formed and listed on the ASX under the name
Australian Pipeline Trust. Together with the refresh of the corporate strategy, this milestone provided a timely opportunity to refresh
the APA brand and to transform the ‘APA’ initials into the acronym: Always Powering Ahead.
Since listing on 13 June 2000, APA’s market capitalisation has increased almost 21-fold to $10.5 billion (1), and is now one of Australia’s largest
listed companies. It has achieved securityholder returns of 15.1% (2) per annum on an annual compounding basis since listing to 30 June 2021.
1) Market capitalisation as at 30 June 2021.
2) Total securityholder return is the capital appreciation of APA’s security price, adjusted for capital management actions (such as security splits and
consolidations) and assuming reinvestment of distributions at the ex-distribution rate per security. Figures quoted are sourced from Refinitiv Eikon.
APA GROUP ANNUAL REPORT 2021
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
11
4. About APA continued
4.3 APA assets and operations
APA’s assets and operations are reported in three principal business segments:
– Energy Infrastructure includes all of APA’s
– Asset Management provides
– Energy Investments includes APA’s
wholly or majority owned gas pipelines, gas
storage, gas compression, gas processing
assets and gas-fired and renewable energy
power generation assets;
commercial, operating services and/
or asset maintenance services to
APA’s energy investments and third
parties for appropriate fees; and
strategic stakes in a number of investment
vehicles that house energy infrastructure
assets, generally characterised by long-
term secure cash flows, with low ongoing
capital expenditure requirements.
APA’s portfolio of assets and investments
APA Group asset
APA Group distribution network asset
APA Group investment
Investment distribution network
APA Group managed asset (not owned)
Managed distribution network
Other natural gas pipelines
Wind farm
Gas storage facility
Solar farm
Gas processing plant
LNG plant
Gas power station
Integrated Operations Centre
18
31
19
Kalgoorlie
Yarmana
20
21
Tropicana
23
22
Kalgoorlie
24
27
25
26
Perth
Energy Infrastructure
Length (1)
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
8 Thompson Power Station
9 Moomba Sydney Pipeline
10 Moomba to Sydney Ethane Pipeline
11 Central West Pipeline
12 Central Ranges Pipeline and
12 Tamworth Gas Network
583 km
944 km
112 km
936 km
556 km
49 km
110 MW
242 MW / 60 MW
22 MW
2,029 km
1,375 km
255 km
295 km
~260 km of gas mains,
~4,000 gas consumer connections
1,847 km
13 Victorian Transmission System
14 Dandenong LNG Storage Facility
12,000 tonnes
15 Orbost Gas Processing Plant (2) (& connection pipeline) 12 km / ~45 TJ/d
45 km
16 SESA Pipeline
1,661 km
17 Amadeus Gas Pipeline (including Laterals)
(gas distribution)
Energy Investment
Interest Detail
Darwin
31
Katherine
17
31
Mount Isa
8
2
Alice Springs
33
Moomba
32
31
29
16
Adelaide
4
6
Roma
Wallumbilla
7
Gladstone
31
5
3
Brisbane
1
28
31
31
IOC
Tamworth
12
Dubbo
11
Lithgow
Griffith
Sydney
9
10
13
Albury
Canberra
14 15
Bendigo
Ballarat
30
Melbourne
18 Pilbara Pipeline System
19 Goldfields Gas Pipeline (88.2%)
20 Yamarna Gas Pipeline
21 Gruyere Power Station
22 Eastern Goldfields Pipeline
23 Kalgoorlie Kambalda Pipeline
24 Mid West Pipeline (50%)
25 Mondarra Gas Storage and Processing Facility
26 Parmelia Gas Pipeline
27 Emu Downs Wind Farm
27 Emu Downs Solar Farm
27 Badgingarra Wind Farm
27 Badgingarra Solar Farm
249 km
1,652 km
198 km
45 MW
298 km
44 km
362 km
18 PJ
448 km
80 MW
20 MW
130 MW
19 MW
20% Gas distribution: Allgas Gas Network ~3,900 km of gas mains, ~117,000 gas consumer connections in QLD and NSW
28 GDI (EII)
29 South East Australia Gas Pty Ltd 50% Gas pipeline: 687 km SEA Gas Pipeline
30 SEA Gas (Mortlake) Partnership 50% Gas pipeline: 83 km Mortlake Gas Pipeline
31 Energy Infrastructure
19.9% Gas pipelines: Telfer/Nifty Gas Pipelines and lateral (488 km); Bonaparte Gas Pipeline (286 km);
Investments
Wickham Point Pipeline (12 km)
Electricity transmission cables: Murraylink (180 km) and Directlink (63 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)
32 EII2
32 Australian Gas Networks
20.2% Wind generation: North Brown Hill Wind Farm (132 MW), SA
Nil Gas distribution: ~25,700 km of gas mains and pipelines, ~1.4 million gas consumer connections,
~1,400 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
12
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
4. About APA continued
4.4 APA’s strategy
In FY21, APA refreshed its strategy to create a stronger alignment with its purpose and vision. The strategy enables APA to capture
the vast opportunities to invest in contracted and regulated energy infrastructure in our target markets of Australia and North
America. APA estimates that the investment opportunities in these target markets is in excess of US$2.8 trillion over the next 40
years across renewable energy, firming and storage, gas pipelines and electricity infrastructure.
Strategy aligned to purpose and vision and unlocks the vast opportunities as the energy market transitions
– Invest in gas, electricity and renewables infrastructure (contracted and regulated) in Australia and North America
– Leverage our energy infrastructure capabilities into next generation energy technologies (Pathfinder Program)
– Respond to the changing needs of our customers and communities
– Maintain disciplined investment, securityholder returns and maintain a strong balance sheet (including BBB/Baa2 credit ratings)
At the same time, as the energy transition continues to gather pace, the strategy also positions APA to play a leading role by
leveraging the skills and capabilities in its core portfolio, into new markets and to develop the energy solutions of tomorrow. This is
consistent with APA’s vision to be world class in energy solutions and will ensure APA continues to respond to the changing needs
of the customers and the communities it serves, to deliver responsible energy solutions.
Importantly, at the core of the refreshed strategy remains a commitment to maintaining disciplined investment, securityholder returns
and balance sheet strength.
4.5 Ambition to achieve net zero operations emissions by 2050
APA understands the challenges and opportunities that climate change presents both for its business and for the long-term
prosperity of the Australian economy and community. APA supports the global transition to a lower-carbon future consistent with the
Paris Agreement goals and has set an ambition to achieve net zero operations (scope 1 and 2) emissions by 2050.
This is an ambitious target and continues the progress towards a sustainable future, sending a clear message to investors, customers
and the community about APA’s commitment to playing its part towards decarbonisation.
The ambition to achieve net zero emission follows the publication of our Climate Change Position Statement. Scenario analysis and
resilience testing of APA’s existing portfolio of assets and operations, including a 1.5° celsius scenario confirmed that APA’s current
asset portfolio remains robust under each of the modelled scenarios.
During FY21, APA has also taken steps to strengthen our engagement in industry research and advocacy, including involvement in
the Australian Industry Energy Transition Initiative (ETI). APA has joined this research initiative with a number of leading Australian
companies, who are working together to decarbonise industry supply chains across hard-to-abate sectors. APA’s CEO and Managing
Director has also recently joined the Climate Leaders’ Coalition as part of a commitment to working with suppliers and customers to
encourage them to reduce their greenhouse gas emissions.
As APA progresses towards a sustainable future, it has developed a Climate Management Framework with a commitment to develop
interim targets, and actions to achieve those targets, for publication in FY22. The Climate Management Plan Framework identifies
five priority areas which will incorporate the interim targets:
– Reduce and Avoid: Optimise scope 1 and 2 emissions reduction opportunities throughout APA’s asset portfolio and avoid
emissions during Front End Engineering Design (FEED) and construction;
– Innovate: Leverage technology initiatives, partnerships and other innovations to advance progress towards net zero, build
readiness and support reduction and avoidance initiatives;
– Invest: The net zero ambition is embedded in APA’s portfolio strategy and capital allocation decision-making, planning and valuation;
– Robust: The approach is built on strong foundations of governance, risk management, reward and recognition, and quality data,
modelling and measurement; and
– Responsible: Take a responsible and transparent approach in our disclosure, public policy engagement and the way in which
APA integrates and implements its approach to climate.
4.6 North America strategy update
The United States of America remains a highly attractive market for APA and entry into that market remains core to our strategy.
There are almost 72 million households and 5.5 million businesses that use natural gas, consuming nearly 30 times more than
Australia and through to 2040, market forecast suggests there are more than US$2.7 trillion of investment opportunities across gas
infrastructure, renewables and firming and electrification.
While the outbreak of COVID-19 contributed to a challenging and generally subdued transaction environment in 2020, APA
continues to develop a deep understanding of the market and will continue its disciplined approach to ensure any investment
outcomes are consistent with our purpose and strategy and deliver value for all our stakeholders.
APA GROUP ANNUAL REPORT 2021 13
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
4. About APA continued
4.6 North America strategy update continued
The US remains highly attractive
– Cold winter climate regions
– Stable and predictable earnings
– Supportive policy, legislative and regulatory regimes
– Ability to leverage APA's existing capabilities in owning, operating and developing energy infrastructure
– Low cost energy sources
– Attractive returns on equity
– Capacity to expand into growth energy markets
4.7 Pathfinder Program
During FY21, APA established the Pathfinder program to ensure appropriate focus was given to long term energy infrastructure
opportunities. Pathfinder has an initial focus on clean molecules, storage and micro grid solutions, supporting pilot projects, equity
investments and research and development.
A number of initiatives are already underway including a landmark hydrogen pilot project to enable the proposed conversion of
43-kilometres of the Parmelia Gas Pipeline in Western Australia into Australia’s first 100 per cent hydrogen-ready transmission pipeline.
APA has also joined the Hunter Hydrogen Network (H2N), a large-scale hydrogen production, transportation and export project
that proposes to enable the development of the hydrogen economy in the Hunter Valley, in partnership with hydrogen users and
exporters. The proposal is looking at opportunities to create a ‘hydrogen valley’ around the renewable energy resources of the
Central West, New England, and the Hunter-Central Coast renewable energy zones.
4.8 APA’s Sustainability Roadmap
Sustainability Roadmap launched
In FY21, APA developed a comprehensive, three-year Sustainability Roadmap to create a step-change in the way the business
approaches sustainability.
Under the Sustainability Roadmap, APA will:
– Create a three-year framework to build strong foundations from which to springboard to sector-leading outcomes
– Test and evolve approach and the outcomes that matter most to all stakeholders
– Support accountability with clear, meaningful and measurable goals and outcomes, with a scorecard that will expand over time
– Build credibility by aligning to and participating in recognised frameworks, benchmarks, standards and alliances
– Build engagement with and ownership of outcomes across the business
A stakeholder-centric materiality assessment was conducted to identify the core sustainability-related issues that APA should be
focussed on. The process, which was based on internationally recognised sustainability frameworks and included scanning of
external fast-moving issues and trends, included: peer and customer benchmarking; stakeholder consultation with customers,
investors and debt providers; and reviewing feedback from consumers, communities and insurance providers to confirm which
APA-related issues are important to them.
More details on the Sustainability Roadmap and APA’s sustainability efforts can be found in the FY21 APA Sustainability Report
and in section 10.
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 ‘underlying’ measures.
APA has delivered a solid set of results for FY21 given the challenging market conditions. Total revenue (excluding pass-through) in
FY21 increased by $15.0 million to $2,144.5 million, an increase of 0.7% on the previous corresponding period (FY20: $2,129.5 million).
This increase is largely due to a part year contribution from the Orbost Gas Processing Plant.
APA’s underlying EBITDA of $1,633.0 million and total reported EBITDA (1) of $1,643.0 million are within APA’s FY21 EBITDA (1)
guidance range of $1,625 million to $1,665 million. The Underlying EBITDA represents a decrease of 1.3% or $20.9 million relative
to the previous corresponding period of $1,653.9 million. Total reported EBITDA (1) represents a decrease of 0.8% or $12.3 million
relative to the previous corresponding period of $1,656.0 million.
Underlying EBITDA was lower overall due to softer contract renewals on East Coast, particularly in Queensland and NSW, and higher
corporate costs largely due to investments in strategic growth opportunities and investments to further strengthen APA’s capability.
Gas demand in Victoria was impacted by a temporary reduction in energy consumption with lower gas volume consumed across
industrial users. This decrease was partly offset by continued strong demand in the Western Australian Goldfields mining region,
increased earnings from Power Generation assets, higher customer contributions to asset relocations in Northern Territory and Western
Australia, and part year contribution from the Orbost Gas Processing Plant which started contributing revenue since August 2020.
1) Excludes significant items.
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14
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
5. Financial Overview continued
Profit after tax including significant items of $3.7 million reduced significantly (FY20: $311.8 million) due to a non-cash impairment of
$249.3 million recognised against the Orbost Gas Processing Plant and one-off finance costs of $148.0 million associated with bond
note redemptions during the period. Excluding significant items, APA generated a profit after tax of $281.8 million.
On 18 February 2021, APA recognised a non-cash impairment of $249.3 million on the Orbost Gas Processing Plant. The impairment
reflects increased capital expenditure and reassessment of the plant’s future cash flows following commissioning work. APA had
moderated its view based on the increased capital cost to improve plant performance and lower than assumed revenue. This was
based on current production rates and higher operating costs due to foaming and fouling in the sulphur recover unit.
Net interest and other finance costs excluding significant items decreased in FY21 by 0.6% to $504.8 million.
In March 2021, APA undertook a Liability Management exercise which involved the refinancing of $2.2 billion worth of capital markets
debt that was maturing in calendar year 2022. The exercise resulted in one-off costs of $148.0 million associated with the bond note
redemptions, recognised as a significant item. Despite this cost, the transaction was structured to be value accretive, lowering APA’s
ongoing interest and funding costs and extending the average tenor of debt from 6.4 years in FY20 to 7.8 years.
Depreciation and amortisation expenses increased by 3.6% to $674.4 million, due to an increase in the depreciable asset base.
On 25 August 2021, the Directors announced a final distribution of 27.0 cents per security, which takes APA’s FY21 total distributions
to 51.0 cents per security. This represents an increase of 2% or 1.0 cents, over the FY20 distributions of 50.0 cents per security.
APA revised its distribution policy during FY21 to a target payout ratio of approximately 60% to 70% of Free Cash Flow. The revised
distribution policy ensures that maintenance (stay-in-business) capex is fully funded while supporting an appropriate level of funding
for organic growth capex.
The following table provides a summary of key financial data for FY21.
30 June 2021
$000
30 June 2020
$000 (1)
Changes
$000
%
Total revenue
Pass-through revenue (2)
Total revenue excluding pass-through
Underlying EBITDA (3)
Fair value gains on contract for difference
SaaS configuration and customisation costs
Total reported EBITDA (3)
Depreciation and amortisation expenses
Underlying EBIT (3)
Finance costs and interest income
Significant items
Impairment of property, plant and equipment
Interest charge on bond note redemptions
Profit before income tax
Income tax (expense) / benefit
Profit after tax including significant items
Profit after tax excluding significant items
Free cash flow (4)
Free cash flow per security (cents)
Earnings per security including significant items (cents)
Earnings per security excluding significant items (cents)
Distribution per security (cents)
Distribution payout ratio (%) (5)
Weighted average number of securities (000)
Numbers in the table may not add up due to rounding.
2,605,013
460,465
2,144,548
1,632,975
18,018
(7,957)
1,643,036
(674,370)
968,666
(504,779)
(249,322)
(147,987)
66,578
(62,894)
3,684
281,800
901,914
76.4
0.3
23.9
51.0
66.7
1,179,894
2,590,621
461,155
2,129,466
1,653,919
10,508
(8,410)
1,656,017
(650,806)
1,005,211
(507,845)
—
—
497,366
(185,615)
311,751
311,751
956,595
81.1
26.4
26.4
50.0
61.7
1,179,894
14,392
(690)
15,082
(20,944)
7,510
453
(12,291)
(23,564)
(43,748)
3,066
(249,322)
(147,987)
(430,788)
122,721
(308,067)
(29,952)
(54,681)
(4.7)
(26.1)
(2.5)
1.0
5.0
—
0.6%
(0.1%)
0.7%
(1.3%)
71.5%
4.0%
(0.8%)
3.6%
(4.4%)
(0.6%)
—
—
(86.6%)
(66.1%)
(98.8%)
(9.6%)
(5.7%)
(5.7%)
(98.9%)
(9.5%)
2.0%
8.2%
—
1) FY20 is restated as a result of change in the APA Group's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements.
2) Pass-through revenue is revenue on which no margin is earned.
3) Excludes significant items.
4) Free cash flow is operating cash flow less SIB capex (SIB capex includes operational assets lifecycle replacement costs and technology lifecycle costs).
5) Distribution payout ratio = total distribution applicable to the financial year as a percentage of free cash flow.
APA GROUP ANNUAL REPORT 2021
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
15
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.
During FY21, APA has undertaken a review of its Energy infrastructure segment reporting to better align the reported categories with
business operations. The result was that Energy Infrastructure will now be reported in categories East Coast Gas, West Coast Gas,
Power Generation and the Wallumbilla Gladstone Pipeline. The previous report format is provided at the back of this section and
detailed historical information on the new segments will be in the supplementary information of the investor presentation. Statutory
reported revenue and underlying EBITDA performance by business segments is set out below.
30 June 2021
$000
30 June 2020
$000 (1)
Changes
$000
%
Revenue (2)
Energy Infrastructure
East Coast Gas
West Coast Gas
Wallumbilla Gladstone Pipeline
Power Generation
Energy Infrastructure total
Asset Management
Energy Investments
Other non-contract revenue
Total segment revenue
Pass-through revenue
Unallocated revenue (3)
Total revenue
EBITDA
Energy Infrastructure
East Coast Gas
West Coast Gas
Wallumbilla Gladstone Pipeline
Power Generation
Energy Infrastructure total
Asset Management
Energy Investments
Corporate costs
Underlying EBITDA
Fair value gains on contract for difference
SaaS configuration and customisation costs
768,638
328,795
552,307
339,564
1,989,304
113,755
30,921
7,438
2,141,418
460,465
3,130
2,605,013
627,468
270,824
549,651
174,621
1,622,565
80,337
30,921
(100,848)
771,504
323,176
541,588
337,454
1,973,722
112,367
35,741
4,975
2,126,805
461,155
2,661
2,590,621
648,778
271,504
538,923
170,601
1,629,807
63,343
35,741
(74,972)
1,632,975
1,653,919
18,018
(7,957)
10,508
(8,410)
(2,866)
5,619
10,719
2,110
15,582
1,388
(4,820)
2,463
55,569
(689)
469
14,392
(21,310)
(680)
10,727
4,020
(7,242)
16,994
(4,820)
(25,876)
(20,944)
7,510
453
Total reported EBITDA (4)
1,643,036
1,656,017
(12,981)
(0.4%)
1.7%
2.0%
0.6%
0.8%
1.2%
(13.5%)
49.5%
2.6%
(0.1%)
17.6%
0.6%
(3.3%)
(0.3%)
2.0%
2.3%
(0.4%)
26.8%
(13.5%)
34.5%
(1.3%)
71.5%
(5.4%)
(0.8%)
Numbers in the table may not add up due to rounding.
1) FY20 is restated as a result of change in the APA Group's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements.
2) Refer to revenue note 4 for additional disclosure on revenue streams from contracts with customers disaggregated by geographical location and major sources.
3) Interest income is not included in calculation of EBITDA but nets off against interest expense in calculating net interest cost.
4) Excludes significant items.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
16
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
6. Business Segment Performance and Operational Review continued
6.1 Energy Infrastructure
The Energy Infrastructure segment consists of all APA’s energy infrastructure footprint across mainland Australia including gas
transmission, gas compression, gas processing and storage assets, renewable energy power generation, and gas-fired power
generation. 88.2% 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 92.9% (excluding pass-through) and
93.6% of underlying EBITDA (before corporate costs) during FY21. Energy Infrastructure segment revenue (excluding pass-through)
was $1,989.3 million, an increase of 0.8% on the previous year (FY20: $1,973.7 million). Underlying Energy Infrastructure EBITDA
decreased by 0.4% on the previous year to $1,622.6 million (FY20: $1,629.8 million).
Energy Infrastructure Revenue by segment
Energy Infrastructure EBITDA by segment
A$2,000m
A$1,600m
1,500
1,000
500
0
1,200
800
400
0
FY18
FY19
FY20
FY21
FY18
FY19
FY20
FY21
East Coast Gas
Power Generation
West Coast Gas
Wallumbilla Gladstone Pipeline
East Coast Gas
Power Generation
West Coast Gas
Wallumbilla Gladstone Pipeline
Energy Infrastructure EBITDA by asset
FY21
FY20
FY19
FY18
A$m
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
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
Gruyere Power Station
Badgingarra Wind and Solar Farms
Other WA assets
East Coast Gas
East Coast Gas underlying EBITDA was down 3.3% or $21.3 million to $627.5 million. The decline was largely due to softer contract
renewals on the South West Queensland and Moomba Sydney Pipelines, and reduced Industrial volume demand in Victoria. This was
in part offset by the part year contribution from the Orbost Gas Processing Plant, which started contributing revenue since August 2020.
West Coast Gas
West Coast Gas underlying EBITDA remained steady at $270.8 million (FY20: $271.5 million).
Wallumbilla Gladstone Pipeline
Wallumbilla Gladstone Pipeline underlying EBITDA increased by 2.0% in line with tariff escalation to $549.7 million (FY20: $538.9 million).
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
17
6. Business Segment Performance and Operational Review continued
6.1 Energy Infrastructure continued
Power Generation
Power Generation underlying EBITDA increased by 2.3% or $4.0 million to $174.6 million. The increase is due to an increased in energy
output from Diamantina Power and favourable wind resources at the Emu Downs Wind Farm. This was partly offset by one-off energy
curtailments and cyclone interruption on the Badgingarra renewable site and lower contribution from the Darling Downs Solar Farm.
Previously reported business segments by states is set out in the table below.
30 June 2021
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30 June 2020
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Changes
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Revenue (2)
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 (3)
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
Energy Infrastructure total
Asset Management
Energy Investments
Corporate costs
Underlying EBITDA
Fair value gains on contract for difference
SaaS configuration and customisation costs
1,191,324
177,931
172,682
3,085
33,590
410,692
1,989,304
113,755
30,921
7,438
2,141,418
460,465
3,130
2,605,013
995,010
151,475
113,383
2,425
22,734
337,538
1,622,565
80,337
30,921
(100,848)
1,204,705
183,251
145,664
3,143
31,649
405,310
1,973,722
112,367
35,741
4,975
2,126,805
461,155
2,661
2,590,621
1,007,891
160,751
101,927
2,294
19,889
337,055
1,629,807
63,343
35,741
(74,972)
1,632,975
1,653,919
18,018
(7,957)
10,508
(8,410)
(13,381)
(5,320)
27,018
(58)
1,941
5,382
15,582
1,388
(4,820)
2,463
14,613
(689)
469
14,393
(12,881)
(9,276)
11,456
131
2,845
483
(7,242)
16,994
(4,820)
(25,876)
(20,944)
7,510
453
Total reported EBITDA
1,643,036
1,656,017
(12,981)
(1.1%)
(2.9%)
18.5%
(1.8%)
6.1%
1.3%
0.8%
1.2%
(13.5%)
49.5%
0.7%
(0.1%)
17.6%
0.6%
(1.3%)
(5.8%)
11.2%
5.7%
14.3%
0.1%
(0.4%)
26.8%
(13.5%)
34.5%
(1.3%)
71.5%
(5.4%)
(0.8%)
Numbers in the table may not add up due to rounding.
1) FY20 is restated as a result of change in the APA Group's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements.
2) Refer to revenue note 4 for additional disclosure on revenue streams from contracts with customers disaggregated by geographical location and major sources.
3) Interest income is not included in calculation of EBITDA but nets off against interest expense in calculating net interest cost.
Low risk business profile
In FY21, 88.2% of Energy Infrastructure revenue (excluding pass-through) was from contracted and regulated revenues. Specifically,
77.8% of Energy Infrastructure revenue (excluding pass-through) was from take-or-pay capacity reservation charges from long-term
offtake agreements, 2.6% from other contracted fixed revenues and 10.7% from throughput charges of which a portion is derived for
long-term offtake agreements (4). Given the dynamic east coast gas market, there were some additional revenues from the provision
of flexible short term and other services, accounting for around 1%.
4) Includes revenue from APA’s renewable generation fleet and Orbost Gas Processing Plant which are underpinned by long term off-take agreements.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
18
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
6. Business Segment Performance and Operational Review continued
6.1 Energy Infrastructure continued
Low risk business profile continued
The regulated portion of APA’s revenue which is predominantly derived from the Victorian Transmission System makes up 7.8% of
total FY21 Energy Infrastructure revenue. The very nature of APA’s revenue streams provides for predictability and cash flow stability
contributing to APA’s low risk business model.
FY21 Energy Infrastructure by Revenue Type
77.8%
7.8%
2.6%
10.7%
0.6%
0.5%
Capacity charge revenue
Regulated revenue
Contracted fixed revenue
Throughput charge & other variable revenue
Flexible short term services
Other
~88%
Take or pay /
regulated
APA manages its counterparty risk in a variety of ways. An area of focus is customers’ credit ratings and 91.0% 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.
FY21 Energy Infrastructure Revenues
By Counterparty Credit Rating
FY21 Energy Infrastructure Revenues
by Customer Industry Segment
43.3%
35.5%
11.9%
9.0%
0.3%
A- rated or better
BBB to BBB+ rated
Investment grade
Not rated
Sub-investment grade
~91%
Investment
grade
Diverse
Source of
revenue
48.3%
24.6%
23.9%
3.2%
Energy
Utility
Resources
Industrial & other
Note: 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.
6.2 Asset Management
APA provides asset management and operational services for the majority of its energy investments and to a number of third parties.
The major third party customers are Australian Gas Networks Limited (AGN) (1), Energy Infrastructure Investments (EII) and GDI. Asset
management services are provided to these customers under long-term contracts. The Asset Management segment also includes
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) from asset management services increased by $1.4 million or 1.2% to $113.8 million (FY20: $112.4 million)
and underlying EBITDA increased by $17.0 million or 26.8% to $80.3 million (FY20: $63.3 million). The increase in Asset Management
revenues is largely driven by one-off customer contributions for asset relocations in Western Australia and Northern Territory.
1) APA sold its 33.05% stake in Envestra (subsequently renamed Australian Gas Networks or AGN) in August 2014, with operating and maintenance
agreements remaining in place until 2027.
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
19
6. Business Segment Performance and Operational Review continued
6.2 Asset Management continued
Customer contributions are payments received to accommodate project activity on APA managed assets. The current major projects
are the Channel Island Bridge Pipeline Replacement Project in the Northern Territory and the Thornlie Link Parmelia Pipeline
re-location in Western Australia. Customer contributions for FY21 were $30.2 million.
Asset Management Revenue
Asset Management EBITDA
Operated Gas Networks Statistics
A$120m
A$100m
1.50 million
90
60
30
0
75
50
25
0
1.45
1.45
1.40
1.35
km
0
0
0
0
3
,
0
0
0
9
2
,
0
0
0
8
2
,
0
0
0
7
2
,
FY18
FY19
FY20
FY21
FY18
FY19
FY20
FY21
FY18
FY19
FY20
FY21
One-off Customer Contributions
Underlying Asset Management Revenue/EBITDA
Gas consumer connections (LHS)
Networks managed (RHS)
The Asset Management segment continues to see demand for gas connections in new housing developments in Victoria.
6.3 Energy Investments
APA has interests in a number of complementary energy investments across Australia.
Asset and ownership interests
Asset details and APA services
Partners
Mortlake Gas Pipeline
SEA Gas Pipeline
North Brown Hill Wind Farm
Allgas Gas Distribution Network
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
50%
SEA Gas
(Mortlake)
Partnership
50%
South East
Australia
Gas Pty Ltd
83 km gas pipeline connecting the Otway
Gas Plant to the Mortlake Power Station
Rest
MAINTENANCE
687 km gas pipeline from Iona and
Port Campbell in Victoria to Adelaide
Rest
MAINTENANCE
20.2%
EII2
132 MW wind farm in
South Australia
CORPORATE SERVICES
Infrastructure Capital
Group Osaka Gas
20%
GDI (EII)
~3,900 km Allgas gas distribution
network in Queensland with
~117,000 connections
Marubeni Corporation
State Super
CORPORATE SERVICES
OPERATIONAL MANAGEMENT
19.9%
Energy
Infrastructure
Investments
Gas-fired power generation 71 MW
Gas processing facilities 45 TJ/day
Electricity transmission cables 243 km
Gas pipelines totaling 786 km
MM Midstream
Investments
Osaka Gas
CORPORATE SERVICES
OPERATIONAL MANAGEMENT
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
20
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
6. Business Segment Performance and Operational Review continued
6.3 Energy Investments continued
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.
A$40m
30
Energy Investments EBITDA
Underlying EBITDA from Energy Investments decreased by
$4.8 million or 13.5% for the reporting period to $30.9 million
(FY20: $35.7 million) due to a lower but more normalised
equity income from Energy Investments. The SEA Gas Pipeline
revenue was impacted by lower interest earned on shareholder
loans to SEA Gas that were repaid in June 2020.
20
10
0
FY18
FY19
FY20
FY21
6.4 Corporate Costs
Corporate costs excluding significant items for FY21 were $100.8 million compared to $75.0 million for the previous corresponding
period. The increase was largely due to investment in strategic growth opportunities in Australia and in the US, including a rise in project
evaluation costs to support its growth agenda. APA have also strengthened the commercial development capability and have developed
the Pathfinder Program to unlock opportunities in next generation energy technologies. APA is building the capability and resilience
of the business, including strengthening investments in areas such as sustainability, community engagement and cyber security. This
financial year also included a number of one-off costs associated with the development of a new executive leadership team.
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 FY21 was $432.5 million (FY20: $418.6 million). There were no acquisitions undertaken in FY21 and
therefore no investment expenditure.
Capital and investment expenditure for FY21 is detailed in the table below.
Description of major projects
30 Jun 2021
($ million)
30 Jun 2020
($ million) (2)
Western Outer Ring Main (WORM); Victorian Transmission System,
Roma Brisbane Pipeline and Goldfields Gas Pipeline Access
Arrangement allowed expenditure
50.2
46.5
South West Queensland Pipeline and Moomba Sydney Pipeline
capacity expansion, upgrade of Orbost Gas Plant
Northern Goldfields Interconnect, Lake Way Gas Pipeline,
Murrin Murrin Lateral Looping, Karlawinda Gas Pipeline
Power generation
Thomson Power Station and Gruyere Hybrid Energy Microgrid
Customer contribution
projects and others
Channel Island Bridge Pipeline Replacement Project and
Thornlie Link Parmelia Pipeline re-location Project
Sub-total non-regulated capex
Total growth capex
Stay-in-business capex (3)
Other IT capex
Total capital expenditure
Investment and acquisitions
Total capital and investment expenditure
47.9
106.5
51.0
27.9
233.3
283.5
134.6
14.4
432.5
—
432.5
184.2
8.3
34.0
14.7
241.2
287.7
109.5
21.4
418.6
—
418.6
Numbers in the table may not add up due to rounding.
1) The capital expenditure shown in this table represents net cash used in investing activities as disclosed in the cash flow statement, and excludes accruals
brought forward from the prior period and carried forward to next period.
2) FY20 is restated as a result of change in the APA Group's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements.
3) Represents stay-in-business capital expenditure not recoverable from customers and/or regulatory frameworks.
Capital and investment
expenditure (1)
Growth expenditure
Regulated
Non-regulated
East Coast Gas
West Coast Gas
APA GROUP ANNUAL REPORT 2021
21
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
7. Capital and Investment Expenditure continued
Growth project expenditure in FY21 of $283.5 million,
compared to the previous corresponding period of $287.7 million.
Stay-in-business capex for FY21 was $134.6 million
(FY20: $109.5 million). The increase in stay-in-business capex
for the period was largely driven by a periodic major overhaul
on the Diamantina Power Station, in advance of its peak
contracted output period.
Other technology capital expenditure for the reporting period
was $14.4 million (FY20: $21.4 million). The spend is largely
due to APA Grid technology upgrade detail in section
10.6 of this report.
Major growth capital expenditure projects invested in
during the reporting period include:
Capital and Investment Expenditure
A$1,000m
875.0
750
500
25
0
576.4
418.6
432.5
FY18
FY19
FY20
FY21
Acquisitions & other investment cash flows
Growth capex
SIB & IT capex
Regulated growth capital expenditure
– Western Outer Ring Main (WORM) project: Engineering and approvals work including landholder liaison and surveys and studies
required for the Environmental Effects Statement (EES) continued during the reporting period. Coated pipe for the pipeline and the
compressor to expand the Wollert facility were both ordered during the period. The EES was submitted to the Victorian Government
in June and will be on public exhibition from 7 July to 17 August 2021. Project completion assuming an approval of the EES in early
2022, is currently expected in late Q3 FY22. Growth capital expenditure is underwritten by the regulatory framework. The project
will enhance gas supply flexibly to meet seasonal loads in the Victorian Market and support gas-fired electricity generation.
Unregulated growth capital expenditure
East Coast Gas
– Wallumbilla and Young expansion program: These expansion programs have resulted in ~130 TJ/d increase in Wallumbilla
compression capacity and a 25 TJ/d increase in capacity in the Young to Culcairn section of the Moomba Sydney Pipeline.
The increase in capacity at Wallumbilla involved the upgrade of three compressors during planned 30,000-hour maintenance.
– East Coast Grid Expansion: Due to strong customer demand for transportation capacity, APA has reached a Final Investment
Decision to commence the expansion of the East Coast Grid. The two stage expansion is expected to require a capital investment
of up to $270 million and is expected to increase winter peak capacity of the East Coast Grid by 25%.
The first stage of expansion works is expected to increase Wallumbilla to Wilton capacity by 12% and is targeted for commissioning
in the first quarter of CY23, in advance of forecast southern state winter supply risks identified in the 2021 AEMO Gas Statement
Of Opportunities. Stage 2 of the expansion works, which is expected to add a further 13% of capacity, will be staged to meet
customer demand and is currently targeted for commissioning towards the end of CY23. Engineering and design works continue
on a potential third stage expansion of the East Coast Grid to add a further 25% transportation capacity.
The expansion will allow APA to respond quickly and efficiently to customer requirements to meet the forecast 2023/2024 shortfall
of gas supply on the East Coast of Australia.
– Kurri Kurri Lateral Pipeline: APA has been working exclusively to support the Hunter Power Project in the development of a
pipeline, compressor station and underground gas storage bottle to provide gas from the existing network to the proposed
660MW Hunter Power Station at Kurri Kurri in NSW. The capability for the pipeline and the storage bottle to transport and store
a hydrogen gas blend is being assessed in the development. APA submitted a Project Scoping Report for a proposed EIS for the
pipeline project to the NSW Department Planning, Industry and Environment (DPIE) in June 2021. For APA’s scope Final Investment
Decision is expected in Q4 CY22.
– Orbost Gas Processing Plant: The Orbost Gas Processing Plant has been processing up to 45 TJ/day since February 2021.
Consistent foaming and fouling within the Sulphur Reduction Units (SRU) has led to weekly absorber cleans to enable continuous
gas supply. Further capital has been invested by both APA and Cooper Energy to improve reliability and to increase production
rates. Cooper Energy has exercised its option to extend the Transition Agreement, which allows the revenue and cost sharing
structure to continue for another 12 months to 1 May 2022.
West Coast Gas
– Northern Goldfields Interconnect (NGI): The Northern Goldfields Interconnect pipeline was announced in November 2020 and
will connect to APA’s Goldfields Gas Pipeline (GGP), which in turn connects to APA’s Eastern Goldfields network. The project scope
includes a 580km 12” pipeline and an inlet compressor station at Eradu on the western end of the pipeline. First shipment of
130km of coated pipe was received into Geraldton in June. APA took delivery of the two compressors ex works in USA in June,
which are expected to land into Western Australia in August 2021. Site surveys and studies and consultation with stakeholders
including landowners and Indigenous groups continued during the period. Work to obtain the necessary approvals continued with
construction expected to commence on site in Q2 FY22 with completion scheduled for late Q1 FY23.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
22
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
7. Capital and Investment Expenditure continued
Unregulated growth capital expenditure continued
– Karlawinda Gas Lateral: APA commissioned the new 56 km lateral during the period. Gas will be transported approximately
500 km along the Goldfields Gas Pipeline then along the new Karlawinda Gas Lateral. First gas was delivered to the Karlawinda
mine in March 2021.
– Lake Way Gas Lateral: APA completed construction and commissioning of the 26 km greenfield lateral from the Goldfields Gas
Pipeline to the Lake Way mine. First gas was delivered to the mine in April 2021.
Power Generation
– Gruyere Power Station Expansion and Hybrid Energy Microgrid: Expansion of the power station continued during the period.
An additional engine has been installed and construction near completed in the period with commissioning expected in Q1 FY22.
A renewable energy agreement was executed with the Gruyere Gold Mine in December 2020 for the creation of the Gruyere
Hybrid Energy Microgrid. The Gruyere Microgrid is APA’s first hybrid energy microgrid investment and will expand the existing
reciprocating gas-fired power station, with a 13MWp solar farm backed up by a 4.4MW/4.4MWh battery energy storage system.
It will utilise a hybrid control system that combines cloud and weather forecasting, battery control and the existing reciprocating
engine control systems to optimise efficiency and maximise the use of renewable generation. The battery component of the
project is expected to be complete in Q1 FY22 and the solar farm is expected to be complete by Q2 FY22. Upon completion, total
installed capacity of the microgrid will be 64MW (60 MW of power generation and 4.4 MW of battery storage).
– Thomson Power Station: Commissioning of the 18 MW reciprocating engine power station was completed during the period
with all 6 engines operational from March 2021. A further expansion to 22 MW was also completed and commissioned during
the period and was operational from May 2021. The new power station will supplement generation from APA’s Diamantina Power
Stations for the Mount Isa region.
Prospective projects
Preliminary work on a number of potential large projects remains on foot with counterparties who are each working through the
feasibility of their own projects:
– Western Slopes Pipeline, New South Wales: A development agreement and associated Gas Transportation Agreement is in
place between APA and our customer. APA is to build own and operate the proposed ~460km Western Slopes Pipeline (WSP) in
northern NSW. The pipeline is to connect the Narrabri Gas Project to APA’s Moomba Sydney Pipeline and subsequently the east
coast domestic gas market. The Narrabri Gas Project received approval from the Independent Planning Commission and approval
under the Environment Protection and Biodiversity Conservation (EPBC) Act during 1H FY21. Our customer was not in a position
to approve APA submitting the Environmental Impact Statement (EIS) for the Western Slopes Pipeline prior to the expiry of the
Secretary’s Environmental Assessment Requirements (SEARs) in May 2021. APA has applied for and had the SEARs for the WSP
re-issued in late June 2021.
– Memorandum Of Understanding with Comet Ridge and Vintage Energy, Queensland: Non-binding Memorandum of
Understanding’s (MOU) with customers are in place 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.
– Bowen Basin, Queensland: A non-binding MOU remains in place with Blue Energy 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 of infrastructure for delivery of gas to the East Coast Gas Grid. APA continues to explore the development of a
pipeline to connect the Bowen Basin to APA’s East Coast Grid. We have also engaged with the Queensland Government who is
preparing the scope for study on the development of the Bowen Basin and a pipeline connection.
– Judith Gas Field, Victoria: APA entered into a non-binding MOU with its customer in October 2019. In May 2020, APA entered
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 was completed in December 2020 and the project awaits the customer’s further progression. Should
the project proceed, the project will include building, owning, 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.
– Gabanintha Vanadium Project, Western Australia: APA entered into a non-binding MOU with a customer for the provision
of gas transportation services along a proposed ~152km new pipeline to supply gas to the Gabanintha Vanadium Project.
The proposed pipeline would allow the customer the opportunity to source gas from the closer emerging Perth Basin gas fields.
– Equus Transcontinental Pipeline: In October 2020, APA entered into a non-binding MOU with a customer to undertake a joint
development and marketing study to supply Equus gas to east coast gas markets via a transcontinental pipeline.
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
23
8. Financing Activities
8.1 Capital Management
As at 30 June 2021, APA had 1,179,893,848 securities on issue. This is unchanged from 30 June 2020.
APA funds its growth with appropriate levels of equity, cash retained in the business and debt, in order to maintain investment grade
BBB and Baa2 credit ratings from Standard & Poor’s and Moody’s, respectively.
As at 30 June 2021, APA had $1.9 billion in cash and committed undrawn facilities available to assist in the ongoing funding of the
business and planned growth activities.
As at 30 June 2021 APA had $9,665.8 million ($9,983.6 million as at 30 June 2020) of committed drawn debt facilities, with an
additional $1,250 million of undrawn committed bank facilities available to the business.
APA has issued debt into a diverse range of global bond and banking markets, such as US Private Placement Notes, Medium Term
Notes in several currencies (Australian dollars, Euros, Sterling and Japanese Yen), United States 144A Notes and Australian dollar
Syndicated and Bilateral bank facilities. The debt portfolio has a broad spread of maturities extending out to FY36, with an average
maturity of drawn debt of 7.8 years as at 30 June 2021.
APA Debt Maturity Profile and Diversity of Funding Sources (1)
A$m / (US$m)
536
1,396
(US$1,100)
650
50
500
200
50
1,109
1,140
(US$886)
879
(US$683)
928
1,018
742
774
381
(US$300)
452
133
FY22
FY23
FY24
FY25
FY26
FY27
FY28
FY29
FY30
FY31
FY32
FY33
FY34
FY35
FY36
Undrawn committed facilities
AUD DCM bonds (2)
USD DCM bonds (3)
1) APA debt maturity profile as at 30 June 2021.
2) Debt capital market (DCM) bonds.
3) 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 2021, 100% (30 June 2020: 100%) of interest obligations on gross borrowings were either
hedged into or issued at fixed interest rates for varying periods extending out to 2036.
In March 2021, APA priced and settled the EUR 1,100 million and GBP 250 million senior unsecured notes. The $2.2 billion of proceeds
from the issuances, coupled with approximately $200 million of available cash on hand, will be used to refinance all of APA’s debt that
matures in calendar 2022 and terminate associated hedges. The facilities to be refinanced and associated hedges include:
– EUR MTN 700m swapped into A$1,132m at a fixed rate of 4.45%
– USPP Notes US$124m swapped into A$154m at a fixed rate of 7.39%
– USPP Notes A$81m at a fixed rate of 7.45%
– USPP Notes A$62m at a fixed rate of 7.45%
– US 144A Notes US$750m swapped into A$735m at a fixed rate of 6.68%
Through its FY21 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.
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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
Average forward USD/AUD exchange rate
FY21
FY22 (to March 2022)
April 2022 onwards (1)
0.7199
0.7099
designated hedge relationship
1) For periods where the revenue has been designated against the debt repayments and in absence of any swap hedges that APA enters into, USD
denominated obligations was translated to AUD at the prevailing rate at inception (USD144A – AUD/USD=0.7879, Euro & Sterling MTNs at AUD/USD=0.7772).
A large portion of the Wallumbilla Gladstone Pipeline 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 excluding significant items decreased in FY21 by $3.1 million to $504.8 million (FY20: $507.8 million). Net interest
costs including significant items increased by $144.9 million to $652.8 million in FY21, due to one-off finance costs related to the
bond note redemptions completed during the period.
The average interest rate (including credit margins) applying to drawn debt was 5.08% (2) for FY21 (FY20: 5.43%), reflective of the
partial year impact of the new lower interest cost attributable to the EUR 1,100 million and GBP 250 million senior unsecured 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 FY21:
– BBB long-term corporate credit rating assigned by Standard & Poor’s (S&P) in June 2009, and last confirmed on
19 November 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 29 May 2021.
APA calculates the Funds From Operations (FFO) to Interest to be 3.1 times (FY20: 3.3 times) and FFO to Net Debt to be 11.3%
for FY21 (FY20: 12.2%). 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.
8.4 Capital management strategy
APA management has undertaken a comprehensive review of the capital management strategy. The key pillars of the capital
management strategy are summarised below and position APA for the next phase of growth:
– Securityholder returns: focus on maximising available free cash flow and distributions;
– Access to capital: maintaining investment grade credit metrics and a diverse source of funding;
– Capital allocation: disciplined investments aligned to strategy and investment hurdles that drive long-term value;
– Risk management: funding strategy focused on diversification, tenor and maturities, with Treasury policies that support strong
liquidity and reduce volatility; and
– Market engagement: proactive investor relations program that addresses the needs of our investors.
2) Excludes one-off finance cost related to the bond note redemptions completed during FY21.
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
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8. Financing Activities continued
8.5 Income tax
Income tax expense of $62.9 million includes a $119.2 million accounting income tax expense benefit from the impairment of Orbost
and interest charge on bond note redemptions (significant items). Income tax expense excluding significant items for the FY21 of
$182.1 million results in an effective income tax rate of 39.3%, compared to 37.3% 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 $48.3 million
will be payable in respect of the year ended 30 June 2021 (FY20: $85.3 million). The cash tax payable results in an effective tax paid
rate excluding significant items of 17.7% in FY21 compared to 16.9% in FY20.
With PAYG instalments of $70.0 million having already been paid, a tax receivable of $21.3 million has been recognised.
APA has provided a Tax Transparency Report, which includes a reconciliation of profit to income tax payable on the tax section of
APA’s website.
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. Securityholders should use their annual tax statement to complete
their final tax return for the relevant tax year and consult professional and financial services advisors for help relating to their
individual particular tax or financial position. 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 FY21 distribution (https://www.apa.com.au/investors/my-securities/apa-
annual-tax-statement-estimator/).
8.6 Distributions
Distributions paid to Securityholders during the financial year were:
APT franked profit distribution
APT unfranked profit distribution
APT capital distribution
APTIT profit distribution
APTIT capital distribution
Total
Franking credits allocated
Final FY20 distribution
paid 16 September 2020
Interim FY21 distribution
paid 17 March 2021
Cents per Total distribution
$000
security
Cents per Total distribution
$000
security
8.53
—
11.74
2.09
4.64
27.00
3.66
100,666
—
138,528
24,686
54,692
318,572
43,184
—
—
16.29
1.97
5.74
—
—
192,175
23,159
67,840
24.00
283,174
On 25 August 2021, the Directors declared a final distribution for APA for the financial year of 27.0 cents per security which is
payable on 15 September 2021. The FY21 final distribution comprises the following components:
APT franked profit distribution
APT unfranked profit distribution
APT capital distribution
APTIT profit distribution
APTIT capital distribution
Total
Franking credits allocated
Final FY21 distribution
payable 15 September 2021
Cents per Total distribution
$000
security
—
—
18.63
1.67
6.70
27.00
—
—
219,820
19,742
79,010
318,572
As a result, the total distribution applicable to the year ended 30 June 2021 is 51.0 cents per security, a 2.0% increase over the total
distribution of 50.0 cents per security applicable to the year ended 30 June 2020.
The Distribution Reinvestment Plan remains suspended.
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Australian Pipeline Trust and its Controlled Entities
8. Financing Activities continued
8.7 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 down 15.7% (1).
APA’s total securityholder return since listing in June 2000 on the ASX, is 1,842% (2), a compound annual growth rate of 15.1%.
8.8 Guidance for 2022 financial year
APA has guided for a FY22 distribution of 53.0 cents per security, which would represent an 3.9% increase on the prior
period. This increase is largely driven by the interest costs savings that have been generated through the March 2021 liability
management exercise.
Although APA is an essential part of the energy supply chain, it can be impacted by economic downturns and reductions in energy
demand. Challenging market conditions are likely to continue in FY22 with APA’s revenues continuing to be subject to customer
recontracting and investment decisions impacted by policy uncertainty and throughput volumes on certain assets.
Looking ahead, APA is in a strong position to continue executing on its strategy, investing for the long-term energy needs of its
customers. This program is fully in execution mode, with growth capital expenditure expected to be in excess of $1.3 billion over the
period from FY22 to FY24. Incremental revenue from the current growth capital expenditure projects will improve APA’s financial
performance in future periods.
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
currently two 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 in a negotiate-arbitrate framework. 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 arbitration
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 tariffs and terms to
be negotiated, supported by additional information disclosure and a commercial arbitration mechanism in the event of a dispute.
In May 2021, the Energy National Cabinet Reform Committee (ENCRC) published the Regulation Impact Statement Options to
improve gas pipeline regulation, which proposed to discontinue light regulation and transition to two forms of regulation: a form,
based on the current full regulation, and a “lighter” form, based on the current Part 23 regime for non-scheme pipelines. Pipelines
currently subject to full regulation will not experience much change whilst non-scheme pipelines will remain under the “lighter” form;
and pipelines currently subject to light regulation are to transition to the “lighter” form. Necessary legislative changes to give effect to
the Pipeline Regulation RIS are currently being prepared.
The map below shows APA pipelines by current 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
1) Figures quoted are sourced from Refinitiv Eikon and measured as at 30 June 2021.
2) Indexed from 13 June 2000, the date of APA’s listing on the ASX.
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
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9. Economic Regulatory Matters continued
Regulatory resets
The diagram below outlines the scheduled regulatory reset dates for pipelines owned and operated by APA. During FY21,
approximately 7.8% of APA’s Energy Infrastructure revenues were revenues that are subject to regulated outcomes.
Roma Brisbane Pipeline
Victorian Transmission System
Goldfields Gas Pipeline
Amadeus Gas Pipeline
2022
2023
2024
2025
2026
Key regulatory matters relating to APA assets addressed during the reporting period include:
Amadeus Gas Pipeline 2021-2026 access arrangement – final decision
The AER released its final decision on the Amadeus Gas Pipeline Access Arrangement on 30 April 2021, reflecting the relatively
minor amendments required by its draft decision. The AER-approved access arrangement includes both interruptible and firm
reference services. The final decision confirmed a decline in the Firm Service Reference Tariff, reflecting a lower rate of return and
a larger volume associated with Northern Gas Pipeline interconnection. The reduced reference tariff has limited impact on APA
because the pipeline is subject to a long-term contract for the vast majority of gas transported.
In both the Draft and Final Decisions, the AER complimented APA on its stakeholder engagement process which preceded
submission of the access arrangement revision proposal. Further information on stakeholder engagement for the Amadeus Gas
Pipeline can be found on APA’s website.
Roma Brisbane Pipeline 2022-2027 access arrangement
Building on its successful experience in the Amadeus Access Arrangement process, APA has undertaken extensive engagement
with the RBP Stakeholder Group as part of developing its proposal for the 2022-2027 RBP access arrangement. APA submitted
revisions to its access arrangement on 1 July 2021, to have effect for a period of five years from 1 July 2022. Stakeholder
engagement ahead of our submission has provided APA with better insights from people ultimately served by the pipeline and
helped shape our proposal to the Australian Energy Regulator (AER). Further information on consumer engagement for the RBP can
be found on APA’s website.
Victorian Transmission System 2023-2027 access arrangement – consumer consultation
APA is meeting monthly with the VTS Stakeholder Engagement Group as part of the regulatory process for review of the 2023-2027
VTS access arrangement. APA will submit revisions on 1 December 2021, which have effect for a period of five years from 1 January
2023. APA will incorporate insights obtained during stakeholder engagement into its proposal. Further information on stakeholder
engagement for the VTS can be found on APA’s website.
Energy Industry developments
On 15 September 2020, Prime Minister Scott Morrison announced as part of the post COVID-19 gas led recovery that the
Government would reset the east coast gas market and create a more competitive and transparent Australian Gas Hub by unlocking
gas supply, delivering an efficient pipeline and transportation market, and empowering gas customers. APA is supportive of the
government’s strategy and the opportunities it creates for APA’s core gas transmission business. To maximise the potential benefits
to APA and the community, APA is actively engaging with the Government and the Department of Industry, Science, Energy and
Resources in relation to the National Gas Infrastructure Plan and the development of an Australian Gas Hub.
State Governments are pursuing decarbonisation initiatives which may impact gas utilisation and therefore pipelines. APA
is actively engaging in the development of these initiatives to ensure that the key role gas is able to play in the objective
of decarbonising the economy is recognised. In addition, APA is pursuing strategies to minimise any adverse consequences
on the economic life of our assets.
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10. Sustainability
Sustainability for APA means standing up and being counted. It’s about being responsible in the way that the business is conducted
and operated, and importantly, how APA contributes to society. Sustainability is prioritised to ensure that employees, stakeholders,
customers and the communities in which APA operates in can all thrive – now, and into the future.
APA has released a separate FY21 Sustainability Report which is available on APA’s website. Contained below, is an overview of the
sustainability approach and key metrics for health and safety, environment and emissions.
10.1 Climate change and energy transition
APA gathered significant momentum in understanding and defining its response to the energy transition. This included incorporating
net zero in the corporate strategy and establishing the framework to embed consideration of climate risk and opportunity into
business as usual via the Sustainability Roadmap and Climate Change Management Framework.
APA’s Net Zero ambition and the Climate Change Management Framework are highlighted in section 4.5 of this report and in depth
in the standalone Sustainability Report.
Emissions footprint
Each October, APA reports under the National Greenhouse and Energy Reporting Act 2007 (NGER Act) to the Australian Clean
Energy Regulator. The FY21 NGER submission is currently being prepared and will be lodged with the Regulator by 31 October 2021.
In FY20, on balance APA’s total scope 1 and 2 emissions footprint remained relatively stable compared with the previous year, with gross
scope 1 and 2 emissions rising 0.22% from FY19. This comprised of:
– Scope 1 emissions which increased from 1,229,923 t-CO2e to 1,322,249 t-CO2e primarily due to the Orbost Gas Processing
Plant becoming operational in March 2020; an increase in the gas used to generate electricity at Daandine Power Station due to
increased customer demand; and an increase in gas combustion on the Goldfields Gas Pipeline due to increased gas throughput
and a new compressor becoming operational.
– Scope 2 emissions which decreased from 176,980 t-CO2e to 87,765 t-CO2e, largely due to the adoption of a more refined
calculation method applied in FY20. Using the existing metering data, the calculation method better reflects actual emissions
associated with line loss on the Murraylink Interconnector and will be applied from FY20 onwards.
APA’s summary of Scope 1 and 2 emissions and energy consumption for FY20 as reported under the NGER Act, are set out in the
table below and for detail breakdown of APA’s emission profile refer to the Sustainability Report data tables section.
Scope 1 (2) CO2-e emissions (tonnes)
Scope 2 (3) CO2-e emissions (tonnes)
Energy consumption (4) (GJ)
FY20
FY19 (1)
1,322,249
87,765
32,078,649
1,229,923
176,980
27,831,008
1) FY19 scope 1 emissions and energy figure has been restated from those reported in our previous disclosures (e.g. APA’s 1H FY21 Directors’ Report).
This restatement is the result of a Clean Energy Regulator audit completed during FY20 and adjustment of reported figures in FY21
2) Scope 1: are direct emissions such as company vehicles, ‘fuel combustion’ and fugitive emissions from gas pipelines from facilities that APA has
operational control over.
3) Scope 2: are indirect emissions such as the consumption of electricity or electricity line losses from facilities that APA has operational control over
4) Energy Consumption is referring to the total calculation of energy consumed across all facilities within APA’s operational control.
5) Greenhouse gas emissions and energy data has generally been calculated in accordance with methodologies under the National Greenhouse and Energy
Reporting Act 2007 (NGER). For the purposes of emissions and energy data, APA is not the entity with operational control of Gruyere Power Station.
10.2 Community & Social Performance
Strengthening Community & Social Performance
Community and Social Performance (CSP) is core to deliver on APA’s purpose of strengthening communities through responsible
energy, mindful that strong and positive relationships with stakeholders is the key to APA’s success. Strengthening the approach
to CSP is a high priority, requiring APA to understand and work with communities to manage impacts and deliver outcomes which
reflect their values, needs and aspirations.
To gain momentum and demonstrate commitment, in FY21 APA introduced an interim plan to leverage existing capability and support
existing business activity. This interim plan focuses on piloting new practices in approach to local content and Indigenous engagement,
introducing sustainable development principles, and taking a more participatory and inclusive approach to working with stakeholders.
A CSP Strategy is now being developed to:
– Strengthen CSP expertise and capability
– Build a new CSP management system, with enhanced standards, a formal grievance management approach and better
measurement and monitoring practices
– Enhance consultation techniques and shift engagement to be more proactive and relationship focused
– Make sure we consider CSP early in business processes and decision-making
– Shift social investment to focus on sustainable development outcomes
APA GROUP ANNUAL REPORT 2021
DIRECTORS’ REPORT continued
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10. Sustainability continued
10.2 Community & Social Performance continued
Community and stakeholder engagement
APA gains trust and confidence by listening to stakeholders and proactively considering and responding to their needs. During FY21,
a range of new initiatives were introduced, including the Stakeholder Advisory Panel and the CSP Plan currently under development.
Focussing on sustainable development and First Nations people
In the coming year, APA will develop dedicated strategies to define the approach and outcomes in relation to First Nations People
and Sustainable Development.
The First Nations Plan will guide APA engagement with First Nations stakeholders, including Indigenous employees, communities
and stakeholder groups. It will also provide the foundations for achieving stronger local outcomes and contributing to reconciliation.
The Sustainable Development Strategy will evolve APA’s approach to social investment to guide more meaningful and impactful
outcomes for communities, strengthening alignment to business activities and priorities, and enhancing measurement and focus.
10.3 People
Embedding a culture of high performance
To support the refreshed vision, purpose and long-term strategy, and to embed a high-performance culture, in FY21 APA established
the following set of behaviours that guide how business is conducted, operated and how APA interacts with its customers,
stakeholders and each other.
– Courageous: we are honest and transparent; we learn from our mistakes and we challenge the status quo
– Accountable: we spend time on what matters, we do what we say and deliver world class solutions
– Nimble: we are curious, adaptive and future focused
– Collaborative: we are inclusive, work together, respect and listen to our stakeholders
– Impactful: we create positive legacies and work safely, for our customers, communities our people and the environment.
Inclusion and Diversity – Strategy for 2020 – 2025
During FY21, APA launched the Inclusion and Diversity Strategy for 2020 – 2025. This document outlines APA’s approach to
embracing diversity and building an inclusive culture, so all people feel safe, valued and trusted to do their very best every day,
supporting APA’s vision of being world class in energy solutions.
The Inclusion and Diversity Strategy is reflected in the Inclusion and Diversity Plan which focuses on four key areas:
– Gender Equity – providing a level playing field for all employees to reach their potential
– Flexibility – to encouraging flexible ways of working and empowering our people to think differently about where, when and how
work is completed to meet the employee’s professional and personal goals and priorities
– Inclusive Culture – to creating an inclusive culture that values all people and addresses biases
– Inclusive Leadership – to making sure our people feel a sense of belonging, are treated fairly and respectfully, and all people’s
voices are heard and valued
Supporting diversity
Under APA’s Gender Target Action Plan (1), FY21 saw an increase of female representation in the Senior Leaders category by 6.9%,
to 26.7%, moving APA closer to its goal of 30% female representation by 2025.
APA’s female representation amongst total employees rose slightly to 29.3%. This is an area of focus to ensure APA achieves the
target of 40% by 2025.
Investing in APA’s Future
APA continually develops its employee’s core, compliance, technical and leadership skills. In FY21, our employees completed
over 34,000 hours of training, with an average of 16 hours per employee.
Leadership Training and Capability
During the lock downs and restrictions in FY21, APA continued its leadership and professional development online:
– Investing in a Digital Learning Library with thousands of courses, videos, e-books, and audiobooks that employees can access
anytime and from any device
– Delivering the “Leading at APA” course via virtual workshops, equipping leaders with the capability to have quality conversations.
Currently, 38% of people leaders have completed this program, with a target of 70% by December 2021
– Introducing a new workshop, “Leading Remote Teams”, and a new webinar series, Leading Sustainable Performance in a Volatility,
Uncertainty, Complexity and Ambiguity (VUCA) world, looking at the science and research behind resilient leadership, sustainable
performance and the best ways to manage a crisis and lead teams through cultural change
1) Effective Date is as of 31 March 2021 as per WGEA submission. GTAP metrics align with Workplace Gender Equality Agency (WGEA) reporting rules in which
only the Australian workforce is included. ‘Senior Leaders’ metric includes Executive Leadership Team (ELT) members.
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10. Sustainability continued
10.3 People continued
Technical Training
In FY21 APA implemented its first two new accredited training programs through Registered Training Organisations (RTOs):
1) Certificate III in Gas Supply for Systems for operators to provide a greater depth of technical knowledge for technicians working
in the field.
2) Certificate III in Warehousing for all stores employees, providing an introduction to warehousing systems, practices and regulations.
Talent pipeline
Programs to encourage young talent.
Program
Work experience and traineeships
Refreshed Intern Program
Graduate Program
New National Apprenticeship Program
FY21 numbers
5 students
31 interns
6 graduates (50:50 gender split)
6 apprentices (2 female, 4 male)
10.4 Health and safety
Health & Safety Performance
Following inconsistent safety results in FY20 with contractor performance an area of concern, APA’s primary focus in FY21 was to
close the gap between employee and contractor safety performance lag indicators and improve visible leadership of the safety focus
through key leading indicators of Management Interactions and Hazard Identification.
APA’s key lag indicators of safety performance are Total Recordable Injury Frequency Rate (TRIFR), Lost Time Injury Frequency Rate
(LTIFR), and Fatalities.
Safety Lead Indicators
In FY21 APA leaders completed over 3,500 Management Interactions, an increase of more than a 50% on the number completed
in FY20. These interactions – where leaders of its business have safety focused discussions on hazard identification, risk mitigation
and corrective action mechanisms – are a key opportunity to ensure that safety is kept front of mind for everyone.
APA personnel and contractors collectively identified and reported over 3,800 hazards, at a rate of 598 per million hours worked. This
increase in hazard reporting demonstrates an improved risk awareness culture and an increased ability to identify risks in the workforce.
Safety Lag Indicators
During FY21, APA’s combined employee and contractor Total Recordable Injury Frequency Rate (TRIFR) was 6.33, in line with the
target of <6.5. This was driven by an improvement in contractor TRIFR which fell from 15.63 in FY20 to 8.84. Disappointingly, the
overall TRIFR improvement was impacted by an increase in APA employee TRIFR which rose from 3.82 to 4.63.
The combined TRIFR of 6.33 meant that a total of 39 persons were injured and required medical intervention during FY21.
APA ended the year with a combined employee/contractor Lost Time Injury Frequency Rate (LTIFR) of 1.62, above the year-end target
of <1.0, and was an increase from our FY20 LTIFR of 1.21. This increase was driven by rising lost time injuries among our employees,
with the employee LTIFR increasing from 0.82 in FY20 to 2.18 at the end of FY21.
APA again remained employee and contractor fatality free in FY21.
Total Reportable Injury Frequency Rate (TRIFR)
Lost Time Injury Frequency Rate (LTIFR)
16
12
8
4
0
3
2
1
0
8.8
6.3
4.6
2.2
1.6
0.8
FY17
FY18
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
APA overall
Contractor
Employee
APA overall
Contractor
Employee
TRIFR is measured as the number of lost time and medically treated injuries
sustained per million hours worked. Data includes both employees and contractors.
LTIFR is measured as the number of lost time injuries per million hours worked.
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
31
10. Sustainability continued
10.5 Environment and heritage
Strengthening Environmental Governance and Systems
APA is focused on continually improving environment and heritage governance and systems.
In FY21, APA developed and published a new Environment & Heritage Policy, recognising Environment & Heritage as a separate
management area distinct from the Health and Safety components under our previous Health Safety Environment (HSE) Policy. The
new policy is underpinned by the APA corporate environment framework, which includes procedures and state-based guidelines for
all assets and activities under APA’s operational control.
An example of this is the 4-year Environment Management Plan (EMP) Improvement Program completed in this financial year. The
improvement program refreshed 32 EMPs for individual assets across APA’s networks, transmission and power divisions. As well as
creating site-specific plans. The Program has streamlined and standardised local management structures for environment risk at APA by:
– Improving asset-specific environmental risk management
– Creating greater awareness of environmental risks, associated responsibilities and control measures
– Refining environment risk assessment processes and templates
– Standardising EMP templates for our Networks and Transmission/Power divisions to drive consistency
– Conducting an environment risk assessment workshop with operations and environment personnel for each Environment
Management Plan
During the year, APA also developed and established seven new Environment Standards (see figure see figure below) to help drive a
consistent approach to environmental management. This is a core initiative within the Environment & Heritage Pillar of the 3-year Health,
Safety, Environment and Heritage (HSEH) Strategy. These Standards set minimum mandatory requirements for each environmental area
in the framework, raising the standard of environmental management practice and driving consistency across all business divisions.
Biodiversity
Pests, Weeds
& Diseases
Air Emissions
Spills &
Contamination
Waste
Soil
Heritage
Water
10.6 Customers and suppliers
Adapting products and services to meet customers’ needs
APA puts its customers at the centre of everyday decisions, activities and planning. Through APA’s Customer Promise and Energy
Charter commitments, APA continues to implement a customer-driven approach when creating new products and services. APA seeks
feedback and works directly with customers to understand the products and services that can be designed to better suit their needs.
Three new products and services were developed and released in FY21:
– APA Grid technology upgrade: Customers use the APA Grid to request our products and services. During the year, APA improved
the platform to allow access from any connected device. It also added a more intuitive user interface and new security features.
– New APA Grid 90-day Planned Maintenance visualisation: This online tool gives customers a simple, visual way to identify
capacity-impacting planned maintenance.
– New Dandenong LNG storage services: To help customers better manage their exposure to market events, new LNG storage
services offer additional capacity options to address various gas supply portfolio needs and match different risk appetites.
Striving to improve supply chain sustainability performance
During FY21, the top 230 suppliers participated in the APA Supplier Prequalification Program, providing a central repository for all key
supplier information. This allows APA to monitor supplier safety performance, modern slavery performance, and performance with
respect to environmental and social issues.
APA uses a documented risk management approach to fulfil the principles of and its obligations under Australia’s the Commonwealth
Modern Slavery Act 2018 (MSA). APA will not intentionally use suppliers and contractors that engage in modern slavery practices,
such as child labour, debt bondage, inhumane treatment of employees and forced or compulsory labour.
In December 2020, APA provided its first Modern Slavery Statement to the Australian Border Force for publication ahead of the
reporting timetable of March 2021.
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DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
10. Sustainability continued
10.6 Customers and suppliers continued
Addressing modern slavery continued
The focus for FY21 was on Tier 1 suppliers in our supply chain – those with whom APA has a direct contractual agreement – who are
largely based in Australia.
Based on the risk management approach set out for modern slavery, APA has identified potential very high and high-risk suppliers
with operations in a number of countries, in consideration of modern slavery risk across its product and service categories and other
sources of information.
APA is now in the process of assessing these high-risk suppliers to more detailed reviews to assess and appropriately manage the
risk of modern slavery. APA is also updating supplier onboarding procedures to better capture potential modern slavery risk and
continuing to review and monitor all existing suppliers. Finally, APA implemented a new modern slavery awareness training module,
which is mandatory for all procurement staff.
APA has the intention to will expand its modern slavery efforts towards its Tier 2 suppliers in the future.
11. Risk Management
Effective risk management is essential to delivering value for our stakeholders. APA identifies risks to its business and puts in
place controls and strategies to manage any adverse consequences, maximise any opportunities that arise from these risks, and
establish contingency plans to recover in the event of disruption. Material risks are reviewed on an ongoing basis by APA’s Executive
Leadership Team, the Board’s Audit and Risk Management Committee and the relevant business divisions, with the support of both
internal and external experts.
APA’s Risk Management System comprises three elements covering:
– our Risk Management Policy and Risk Appetite;
– the Risk Management Enablers providing governance, risk awareness in line with our 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 and in line with risk appetite. All risk assessments consider
a combination of likelihood and consequence based on the Enterprise Risk Management Framework.
The approach to risk management is aligned to the international risk standard ISO 31000 and considers the internal and external
environment with coverage of both financial and non-financial risks. 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 Group Board
APA Group Audit & Risk Management Committee
Approve risk strategy
& enterprise risk
management framework
Approve and monitor
risk appetite and risk
taking performance
Review current and
emerging material risks
(financial and non‑financial)
Approve key risk
& compliance
policies
Oversight risk
frameworks and
control environment
Executive Risk Management Committee
Review current
and emerging
material risks
Review Enterprise Risk
Management Framework
and risk strategy
Review asset and
corporate insurance
program
Review key risk and
compliance policies and
crisis management plan
Promote risk
awareness as part of
APA’s overall culture
Standards & Oversight
Sets standards & frameworks and monitor
the risk and control environment
Business
Implements Enterprise risk management frameworks, owns and
manages risk and applies risk appetite in decision making
Independent review
Independent review of frameworks
and control effectiveness
Group Risk, Compliance & Insurance
IT Security
Health, Safety, Environment & Heritage
Group Sustainability
Operational functions
Corporate functions
Internal Audit
External Audit
Third parties
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
33
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
Bypass and
competition risk
Gas demand risk
Gas supply risk
Alignment with
future energy
transition needs
APA has a number of significant assets and
investments in its portfolio subject to economic
regulation, which includes the regulation of prices
that APA is permitted to charge for certain services.
Government policy in relation to the Australian
domestic gas market also continues to develop.
Changes in policy as to which assets are regulated
and the settings applicable to regulated assets
can impact APA’s business.
APA’s future earnings may be reduced if customers
purchase gas transportation services from new
pipelines that by-pass or compete with APA’s
pipelines, rather than from APA’s existing pipelines.
– Strong regulatory and policy functions, active in
regulatory management and policy development.
– Assessment of key policy change proposals for
potential impacts on APA’s business.
– Structured and flexible services that leverage
APA’s capability and infrastructure.
– Customer relationship engagement and pro-
active management of business development
opportunities.
– Ensure costs and pricing associated with the
provision of services remains competitive and
provides value to the market.
– Asset management plans aligned with capacity
contracting strategy.
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.
– Development of new and innovative services
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, investor and government
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.
that provide flexibility.
– Competitor analysis
– Recontracting strategy and market monitoring.
– Knowledge and monitoring of gas reserves to
identify potential opportunities.
– Identification of different “energy futures” to drive
strategic direction with diversification in asset
class and geography to manage risk exposure.
– Understanding of advances in the transportation
of alternate fuels utilising existing gas
infrastructure.
– Extend and refine strategies on alternate fuel /
infrastructure consistent with APA’s outlook on
future energy mix and decarbonisation including
innovation projects under the Pathfinder Program.
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DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
11. Risk Management continued
11.1 Key risks continued
Type of Risk
Description
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.
Customer contract
renewal 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.
Reputation risk
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.
Key Management Actions to Manage Risks
– Portfolio of investment grade credit rated
customers.
– Strong counterparty credit due diligence with
customer credit exposures closely monitored.
– Contractual credit support arrangements in place.
– Recontracting strategy in place with close
monitoring of contract renewal portfolio.
– Monitoring of emerging gas supply alternatives
and power generation market developments to
identify new opportunities.
– Structured and flexible service options.
– Engagement with key stakeholders (landowners,
producers, customers, government etc).
– Sustainable development initiatives.
– Industry engagement and implementation of
Energy Charter initiatives.
– Stakeholder Engagement Forums and panels.
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 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.
Investment risk
Credit rating risks
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 periodically and
independently reviewed.
– Oversight by APA’s Due Diligence Committee for
material investment transactions.
– APA’s Capital Management strategy is
formulated to ensure APA’s 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 ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
11. Risk Management continued
11.1 Key risks continued
Type of Risk
Description
35
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, health, safety, environment and heritage.
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, poor relationships with
local communities, 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.
Information
technology and cyber
risk
APA’s operations rely on a number of information
technology systems, applications and
business processes utilised in the delivery of
business functions, including APA’s customer
management system, grid network and
integrated operations centre.
People 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.
– Operations are subject to operational, process
safety, cultural heritage 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 assets within
design parameters and coordinate asset
maintenance issues.
– Comprehensive insurance arrangements
provided as part of asset protection program.
– APA’s information and technology assets are
managed in accordance with recognised industry
standards across hardware, software, applications
and communication systems.
– Cyber security standards are applied 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.
– Performance management standard.
– Leadership development and capability programs
in place.
– Expectations of behaviour set out in the APA’s
Code of Conduct and new behaviours refreshed
in FY21 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.
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DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
11. Risk Management continued
11.1 Key risks continued
Type of Risk
Description
Construction and
development risk
Sustainability 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.
Inadequate management and disclosure of
sustainability (including climate and ESG matters)
impacting APA performance and reputation.
Key Management Actions to Manage Risks
– 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.
– Sustainability Roadmap setting out three year
program covering material sustainability issues
together with plans covering climate change,
community and social performance (including
First Nations), sustainable development (social
investment) and environmental management.
– Development of an ESG scorecard.
– Annual climate reporting and disclosures.
– Continued commitment to TCFD.
Compliance risks – legal or regulatory risks arising in respect of laws, regulations, licences and recognised practising codes including
health, safety environment and heritage, payroll, 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,
payroll compliance, 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 e.g Bushfire Management Plans.
Property insurance cover in place with review planned for business interruption.
Threat: Global economic slowdown impacts
financial markets and customer demand,
potentially reducing gas contract capacity
demand & recontracting revenue, access to new
debt markets and liquidity and commodity prices.
Threat: Competition for talent increases in
particular for new engineering and IT skills as
companies adjust business strategies with a
focus on digitisation and decarbonisation activity.
Physical resilience work planned as apart of Net Zero work program.
Strong capital management and customer credit monitoring.
Active monitoring of commodity pricing impacting sourcing of overseas sourced
items utilised in large construction projects and domestic demand.
Close monitoring of potential changes in energy demand including substitution.
Focus on retention and culture programs of work.
Opportunity: New fuel sources providing medium
to long term sustainable growth opportunities.
Proactive investigation of new energies as part of strategy development and
Pathfinder innovation program works.
APA GROUP ANNUAL REPORT 2021 DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
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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
(from 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 lawyer in Australia and overseas. She holds a Graduate Diploma of Applied
Corporate Governance and is a Fellow of the Governance Institute of Australia.
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
Company
Period of directorship
Michael Fraser
Aurizon Holdings Limited
Since February 2016
Robert Wheals
—
—
Steven Crane
nib holdings limited
SCA Property Group
September 2010 to July 2021
Since December 2018
James Fazzino
Tassal Group Limited
Since May 2020
Debra Goodin
Shirley In’t Veld
Senex Energy Limited
oOh!media Limited
Atlas Arteria Limited
May 2014 to November 2020
November 2014 to February 2020
Since September 2017, Chair since November 2020
Northern Star Resources Limited
Alumina Limited
Venturex Resources Limited
September 2016 to June 2021
Since August 2020
Since July 2021
Rhoda Phillippo
Vocus Group Ltd
March 2015 (previously as M2 Group Ltd) to August 2018
Peter Wasow
Oz Minerals Limited
Since November 2017
12.3 Directors’ meetings
During the financial year, 21 Board meetings, four Audit and Risk Management Committee meetings, four People and Remuneration
Committee meetings, four Health, Safety, Environment and Heritage Committee meetings and nil Nomination Committee meetings were
held. The following table sets out the number of meetings attended by each Director while they were a Director or a committee member:
Board
People &
Remuneration
Committee
Audit & Risk
Management
Committee
Health Safety,
Environment
& Heritage
Committee
Nomination
Committee (1)
A
21
21
21
21
21
21
21
21
B
21
21
21
21
21
20
21
20
A
—
—
4
—
—
4
4
4
B
—
—
4
—
—
4
4
4
A
4
—
4
4
4
—
4
—
B
4
—
4
4
4
—
4
—
A
—
—
—
4
4
4
—
4
B
—
—
—
4
4
4
—
3
A
—
—
—
—
—
—
—
—
B
—
—
—
—
—
—
—
—
Directors
Michael Fraser
Robert Wheals
Steven Crane
James Fazzino
Debra Goodin
Shirley In’t Veld
Peter Wasow
Rhoda Phillippo
A) Number of meetings held during the time the Director held office or was a member of the committee during the financial year.
B) Number of meetings attended.
1) The Nominations Committee is required by its Charter to meet at least two times each year. No meetings were held in the Reporting Period following the
high frequency of meetings during the preceding period, and scheduled meeting to be held in August 2021 (and later this calendar year).
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DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
12. Directors continued
12.4 Directors’ security holdings
The aggregate number of APA securities held directly, indirectly or beneficially by Directors or their related entities at 30 June 2021
is 318,468 (FY20: 385,260).
The following table sets out Directors’ relevant interests in APA securities as at 30 June 2021:
Directors
Michael Fraser
Robert Wheals
Steven Crane
Debra Goodin
James Fazzino
Shirley In’t Veld
Peter Wasow
Rhoda Phillippo
Fully paid securities
as at 1 July 2020
Securities
acquired
Securities
disposed
Fully paid securities
as at 30 June 2021
102,942
46,388
130,000
24,179
30,751
25,000
26,000
—
—
28,208
—
—
—
—
—
5,000
385,260
33,208
—
—
100,000
—
—
—
—
—
—
102,942
74,596
30,000
24,179
30,751
25,000
26,000
5,000
318,468
As at 30 June 2021, Robert Wheals held 432,966 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 40 to 55.
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 ensured a premium was paid 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.
15. Remuneration Report
The Remuneration Report is attached to and forms part of this report.
APA GROUP ANNUAL REPORT 2021
DIRECTORS’ REPORT continued
Australian Pipeline Trust and its Controlled Entities
39
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 113.
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.
17. Information Required for Registered Schemes
Fees paid to the Responsible Entity and its associates (including Directors and Secretaries of the Responsible Entity, related bodies
corporate and Directors and Secretaries of related bodies corporate) out of APA scheme property during the financial year are
disclosed in note 28 to the financial statements.
Except as disclosed in this report, neither the Responsible Entity nor any of its associates holds any APA securities.
The number of APA securities issued during the financial year, and the number of APA securities on issue at the end of the financial
year, are disclosed in note 21 to the financial statements.
The value of APA’s assets as at the end of the financial year is disclosed in the balance sheet in total assets, and the basis of
valuation is disclosed in the notes to the financial statements.
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
At APA’s Annual Meeting on 22 October 2020, special resolutions were passed by APA’s securityholders to amend the Constitutions
of Australian Pipeline Trust and APT Investment Trust. The amendments primarily updated the meetings provisions and provided
enhanced flexibility for hybrid or virtual annual meetings in the future.
Corporate Governance Statement for the financial year is available at APA’s website on https://www.apa.com.au/about-apa/our-
organisation/corporate-governance/.
20. Authorisation
The Directors’ Report is signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to section
298(2) of the Corporations Act 2001.
On behalf of the Directors
Michael Fraser
Chairman
Sydney, 25 August 2021
Robert Wheals
CEO and Managing Director
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REMUNERATION REPORT
Australian Pipeline Trust and its Controlled Entities
LETTER FROM THE CHAIR OF THE PEOPLE AND REMUNERATION COMMITTEE
I am pleased to present APA Group’s Remuneration Report for financial year 2021.
As the global economy adjusts to the ongoing economic impact of COVID-19, APA has delivered solid financial performance,
reflecting the resilience of the business in a year of significant change.
This gave the Board confidence to declare a distribution of 51 cents per security – the highest since APA listed 21 years
ago. Pleasingly, despite the ongoing uncertainty of COVID-19, APA has not stood any employees down during FY21.
Remuneration outcomes for FY21
APA’s underlying EBITDA met the financial gateway, resulting in executives being eligible for a short-term incentive (STI)
payment, however EBITDA performance was below target, which has been reflected in executives’ scorecard outcomes.
In addition, given the impairment charge relating to the Orbost Gas Processing Plant, the Board has exercised its
discretion to reduce STI target outcomes by 10-20% for selected individuals to recognise the link between financial
outcomes and executive incentive outcomes. In exercising downward discretion, the Board considered the individual’s
area of accountability and the date of appointment to their role relative to the timing of the decision to invest in and to
construct the Orbost plant. This resulted in a final STI outcome of 66.4% of maximum for the CEO and 46.3-75.6% of
maximum for Other Executive Key Management Personnel (KMP). This differentiation in outcomes amongst executive
KMP aims to reinforce the pay-for-performance culture at APA.
APA introduced a new long-term incentive (LTI) plan in FY20 hence given the new LTI plan is only two years into the
three year performance period, no LTI grants under the new plan were due for testing in FY21. Under APA’s legacy
LTI plan, a number of awards vested following the testing of performance in prior financial years. Details on the legacy
LTI are set out in section 3.5.
In addition, no fixed pay increases were provided to Executive KMP in FY21 from their FY20 levels, except for the
Group Executive Operations, to ensure his remuneration continues to be attractive and competitive in the market.
No fee increases were provided to Non-executive Directors in FY21.
Changes to the executive team
During FY21, several appointments to the executive team were made. Adam Watson commenced as our Chief
Financial Officer in November 2020 and Julian Peck commenced in August 2020 as Group Executive Strategy and
Commercial. Most recently, Jane Thomas has joined the executive team in May 2021 as the Group Executive People,
Safety and Culture.
Remuneration changes for FY22
Whilst there were no significant changes to the remuneration framework in FY21, as part of the multi-year review of our
executive remuneration framework, the following changes have been made for FY22:
– A re-weighting of our executive team’s pay mix to the long-term, which included reducing STI opportunity and
increasing LTI opportunity for some executives, to drive executives’ focus on APA’s long-term success; and
– For the FY22 LTI grant and onwards, changing our relative total shareholder return peer group from the S&P/ASX100
to a bespoke group of peers whose businesses are more relevant to the nature of APA’s operations.
Further detail on these changes will be provided in this year’s Notice of Meeting and the FY22 Remuneration Report.
In addition, following the increase to the superannuation guarantee contribution from 9.5% to 10.0% effective 1 July
2021, APA has elected to cover this increase across our employee population. This ensures there is no reduction in
take-home pay for our people.
I hope you find this Remuneration Report informative. We look forward to receiving your support at the 2021 AGM.
Peter Wasow
People and Remuneration Committee Chair
APA GROUP ANNUAL REPORT 2021 REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
Contents
1.
Individuals covered by the Remuneration Report
2. Executive summary
3. FY21 performance and executive incentive outcomes
4. Executive remuneration policy and framework
5. Executive KMP contractual arrangements
6. Non-executive Director remuneration
7. Remuneration governance
8. Statutory tables
1. Individuals covered by the Remuneration Report
41
41
41
43
47
51
51
52
53
The Remuneration Report (the Report) for APA for FY21 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):
Name
Non-Executive Directors (NEDs)
Michael Fraser
Steven (Steve) Crane
James Fazzino
Debra (Debbie) Goodin
Shirley In’t Veld
Rhoda Phillippo
Peter Wasow
Role
Chair
Director
Director
Director
Director
Director
Director
Chief Executive Officer and Managing Director (CEO/MD)
Chief Financial Officer (CFO)
President North American Development
Group Executive Strategy and Commercial
Group Executive (GE) Operations
Former Chief Financial Officer
Executive KMP
Robert (Rob) Wheals
Adam Watson
Ross Gersbach
Julian Peck
Darren Rogers
Peter Fredricson
1) Commenced on 16 November 2020.
2) Commenced on 20 August 2020.
3) Retired on 31 December 2020.
2. Executive Summary
Term
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year (1)
Full year
Part year (2)
Full year
Part year (3)
The Board recognises the important role remuneration plays in supporting and implementing the achievement of APA’s operational
strategy over both the short and long-term. The key principles of the remuneration policy and a summary of the executive
remuneration framework is outlined 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 Health, Safety
& Environment (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.
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REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
2. Executive Summary continued
Fixed pay
Short-term incentive (STI)
Long-term incentive (LTI)
Purpose
To be market competitive
to attract, motivate and
retain individuals.
Performance period N/A
Performance
measures
N/A
Delivery and
delivery timeframe
Cash salary and other
benefits including statutory
superannuation.
Opportunity
Executive KMP roles are
benchmarked against external
positions in companies with
comparable characteristics.
To reward executives for their
contribution to APA's short-term
performance, which will enable the
achievement of long-term goals.
To focus executives on the
achievement of APA’s long-term
business strategy and to create
alignment with security holders
through security ownership.
One year
Three years
A scorecard of financial and
non-financial measures, subject
to meeting an underlying Earnings
before Interest Tax Depreciation
and Amortisation (EBITDA) gateway.
Relative total shareholder return
(TSR) (50%) and Return on
Capital (ROC) (50%).
Cash (2/3) paid at the end of Year one
and deferred equity (1/3) delivered as
Restricted Securities where the minimum
security holding requirement is not met.
Restricted Securities are released at the
end of a two-year holding lock period.
Eligible to receive 100% of STI in cash
once the minimum security holding
requirement is met.
Performance Rights will vest
subject to meeting performance
and employment conditions,
tested in Year three. Where
performance conditions are
met, Rights vest in equal
tranches at the end of Year
three, four and five subject
to continued employment.
CEO/MD: Target of 60% of fixed pay
and maximum of 90% of fixed pay
CEO/MD: 150% of fixed pay
Other Executive KMP: Target of 40-50%
of fixed pay and maximum of 60-75%
of fixed pay
Other Executive KMP: 75-125%
of fixed pay
Minimum
security holding
requirement
Executive
remuneration
framework
CEO/MD: 100% of fixed pay
Other Executive KMP: 50% of fixed pay
Where the minimum security holding requirement has not been met, 1/3 of the STI payable will be deferred
into Restricted Securities.
Fixed pay
Cash STI (2/3)
STI Restricted Securities (1/3) (1)
LTI
3 year performance period
1/3 vests
1/3 vests
1/3 vests
FY21
FY22
FY23
FY24
FY25
1) Subject to whether the minimum security holding requirement is met.
Maximum
pay mix
The pay mix graph below displays the proportion of fixed vs variable remuneration (STI and LTI) at the
maximum pay mix. The LTI component has been calculated at face value assuming 100% vesting.
APA Executive KMP Maximum Pay Mix
CEO/MD
29%
27%
Other Executive KMP (average)
37%
24%
44%
39%
0%
Fixed pay
STI
50%
LTI
75%
100%
APA GROUP ANNUAL REPORT 2021 REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
3. FY21 performance and executive incentive outcomes
3.1 5-year financial performance
The table below summarises APA’s financial performance for the past 5 years.
Measure
FY21
FY20
FY19
FY18
Underlying EBITDA ($m) (1)
Profit after tax including significant items ($m) (2)
Profit after tax excluding significant items ($m)
Free cash flow per security (cents)
Distribution per security (cents)
Closing security price at 30 June ($)
1,633.0
3.7
281.8
76.4
51.0
8.90
1,653.9
311.8
311.8
81.1
50.0
11.13
1,573.8
288.0
288.0
75.7
47.0
10.80
1,518.5
264.8
264.8
80.8
45.0
9.85
43
FY17
1,470.1
236.8
236.8
80.9
43.5
9.17
1) EBITDA excluding recurring items arising from other activities, transactions that are not directly attributable to the performance of APA Group's business
operations and significant items. The Board considers this to best reflect the core earnings of APA. Refer to note 3 to the Financial Statements.
2) Includes an impairment loss on Orbost Gas Processing Plant and a once-off interest charge associated with bond note redemptions. Refer to note 2 to the
Financial Statements.
Since listing in 2000, APA’s has paid an interim and full year distribution every year and distributions have grown for 17 consecutive
years. Our distribution per security of 51.0 cents for FY21 represents a 2.0% increase on FY20.
300%
TSR %
TSR: 192.8%
CAGR: 12.7% pa
cents
60.0
35.0
35.5
36.3
41.5
38.0
43.5
45.0
47.0
50.0
51.0
250%
200%
150%
100%
50%
0
50.0
40.0
30.0
20.0
10.0
0
Jun 12
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Jun 19
Jun 20
Jun 21
Distributions (RHS)
APA TSR (LHS)
ASX100 TSR (LHS)
ASX200 Utilities TSR (LHS)
3.2 FY21 STI scorecard outcomes – CEO/MD
The Board reviewed the CEO/MD’s performance considering APA’s performance in FY21, taking into account his performance
against the key performance indicators (KPIs) in his STI scorecard and the impact of the Orbost Gas Processing Plant impairment on
Group performance.
Following the exercise of downwards discretion of 10% on the CEO/MD’s target outcome, due to the impact of the impairment, it
determined the final STI outcome to be 66.4% of maximum. In FY20, the Board also exercised downwards discretion for the Orbost
project not achieving planned outcomes.
Scorecard measures
FY21 outcome
Financial – Underlying EBITDA (35% weighting)
Outcome
(% of maximum)
Further detail
Underlying EBITDA is the primary
financial measure used to measure
operational performance.
THRESHOLD
TARGET
MAXIMUM
Financial – Growth in invested capital (15% weighting)
Capex encourages the business
to grow through new developments
and organic growth projects.
THRESHOLD
TARGET
MAXIMUM
19.1%
15.0%
Underlying EBITDA outcome of
$1,633m was between threshold
(1,600m) and target ($1,652m).
Actual outcome of $636m in
growth capex exceeds the
stretch target of $300m.
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REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
3. FY21 performance and executive incentive outcomes continued
3.2 FY21 STI scorecard outcomes – CEO/MD continued
Scorecard measures
FY21 outcome
Operational Excellence (including HSE) (10% weighting)
Outcome
(% of maximum)
Further detail
THRESHOLD
TARGET
MAXIMUM
THRESHOLD
TARGET
MAXIMUM
Improve the HSE performance
outcomes and culture, including
process safety, measured by
key metrics and HSE strategy progress.
People & Culture (10% weighting)
Establish new operating model
for APA in line with Group Purpose
and Vision, and continue to develop
and improve APA’s culture in line
with APA values and diversity &
inclusion (D&I) strategy.
Growth & Innovation (20% weighting)
Progress APA’s strategy to grow
APA’s portfolio of assets in Australia
and the USA.
THRESHOLD
TARGET
MAXIMUM
7.9%
7.5%
Total recordable injury frequency rate
(TRIFR) of 6.33 exceeds target of 6.5.
Above target performance against
the HSE strategy implementation,
HSE lead measures and process
improvement plans.
Above target performance against
4 equally weighted measures:
– Developing APA’s culture statement;
– Increasing senior female
representation from 19.8% to 26.7%;
– Implementation of D&I strategy
including flexible working policy and
inclusive leadership program; and
– Moderate progress against Ways
of Working targets.
15.3%
US strategy endorsed, placing APA
in a strong position as it looks to
acquire a North American asset.
Led refresh of Australian strategy,
including a focus on electrification.
Customer & Stakeholder Management (10% weighting)
Lead improved customer engagement
and outcomes, and drive progress on
APA’s sustainability roadmap.
THRESHOLD
TARGET
MAXIMUM
8.3%
Above target performance
with improvements in
customer initiatives.
Scorecard outcome
73.1% (of maximum)
109.7% (of target)
Final outcome after the exercise of Board discretion
66.4%
(of maximum)
99.7%
(of target)
3.3 FY21 performance scorecard outcomes – Other Executive KMP
Detailed below are the individual scorecard outcomes for Other Executive KMP who remain employed by APA at the end of the
financial year. A number of group-wide KPIs (outlined in the CEO/MD’s STI scorecard above) apply as well as individual-specific KPIs,
to reflect the nature of their role and contribution to APA’s business outcomes.
In light of the Orbost Gas Processing Plant impairment, the Board exercised its discretion to reduce the target outcome of specific
individuals by -20%. In determining the degree of discretion to apply, the following factors were considered by the Board, to ensure
fairness of STI outcomes across the Executive Leadership Team:
– The day-to-day area of accountability of the individual; and
– The individual’s date of appointment to their role relative to the timing of the decision to invest in and the construction of the project.
After any applicable adjustments, final STI outcomes were significantly differentiated between executive KMP, ranging from 46.3%
to 75.6% of maximum, to reflect individual performance.
APA GROUP ANNUAL REPORT 2021
45
REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
3. FY21 performance and executive incentive outcomes continued
3.3 FY21 performance scorecard outcomes – Other Executive KMP continued
Scorecard measures
A Watson
Financial strength (45%)
Operational excellence (incl HSE) (10%)
People & Culture (10%)
Growth & Innovation (30%)
Customer & Stakeholder Management (5%)
FY21 outcome
Scorecard
outcome
(% of maximum)
Final outcome
after any applicable
Board discretion
(% of maximum)
THRESHOLD
TARGET
MAXIMUM
75.6%
75.6%
75.6%
Commentary on A Watson’s performance against individual KPI’s:
– Outperformance in refreshing APA’s capital management strategy in-line with business strategy.
– Above target performance in establishing a new procurement strategy and improving cost and risk management.
– No downwards modifier for Orbost impairment given he was a new appointment to the role in FY21.
R Gersbach
Financial strength (30%)
Operational excellence (incl HSE) (10%)
People & Culture (15%)
Growth & Innovation (35%)
Customer & Stakeholder Management (10%)
THRESHOLD
TARGET
MAXIMUM
59.6%
46.3%
46.3%
Commentary on R Gersbach’s performance against individual KPI’s:
– Continued progress against US strategy.
– Continues to play a significant role in leading APA’s US people strategy.
– Above target performance in supporting APA’s decarbonisation strategy.
– US stakeholder plan under development but not yet completed.
– Downwards modifier on STI outcome to recognise accountability for the Orbost impairment.
J Peck
Financial strength (40%)
Operational excellence (incl HSE) (10%)
People & Culture (10%)
Growth & Innovation (30%)
Customer & Stakeholder Management (10%)
THRESHOLD
TARGET
MAXIMUM
74.4%
74.4%
74.4%
Commentary on J Peck’s performance against individual KPI’s:
– Provided M&A support for potential acquisitions.
– Stretch outcome achieved in progressing Australian strategy as it relates to M&A and climate change.
– Above target outcome for improvement in customer engagement and outcomes.
– No downwards modifier for Orbost impairment given he was a new appointment to the role in FY21.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
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REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
3. FY21 performance and executive incentive outcomes continued
3.3 FY21 performance scorecard outcomes – Other Executive KMP continued
Scorecard measures
D Rogers
Financial strength (30%)
Operational excellence (incl HSE) (37.5%)
People & Culture (15%)
Growth & Innovation (7.5%)
Customer & Stakeholder Management (10%)
FY21 outcome
Scorecard
outcome
(% of maximum)
Final outcome
after any applicable
Board discretion
(% of maximum)
THRESHOLD
TARGET
MAXIMUM
73.9%
73.9%
73.9%
Commentary on D Rogers’ performance against individual KPI’s:
– Stretch performance in progressing asset management and operational excellence.
– Significant improvement to Orbost operating performance as oversight of Orbost was transferred to Operations portfolio in August 2020.
– No downwards modifier for Orbost impairment given it was outside the individual’s portfolio until August 2020.
P Fredricson (former CFO)
Commentary on P Fredricson’s performance:
– Smooth transition of CFO role between September to November 2020 to Adam Watson.
– Downwards modifier on STI outcome to recognise accountability for the Orbost
impairment whilst employed at APA.
66.7%
53.3%
53.3%
3.4 FY21 STI outcomes – Executive KMP
The table below provides an overview of the STI outcomes for FY21.
Executive KMP
R Wheals
A Watson (1)
R Gersbach
J Peck (3)
D Rogers
P Fredricson (4)
STI earned
STI forfeited
Cash
Deferred
% of maximum
opportunity
Total
Foregone
% of maximum
opportunity
637,910
268,052
336,427
329,261
236,614
191,562
318,955
—
— (2)
—
118,307
—
956,865
268,052
336,427
329,261
354,921
191,562
66.4%
75.6%
46.3%
74.4%
73.9%
53.3%
483,134
86,441
390,323
113,342
125,078
167,616
33.6%
24.4%
53.7%
25.6%
26.1%
46.7%
1) Adam Watson’s STI outcome was pro-rated to reflect his appointment on 16 November 2020.
2) Ross Gersbach’s STI outcome was delivered wholly in cash to reflect the terms of his US assignment. He is still required to meet the minimum security
holding requirement.
3) Julian Peck’s STI outcome was pro-rated to reflect his appointment on 20 August 2020.
4) Peter Fredricson’s STI was pro-rated to reflect his retirement on 31 December 2020.
3.5 LTI outcomes
No awards were due to vest in FY21 under the new LTI plan introduced in FY20. Under the legacy LTI plan arrangements (cash settled),
the awards vest in 3 equal tranches over three years following performance assessment.
The final awards under the legacy LTI plan were performance tested at the end of FY20 hence a number of awards allocated in
FY20, as well as prior years, vested in FY21. No legacy LTI arrangements were tested in FY21.
APA GROUP ANNUAL REPORT 2021
REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
47
3. FY21 performance and executive incentive outcomes continued
3.6 FY21 actual remuneration
The actual remuneration detailed in the table below differs 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 legacy LTI plan.
– Other equity awards vested in the year.
Executive kMP
Fixed pay
$ (1)
Other
$
R Wheals
A Watson
R Gersbach
J Peck
D Rogers
P Fredricson
1,600,000
521,865
969,000
739,484
825,599
475,000
—
—
969,431 (6)
—
—
270,516 (8)
Cash STI
$ (2)
637,910
268,052
336,427 (7)
329,261
236,614
191,562
STI vested
prior years
deferred equity
$ (3)
LTI vested
$ (4)
Other
equity awards
$ (5)
246,006
—
—
—
70,539
—
309,833
—
347,966
—
127,270
341,013
—
585,288
—
547,081
—
—
Total
$
2,793,749
1,375,205
2,622,824
1,615,826
1,260,022
1,278,091
1) 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.
2) Cash STI refers to the cash portion of the STI, relating to performance in FY21. Payment will be made in September 2021.
3) Deferred STI refers to the equity portion of the STI.
4) LTI vested refers to the cash amount to be paid in September 2021, based on the VWAP of $9.3464 and number of reference units that vested in August 2021
as outlined in section 8.4.
5) This includes buy-out awards provided to Adam Watson and Julian Peck as outlined in section 4.4. The number of securities granted is calculated by dividing
the total face value of the award by the VWAP of securities on ASX over the 20 trading days prior to the commencement date. The actual value of the award
reflects the actual cash paid to acquire the securities on-market.
6) This includes the value of benefits relating to Mr. Gersbach’s secondment to the USA and includes a one-off project award, relocation allowances and
assistance as well as cost of living adjustment. Costs are inclusive of USA tax impacts and are split between ongoing costs of $211,118 (22%), a one-off project
award of $750,000, as well as foreign exchange rate differences for USD fixed pay and a portion of FY20 STI paid in USD.
7) This is all paid as cash due to the secondment to the USA.
8) This represents the annual leave and long service leave payout upon Mr Fredricson’s retirement.
4. Executive remuneration policy and framework
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.
4.1 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.
4.2 STI plan
In addition to the information covered in section 2, further detail on the operation of the FY21 STI plan is provided below:
Feature
Description
Opportunity
Role
STI target (% of fixed pay)
STI maximum (% of fixed pay)
CEO/MD
President North American Development
All Other Executive KMP
60%
50%
40%
90%
75%
60%
Allocation
methodology
of deferred STI
Restricted Securities are allocated at face value using a volume weighted average price (VWAP) of the
30 trading days ending 7 working days before the People & Remuneration Committee meeting to consider
APA’s full year financial results.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
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REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
4. Executive remuneration policy and framework continued
4.2 STI plan continued
Feature
Description
Performance
measures
Performance is assessed against a scorecard of financial and non-financial measures.
The key metrics used in the CEO’s scorecard are outlined below.
Category
Measures
Objective
Financial strength (50%)
– Underlying EBITDA
– Capex growth projects
– Maintain financial stability through solid
operating earnings
– Grow business through new
developments or organic growth projects
Operational excellence
(including HSE) (10%)
– TRIFR
– Progress against HSE strategy
and process improvement plan
– Improve safety, wellbeing and
environmental performance and safety
culture through delivery of HSE strategy
People & Culture (10%)
– Progress on Culture Statement
– D&I targets
– Improve organisational structure and
culture including meeting its D&I targets
Growth & Innovation (20%)
– Progress against strategic
– Progress US and Australian strategy via
plans and initiatives
acquisitions, investments
and/or divestments
Customer & Stakeholder
Management (10%)
– Progress against Energy
Charter initiatives and
sustainability roadmap
– Drive improved customer engagement
and outcomes
– Drive progress on sustainability roadmap
4.3 LTI plan
In addition to the information covered in section 2, further detail on the operation of the FY21 LTI plan is provided below:
Feature
Description
Opportunity
Role
CEO/MD
President North American Development
GE Operations
All Other Executive KMP
LTI maximum (% of fixed pay)
150%
75%
100%
125%
Allocation
methodology
Performance
measures
Performance Rights are allocated at face value using a VWAP of the 30 trading days ending 7 working days
before the People & Remuneration Committee meeting to consider APA’s full year financial results.
Relative TSR (50% weighting) measures the Group’s TSR over a three year period relative to a market peer
group comprising S&P/ASX 100 companies.
ROC (50% weighting) is calculated by dividing underlying EBITDA by Funds Employed (FE). The ROC
hurdle measures APA Group’s operating earnings achieved based on operating assets over a three year
performance period.
APA GROUP ANNUAL REPORT 2021 49
REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
4. Executive remuneration policy and framework continued
4.3 LTI plan continued
Feature
Description
Relative TSR
vesting schedule
The Relative TSR component vests in accordance with the following scale:
Relative TSR percentile ranking
% of awards that vest
Below 50th percentile
At 50th percentile
Nil
50%
Between 50th and 82.5th percentile
Straight line pro-rata vesting between 50% and 100%
ROC vesting
schedule
At 82.5th percentile or above
100%
The ROC component vests in according with the following scale:
ROC (Underlying EBITDA/FE)
% of awards that vest
Less than 11.10%
Equal to 11.10%
0%
33%
Greater than 11.10% up to 11.40%
Straight line pro-rata vesting between 33% and 100%
At or above 11.40%
100%
Retesting
Re-testing of LTI awards is not permitted.
ROC Component calculation
ROC is calculated as an average over three years – the average of underlying 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 FY21 Financial Statements). This represents the value of assets
which are under construction as at balance date and are therefore not yet earning revenue;
2) Deduct: Other Financial Instruments Assets Current and Non-Current but excluding Redeemable Preference Share balances
(per note 20 in the FY21 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 FY21 Financial Statements, however, are not
separately identifiable; and
4) Normalise: Cash balances to $30 million. For example: $652.352 million cash was held at 30 June 2021, however this was
normalised back to $30 million, therefore, $622.352 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 FY21
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, acquisitions, organisational changes or otherwise ensure that inappropriate outcomes are avoided,
as per the terms of the offer under the LTI plan.
4.4 Additional one-off awards
Project award
As part of his role with APA, Ross Gersbach relocated to the US in 2019 and was granted a one-off project award in July 2019 subject
to the achievement of defined and specific deliverables relating to APA’s growth strategy in the US; given this is a key area to the
business' long-term success.
At the time the award was assessed in December 2020, APA determined that Mr. Gersbach had made strong progress against
his deliverables relating to the US strategy, resulting in an award of $750,000. There is no intention to provide this one-off award
again in FY22.
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REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
4. Executive remuneration policy and framework continued
4.4 Additional one-off awards continued
Buy-out awards
Having identified two key employees of a high calibre with the necessary skills and experience for the roles at APA, buy-out awards
were provided to compensate external appointments for incentive awards foregone from their previous employer.
In FY21, all buy-out awards were granted as APA securities, as follows:
– Adam Watson (CFO) was granted securities to the face value of $600,000; and
– Julian Peck (GE Strategy & Commercial) was granted securities to the face value of $600,000.
Whilst 2/3 of securities vested during FY21, the remaining 1/3 of securities are subject to a holding lock until the earlier of:
– Two years from commencement date; or
– The date the minimum security holding requirement is met.
4.5 Additional provisions
The table below summarises additional provisions as they relate to the remuneration of Executive KMP for FY21.
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 (malus) or recouped (clawback) in the event of misconduct or of a material misstatement in the year-end
financial statements, as per APA’s Executive Clawback and Malus Policy.
Distribution and
voting rights
Restricted Securities carry the same distribution and
voting rights as ordinary securities.
Unvested Rights do not carry distribution and voting
rights.
Cessation of
employment
Change of control
Subject to Board discretion:
Subject to Board discretion:
– Where the participant is terminated summarily or
– Where the participant is terminated summarily or
resigns having breached their terms of employment,
they will not be eligible for a STI payment for the
relevant financial year.
– Where employment ceases for any other reason,
a pro-rated STI award may be paid based on the
performance period served.
resigns having breached their terms of employment,
all Rights will automatically lapse.
– Where employment ceases for any other reason,
unvested Rights will remain on-foot subject to
the original terms of grant and tested against
performance hurdles in the ordinary course.
The Board has absolute discretion to determine
whether any or all Rights vest. Where the Board does
not make a determination, all Rights will vest.
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.
The Board has absolute discretion to determine
whether any or all Restricted Securities are released
from restrictions. Where the Board does not make a
determination, all Restricted Securities will be released
from dealing restrictions.
4.6 Executive KMP minimum security holding requirement
The minimum security holding requirement helps to ensure the alignment of the interests of Executive KMP and securityholders.
Within five years from the date of appointment to their role:
– The CEO is required to hold securities to the value of 100% of fixed pay; and
– Other Executive KMP are required to hold securities to the value of 50% of fixed pay.
Where there have been a number of recent appointments or internal promotions to Executive KMP roles, these individuals remain
within the five year timeframe to meet the requirement. Details of Executive KMP security holdings may be found in section 8.5.
APA GROUP ANNUAL REPORT 2021 REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
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5. Executive KMP contractual arrangements
5.1 Outgoing arrangements of Peter Fredricson (former CFO)
Mr Fredricson retired on 31 December 2020 following the ASX announcement made in December 2019. Following the
announcement, he served out his notice period, ensuring a smooth transition of the CFO role during this time.
In addition to the contractual entitlements paid to Mr Fredricson upon retirement, and in-line with market practice for a good leaver,
awards will be left on foot and tested in their ordinary course, with the FY21 STI and LTI awards pro-rated to reflect the period of
employment in FY21. There is no accelerated vesting of awards for actual payment.
5.2 Executive KMP service agreements
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
Additional payments on termination
CEO/MD
Permanent
– 9 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
9 months fixed pay (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 fixed pay.
Permanent
Other
Executive
KMP
– 6 months’ notice by either APA or the individual
– APA may provide payment in lieu of notice
– No notice is required by APA for termination for cause
Termination by APA: termination
payment of 13 weeks’ (1) fixed pay
Termination by KMP: Nil
1) 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.
6. Non-executive Director remuneration
6.1 Determination of NED 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 of:
– A Board fee; and
– An additional fee for serving as a Chair or member of a Board Committee.
NED fees are inclusive of superannuation contributions which are provided in accordance with the statutory requirements under
the Superannuation Guarantee Act. NEDs do not receive incentive payments nor participate in incentive plans.
The Board Chair does not receive additional fees for his membership on other Committees.
One-off ‘per diems’ may be paid in exceptional circumstances. No per-diem payments were made in FY21.
6.2 Aggregate NED fee pool
The aggregate NED fee pool as at 30 June 2021 was $2,500,000.
6.3 Director fees
The following table sets out NED fees, for which there were no increases in FY21.
Board
Audit & Risk Management Committee
Health, Safety & Environment Committee
People & Remuneration Committee
Nomination Committee
Chair
$
511,400
47,900
39,900
39,900
Nil
Member
$
177,600
23,900
19,900
19,900
Nil
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 payable for their
membership on Committees). This level of security holding is to be held throughout their tenure as a NED and the requirement is to
be met within three years of their appointment.
As at 30 June 2021, all NEDs met this requirement, with the exception of Rhoda Phillippo who was appointed on 1 June 2020 and
remains within the three year timeframe to meet this requirement. Details of NED security holdings may be found in section 8.5.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
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REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
7. Remuneration governance
The diagram below outlines the remuneration governance framework in place at APA.
The Board has overarching responsibility for the approval of the Executive KMP and NED remuneration framework,
pay outcomes, policies and procedures, based on the recommendations of the People & Remuneration Committee.
BOARD
PEOPLE & REMUNERATION COMMITTEE
The Committee has been established by the Board to oversee
Executive KMP and NED remuneration.
AUDIT & RISK
MANAGEMENT
COMMITTEE
The purpose of the Committee is to oversee the development of APA’s
performance and remuneration strategy and frameworks to reflect
APA’s core values, purpose, strategic direction and risk appetite.
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 the effective attraction,
retention and development of a diverse and talented workforce. The
full responsibilities of the Committee can be found in APA’s People &
Remuneration Committee Charter available on APA’s website.
The members of the Committee, all of whom are independent
NEDs, are:
– Peter Wasow (Chair)
– Steve Crane
– Shirley In’t Veld
– Rhoda Phillippo
MANAGEMENT
Management is responsible for providing relevant information and
analysis to the Board and the People & Remuneration Committee.
This advice is used as a guide, and does not serve as a substitute
for the thorough consideration of the issues by each Director.
Management may also be required to communicate with external
advisors as required, to ensure the People & Remuneration
Committee receives all the relevant factual information.
In considering whether a robust
performance assessment process is
in place, the People & Remuneration
Committee consults with the Audit
& Risk Management Committee on
whether proposed remuneration
outcomes are appropriate in
light of relevant risk outcomes
and corporate culture.
EXTERNAL ADVISORS
The People & Remuneration
Committee seeks external
professional advice from
time-to-time on matters within
its terms of reference.
In FY21, KPMG was engaged to provide
market practice information and
benchmarking data.
Where a remuneration
recommendation is provided,
as defined by the Corporations Act
2001, all advice is provided directly
to the Committee to ensure it is free
from the influence of management.
No remuneration recommendations
were made in FY21.
APA GROUP ANNUAL REPORT 2021 REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
53
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 (1)
Short-Term Employment Benefits
Post-
Employment
Awarded
Cash
STI
STI (3) Deferral
Other
Equity
Awards (4)
Salary (2)
Other
Superan-
nuation
Security-based payments
Equity settled
Legacy Security Based
LTI Plan
payments (5)
Total
1,575,000
1,561,413
637,910
529,061
318,955
264,531
—
—
—
—
25,000
25,000
232,375
412,639
715,473 3,504,713
3,160,765
368,121
499,383
268,052
—
585,288
—
22,482
—
171,867
1,547,072
947,306
947,997
336,427
422,969
—
—
—
—
969,431 (7)
376,897
21,694
21,003
260,975
476,891
216,656 2,752,489
111,473 2,357,230
675,328
329,261
—
547,081
—
64,156
—
132,711
1,748,537
800,599
489,913
236,614
151,709
118,307
75,855
191,562
393,775
—
—
—
—
—
—
—
—
—
—
—
—
—
—
25,000
16,667
56,485
67,433
202,064
86,279
1,439,069
887,856
270,516 (10)
—
—
—
12,500
25,000
567,948
467,335
531,551 2,036,577
1,920,398
109,288
—
453
—
1,467,007
—
—
—
1,508,043
R Wheals
2021
2020
A Watson (6)
2021
R Gersbach
2021
2020
Julian Peck (8)
2021
D Rogers
2021
2020
Former KMP
P Fredricson (9)
2021
2020
462,500
925,000
M McCormack (11)
2021
2020
—
40,583
Total Remuneration
2021
2020
4,960,116
3,964,906
1,999,826
1,497,514
437,262
340,386
1,132,369
—
1,239,947
376,897
170,832
88,123
1,117,783
2,891,305
1,970,322 13,028,457
675,161 9,834,292
1) This table outlines the total remuneration earned by Executive KMP during FY20 and FY21, calculated in accordance with the relevant accounting standard,
including AASB 2: Share-based Payments (AASB 2).
2) 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.
3) 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).
4) Other Equity Rewards relate to once-off buy-out awards provided to Adam Watson and Julian Peck. The value reflects actual cash paid to purchase the
securities on-market. See section 4.4 for more detail.
5) 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.
6) Commenced on 16 November 2020.
7) This includes the value of benefits relating to Mr. Gersbach’s secondment to the USA and includes a one-off project award, relocation allowances and
assistance as well as cost of living adjustment. Costs are inclusive of USA tax impacts and are split between ongoing costs of $211,118 (22%), a one-off project
award of $750,000, as well as foreign exchange rate differences for USD fixed pay and a portion of FY20 STI paid in USD.
8) Commenced on 20 August 2020.
9) Mr Peter Fredricson’s retirement was effective on 31 December 2020. Mr Fredricson is entitled to further reference units under the legacy LTI plan, due to
vest in August 2021, August 2022 and August 2023, with a total value of $757,264 (based on a VWAP of $9.3464) This has been fully expensed in FY21
for statutory accounting.
10) This represents the annual leave and long service leave payout upon Mr Peter Fredricson’s retirement.
11) Mr Mick McCormack was not a member of KMP during FY21 however is included in the table for FY20 comparative balance to align with the table published
in FY20 Annual Report.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
54
REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
8. Statutory tables continued
8.2 NED statutory remuneration disclosure
M Fraser
2021
2020
S Crane
2021
2020
J Fazzino
2021
2020
D Goodin
2021
2020
S In’t Veld
2021
2020
R Phillippo (1)
2021
2020
P Wasow
2021
2020
Total
2021
2020
Short-term
employment benefits
Post-employment
benefits
Fees
$
Superannuation
$
Total
$
467,032
467,032
202,192
202,192
202,192
202,192
224,110
224,110
216,804
216,804
215,084
16,545
220,457
220,457
44,368
44,368
19,208
19,208
19,208
19,208
21,290
21,290
20,596
20,596
20,433
1,572
20,943
20,943
511,400
511,400
221,400
221,400
221,400
221,400
245,400
245,400
237,400
237,400
235,517
18,117
241,400
241,400
1,747,871
1,549,332
166,046
147,185
1,913,917
1,696,517
1) Payment for June 2020 was delayed, this amount was paid in July 2020.
8.3 Outstanding awards under current LTI plan
The following table sets out the movements in the number of Performance Rights granted to executives, and any amounts vested or
forfeited during the financial year.
Opening
balance at
1 Jul 2020
Performance
Rights
granted
in FY21 Grant date
Allocation
Date
Vested in Forfeited
Closing
balance on
in FY21 30 Jun 2021
Fair value of Face value of
performance
performance
rights at
rights at
grant date (3)
grant date (2)
$
$
R Wheals
A Watson
R Gersbach
J Peck
D Rogers
P Fredricson
2021
2021
2021
2021
2021
2021
217,872
—
65,975
—
51,064
64,682
215,094
106,426
65,133
82,179
71,698
32,190
12/11/2020
16/11/2020
12/11/2020
12/11/2020
12/11/2020
12/11/2020
—
—
—
—
—
—
432,966
106,426
131,108
82,179
122,762
96,872
1,379,828
682,723
417,829
527,179
459,943
206,499
2,400,000
1,187,500
726,750
916,952
800,000
359,178
FY21
—
—
—
—
—
—
2) Calculated based on fair value of the individual vesting conditions being $4.17, $3.97, and $3.79 for the relative TSR and $9.28, $8.85, and $8.43 for the ROC hurdle
vesting conditions for each of the vesting dates being August 2023, August 2024 and August 2025 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 2021 satisfied all vesting conditions.
3) Based on a VWAP of $11.1579.
APA GROUP ANNUAL REPORT 2021
REMUNERATION REPORT continued
Australian Pipeline Trust and its Controlled Entities
55
8. Statutory tables continued
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 or been paid, and the years in which they will vest.
Allocation
Date
Opening
balance at
1 Jul 2020
Closing
Units Cash settled
balance at
reference
units paid 30 Jun 2021
allocated
in FY21
Reference units allocated that have
not yet vested or been paid and
the months in which they will vest
Aug 21
Aug 22
Aug 23
R Wheals
R Gersbach
D Rogers
Former KMP
P Fredricson
2017
2018
2019
2020
Total
2017
2018
2019
2020
Total
2020
Total
2017
2018
2019
2020
Total
16,159
12,654
37,962
19,757
14,958
42,207
(16,159)
(6,327)
(12,654)
(19,757)
(7,479)
(14,069)
—
6,327
25,308
42,507
—
7,479
28,138
47,046
42,507
47,046
24,174
24,174
19,359
14,650
41,358
(19,359)
(7,325)
(13,786)
—
7,325
27,572
46,125
46,125
6,327
12,654
14,169
33,150
7,479
14,069
15,682
37,230
8,058
8,058
7,325
13,786
15,375
36,486
12,654
14,169
26,823
14,069
15,682
29,751
8,058
8,058
14,169
14,169
15,682
15,682
8,058
8,058
13,786
15,375
29,161
15,375
15,375
8.5 Security holdings
Year ended 30 June 2021
Opening
Balance at
1 Jul 2020
Securities
Acquired
Closing
Securities
Balance at
Disposed 30 Jun 2021
% of
NED fee /
fixed pay (1)
NEDs
M Fraser
S Crane
J Fazzino
D Goodin
S In’t Veld
R Phillippo (2)
P Wasow
Executive KMP
R Wheals
A Watson (3)
R Gersbach
J Peck (4)
D Rogers
P Fredricson (5)
102,942
130,000
30,751
24,179
25,000
—
26,000
46,388
—
44,691
—
3,794
49,500
—
—
—
—
—
5,000
—
28,208
55,556
—
53,428
9,298
—
—
100,000
—
—
—
—
—
—
—
—
—
—
12,500
102,942
30,000
30,751
24,179
25,000
5,000
26,000
74,596
55,556
44,691
53,428
13,092
37,000
188%
158%
162%
127%
132%
26%
137%
44%
55%
43%
56%
15%
N/A
1) Securities valued using a price of $9.3464, divided by NED fee/contractual fixed pay.
2) Appointed on 1 June 2020.
3) Commenced on 16 November 2020.
4) Commenced on 20 August 2020.
5) Retired on 31 December 2020.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
56
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Note
4
4
5
5
5
5
19
13
6
Revenue
Share of net profits of associates and joint ventures using the equity method
Asset operation and management expenses
Depreciation and amortisation expenses (1)
Other operating costs – pass-through
Finance costs (2)
Employee benefit expense
Other expenses
Fair value gains on contract for difference
Impairment of property, plant and equipment (3)
Profit before tax
Income tax expense (1)
Profit for the year
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit plan
Income tax relating to items that will not be reclassified subsequently
Items that may be reclassified subsequently to profit or loss:
Transfer of gain on cash flow hedges to profit or loss
Gain/(loss) on cash flow hedges taken to equity
Gain/(loss) on associate hedges taken to equity
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
(Loss)/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) (1)
7
2021
$000
2,575,236
29,777
2,605,013
(214,065)
(674,370)
(460,465)
(655,896)
(286,549)
(15,786)
18,018
(249,322)
66,578
(62,894)
3,684
23,582
(7,075)
16,507
28,916
435,895
12,420
(143,169)
334,062
350,569
354,253
(39,217)
42,901
3,684
311,352
42,901
354,253
2021
0.3
Restated
2020
$000
2,559,944
30,677
2,590,621
(218,010)
(650,806)
(461,155)
(510,506)
(249,690)
(13,596)
10,508
—
497,366
(185,615)
311,751
(28,103)
8,431
(19,672)
80,184
(206,864)
(5,847)
39,758
(92,769)
(112,441)
199,310
258,730
53,021
311,751
146,289
53,021
199,310
Restated
2020
26.4
1) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRS Interpretations Committee’s (“IFRIC”) Agenda Decision
published in April 2021 related to accounting for Software-as-a-Service (“SaaS”) arrangements. Refer to note 11.
2) Includes a once-off interest charge of $148.0 million reflecting swap termination costs, realised net foreign exchange movements and make-whole charges
associated with bond note redemptions completed during the year. Refer to note 2 for further details.
3) An impairment loss of $249.3 million has been recognised for Orbost Gas Processing Plant. Refer to note 2 and 13 for further details.
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
APA GROUP ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Australian Pipeline Trust and its Controlled Entities
As at 30 June 2021
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other
Assets classified as held for sale (1)
Current assets
Non-current assets
Trade and other receivables
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment (2)
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
Liabilities directly associated with assets classified as held for sale (1)
Current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Borrowings
Other financial liabilities
Deferred tax liabilities (2)
Provisions
Unearned revenue
Non-current liabilities
Total liabilities
Net assets
Note
18
9
20
9
20
23
11
12
12
15
10
17
18
20
14
10
17
18
20
6
14
57
Restated
2020
$000
1,172,771
264,137
32,748
34,181
22,101
—
2021
$000
652,352
298,574
56,717
41,066
26,978
343
1,076,030
1,525,938
10,375
218,900
240,201
9,500,772
1,183,604
2,481,336
31,650
11,639
581,027
226,380
9,766,411
1,183,604
2,669,970
29,343
13,666,838
14,468,374
14,742,868
15,994,312
314,560
13,828
2,721
169,031
93,759
10,750
258
604,907
13,390
49,228
9,921,317
262,117
756,993
102,352
63,336
308,764
13,544
310,613
186,347
89,636
10,753
—
919,657
4,826
56,333
10,607,382
427,638
590,976
115,905
56,737
11,168,733
11,859,797
11,773,640
12,779,454
2,969,228
3,214,858
1) Relates to APA Group’s 50% ownership in Mid West Pipeline to be disposed of in the next 12 months.
2) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
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R
APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
58
CONSOLIDATED STATEMENT OF FINANCIAL POSITION continued
Australian Pipeline Trust and its Controlled Entities
As at 30 June 2021
Note
21
Equity
Australian Pipeline Trust equity:
Issued capital
Reserves
(Accumulated deficit)/Retained earnings (1)
Equity attributable to unitholders of the parent
Non-controlling interests:
APT Investment Trust:
Issued capital
Retained earnings
Equity attributable to unitholders of APT Investment Trust
22
Total equity
2021
$000
Restated
2020
$000
2,571,420
(355,540)
(31,707)
2,902,123
(691,465)
91,669
2,184,173
2,302,327
765,313
19,742
785,055
887,845
24,686
912,531
2,969,228
3,214,858
1) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
APA GROUP ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
59
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
60
CONSOLIDATED STATEMENT OF CASH FLOWS
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees (1)
Dividends received from associates and joint ventures
Proceeds from repayments of finance leases
Interest received
Interest and other costs of finance paid
Income taxes paid
Note
2021
$000
2,868,751
(1,272,027)
28,376
1,155
6,629
(481,903)
(100,023)
Restated
2020
$000
2,791,905
(1,221,174)
62,279
1,272
7,941
(468,070)
(86,620)
Net cash provided by operating activities
1,050,958
1,087,533
Cash flows from investing activities
Payments for property, plant and equipment (1)
Proceeds from sale of property, plant and equipment
Payments for intangible assets (2)
Repayment of loans by related parties
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Repayments of lease liabilities
Transaction costs related to borrowings
Proceeds from early settlement of derivatives
Distributions paid to:
Unitholders of APT
Unitholders of non-controlling interests – APTIT
Net cash (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of financial year
18
(422,170)
908
(10,758)
—
(432,020)
2,358,421
(2,866,999)
(16,046)
(13,798)
1,085
(431,369)
(170,377)
(1,139,083)
(520,145)
1,172,771
(274)
652,352
(408,168)
485
(10,741)
122,284
(296,140)
1,987,812
(1,368,836)
(13,482)
(6,870)
8
(437,484)
(134,765)
26,383
817,776
354,947
48
1,172,771
1) FY20 is restated as a result of change in APA Group accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for
SaaS arrangements. Refer to note 11.
2) Balance is re-presented to reflect the software and licences that are reclassified from property, plant and equipment to intangible assets.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
APA GROUP ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF CASH FLOWS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Reconciliation of profit for the year to the net cash provided by operating activities
Profit for the year (1)
Impairment of property, plant and equipment (2)
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 expenses (1)
Finance costs (2)
Effect of exchange rate changes
Amortisation of hedging loss
Equity settled long-term incentives
Changes in assets and liabilities:
Trade and other receivables
Inventories
Other assets
Trade and other payables
Provisions
Other liabilities
Income tax balances
Note
13
2021
$000
3,684
249,322
(606)
(29,777)
28,374
674,370
138,023
14,439
8,297
1,863
(13,166)
(6,885)
(4,291)
6,130
5,747
11,847
(36,359)
61
Restated
2020
$000
311,751
—
(464)
(30,677)
62,279
650,806
14,823
11,007
6,885
652
(19,283)
(2,777)
(5,997)
5,074
(10,954)
(4,851)
99,259
Net cash provided by operating activities
1,050,958
1,087,533
1) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
2) Refer to note 2 significant items section for details.
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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
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
30. Adoption of new and revised Accounting Standards
31. Events occurring after reporting date
87
88
99
102
103
104
105
107
108
109
109
110
111
111
62
63
64
67
69
70
73
74
75
76
76
79
81
82
83
83
85
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
63
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 2021 was authorised for issue in accordance with a
resolution of the directors on 25 August 2021.
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 ($000) in accordance with ASIC
Corporations Instrument 2016/191, unless otherwise stated.
Certain comparative amounts have been re-presented to conform with the current period’s presentation to better reflect the nature
of the financial position and performance of the APA Group.
Foreign currency transactions
Both the functional and presentation currency of APA Group and APT is Australian dollars (A$). 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))
– Commitments and contingencies (note 25)
Judgements and estimates require assumptions to be made about highly uncertain external factors such as: discount rates;
probability factors; the effects of inflation within Reserve Bank of Australia’s guidance range; the outlook for global and regional gas
market supply-and-demand conditions; contract renewals; asset useful lives; and climate-related risks. As such the actual outcomes
may differ as a result of change in these judgements and assumptions.
These judgements, estimates and assumptions are based on most current facts and circumstances and are reassessed on an
ongoing basis, the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions and conditions in respect of laws, regulations, climate change,
licences and recognised practising codes including health, safety and environment, employee entitlements, environmental laws and
regulations and asset construction and operation. This may materially affect financial results and the financial position to be reported
in future periods.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Basis of Preparation
2. General information continued
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.
Despite the relative stablity of the business, APA Group continues to ensure it maintains an appropriate level of liquidity during the
uncertainty created by COVID-19.
As at 30 June 2021, APA Group had $1,902.4 million in cash and committed un-drawn bank facilities available (2020: $2,472.8
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.
Significant items
Individually significant items included in profit after income tax expense are as follows:
Significant items impacting profit before tax
Impairment of property, plant and equipment (1)
Finance costs associated with bond note redemptions (2)
Total significant items impacting profit before tax
Income tax related to significant items above
Profit from significant items after income tax
2021
$000
(249,322)
(147,987)
(397,309)
119,193
(278,116)
1) During the year, APA Group impaired the carrying value of the Orbost Gas Processing Plant, reflecting the continuation of production levels and expenditure
based on the current performance of the asset. Refer to note 13.
2) In April 2021, APA Group refinanced all of APA’s debt that was due to mature in calendar year 2022 and terminated associated hedges. The facilities to be
refinanced and associated hedges include:
– EUR MTN 700m swapped into A$1,132m at a fixed rate of 4.45%
– USPP Notes US$124m swapped into A$154m at a fixed rate of 7.39%
– USPP Notes A$81m at a fixed rate of 7.45%
– USPP Notes A$62m at a fixed rate of 7.45%
– US 144A Notes US$750m swapped into A$735m at a fixed rate of 6.68%
A once-off interest charge was recognised in the year, reflecting swap termination costs, realised net foreign exchange movements and make-whole charges
associated with bond note redemptions completed during the year. APA Group discontinued the application of hedge accounting, as the debt no longer
existed and the associated hedges were terminated. The interest charge, cumulative gain or loss and deferred costs of hedging were immediately recognised
as finance cost in the statement of profit or loss.
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.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
65
Financial Performance
3. Segment information continued
2021
Segment revenue (1)
Revenue from contracts with customers
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
Segment underlying EBITDA (2)
Share of net profits of joint ventures and
associates using the equity method
Finance lease and investment interest income
Corporate costs
Total underlying EBITDA (2)
Fair value gains on contract for difference (3)
SaaS configuration and customisation costs (4)
Total reported EBITDA (5)
Depreciation and amortisation (4)
Total reported EBIT (6)
Net interest cost (7)
Profit before tax excluding significant items
Income tax expense
Profit after tax excluding significant items
Significant items before tax (8)
Reported profit before tax
Significant items after tax
Reported profit after tax
Energy
Asset
Infrastructure Management
$000
$000
Energy
Investments
$000
Other Consolidated
$000
$000
1,989,304
—
52,982
3,610
1,078
113,755
—
407,483
2,750
—
—
29,777
—
—
1,144
2,046,974
523,988
30,921
—
—
—
—
—
—
2,103,059
29,777
460,465
6,360
2,222
2,601,883
3,130
2,605,013
1,621,487
80,337
—
—
1,701,824
—
1,078
—
1,622,565
18,018
—
1,640,583
(657,781)
—
—
—
80,337
—
—
80,337
(16,589)
29,777
1,144
—
30,921
—
—
30,921
—
—
—
(100,848)
(100,848)
—
(7,957)
29,777
2,222
(100,848)
1,632,975
18,018
(7,957)
(108,805)
—
1,643,036
(674,370)
982,802
63,748
30,921
(108,805)
968,666
(504,779)
463,887
(182,087)
281,800
(397,309)
66,578
(278,116)
3,684
1) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial.
2) Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) excludes recurring items arising from other activities, transactions that are not directly
attributable to the performance of APA Group’s business operations and significant items.
3) The amount represents a net gain arising from a contract for difference in an electricity sales agreement with a customer that economically hedges the fair
value of the electricity sales agreement for which hedge accounting is not applicable (see note 19).
4) The amount represents the impact of the change in the APA Group’s accounting policy following the IFRIC Agenda Decision in April 2021 related to
accounting for SaaS arrangements. Refer to note 11.
5) Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) excluding significant items.
6) Earnings before interest and tax (“EBIT”) excluding significant items.
7) Excluding finance lease and investment interest income, any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting
purposes, and interest charge on bond note redemptions disclosed as a significant item, but including other interest income.
8) Refer to note 2 significant items section for details.
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A
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P
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F
F
I
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N
A
A
N
N
C
C
I
I
A
A
L
L
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
D
I
R
E
C
T
O
R
S
’
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P
O
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F
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Financial Performance
3. Segment information continued
2021
Segment assets and liabilities
Segment assets
Carrying value of investments using the equity method
Unallocated assets (1)
Total assets
Segment liabilities
Unallocated liabilities (2)
Total liabilities
Energy
Infrastructure
$000
Asset
Management
$000
Energy
Investments
$000
Consolidated
$000
13,343,202
—
210,228
—
10,685
240,201
423,008
90,007
—
13,564,115
240,201
938,552
14,742,868
513,015
11,260,625
11,773,640
1) Unallocated assets consist of cash and cash equivalents, fair value of cross currency swaps, foreign currency forward exchange contracts and equity forwards.
2) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of cross currency swaps, foreign currency forward
exchange contracts and equity forwards.
2020 (Restated)
Segment revenue (3)
Revenue from contracts with customers
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
Segment underlying EBITDA (4)
Share of net profits of joint ventures
and associates using the equity method
Finance lease and investment interest income
Corporate costs
Total underlying EBITDA (4)
Fair value gains or losses on contract for difference (5)
SaaS configuration and customisation costs (6)
Total reported EBITDA (7)
Depreciation and amortisation (6)
Total reported EBIT (8)
Net interest cost (9)
Profit before tax
Income tax expense
Profit for the year
Energy
Asset
Infrastructure Management
$000
$000
Energy
Investments
$000
Other Consolidated
$000
$000
1,973,722
—
49,386
3,594
1,176
112,367
—
411,769
205
—
2,027,878
524,341
—
30,677
—
—
5,064
35,741
—
—
—
—
—
—
2,086,089
30,677
461,155
3,799
6,240
2,587,960
2,661
2,590,621
1,628,631
—
63,343
—
—
30,677
—
—
1,691,974
30,677
1,176
—
1,629,807
10,508
—
1,640,315
(634,048)
—
—
63,343
—
—
63,343
(16,758)
1,006,267
46,585
5,064
—
35,741
—
—
35,741
—
35,741
—
(74,972)
(74,972)
—
(8,410)
(83,382)
—
(83,382)
6,240
(74,972)
1,653,919
10,508
(8,410)
1,656,017
(650,806)
1,005,211
(507,845)
497,366
(185,615)
311,751
3) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial.
4) Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) excludes recurring items arising from other activities, transactions that are not directly
attributable to the performance of APA Group’s business operations and significant items.
5) The amount represents a net gain arising from a contract for difference in an electricity sales agreement with a customer that economically hedges the fair
value of the electricity sales agreement for which hedge accounting is not applicable (see note 19).
6) The amount represents the impact of the change in the APA Group’s accounting policy following the IFRIC Agenda Decision in April 2021 related to
accounting for SaaS arrangements. Refer to note 11.
7) Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) excluding significant items.
8) Earnings before interest and tax (“EBIT”) excluding significant items.
9) Excluding finance lease and investment interest income, any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting
purposes, and interest charge on bond note redemption disclosed as a significant item, but including other interest income.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
67
Financial Performance
3. Segment information continued
2020 (Restated)
Segment assets and liabilities
Segment assets (1)
Carrying value of investments using the equity method
Unallocated assets (2)
Total assets
Segment liabilities
Unallocated liabilities (3)
Total liabilities
Energy
Infrastructure
$000
Asset
Management
$000
Energy
Investments
$000
Consolidated
$000
13,782,495
—
198,893
—
10,685
226,380
412,898
110,022
—
13,992,073
226,380
1,775,859
15,994,312
522,920
12,256,534
12,779,454
1) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
2) Unallocated assets consist of cash and cash equivalents, fair value of cross currency swaps, foreign currency forward exchange contracts and equity forwards.
3) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of cross currency swaps, foreign currency forward
exchange contracts and equity forwards.
4. Revenue
Disaggregation of revenue
Revenue is disaggregated below by business unit and region.
2021
Energy Infrastructure
Wallumbilla Gladstone Pipeline (1)
East Coast
West Coast
Power Generation
Energy Infrastructure revenue from contracts with customers
Asset Management revenue from contracts with customers
Energy Investments
Other non-contract revenue
Total segment revenue
Pass-through revenue
Unallocated revenue
Total revenue
Underlying EBITDA (2)
Wallumbilla Gladstone Pipeline (1)
East Coast
West Coast
Power Generation
Energy Infrastructure revenue from contracts with customers
Asset Management revenue from contracts with customers
Energy Investments
Corporate costs
Total underlying EBITDA (2)
Total
$000
552,307
768,638
328,795
339,564
1,989,304
113,755
30,921
7,438
2,141,418
460,465
3,130
2,605,013
549,651
627,468
270,824
174,622
1,622,565
80,337
30,921
(100,848)
1,632,975
1) Wallumbilla Gladstone Pipeline is separated from East Coast Grid in this note as a result of the significance of its revenue and EBITDA in the Group. It is
categorised as part of the East Coast Grid cash-generating unit for impairment assessment in note 12.
2) Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) excludes recurring items arising from other activities, transactions that are not directly
attributable to the performance of APA Group’s business operations and significant items.
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F
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A
A
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A
A
L
L
S
S
T
T
A
A
T
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E
E
M
M
E
E
N
N
T
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S
S
D
I
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Financial Performance
4. Revenue continued
Disaggregation of revenue continued
2020 (Restated)
Energy Infrastructure
Wallumbilla Gladstone Pipeline (1)
East Coast
West Coast
Power Generation
Energy Infrastructure revenue from contracts with customers
Asset Management revenue from contracts with customers
Energy Investments
Other non-contract revenue
Total segment revenue
Pass-through revenue
Unallocated revenue
Total revenue
Underlying EBITDA (2)
Wallumbilla Gladstone Pipeline (1)
East Coast
West Coast
Power Generation
Energy Infrastructure revenue from contracts with customers
Asset Management revenue from contracts with customers
Energy Investments
Corporate costs (3)
Total underlying EBITDA (2)
Total
$000
541,588
771,503
323,177
337,454
1,973,722
112,367
35,741
4,975
2,126,805
461,155
2,661
2,590,621
538,924
648,778
271,504
170,601
1,629,807
63,343
35,741
(74,972)
1,653,919
1) Wallumbilla Gladstone Pipeline is separated from East Coast Grid in this note as a result of the significance of its revenue and EBITDA in the Group. It is
categorised as part of the East Coast Grid cash-generating unit for impairment assessment in note 12.
2) Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) excludes recurring items arising from other activities, transactions that are not directly
attributable to the performance of APA Group’s business operations and significant items.
3) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
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
primarily volume based and is recognised as revenue in a manner that depicts the transfer based on 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.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
69
Financial Performance
4. Revenue continued
Other types of revenue is recognised as follows:
– Other non-contract revenue: includes dividend income, which is recognised when the right to receive the payment has been
established, net cost reimbursement of development work for the Crib Point project; and
– Unallocated revenue: interest income, which is recognised as it accrues and is determined using the effective interest method
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.
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 and government grants received
in advance. During the year, the Group recognised $8.2 million (2020: $13.2 million) in revenue from contracts with customers from
unearned revenue balance at 30 June 2020.
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 2021, future contracted Energy Infrastructure revenues extending through to 2049 are approximately $17.6 billion,
of which $1.6 billion is expected to be recognised in 2022. These amounts relate to Energy Infrastructure revenue from contracts,
with the bulk of the customers being high credit worthy counterparties.
Future contracted Energy Infrastructure revenues outlined above are in nominal 2021 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 FY22 and beyond.
Information about major customers
Included in revenues from contracts with customers arising from Energy Infrastructure of $1,989.3 million (2020: $1,973.7 million) are
revenues of approximately $720.1 million (2020: $718.8 million) which arose from sales to APA Group’s top three customers.
5. Expenses
Depreciation of non-current assets (1)
Amortisation of non-current assets (2)
Depreciation and amortisation expense
Energy infrastructure costs – pass-through
Asset management costs – pass-through
Other operating costs – pass-through
2021
$000
474,978
199,392
674,370
52,982
407,483
460,465
Restated
2020
$000
454,534
196,272
650,806
49,386
411,769
461,155
1) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
2) Balance is re-presented to reflect the software and licences that are reclassified from property, plant and equipment to intangible assets.
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M
E
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N
N
T
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S
S
D
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Financial Performance
5. Expenses continued
Interest on bank overdrafts and borrowings (1)
Finance costs associated with bond note redemptions (2)
Amortisation of deferred borrowing costs
Other finance costs
Less: amounts included in the cost of qualifying assets
(Gain)/loss on derivatives (3)
Unwinding of discount on non-current liabilities
Unwinding of discount on deferred revenue
Interest incurred on lease liabilities
Finance costs
Defined contribution plans
Defined benefit plans (note 16)
Post-employment benefits
Termination benefits
Cash settled long-term incentive payments (4)
Equity settled long-term incentive payments (4)
Other employee benefits
Employee benefit expense (5)
2021
$000
500,424
147,987
9,545
7,792
665,748
(16,330)
649,418
(5,389)
6,869
2,603
2,395
655,896
18,128
3,027
21,155
1,728
25,322
3,802
234,542
286,549
Restated
2020
$000
498,940
—
7,366
7,008
513,314
(23,208)
490,106
7,815
7,322
2,625
2,638
510,506
16,159
2,348
18,507
1,497
16,442
992
212,252
249,690
1) The average interest rate applying to drawn debt is 5.09% p.a. (2020: 5.33% p.a.) excluding finance costs associated with bond note redemptions, amortisation
of borrowing costs and other finance costs.
2) Refer to note 2 significant items section for details.
3) Represents unrealised gains and losses on the mark-to-market valuation of derivatives.
4) APA Group provides benefits to certain employees in the form of long-term incentive payments. For cash settled long-term incentive 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 long-term incentive
payments, a reserve is recognised equal to the portion of services received based on the fair value of the equity instrument at grant date.
5) Employee benefit expense of $69.0 million (2020: $70.0million) 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
Deferred tax expense relating to the origination and reversal of temporary differences (1)
Total tax expense
2021
$000
(47,211)
90
(15,773)
(62,894)
Restated
2020
$000
(85,236)
25
(100,404)
(185,615)
1) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Financial Performance
6. Income tax continued
Tax reconciliation
Profit before tax (1)
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
2021
$000
66,578
(19,973)
12,870
(58,447)
(100)
(65,650)
1,043
603
90
1,020
(62,894)
71
Restated
2020
$000
497,366
(149,210)
15,906
(59,816)
114
(193,006)
5,310
1,038
25
1,018
(185,615)
1) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements. Refer to note 11.
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 $62.9 million (2020: $185.6million). An income tax receivable of $21.3 million (2020: $30.9 million
payable) has been recognised after instalments made during the year and partial utilisation of available transferred tax losses
(refer to note 9).
Deferred tax balances
Deferred tax (liabilities)/assets arise from the following:
2021
Gross deferred tax liabilities
Property, plant and equipment and intangible assets
Deferred expenses
Other
Gross deferred tax assets
Provisions
Cash flow hedges
Security issue costs
Deferred revenue
Investments equity accounted
Defined benefit obligation
Tax losses
Net deferred tax liability
Opening
balance
$000
Charged to
income
$000
Charged to
equity
$000
Closing
balance
$000
(1,079,875)
(53,711)
(131)
(1,133,717)
66,508
292,350
1,045
13,669
8,082
11,555
149,532
542,741
(590,976)
20
2,678
967
3,665
3,169
(6,698)
(517)
(1,035)
402
(38)
(14,721)
(19,438)
(15,773)
—
—
—
—
(1,079,855)
(51,033)
836
(1,130,052)
—
(140,399)
—
—
(2,770)
(7,075)
—
69,677
145,253
528
12,634
5,714
4,442
134,811
(150,244)
373,059
(150,244)
(756,993)
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Financial Performance
6. Income tax continued
Deferred tax balances continued
2020 (Restated)
Gross deferred tax liabilities
Property, plant and equipment and intangible assets (1),(2)
Deferred expenses
Other
Gross deferred tax assets
Provisions (1)
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
(988,094)
(55,516)
(299)
(1,043,909)
48,640
254,217
1,562
14,531
4,434
2,939
175,134
501,457
(73,130)
1,805
168
(71,157)
(4,475)
(800)
(517)
(862)
2,824
185
(25,602)
(29,247)
(18,651)
—
—
(18,651)
22,343
38,933
—
—
824
8,431
—
70,531
51,880
(1,079,875)
(53,711)
(131)
(1,133,717)
66,508
292,350
1,045
13,669
8,082
11,555
149,532
542,741
(590,976)
Net deferred tax liability
(542,452)
(100,404)
1) Amounts charged to equity relate to the deferred tax on the transition adjustment from the adoption of AASB 16 Leases.
2) FY20 is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for:
– Initial recognition of goodwill;
– Initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
– Differences relating to investments in wholly-owned entities to the extent that they will probably not reverse in the foreseeable future.
Deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using the
appropriate tax rates at the end of the reporting period.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Tax consolidation
APT and its wholly-owned Australian resident entities formed a tax-consolidated group with effect from 1 July 2003 and are
therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is APT. The members of the tax-
consolidated group are identified at note 24.
Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the
tax-consolidated group are recognised in the separate financial reports of the members of the tax-consolidated group using the
‘separate taxpayer within group’ approach, by reference to the carrying amounts in the separate financial reports of each entity and
the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the wholly-owned entities are assumed
by the head entity in the tax-consolidated group and are recognised as amounts payable/(receivable) to/(from) other entities in the
tax-consolidated group in conjunction with any tax funding arrangement amounts.
The head entity recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is
probable that future taxable profits of the tax-consolidated group will be available against which the assets can be utilised.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
73
Financial Performance
6. Income tax continued
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
Earnings per security
Basic and diluted (loss)/earnings per unit attributable to the parent (1),(2)
Basic and diluted earnings per unit attributable to the non-controlling interest
Basic and diluted earnings per security
Earnings per security excluding significant items
Basic and diluted earnings excluding significant items per unit attributable to the parent
Basic and diluted earnings excluding significant items per unit attributable to
the non-controlling interest
Basic and diluted earnings per security excluding significant items
Underlying earnings per security (3)
Underlying basic and diluted earnings per unit attributable to the parent
Underlying basic and diluted earnings per unit attributable to the non-controlling interest
Underlying basic and diluted earnings per security
2021
cents
(3.3)
3.6
0.3
20.2
3.6
23.9
19.7
3.6
23.3
Restated
2020
cents
21.9
4.5
26.4
21.9
4.5
26.4
21.8
4.5
26.3
The earnings and weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security
are as follows:
2021
$000
Restated
2020
$000
Net (loss)/profit
Net (loss)/profit attributable to unitholders of the parent (1),(2)
Net profit attributable to unitholders of the non-controlling interest
Net profit attributable to stapled securityholders for calculating basic
and diluted earnings per security (note 3)
Underlying net profit
Net (loss)/profit attributable to unitholders of the parent
Significant items, net of tax
Net profit excluding significant items attributable to unitholders of the parent
Fair value gains or losses on contract for difference, net of tax
SaaS configuration and customisation costs, net of tax
Underlying net profit attributable to unitholders of the parent
Underlying net profit attributable to unitholders of the non-controlling interest
Underlying net profit attributable to stapled securityholders for
calculating basic and diluted earnings per security
(39,217)
42,901
258,730
53,021
3,684
311,751
(39,217)
278,116
238,899
(12,613)
5,570
231,856
42,901
258,730
—
258,730
(7,356)
5,355
256,729
53,021
274,757
309,750
1) There is no dilutive effect of the performance rights granted under long-term incentive plan as a result of the loss after tax in FY21.
2) FY20 was restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision in April 2021 related to accounting for
SaaS arrangements. Refer to note 11.
3) Excludes recurring items arising from other activities and transactions that are not directly attributable to the performance of APA Group’s business operations,
and significant items.
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N
N
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A
L
L
S
S
T
T
A
A
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T
E
E
M
M
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E
N
N
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S
S
D
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Financial Performance
7. Earnings per security continued
Adjusted weighted average number of ordinary securities used in the calculation of:
Basic earnings per security
Diluted earnings per security (1)
2021
No. of
securities
000
2020
No. of
securities
000
1,179,894
1,180,723
1,179,894
1,180,188
1)
Includes 1.3 million (2020: 0.5 million) performance rights granted under 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 and board approval. Further information can be found in the most recent annual
report. APA has historically instructed Link Market Services to acquire securities on-market to minimise dilution of existing securityholders.
8. Distributions
Recognised amounts
Final FY20 distribution paid on 16 September 2020
(30 June 2019: Final FY19 distribution paid on 11 September 2019)
Profit distribution – APT (1)
Capital distribution – APT
Profit distribution – APTIT (2)
Capital distribution – APTIT
2021
cents per
security
2021
Total
$000
2020
cents per
security
2020
Total
$000
8.53
11.74
2.09
4.64
27.00
100,666
138,528
24,686
54,692
318,572
8.53
10.44
2.55
3.98
100,663
123,153
30,056
47,002
25.50
300,874
1) Profit distributions were fully franked and resulted in franking credits of 3.66 cents per security (30 June 2019: fully franked, franking credits of 3.66 cents per security)
2) Profit distributions were unfranked (30 June 2019: unfranked).
Interim FY21 distribution paid on 17 March 2021
(31 December 2019: Interim FY20 distribution paid on 11 March 2020)
Profit distribution – APT (3)
Capital distribution – APT
Profit distribution – APTIT (4)
Capital distribution – APTIT
Total distributions recognised
Profit distributions
Capital distributions
2021
cents per
security
2021
Total
$000
2020
cents per
security
2020
Total
$000
—
16.29
1.97
5.74
24.00
12.59
38.41
51.00
—
192,175
23,159
67,840
283,174
148,511
453,235
601,746
11.45
6.66
2.40
2.49
135,138
78,530
28,335
29,372
23.00
271,375
24.93
23.57
48.50
294,192
278,057
572,249
3) 31 December 2019: 8.52 cents per security franked and 2.93 cents per security unfranked.
4) Profit distributions are unfranked (31 December 2019 and 30 June 2020: unfranked).
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
75
Financial Performance
8. Distributions continued
Unrecognised amounts
Final FY21 distribution payable on 15 September 2021 (1)
(30 June 2020: Final FY20 distribution payable on 16 September 2020)
Profit distribution – APT (2)
Capital distribution – APT
Profit distribution – APTIT (3)
Capital distribution – APTIT
1) Record date 30 June 2021.
2) 30 June 2020: fully franked, franking credits of 3.66 cents per security.
3) Profit distributions are unfranked (31 December 2019 and 30 June 2020: unfranked).
2021
cents per
security
2021
Total
$000
2020
cents per
security
2020
Total
$000
—
18.63
1.67
6.70
27.00
—
219,820
19,742
79,010
318,572
8.53
11.74
2.09
4.64
27.00
100,666
138,528
24,686
54,692
318,572
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 (receivable)/payable
Adjusted franking account balance
2021
$000
58,189
(21,271)
36,918
2020
$000
(177)
30,861
30,684
The adjusted franking account balance at 30 June 2021 represents the income tax prepayments made in relation to FY22.
The adjusted franking account balance at 30 June 2020 was reduced by $43.1 million following the payment of the FY20 final
distribution payable on 16 September 2020.
No franking deficit tax payment was made during the financial year (FY20: $0.2 million made on 31 July 2020).
Operating Assets and Liabilities
9. Receivables
Trade receivables
Accrued revenue
Loss allowance
Trade receivables
Income tax receivable
Receivables from associates and related parties
Finance lease receivables (note 17)
Interest receivable
Other debtors
Current
Finance lease receivables (note 17)
Non-current
2021
$000
41,235
223,337
(500)
264,072
21,271
11,689
1,275
62
205
298,574
10,375
10,375
2020
$000
31,313
218,013
(700)
248,626
—
12,985
1,166
1,340
20
264,137
11,639
11,639
Trade receivables are non-interest bearing and are generally on 14 to 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 the loss allowance. No material impact has been identified to the date of
the issuance of these financial statements.
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L
L
S
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N
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Operating Assets and Liabilities
10. Payables
Trade payables (1)
Income tax payable
Other payables
Current
Other payables
Non-current
2021
$000
59,296
—
255,264
314,560
13,390
13,390
2020
$000
35,561
30,861
242,342
308,764
4,826
4,826
1) Trade payables are non-interest bearing and are normally settled on 15 - 30 day terms.
Trade and other payables are recognised when APA Group becomes obliged to make future payments resulting from the purchase
of goods and services. Trade and other payables are initially recognised at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, they are stated at amortised cost.
Payables are recognised inclusive of GST, except for accrued revenue and accrued expense at balance dates which exclude GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. GST
receivable or GST payable is only recognised once a tax invoice has been issued or received.
11. Property, plant and equipment
Freehold Leasehold
land and
improve-
buildings
– at cost
$000
– at cost
$000
Plant and
ments equipment
– at cost
$000
Work in
progress
– at cost
$000
ROU
ROU
land and
plant and
buildings equipment
– at cost (1) – at cost (1)
$000
$000
Total
$000
Gross carrying amount
Balance at 1 July 2019 (Restated) (1),(2)
Reclassified to intangible assets (3)
Additions (2)
Disposals
Transfers (2)
261,704
—
—
—
5,514
10,787
—
—
—
—
11,491,776
(70,740)
30,597
(1,511)
202,998
529,178
(8,999)
376,427
—
(208,512)
54,646
—
3,437
(102)
—
7,619
—
3,400
(246)
—
12,355,710
(79,739)
413,861
(1,859)
—
Balance at 30 June 2020 (Restated)
267,218
10,787
11,653,120
688,094
57,981
10,773
12,687,973
Balance at 1 July 2020 (Restated)
Additions
Disposals
Reclassified as held for sale (4)
Transfers
267,218
—
—
—
9,184
10,787 11,653,120
34,064
(2,639)
(104)
759,322
—
—
—
52
688,094
415,932
—
(229)
(768,558)
57,981
4,166
(81)
—
—
10,773 12,687,973
459,378
5,216
(4,400)
(1,680)
(333)
—
—
—
Balance at 30 June 2021
276,402
10,839 12,443,763
335,239
62,066
14,309 13,142,618
1) 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.
2) This is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements.
3) $36.1m of non-Saas software, $0.7m of licences net of accumulated amortisation, and $9.0m of non-SaaS software related work in progress are reclassified
to intangible assets.
4) Relates to APA Group’s 50% ownership in Mid West Pipeline to be disposed of in the next 12 months.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
77
Operating Assets and Liabilities
11. Property, plant and equipment continued
Freehold Leasehold
land and
improve-
buildings
– at cost
$000
– at cost
$000
Plant and
ments equipment
– at cost
$000
Work in
progress
– at cost
$000
ROU
ROU
land and
plant and
buildings equipment
– at cost (1) – at cost (1)
$000
$000
Total
$000
Accumulated depreciation and impairment
Balance at 1 July 2019 (Restated) (1),(2)
Reclassified to intangible assets (3)
Disposals
Depreciation expense (note 5) (2)
Amounts included in the cost of other assets
(53,889)
—
—
(7,950)
—
(4,919)
—
—
(800)
—
(2,443,768)
33,999
1,490
(433,222)
—
Balance at 30 June 2020
(61,839)
(5,719)
(2,841,501)
Balance at 1 July 2020
Disposals
Depreciation expense (note 5)
Impairment expense (note 13)
Reclassified as held for sale (4)
Amounts included in the cost of other assets
(61,839)
—
(7,741)
—
—
—
(5,719) (2,841,501)
2,337
(451,935)
(249,322)
26
—
—
(802)
—
—
—
Balance at 30 June 2021
(69,580)
(6,521) (3,540,395)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
51
(9,108)
—
—
—
66
(3,454)
(58)
(2,502,576)
33,999
1,607
(454,534)
(58)
(9,057)
(3,446)
(2,921,562)
(9,057)
81
(10,447)
—
—
—
(3,446) (2,921,562)
4,023
1,605
(474,978)
(4,053)
(249,322)
—
26
—
(33)
(33)
(19,423)
(5,927) (3,641,846)
Net book value
As at 30 June 2020 (Restated) (1),(2)
205,379
5,068
8,811,619
688,094
48,924
7,327
9,766,411
As at 30 June 2021
206,822
4,318 8,903,368
335,239
42,643
8,382 9,500,772
1) 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.
2) This is restated as a result of change in the APA Group’s accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting
for SaaS arrangements.
3) $36.1m of non-Saas software, $0.7m of licences net of accumulated amortisation, and $9.0m of non-SaaS software related work in progress are reclassified to
intangible assets.
4) Relates to APA Group’s 50% ownership in Mid West Pipeline to be disposed of in the next 12 months.
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 2021.
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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Operating Assets and Liabilities
11. Property, plant and equipment continued
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-related risks under three divergent climate scenarios for 2020-2050 detailed in the APA Group
Climate Change Resilience Report published in October 2020. The Report provides a comprehensive analysis of the resilience of
APA’s current asset portfolio under a series of scenarios and uses a range of assumptions considering external factors and data
sources, e.g. economic activities and growth projections ranging from 1.7% to 5.5% sourced from Shared Socioeconomic Pathways
database, emission trajectory defined by Representative Concentration Pathways, carbon budget and offsets, key social and political
characteristics, and Asian gas demand. 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
– Gas processing facilities
– Other plant and equipment
– ROU land and buildings
– ROU property, plant and equipment
30 – 50 years;
10 – 50 years;
10 – 80 years;
20 – 30 years;
3 – 25 years;
10 – 25 years;
3 – 20 years;
1 – 40 years; and
1 – 4 years.
Change in accounting policy – Software-as-a-Service arrangements
IFRIC issued an Agenda Decision in April 2021 summarising IFRIC considerations and decisions relating to customisation and
configuration costs in a SaaS arrangement where an intangible asset is not recognised under AASB 138 Intangible Assets. The
standard requires the costs be recognised as an expense when services are received where these costs do not create a resource
controlled by the company that is separate to the software.
During the year, APA Group revised its accounting policy to record the configuration and customisation costs incurred in
implementing SaaS arrangements as an operating expenses within profit or loss in response to the IFRIC Agenda Decision.
Costs incurred to configure or customise the cloud provider’s application software, are now recognised as operating expenses when
the services are received. Previously, the Group capitalised the configuration and customisation costs as and when they are incurred
during implementation and amortised them over the term of the SaaS arrangement outlined in the service contract, where material
modifications and incremental capability was being added to the application software.
Some of these costs incurred are for the set-up of current IT environment or the development of software code that enhances
or modifies, or creates the incremental capability to, existing on-premise systems or network and meets the definition of and
recognition criteria for an intangible asset. These costs create a resource controlled by APA Group and are recognised as intangible
software assets and amortised over the useful life of the software on a straight-line basis. The useful lives of these assets are
reviewed at least at the end of each financial year, and any change is for prospectively as a change in accounting estimate.
APA GROUP ANNUAL REPORT 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
79
Operating Assets and Liabilities
11. Property, plant and equipment continued
APA Group has implemented the IFRIC Agenda Decision retrospectively as a change in accounting policy. Historical financial
information has been restated to account for the impact of the change in accounting policy. The amount of the movements resulting
for the change in accounting policy are as follows:
30 June
2021
$000
30 June
2020
$000
1 July
2019
$000
Financial statement item
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Other expenses
Depreciation and amortisation expense
Profit before tax
Income tax benefit
Profit after tax
Consolidated Statement of Financial Position
Property, plant and equipment
Deferred tax balance
Net assets
Retained earnings
Total equity
Consolidated Statement of Cash Flows
Payments to suppliers and employees
Net cash provided by operating activities
Payments for property, plant and equipment
Net cash used in investing activities
12. Goodwill and intangibles
Goodwill
Balance at beginning of financial year
Balance at end of financial year
(7,957)
3,008
(4,949)
1,485
(3,464)
(17,802)
5,341
(12,461)
(12,461)
(12,461)
(7,957)
(7,957)
7,957
7,957
(8,410)
760
(7,650)
2,295
(5,355)
(12,853)
3,856
(8,997)
8,997
8,997
(8,410)
(8,410)
8,410
8,410
(5,203)
1,561
(3,642)
3,642
3,642
2021
$000
2020
$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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
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 (1)
2021
$000
21,456
1,060,681
43,104
58,363
1,183,604
2020
$000
21,456
1,060,681
43,104
58,363
1,183,604
1) Primarily represents goodwill relating to the Pilbara Pipeline System ($32.6m) and the Goldfields Gas Pipeline ($18.5m).
Software, licences, contract and other intangibles
Software
– at cost
$000
Licences
– at cost
$000
Work in
progress
– at cost
$000
Contract
and other
– at cost
$000
Total
$000
Gross carrying amount
Balance at 1 July 2019
Reclassified from property, plant and equipment
Additions
Transfer
Balance at 30 June 2020
Balance at 1 July 2020
Additions
Transfer
Balance at 30 June 2021
Accumulated amortisation
Balance at 1 July 2019
Reclassified from property, plant and equipment
Amortisation expense (note 5)
Balance at 30 June 2020
Balance at 1 July 2020
Amortisation expense (note 5)
Balance at 30 June 2021
Net book value
As at 30 June 2020
As at 30 June 2021
—
69,831
880
3,873
74,584
74,584
1,122
5,510
81,216
—
(33,767)
(13,104)
(46,871)
(46,871)
(16,359)
(63,230)
27,713
17,986
—
909
526
716
2,151
2,151
144
—
—
8,999
9,082
(4,589)
3,591,278
—
253
—
3,591,278
79,739
10,741
—
13,492
3,591,531
3,681,758
13,492
9,101
(5,510)
3,591,531
391
—
3,681,758
10,758
—
2,295
17,083
3,591,922
3,692,516
—
(232)
(433)
(665)
(665)
(551)
(1,216)
1,486
1,079
—
—
—
—
—
—
—
(781,517)
—
(182,735)
(781,517)
(33,999)
(196,272)
(964,252)
(1,011,788)
(964,252)
(182,482)
(1,011,788)
(199,392)
(1,146,734)
(1,211,180)
13,492
2,627,279
2,669,970
17,083
2,445,188
2,481,336
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. 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.
The following useful lives are used in the calculation of amortisation:
– Contract and other intangibles
– Software
– Licences
1 – 20 years;
4 – 7 years; and
4 years.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
81
Operating Assets and Liabilities
12. Goodwill and intangibles continued
Contract and other intangibles
APA Group holds various third party operating and maintenance contracts. The combined gross carrying amount of $3,591.9 million
amortises over terms ranging from 1 to 20 years. Useful life is determined based on the underlying contractual terms plus estimations
of renewal of up to two terms where considered probable by management.
Software
Software is measured at cost less accumulated amortisation and impairment losses. Cost includes expenditure that is directly
attributable to the acquisition or development of software.
Licences
Licences are carried at cost less any accumulated amortisation and impairment losses.
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 the higher of value-in-use calculations and fair value
less costs of disposal. Value-in-use 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. Fair value less costs
to dispose calculation utilise comparable market transactions less estimated costs of disposal.
In accordance with the requirements of AASB 136 Impairment of Assets, APA Group reviewed its CGUs for indicators of impairment
at the end of the reporting period. No such indicators were identified and no impairment recognised.
Critical accounting judgements and key sources of estimation uncertainty – impairment of assets
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 within Reserve Bank of Australia’s
guidance range, the outlook for global and regional gas market supply-and-demand conditions, internal information such as contract
renewals, forecast input costs and climate-related risks under three divergent climate scenarios for 2020-2050 detailed in the
APA Group Climate Change Resilience Report published in October 2020. The Report provides a comprehensive analysis of the
resilience of APA’s current asset portfolio under a series of scenarios and uses a range of assumptions considering external factors
and data sources, e.g. economic activities and growth projections ranging from 1.7% to 5.5% sourced from Shared Socioeconomic
Pathways database, emission trajectory defined by Representative Concentration Pathways, carbon budget and offsets, key social
and political characteristics, and Asian gas demand. 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 7.00% p.a. (2020: 7.75% p.a.) for Energy Infrastructure assets and 7.00% p.a. (2020: 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 -0.1% p.a. (2020: 0.3% p.a.). APA Group has
assumed prudent capital and operating expenditure, appropriate regulated rates of return, and forecast inflation over the existing
and renewal contract terms. 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 and firming costs 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Operating Assets and Liabilities
13. Impairment of non-financial assets continued
Critical accounting judgements and key sources of estimation uncertainty – impairment of assets continued
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 at 31 December 2020, APA determined the recoverable amount to be $233.3 million on a pre-tax basis based on value-in-use
calculation which results in a pre-tax impairment charge of $249.3 million. This has been disclosed as a significant item in the interim
financial report.
The impairment charge reflects the continuation of production levels and expenditure based on the current performance of the
asset since re-configuration and resumption of the processing plant, where current production is expected to achieve 45 TJ/day, and
contractual renewal terms based on management’s expectations. APA has applied a pre-tax discount rate of 7.25% in both December
2020 and June 2021 assessments.
The key sensitivity, holding all other assumptions constant, that could result in a further change in the carrying value of the asset
based on a reasonably possible change, is a 1% increase to the discount rate, which could result in a further impairment charge in the
order of $10 million.
No further impairment triggers have been identified in the second half of 2021 and the recoverable amount remains supportable.
APA will continue to monitor the project and will revise estimates should new material information become available.
14. Provisions
Employee benefits
Other
Current
Employee benefits
Other (1)
Non-current
Employee benefits
Incentives
Cash settled long-term incentives
Leave balances
Termination benefits
Current
Cash settled long-term incentives
Defined benefit liability (note 16)
Leave balances
Non-current
2021
$000
85,154
8,605
93,759
35,267
67,085
102,352
25,986
5,447
53,721
—
85,154
4,587
19,686
10,994
35,267
2020
$000
77,878
11,758
89,636
60,082
55,823
115,905
21,204
7,132
49,009
533
77,878
8,414
41,052
10,616
60,082
1) This amount represents the restoration provision of APA Group’s assets.
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.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
83
Operating Assets and Liabilities
14. Provisions continued
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
2021
$000
20,571
6,010
4,877
192
31,650
2020
$000
20,607
6,010
2,534
192
29,343
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 2021. The present value of the defined benefit obligations, and the related current service cost and past service cost,
were measured using the projected unit credit method.
The following sets out details in respect of the defined benefit plans only:
Amounts recognised in the statement of profit or loss and other comprehensive income
Current service cost
Net interest expense
Components of defined benefit costs recognised in profit or loss (note 5)
Amounts recognised in the statement of financial position
Fair value of plan assets
Present value of benefit obligation
Defined benefit asset – non-current (note 15)
Defined benefit liability – non-current (note 14)
Opening defined benefit obligation
Current service cost
Interest cost
Contributions from plan participants
Actuarial (gain)/loss
Benefits paid
Administrative expenses, taxes and premiums paid
Closing defined benefit obligation
2021
$000
2,032
995
3,027
139,336
(154,145)
4,877
(19,686)
162,876
2,032
4,613
572
(4,554)
(10,748)
(646)
154,145
2020
$000
2,054
294
2,348
124,358
(162,876)
2,534
(41,052)
146,282
2,054
4,329
669
21,914
(11,905)
(467)
162,876
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P
O
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F
F
I
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N
A
A
N
N
C
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I
I
A
A
L
L
S
S
T
T
A
A
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E
E
M
M
E
E
N
N
T
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S
S
D
I
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F
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Operating Assets and Liabilities
16. Employee superannuation plans continued
Movements in the present value of the plan assets in the current period were as follows:
Opening fair value of plan assets
Interest income
Actual return/(loss) 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
2021
$000
124,358
3,618
19,028
3,154
572
(10,748)
(646)
139,336
2020
$000
136,487
4,035
(6,189)
1,728
669
(11,905)
(467)
124,358
Defined contribution plans
Contributions to defined contribution plans are expensed when incurred. The percentage rate for superannuation guarantee contribution
by APA Group remain at 9.5% until 30 June 2021, increasing to 10% from 1 July 2021, and eventually to 12% from 1 July 2025.
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 3.2% gross of tax (2020:
3.0%), based on the corporate bond yield curve published by Milliman, an expected salary increase rate of 2.7% (2020: 2.7%), and
pension indexation rate of 1.8% (2020: 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 $8,479,000 (increase by
$9,455,000).
– If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $1,437,000
(decrease by $1,386,000).
– If the expected pension indexation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by
$7,744,000 (decrease by $7,033,000).
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 $3.1 million in contributions to the defined benefit plans during the year ending 30 June 2022.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
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 liabilities
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
Included in the consolidated statement of financial position as part of:
Current lease liabilities
Non-current lease liabilities
2021
$000
16,265
40,033
16,827
73,125
10,069
63,056
13,828
49,228
63,056
85
2020
$000
15,808
42,671
22,475
80,954
11,077
69,877
13,544
56,333
69,877
In FY20, APA Group adopted AASB 16 using the modified retrospective approach.
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 $15.3 million, excluding payments for short term leases, low-value asset leases and
variable payments leases.
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L
L
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A
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M
M
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N
N
T
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S
S
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
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 (1)
Less: unearned finance lease receivables
Present value of lease receivables
Included in the consolidated statement of financial position as part of:
Current trade and other receivables (note 9)
Non-current receivables (note 9)
2021
$000
2,237
7,016
7,699
16,952
(5,302)
11,650
1,275
10,375
11,650
2020
$000
2,232
7,542
9,410
19,184
(6,379)
12,805
1,166
11,639
12,805
1) 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. APA Group’s policy is to maintain balanced and diverse funding sources through raising funds locally and from overseas from
a variety of capital markets including 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 2021 and 2020 periods.
APA Group’s capital management strategy has been refreshed during the year, taking into consideration the cost of capital and the
state of the capital markets. It remains focused on maintaining Baa2/BBB investment grade credit ratings.
The main aspects are:
– Distribution policy balances organic growth capex funding with strong investor returns;
– Lower cost of capital and competitive investment hurdle rates;
– Investment grade credit metrics provides prudent levels of gearing and access to capital markets;
– Treasury policies ensures strong levels of liquidity and minimises risk; and
– Insightful communications ensuring strong investor engagement.
APA Group’s Funds From Operations to Net Debt exceed the minimum threshold levels that Moody’s and Standard & Poor’s consider
appropirate 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 ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
87
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 (1)
Other financial liabilities
Current borrowings
Guaranteed senior notes (2)
Other financial liabilities
Less: unamortised borrowing costs
Non-current borrowings
Total borrowings
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Net debt
2021
$000
212,938
439,414
652,352
—
(2,721)
(2,721)
2020
$000
502,765
670,006
1,172,771
(299,954)
(10,659)
(310,613)
(9,960,728)
(10,467)
49,878
(10,591,648)
(55,585)
39,851
(9,921,317)
(10,607,382)
(9,924,038)
(10,917,995)
(13,828)
(49,228)
(63,056)
(13,544)
(56,333)
(69,877)
(9,334,742)
(9,815,101)
1) AUD denominated private placement notes and AUD MTN of A$300 million
2) Represents JPY MTN of ¥10,000 million, GBP MTN of £1,600 million, EUR MTN of €2,350 million and USD denominated 144a notes of US$2,250
million measured at the exchange rate at reporting date, and AUD MTN of A$200 million (2020: Includes 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$200 million).
Refer to note 19 for details of interest rates and maturity profiles.
Reconciliation of net debt
Cash and
cash
equivalents
$000
Borrowings
due within
1 year
$000
Borrowings
due after
1 year
$000
Net debt as at 1 July 2019
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
Movement of deferred borrowing costs
354,947
817,776
—
48
—
—
(444,502)
398,836
—
45,666
(310,613)
—
(9,865,813)
(1,017,812)
—
(33,527)
310,659
(889)
Lease
Liabilities
$000
(74,565)
13,482
(8,794)
—
—
—
Net debt
$000
(10,029,933)
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)
Net debt as at 1 July 2020
1,172,771
(310,613)
(10,607,382)
(69,877)
(9,815,101)
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
Movement of deferred borrowing costs
Net debt as at 30 June 2021
(520,145)
—
(274)
—
—
652,352
2,866,999
—
(354,168)
(2,204,939)
—
(2,358,421)
—
829,520
2,204,939
10,027
16,046
(9,225)
—
—
—
4,479
(9,225)
475,078
—
10,027
(2,721)
(9,921,317)
(63,056)
(9,334,742)
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N
N
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
18. Net debt continued
Financing facilities available
Total facilities
Guaranteed senior notes (1)
Bank borrowings (2)
Facilities used at balance date
Guaranteed senior notes (1)
Bank borrowings (2)
Facilities unused at balance date
Guaranteed senior notes (1)
Bank borrowings (2)
2021
$000
2020
$000
9,960,728
1,250,000
10,891,602
1,300,000
11,210,728
12,191,602
9,960,728
—
10,891,602
—
9,960,728
10,891,602
—
1,250,000
1,250,000
—
1,300,000
1,300,000
1) Represents JPY MTN of ¥10,000 million, GBP MTN of £1,600 million, EUR MTN of €2,350 million and USD denominated 144a notes of US$2,250 million
measured at the exchange rate at reporting date, and AUD MTN of A$200 million (2020: Includes USD denominated private placement notes of US$124
million, USD denominated 144a notes of US$750 million, EUR MTN of €700 million, A$143 million of AUD denominated private placement notes and AUD
MTN of A$300 million). Refer to note 19 for details of interest rates and maturity profiles.
2) Refer to note 19 for details of interest rates and maturity profiles.
19. Financial risk management
APA Group’s Capital Markets 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.
Based on Treasury Risk Management Policy, 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
Risk management framework
Financial exposure
Market
Credit
Commercial transactions in foreign
currency and funding activities
Cash, receivables, interest bearing
liabilities and hedging
Liquidity Ongoing business operations,
financial market disruptions and
new investment opportunities
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
Capital Markets department.
Refer to 19 (a) 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.
A detailed table shows APA Group’s
remaining contractual maturities for
its non-derivative financial liabilities
at the end of this section.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
89
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 and operating cost).
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 forward exchange contracts
("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
hedge the long term incentive awards rather than for trading purposes.
APA Group does not actively trade these holdings. Electricity price
risk is managed with electricity sales 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 and operating cost,
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):
2021
US Dollar (USD) (1)
Japanese Yen (JPY)
British Pound (GBP)
Euro (EUR)
Swedish Krona (SEK)
Cash & cash
equivalents
$000
3,139
—
—
—
—
3,139
Total
borrowings
$000
(3,001,400)
(120,079)
(2,945,695)
(3,715,047)
—
Cross
currency
swaps
$000
(959,268)
120,079
2,945,695
3,715,047
—
Forward
exchange
contract
$000
(105,014)
—
75
4,313
1,767
Net foreign
currency
position
$000
(4,062,543)
—
75
4,313
1,767
(9,782,221)
5,821,553
(98,859)
(4,056,388)
1) The net foreign currency position (comprising USD denominated borrowings and forward exchange contracts) are used to manage foreign currency risk
associated with USD revenue and receivables.
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F
F
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N
A
A
N
N
C
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I
I
A
A
L
L
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
D
I
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E
C
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O
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S
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O
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F
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
19. Financial risk management continued
a) Market risk continued
2020
US Dollar (USD) (1)
Japanese Yen (JPY)
British Pound (GBP)
Euro (EUR)
Swedish Krona (SEK)
Cash & cash
equivalents
$000
Total
borrowings
$000
2,934
—
—
—
—
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
(589,300)
—
127
3,162
25,575
Net foreign
currency
position
$000
(4,891,927)
—
127
3,162
25,575
(10,262,669)
5,957,108
(560,436)
(4,863,063)
1) The net foreign currency position (comprising USD denominated borrowings and forward exchange contracts) 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
2021
Average
contract rate
$
Contract Value
1 - 2 years
$000
< 1 year
$000
2 - 5 years
$000
Fair value
$000
Forecast revenue and associated receivable
Sell USD
Forecast capital purchases and operating cost
Buy USD
Buy EUR
Buy SEK
Buy GBP
2020
Forecast revenue and associated receivable
Sell USD
Forecast capital purchases and and operating cost
Buy USD
Buy EUR
Buy SEK
Buy GBP
0.7103
204,710
698
—
10,876
0.7646
0.6193
5.7152
0.5660
(87,464)
(4,402)
(1,984)
(74)
110,786
(42)
—
—
—
656
(42)
—
—
—
(42)
2,032
(79)
(216)
1
12,614
0.7162
318,735
253,313
—
(22,284)
0.6500
0.5974
5.7959
0.5259
(4,991)
(2,755)
(24,697)
(135)
(42)
(496)
(3,683)
—
286,157
249,092
(84)
—
—
—
(84)
(295)
(71)
(2,718)
(8)
(25,376)
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.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
91
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
2021
Foreign
currency
Exchange
rate
$
Less than
1 year
$000
1 - 2 years
$000
2 - 5 years
$000
Pay AUD / receive foreign currency
2012 GBP Medium Term Notes
2017 US144A
2019 GBP Medium Term Notes
2019 JPY Medium Term Notes
2020 EUR Medium Term Notes
2021 EUR Medium Term Notes
2021 GBP Medium Term Notes
Pay USD / receive foreign currency
2015 EUR Medium Term Notes
2015 GBP Medium Term Notes
2020
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
2019 JPY Medium Term Notes
2020 EUR Medium Term Notes
Pay USD / receive foreign currency
2015 EUR Medium Term Notes
2015 GBP Medium Term Notes
AUD/GBP
AUD/USD
AUD/GBP
AUD/JPY
AUD/EUR
AUD/EUR
AUD/GBP
0.6530
0.7668
0.5388
75.2220
0.5895
0.6464
0.5530
USD/EUR
USD/GBP
0.9514
0.6773
AUD/USD
AUD/USD
AUD/GBP
AUD/EUR
AUD/USD
AUD/GBP
AUD/JPY
AUD/EUR
0.8068
1.0198
0.6530
0.6183
0.7668
0.5388
75.2220
0.5895
USD/EUR
USD/GBP
0.9514
0.6773
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
More than
5 years
$000
—
(1,108,503)
(742,390)
(132,940)
(1,017,812)
(1,701,733)
(452,080)
(535,988)
—
—
—
—
—
—
—
—
(911,379)
(1,181,751)
(535,988)
(7,248,588)
—
—
—
—
—
—
—
—
—
—
(153,694)
—
—
(1,132,141)
—
—
—
—
—
(735,438)
(535,988)
—
—
—
—
—
—
—
—
—
(1,108,503)
(742,390)
(132,940)
(1,017,812)
—
—
—
—
(990,741)
(1,284,658)
(1,285,835)
(1,271,426)
(5,277,044)
Foreign currency denominated borrowings
APA Group maintains a level of borrowings in foreign currency, or swapped from one foreign currency to another to match payments of
interest and principal against expected future business cash flows in that foreign currency. This mitigates the risk of movements in foreign
exchange rates in relation to principal and interest payments arising from these foreign currency borrowings as well as future revenues.
Foreign currency sensitivity analysis
The analysis below shows the effect on profit and total equity of retranslating cash, receivables, payables and interest-bearing
liabilities denominated in USD, JPY, 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 (2020: nil); and
– Equity reserves would decrease by $1,028.0 million with a 20 percent depreciation of the A$ or increase by $685.6 million with
a 20 percent increase in foreign exchange rates (2020: decrease by $1,229.6 million or increase by $820.1 million respectively).
C
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
19. Financial risk management continued
a) Market risk continued
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 $652.4 million as at 30 June 2021
(2020: $1,172.8 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:
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 (1)
5 years and more (1)
Weighted average
interest rate
2021
% p.a.
2020
% p.a.
Notional
principal amount
Fair value
2021
$000
2020
$000
2021
$000
2020
$000
—
—
4.25
2.94
—
4.65
4.03
3.66
—
—
535,988
—
1,285,835
1,271,426
7,248,588 5,277,044
—
—
69,513
(262,750)
—
(7,622)
382,490
(354,157)
7,784,576
7,834,305
(193,237)
20,711
1) This amount includes a notional amount of USD 1.6 billion (2020: 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 ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
93
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.
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)
Fair value of
hedge instrument
2021
$000
2020
$000
Fair value of
hedge item
2021
$000
2020
$000
Reserve balance
2021
$000
2020
$000
(193,237)
20,711
204,225
(5,088)
398,468
633,540
(90,663)
(253,287)
90,663
253,287
90,663
253,287
10,876
(22,284)
(10,789)
22,326
(10,423)
21,253
1,738
(3,092)
(1,739)
3,092
(1,738)
3,092
(271,286)
(257,952)
282,360
273,617
476,970
911,172
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)
Change in fair values
of hedge instruments (1)
Change in fair values
of hedged items (1)
2021
$000
114,389
162,624
33,160
4,830
2020
$000
(150,737)
(35,150)
(10,411)
698
2021
$000
(137,314)
(162,624)
(33,115)
(4,831)
2020
$000
164,733
35,150
10,437
(708)
315,003
(195,600)
(337,884)
209,612
1) This table excludes change in fair values of forecast transactions no longer expected to occur.
Foreign exchange risk
Hedging foreign currency borrowings (cross currency swap)
Hedging revenue and associated receivables (FECs)
Interest rate risk
Hedging US$ denominated borrowings (interest rate swap)
Hedge
ineffectiveness
gain / (loss)
2021
$000
2020
$000
(926)
87
(839)
2021
$000
—
—
(417)
—
(417)
2020
$000
—
—
Balance relating
to discontinued
cash flow hedges
2021
$000
2,349
—
2,349
2021
$000
2020
$000
17,906
—
17,906
2020
$000
33,108
33,108
46,289
46,289
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
19. Financial risk management continued
a) Market risk continued
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative
instruments held. A 100 basis point increase or decrease is used and represents management’s assessment of the greatest possible
change in interest rates over the short term. At reporting date, if interest rates had been 100 basis points lower or higher and all
other variables were held constant, APA Group’s equity reserves would increase by $46,784,000 with a 100 basis point decrease in
interest rates or decrease by $4,943,000 with a 100 basis point increase in interest rates (2020: increase by $15,776,000 or increase
by $4,528,000 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 hedge long term incentive awards 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.
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 dealing with creditworthy counterparties or obtaining sufficient collateral or bank guarantees
where appropriate as a means of mitigating the risk of loss. For financial investments or market risk hedging, APA Group’s policy is to
only transact with counterparties that have a credit rating of A- (Standard & Poor’s)/A3 (Moody’s) or higher unless specifically approved
by the Board. Where a counterparty’s rating falls below this threshold following a transaction, no other transactions can be executed
with that counterparty until the exposure is sufficiently reduced or their credit rating is upgraded above APA Group’s minimum
threshold. APA Group’s exposure to financial instrument and deposit credit risk is closely monitored against counterparty credit limits
imposed by the Treasury Risk Management Policy approved by the ARMC. These limits are regularly reviewed by the Board.
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.
2021
External credit rating
Internal credit rating
ECL method (1)
Cash and cash equivalents and
cash on deposit
A- (Standard & Poor’s) /
A3 (Moody’s) or higher
Performing
12-month ECL
Trade receivables
Finance lease receivables
Contract assets
Loans advanced to related parties
Redeemable preference shares (GDI)
N/A
N/A
N/A
N/A
N/A
— (2)
— (2)
— (2)
Lifetime ECL (simplified approach)
Lifetime ECL (simplified approach)
Lifetime ECL (simplified approach)
Performing
Performing
12-month ECL
12-month ECL
1) 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.
2) 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.
APA GROUP ANNUAL REPORT 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
95
Capital Management
19. Financial risk management continued
b) Credit risk continued
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 2021 has been determined to be
immaterial and no liability has been recorded (2020: $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.
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.
2021
Maturity
Average
interest rate
% p.a.
Less than
1 year
$000
1 - 5 years
$000
More than
5 years
$000
Unsecured financial liabilities
Trade and other payables
Unsecured bank borrowings (1)
Denominated in A$
Other financial liabilities
Denominated in US$
Guaranteed Senior Notes (2)
Denominated in A$
2016 AUD Medium Term Notes
Denominated in US$
2015 US 144A (3)
2015 US 144A (3)
2017 US 144A
Denominated in stated foreign currency
2012 GBP Medium Term Notes
2015 GBP Medium Term Notes (3)
2015 EUR Medium Term Notes (3)
2019 GBP Medium Term Notes
2019 JPY Medium Term Notes
2020 EUR Medium Term Notes
2021 EUR Medium Term Notes
2021 EUR Medium Term Notes
2021 GBP Medium Term Notes
—
—
314,560
—
—
—
—
—
3,146
9,349
2,063
20-Oct-23
3.75
7,500
211,250
—
23-Mar-25
23-Mar-35
15-Jul-27
26-Nov-24
22-Mar-30
22-Mar-27
18-Jul-31
13-Jun-34
15-Jul-30
15-Mar-29
15-Mar-33
15-Mar-36
4.20
5.00
4.25
4.25
3.50
2.00
3.13
1.03
2.00
0.75
1.25
2.50
61,629
20,009
59,037
39,459
52,992
40,059
33,595
5,606
39,666
27,388
29,249
19,184
1,652,409
80,037
234,380
634,904
212,073
160,237
135,026
22,518
157,155
109,702
117,155
76,842
—
580,493
1,196,239
—
1,393,824
951,438
927,438
177,913
1,194,801
1,010,382
978,336
644,132
753,079
3,813,037
9,057,059
1) Bank facilities mature or expire on 16 May 2022 ($50 million limit), 18 July 2022 ($150 million limit), 30 June 2023 ($500 million limit), 31 December 2023
($500 million limit) and 19 December 2025 ($50 million limit).
2) Rates shown are the coupon rate in the currency of issuance.
3) Facilities are denominated in or fully swapped by way of CCIRS into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at
30 June 2021. These amounts are fully hedged by FECs or future US$ revenues.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
19. Financial risk management continued
b) Credit risk continued
2020
Maturity
Average
interest rate
% p.a.
Less than
1 year
$000
1 - 5 years
$000
More than
5 years
$000
Unsecured financial liabilities
Trade and other payables
Unsecured bank borrowings (1)
Denominated in A$
Other financial liabilities
Denominated in US$
Other financial liabilities (2)
Guaranteed Senior Notes (3)
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 (2)
2015 US 144A (2)
2017 US 144A
Denominated in stated foreign currency
2012 GBP Medium Term Notes
2015 GBP Medium Term Notes (2)
2015 EUR Medium Term Notes
2015 EUR Medium Term Notes (2)
2019 GBP Medium Term Notes
2019 JPY Medium Term Notes
2020 EUR Medium Term Notes
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
—
—
308,764
—
—
—
—
—
3,610
10,924
3,634
8,473
27,355
18,900
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
6,002
4,617
311,625
7,500
11,354
48,854
66,995
21,752
58,812
39,459
57,606
50,290
43,548
33,595
5,622
28,025
86,584
66,603
—
218,750
165,079
809,057
1,863,295
87,007
234,765
674,363
230,528
1,182,555
174,190
135,026
22,471
157,479
—
—
—
—
—
—
—
652,794
1,254,891
—
1,572,792
—
1,077,836
961,033
183,566
1,234,143
1,116,503
6,146,031
6,959,589
1) 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 ($500 million limit).
2) Facilities are denominated in or fully swapped by way of CCIRS into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at 30
June 2020. These amounts are fully hedged by FECs or future US$ revenues.
3) Rates shown are the coupon rate in the currency of issuance.
Critical accounting judgements and key sources of estimation uncertainty - fair value of financial instruments
APA Group has financial instruments that are carried at fair value in the statement of financial position. The best evidence of fair value
is quoted prices in an active market. If the market for a financial instrument is not active, APA Group determines fair value by using
various valuation models. The objective of using a valuation technique is to establish the price that would be received to sell an asset
or paid to transfer a liability between market participants. The chosen valuation models make maximum use of market inputs and rely
as little as possible on entity specific inputs. The fair values of all positions include assumptions made as to recoverability based on
the counterparty’s and APA Group’s credit risk.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
97
Capital Management
19. Financial risk management continued
b) Credit risk continued
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities.
– Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Transfers between levels of the fair value hierarchy occur at the end of the reporting period. There have been no transfers between
the levels during 2021 (2020: 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 value of indexed revenue contract is derived from present value of expected future cash flows based on observable
inflation indices and yield curve at the end of the reporting period. 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.
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N
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L
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A
A
T
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E
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M
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N
N
T
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S
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D
I
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
19. Financial risk management continued
b) Credit risk continued
Fair value hierarchy
2021
Financial assets measured at fair value
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
Indexed revenue contract
Contract for difference
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
Indexed revenue contract
Reconciliation of Level 3 fair value measurements
Opening balance
Revaluation
Settlement
Closing balance
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
—
—
—
—
—
—
—
—
—
—
Level 1
$000
—
—
—
—
—
—
—
—
—
—
193,004
22,724
—
215,728
2,211
386,241
10,110
3,365
—
401,927
Level 2
$000
1,667
557,336
15,236
—
574,239
74
536,625
40,612
8,090
585,401
—
—
29,742
29,742
—
—
—
—
1,216
1,216
193,004
22,724
29,742
245,470
2,211
386,241
10,110
3,365
1,216
403,143
Level 3
$000
Total
$000
—
—
—
10,508
10,508
—
—
—
—
—
2021
$000
10,508
13,943
4,075
28,526
1,667
557,336
15,236
10,508
584,747
74
536,625
40,612
8,090
585,401
2020
$000
1,742
9,288
(522)
10,508
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
99
Capital Management
19. Financial risk management continued
b) Credit risk continued
Fair value measurements of financial instruments measured at amortised cost
The financial liabilities included in the following table are fixed rate borrowings. Other debts held by APA Group are floating rate
borrowings and amortised cost as recorded in the financial statements approximate their fair values.
Financial liabilities
Unsecured long term Private Placement Notes
Unsecured Australian Dollar Medium Term Notes
Unsecured Japanese Yen Medium Term Notes
Unsecured US Dollar 144A Medium Term Notes
Unsecured British Pound Medium Term Notes
Unsecured Euro Medium Term Notes
Carrying amount
Fair value (Level 2) (1)
2021
$000
2020
$000
2021
$000
2020
$000
—
200,000
120,079
3,001,400
2,945,695
3,715,047
322,353
500,000
134,338
4,350,348
2,423,481
3,174,688
—
212,150
123,105
3,405,782
3,173,349
3,790,914
351,357
515,311
136,838
4,821,607
2,620,897
3,253,322
9,982,221
10,905,208
10,705,300
11,699,332
1) 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.
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 items carried at amortised cost:
Redeemable preference shares
Redeemable preference share interest
Current
Derivatives at fair value:
Contract for difference
Equity forward contracts
Indexed revenue contracts
Derivatives at fair value designated as hedging instruments:
Cross currency interest rate swaps – cash flow hedges
Foreign exchange contracts – cash flow hedges
Financial items carried at amortised cost:
Redeemable preference shares
Non-current
2021
$000
3,885
—
19,463
22,684
10,400
285
56,717
25,857
—
—
193,004
39
—
218,900
2020
$000
2,813
1,336
18,343
9,971
—
285
2021
$000
—
498
2020
$000
—
—
158,433
10,100
159,305
27,042
—
—
—
—
32,748
169,031
186,347
7,695
331
—
557,336
5,265
10,400
581,027
1,216
1,713
3,365
—
74
8,090
255,813
10
405,904
13,570
—
—
262,117
427,638
Redeemable preference shares relate to APA Group’s 20% interest in GDI (EII) Pty Ltd. In December 2011, APA sold 80% of its gas
distribution network in South East Queensland (Allgas) into an unlisted investment entity, GDI (EII) Pty Ltd. At that date GDI issued
52 million Redeemable Preference Shares (RPS) to its owners. The shares attract periodic interest payments and have a redemption
date 10 years from issue.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
20. Other financial instruments continued
Recognition and measurement
Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortised cost:
– The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
– The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive
income (FVTOCI):
– The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and
selling the financial assets; and
– The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured at fair value through profit or loss (FVTPL).
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses
recognised in profit or loss to the extent they are not part of a designated hedging relationship.
Derivatives that APA Group does not elect to apply hedge accounting to or do not meet the hedge accounting criteria, are classified
as ‘financial assets/liabilities’ for accounting purposes and accounted for at FVTPL.
Fair value measurement
For information about the methods and assumptions used in determining the fair value of financial instruments refer to note 19.
Hedge accounting
APA Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect
of foreign currency risk, as either fair value hedges or cash flow hedges. There are no fair value hedges in the current or prior year,
hedges of foreign exchange and interest rate risk are accounted for as cash flow hedges.
At the inception of the hedge relationship, APA Group formally designates and documents the relationship between the hedging
instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge and on an ongoing basis, APA Group expects the hedging instrument is
effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the
hedging relationships meet all of the following hedge effectiveness requirements:
– there is an economic relationship between the hedged item and the hedging instrument;
– the effect of credit risk does not dominate the value changes that result from that economic relationship; and
– the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that APA Group
actually hedges and the quantity of the hedging instrument that APA Group actually uses to hedge that quantity of hedged item.
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
AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform Phase 2 was issued in
September 2020 and will be effective for APA Group from 1 July 2021. Phase 2 amendments enable the Group to reflect the effects
of transitioning IBORs to risk free rates (RFRs) without giving rise to accounting impacts that would not provide useful information to
users of financial statements. APA Group does not have any debt or derivative instruments directly linked to US LIBOR, EURIBOR,
GBP LIBOR or JPY LIBOR (collectively ‘IBORs’). APA Group only has an indirect exposure to the IBORs in relation to the valuation of
Cross Currency Interest Rate Swaps that are designated in hedging relationships.
APA Group’s Capital Markets department will work closely with banks and swap counterparties to review the process of replacing the
IBORs with replacement RFRs and implications on the pricing and valuation of existing hedging instruments.
APA GROUP ANNUAL REPORT 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
101
Capital Management
20. Other financial instruments continued
Recognition and measurement continued
Cash flow hedges
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and
qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the cash flow hedge reserve,
limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the
ineffective portion is recognised immediately in profit or loss, and is included in the ‘finance costs’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in
the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the
hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses
previously recognised in other comprehensive income and accumulated in equity are removed from equity and included in the
initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect other comprehensive
income. Furthermore, if APA Group expects that some or all of the loss accumulated in the cash flow hedging reserve will not be
recovered in the future, that amount is immediately reclassified to profit or loss.
APA Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying
criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or
exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and
accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast
transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the 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.
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:
Gain/(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 forecast transactions no longer expected to occur
Amount reclassified to P&L for effective hedges
Tax effect
2021
$000
2020
$000
(700,786)
(608,016)
421,547
(46,941)
12,420
61,289
28,916
(143,169)
(183,107)
(23,757)
(5,848)
—
80,184
39,758
Balance at end of financial year
(366,724)
(700,786)
The foreign currency basis spread reserve balance at beginning of financial year is ($58.2 million) and at end of financial year is
($70.0 million) in 2021 (2020: ($56.2m) and ($58.2m) respectively).
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N
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
20. Other financial instruments continued
Recognition and measurement continued
Hedge ineffectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
In hedges of foreign currency capital equipment purchases, ineffectiveness may arise if the timing of the forecast transaction
changes from what was originally estimated, or if there are changes in the credit risk of APA Group or the derivative counterparty.
Hedge ineffectiveness for cross currency interest rate swaps is assessed using the same principles as for hedges of foreign currency
capital equipment purchases. It may occur due to the credit value/debit value adjustment on the swap contracts which is not
matched by the debts.
Impairment of financial assets
In relation to the impairment of financial assets, it is no longer necessary for a credit event to have occurred before credit losses
are recognised. APA Group applies an ECL model to account for ECL and changes in those ECL at each reporting date to reflect
changes in credit risk since initial recognition of a financial asset.
APA Group recognises a loss allowance for ECL on investments in debt instruments that are measured at amortised cost, for
example, loans advanced to related parties and trade receivables. No impairment loss is recognised for investments in equity
instruments. For trade receivables, finance lease receivables and contract assets, APA Group applies the simplified approach to
assessing ECL. Under the simplified approach, ECL on these financial assets is estimated using a provision matrix. This matrix is
based on APA Group’s historical credit losses and reasonable and supportable information that is available without undue cost.
The amount of ECL under either approach is updated at each reporting date to reflect changes in credit risk since initial recognition
of the respective financial instrument.
APA Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to
their carrying amount through a loss allowance account. Aside from the additional disclosure requirements in note 19, the history of
collection rates and forward-looking information that is available without undue cost or effort shows that APA Group does not have
an expected loss on collection of debtors or loans.
Significant increase in credit risk
An actual or expected significant deterioration in the financial instrument’s external (if available) or internal credit rating.
Definition of default
When there is a breach of financial covenants by the debtor.
Write-off policy
APA Group writes off a financial asset when all reasonable attempts at recovery have been taken and failed e.g. debts that are
considered irrecoverable, or where the cost of recovery is uneconomic, must be written off as a bad debt.
21. Issued capital
Units
1,179,893,848 securities, fully paid (2020: 1,179,893,848 securities, fully paid) (1)
2021
$000
2020
$000
2,571,420
3,103,806
Movements
Balance at beginning of financial year
Capital distributions paid (note 8)
Balance at end of financial year
2021
No. of units
000
2021
$000
2020
No. of units
000
1,179,894
—
2,902,123
(330,703)
1,179,894
2,571,420
1,179,894
—
1,179,894
2020
$000
3,103,806
(201,683)
2,902,123
1) Fully paid securities carry one vote per security and carry the right to distributions.
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to issued capital from 1 July
1998. Therefore, the Trust does not have a limited amount of authorised capital and issued securities do not have a par value.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
103
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
2021
$000
2020
$000
894
784,171
785,065
10
10
785,055
785,055
42,914
(13)
42,901
42,901
43,741
126,637
(170,377)
(170,377)
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)
The accounting policies of APTIT are the same as those applied to APA Group.
There are no material guarantees, contingent liabilities or restrictions imposed on APA Group from APTIT’s non-controlling interests.
APT Investment Trust
APT Investment Trust
Issued capital:
Balance at beginning of financial year
Distribution – capital return (note 8)
Retained earnings:
Balance at beginning of financial year
Net profit attributable to APTIT unitholders
Distributions paid (note 8)
2021
$000
785,055
785,055
887,845
(122,532)
765,313
24,686
42,901
(47,845)
19,742
2020
$000
912,531
912,531
964,219
(76,374)
887,845
30,056
53,021
(58,391)
24,686
C
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N
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L
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N
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Group Structure
23. Joint arrangements and associates
The table below lists APA Group’s interest in joint ventures and associates that are reported as part of the Energy Investments
segment. APA Group provides asset management, operation and maintenance services and corporate services, in varying
combinations to the majority of energy infrastructure assets housed within these entities.
Ownership interest %
Name of entity
Principal activity
Country of incorporation
2021
2020
Joint ventures:
SEA Gas
SEA Gas (Mortlake)
Energy Infrastructure Investments
EII 2
Associates:
GDI (EII)
Gas transmission
Gas transmission
Energy infrastructure
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
Investment in joint ventures and associates using the equity method
240,201
226,380
2021
$000
2020
$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
217,702
204,778
25,265
10,226
35,491
25,863
(4,178)
21,685
22,499
21,602
4,512
2,194
6,706
4,814
(1,669)
3,145
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.
APA GROUP ANNUAL REPORT 2021
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Group Structure
23. Joint arrangements and associates continued
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 oper ations:
Name of venture
Principal activity
Goldfields Gas Transmission (1)
Mid West Pipeline (2)
Gas pipeline operation – Western Australia
Gas pipeline operation – Western Australia
Output interest
2021
%
88.2
50.0
2020
%
88.2
50.0
1) On 17 August 2004, APA acquired a direct interest in the Goldfields Gas Transmission joint operations as part of the SCP Gas Business acquisition.
2) Pursuant to the joint venture agreement, APA Group receives a 70.8% share of operating income and expenses.
Interest in joint arrangements
A joint arrangement is an arrangement whereby two or more parties have joint control. Joint control is the contractually agreed
sharing of control such that decisions about the relevant activities of the arrangement (those that significantly affect the returns)
require the unanimous consent of the parties sharing control. APA Group has two types of joint arrangements:
Joint ventures: A joint arrangement in which the parties that share joint control have rights to the net assets of the arrangement.
Joint Ventures are accounted for using the equity accounting method; and
Joint operations: A joint arrangement in which the parties that share joint control have rights to the assets, and obligations for the
liabilities, relating to the arrangement. In relation to its interest in a joint operation, APA Group recognises its share of assets and liabilities,
revenue from the sale of its share of the output and its share of any revenue generated from the sale of the output by the joint operation
and its share of expenses. These are incorporated into APA Group’s financial statements under the appropriate headings.
24. Subsidiaries
Subsidiaries are entities controlled by APT. Control exists where APT has power over the entities, i.e. existing rights that give it the
current ability to direct the relevant activities of the entities (those that significantly affect the returns); exposure, or rights, to variable
returns from its involvement with the entities; and the ability to use its power to affect those returns.
Name of entity
Country of registration/incorporation
Ownership interest
2021
%
2020
%
Parent entity
Australian Pipeline Trust (1)
Subsidiaries
Agex Pty. Ltd. (2),(3)
APA (BWF Holdco) Pty Ltd (2),(3)
APA (EDWF Holdco) Pty Ltd (2),(3)
APA (EPX) Pty Limited (2),(3)
APA (NBH) Pty Limited (2),(3)
APA (Pilbara Pipeline) Pty Ltd (2),(3)
APA (SWQP) Pty Limited (2),(3)
APA (WA) One Pty Limited (2),(3)
APA AIS 1 Pty Limited (2),(3)
APA AIS 2 Pty Ltd (2),(3)
APA AIS Pty Limited (2),(3)
APA AM (Allgas) Pty Limited (2),(3)
APA BIDCO Pty Limited (2),(3)
APA Biobond Pty Limited (2),(3)
APA Country Pipelines Pty Limited (2),(3)
APA DPS Holdings Pty Limited (2),(3)
APA DPS2 Pty Limited (2),(3)
APA East Pipelines Pty Limited (2),(3)
APA EE Australia Pty Limited (2),(3)
APA EE Corporate Shared Services Pty Limited (2),(3)
APA EE Holdings Pty Limited (2),(3)
APA EE Pty Limited (2),(3)
APA Ethane Pty Limited (2),(3)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
C
H
A
I
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A
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S
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Group Structure
24. Subsidiaries continued
Name of entity
Country of registration/incorporation
Ownership interest
2021
%
2020
%
APA Operations (EII) Pty Limited (2),(3)
APA Facilities Management Pty Limited (2),(3)
APA Midstream Holdings Pty Limited (2),(3)
APA Operations Pty Limited (2),(3)
APA Orbost Gas Plant Pty Ltd (2),(3)
APA Pipelines Investments (BWP) Pty Limited (2),(3)
APA Power Holdings Pty Limited (2),(3)
APA Power PF Pty Limited (2),(3)
APA Reedy Creek Wallumbilla Pty Limited (2),(3)
APA SEA Gas (Mortlake) Holdings Pty Ltd (2),(3)
APA SEA Gas (Mortlake) Pty Ltd (2)
APA Services (Int) Inc.
APA Sub Trust No 1 (2),(4)
APA Sub Trust No 2 (2),(4)
APA Sub Trust No 3 (2),(4)
APA Transmission Pty Limited (2),(3)
APA VTS A Pty Limited (2),(3)
APA VTS Australia (Holdings) Pty Limited (2),(3)
APA VTS Australia (NSW) Pty Limited (2),(3)
APA VTS Australia (Operations) Pty Limited (2),(3)
APA VTS Australia Pty Limited (2),(3)
APA VTS B Pty Limited (2),(3)
APA Western Slopes Pipeline Pty Limited (2),(3)
APA WGP Pty Ltd (2),(3)
APT (MIT) Services Pty Limited (2),(3)
APT AM (Stratus) Pty Limited (2),(3)
APT AM Employment Pty Limited (2),(3)
APT AM Holdings Pty Limited (2),(3)
APT Facility Management Pty Limited (2),(3)
APT Goldfields Pty Ltd (2),(3)
APT Management Services Pty Limited (2),(3)
APT O&M Holdings Pty Ltd (2),(3)
APT O&M Services (QLD) Pty Ltd (2),(3)
APT O&M Services Pty Ltd (2),(3)
APT Parmelia Holdings Pty Ltd (2),(3)
APT Parmelia Pty Ltd (2),(3)
APT Parmelia Trust (2),(4)
APT Petroleum Pipelines Holdings Pty Limited (2),(3)
APT Petroleum Pipelines Pty Limited (2),(3)
APT Pipelines (NSW) Pty Limited (2),(3)
APT Pipelines (NT) Pty Limited (2),(3)
APT Pipelines (QLD) Pty Limited (2),(3)
APT Pipelines (SA) Pty Limited (2),(3)
APT Pipelines (WA) Pty Limited (2),(3)
APT Pipelines Investments (NSW) Pty Limited (2),(3)
APT Pipelines Investments (WA) Pty Limited (2),(3)
APT Pipelines Limited (2),(3)
APT Sea Gas Holdings Pty Limited (2),(3)
APT SPV2 Pty Ltd (2)
APT SPV3 Pty Ltd (2)
APA US Investments Inc.
Australian Pipeline Limited (2)
Central Ranges Pipeline Pty Ltd (2),(3)
Darling Downs Solar Farm Pty Ltd (2),(3)
Diamantina Holding Company Pty Limited (2),(3)
Diamantina Power Station Pty Limited (2),(3)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
—
—
—
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
—
100
100
100
100
100
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
107
Group Structure
24. Subsidiaries continued
Name of entity
Country of registration/incorporation
Ownership interest
2021
%
2020
%
East Australian Pipeline Pty Limited (2),(3)
EDWF Holdings 1 Pty Ltd (2),(3)
EDWF Holdings 2 Pty Ltd (2),(3)
EDWF Manager Pty Ltd (2),(3)
Epic Energy East Pipelines Trust (2),(4)
EPX Holdco Pty Limited (2),(3)
EPX Member Pty Limited (2),(3)
EPX Trust (2),(4)
Ethane Pipeline Income Financing Trust (2),(4)
Ethane Pipeline Income Trust (2),(4)
Gasinvest Australia Pty Ltd (2),(3)
GasNet A Trust (4)
GasNet Australia Investments Trust (4)
GasNet Australia Trust (2),(4)
Goldfields Gas Transmission Pty Ltd (2)
Gorodok Pty. Ltd. (2),(3)
Griffin Windfarm 2 Pty Ltd (2)
Moomba to Sydney Ethane Pipeline Trust (2),(4)
N.T. Gas Distribution Pty Limited (2),(3)
N.T. Gas Easements Pty. Limited (2),(3)
N.T. Gas Pty Limited
Northern Goldfiends Interconnect Pty Ltd (2),(3)
Roverton Pty. Ltd. (2),(3)
SCP Investments (No. 1) Pty Limited (2),(3)
SCP Investments (No. 2) Pty Limited (2),(3)
SCP Investments (No. 3) Pty Limited (2),(3)
Sopic Pty. Ltd. (2),(3)
Southern Cross Pipelines (NPL) Australia Pty Limited (2),(3)
Southern Cross Pipelines Australia Pty Limited (2),(3)
Trans Australia Pipeline Pty Ltd (2),(3)
Votraint No. 1606 Pty Limited (2)
Votraint No. 1613 Pty Limited (2)
Western Australian Gas Transmission Company 1 Pty Ltd (2),(3)
Wind Portfolio Pty Ltd (2),(3)
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
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
96
—
100
100
100
100
100
100
100
100
100
100
100
100
1) Australian Pipeline Trust is the head entity within the APA tax-consolidated group.
2) These entities are members of the APA tax-consolidated group.
3) 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.
4) These trusts are unincorporated and not required to be registered.
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
2021
$000
2020
$000
231,871
19,708
251,579
168,391
11,107
179,498
46,207
51,483
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F
F
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A
N
N
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A
A
L
L
S
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A
A
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E
E
M
M
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E
N
N
T
T
S
S
D
I
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C
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S
’
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P
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T
F
I
N
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I
A
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S
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A
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M
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Other
25. Commitments and contingencies continued
APA Group is subject to a range of operational matters, which can at times raise exposure to assets and liabilities that are uncertain
and cannot be measured reliably. This includes our exposure to matters such as regulatory requirements, changes in law, climate
change policy, changes to licencing and recognised practising codes including health, safety and environment, employee
entitlements, environmental laws and regulations, occupational health and safety requirements, technical and safety standards and
asset construction and operation compliance requirements. The preparation of the financial statements requires management to
make judgements and estimates and form assumptions that affect the amounts of contingent assets and liabilities reported in the
financial statements.
These judgements, estimates and assumptions are based on the most current facts and circumstances and are reassessed on an
ongoing basis, the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions and conditions. This may materially affect financial results and
the financial position to be reported in future periods. APA Group continues to assess these judgements, estimates and assumptions
relating to the disclosure of contingent assets and liabilities.
Contingent assets and liabilities relate predominantly to possible benefits or obligations whose existence will only be confirmed
by uncertain future events and present obligations where the transfer of economic resources is not probable or cannot be reliably
estimated. Therefore such amounts are not recognised in the financial statements.
On 18 May 2021, a statement of claim was filed against APA Group in respect of construction of the Orbost Gas Processing Plant. The
statement of claim is subject to significant uncertainty, and it is not currently possible to make a reasonable estimate of the outcome,
quantum or timing of any potential determination as at 30 June 2021.
As at 30 June 2021 and 30 June 2020 APA Group had no material contingent liabilities, other than those disclosed above.
APA Group had no contingent assets as at 30 June 2021 and 30 June 2020.
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 (1)
Total remuneration: Directors
Remuneration of Executive Key Management Personnel (1),(2)
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
2021
$
1,747,871
166,046
1,913,917
2,531,865
25,000
232,375
715,473
2020
$
1,549,332
147,185
1,696,517
2,395,588
25,453
1,879,646
368,121
3,504,713
4,668,808
5,418,630
6,365,325
9,769,520
170,832
1,117,783
1,970,322
6,179,703
88,123
2,891,305
675,161
Total remuneration: Executive Key Management Personnel
13,028,457
9,834,292
1)
In FY20, 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.
2) In FY21, the remuneration for the former Chief Financial Officer, Peter Fredricson to 31 December 2020, current Chief Financial Officer, Adam Watson from 16
November 2020, and Group Executive Strategy & Commercial, Julian Peck from 20 August 2020, are included in the remuneration disclosure for Executive
Key Management Personnel.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
109
Other
27. Remuneration of external auditor
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
Audit or review of the financial reports:
Group
Subsidiaries
Total audit or review of the financial reports
Audit or review of the regulatory financial reporting to the Australian Energy
Regulator and Economic Regulation Authority
Subsidiaries (1)
Total audit or review of the financial reports
Audit or review of the National Greenhouse and Energy Reporting (2)
Group
Subsidiaries
Total audit or review of the National Greenhouse and Energy Reporting
Statutory assurance services required by legislation to be provided by the auditor
Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements (3)
ASIC Compliance plan audit
Financial Services Licence audit
Total statutory assurance services required by legislation to be provided by the auditor
Other assurance services (4)
Total remuneration of external auditor
2021
$
2020
$
754,900
8,300
763,200
691,000
8,100
699,100
911,766
911,766
2,170,000
2,170,000
224,258
30,000
254,258
11,100
21,000
8,300
40,400
—
—
—
84,800
20,500
8,100
113,400
534,253
106,600
2,503,877
3,089,100
1) Service provided in FY20 includes one-off procedures covering 7-year historical period. Represent total fees for contracted services, partly incurred at period end.
2) Service provided includes assurance procedures on the energy and emissions reports and submissions required under the relevant National Greenhouse and
Energy Reporting legislations, and review of APA Group’s National Greenhouse and Energy Reporting systems and controls.
3) Service provided includes Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements (FY20 includes triennial procedures required
under RG231, procedures last undertaken in FY17).
4) Services provided were in accordance with the external auditor independence policy. Other assurance services mainly comprise assurance services in
relation to corporate funding activities for debt and potential equity raising.
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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
Other
28. Related party transactions continued
Management fees of $8,529,313 (2020: $5,909,078) were paid to the Responsible Entity as reimbursement of costs incurred on behalf
of APA Group. No amounts were paid directly by APA Group to the Directors of the Responsible Entity, except as disclosed at note 26.
Australian Pipeline Limited, in its capacity as trustee and Responsible Entity of the Trust, has guaranteed the payment of principal, interest
and other amounts as provided in the senior debt facilities of APT Pipelines Limited, the principal borrowing entity of APA Group.
d) Transactions with other associates and joint ventures
The following transactions occurred with APA Group’s associates and joint ventures on normal market terms and conditions:
2021
SEA Gas
Energy Infrastructure Investments
EII 2
GDI (EII)
2020
SEA Gas
Energy Infrastructure Investments
EII 2
GDI (EII)
29. Parent entity information
Dividends from
related parties
$000
Sales to Purchases from
related parties
$000
related parties
$000
Amount
owed by
related parties
$000
Amount
owed to
related parties
$000
14,050
4,494
4,023
5,809
28,376
49,162
3,055
3,933
6,129
2,253
31,855
1,071
50,522
85,701
6,666
45,666
803
53,715
62,279
106,850
—
—
—
—
—
86
—
—
—
86
28
5,506
351
5,804
11,689
23
7,085
343
5,534
12,985
—
—
—
—
—
—
—
—
—
—
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
2021
$000
2020
$000
1,997,226
660,498
2,361,345
678,738
2,657,724
3,040,083
76,809
76,809
128,854
128,854
2,580,915
2,911,229
2,571,420
9,495
2,580,915
101,055
101,055
2,902,123
9,106
2,911,229
238,228
238,228
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
111
Other
29. Parent entity information continued
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 (2020: $nil).
Contingent liabilities of the parent entity
No contingent liabilities have been identified in relation to the parent entity.
30. Adoption of new and revised Accounting Standards
Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)
The APA Group has adopted the following new standards on their applicable start date.
Standard/Interpretation
Effective for annual reporting
periods beginning on or after
Adoption date
AASB 2018-6 Amendments – Definition of a Business
AASB 2019-3 Amendments – Interest Rate Benchmark Reform
AASB 2020-8 Amendments – Interest Rate Benchmark Reform Phase 2
Amendments to AASB 116 Property, Plant and Equipment: Proceeds before Intended Use
1 January 2020
1 January 2020
1 January 2021
1 January 2022
1 July 2020
1 July 2020
1 July 2020
1 July 2020
The adoption of the above Standards and Interpretations do not have material impact on APA Group’s accounting policies or any of
the amounts recognised in the financial statements.
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform & AASB 2020-8
Amendments – Interest Rate Benchmark Reform Phase 2
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.
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 25 August 2021, 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 18.63 cents per security from APT and a distribution of 8.37 cents per security from APTIT. The APT
distribution represents 18.63 cents per security capital distribution. The APTIT distribution represents a 1.67 cent per security
unfranked profit distribution and a 6.70 cents per security capital distribution. The distribution will be paid on 15 September 2021.
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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
112
DECLARATION BY THE DIRECTORS OF AUSTRALIAN PIPELINE LIMITED
Australian Pipeline Trust and its Controlled Entities
For the financial year ended 30 June 2021
The Directors declare that:
a) in the Directors’ opinion, there are reasonable grounds to believe that Australian Pipeline Trust will be able to pay its debts as and
when they become due and payable;
b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001,
including compliance with Accounting Standards and giving a true and fair view of the financial position and performance
of APA Group;
c) in the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board; and
d) the Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section
295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to section 295(5) of the
Corporations Act 2001.
On behalf of the Directors
Michael Fraser
Chairman
Sydney, 25 August 2021
Robert Wheals
CEO and Managing Director
APA GROUP ANNUAL REPORT 2021 AUDITOR’S INDEPENDENCE DECLARATION
To Australian Pipeline Limited as Responsible Entity for Australian Pipeline Trust
Australian Pipeline Trust and its Controlled Entities
113
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
25 August 2021
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 2021, 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
114
INDEPENDENT AUDITOR’S REPORT
To the Unitholders of Australian Pipeline Trust
Australian Pipeline Trust and its Controlled Entities
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 2021, 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 consolidated 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 2021 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.
APA GROUP ANNUAL REPORT 2021
INDEPENDENT AUDITOR’S REPORT continued
To the Unitholders of Australian Pipeline Trust
Australian Pipeline Trust and its Controlled Entities
115
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 2021 the carrying amount of Orbost,
included in Property, Plant and Equipment was $225.7
million as disclosed in Note 11 and Note 13.
• Understanding the appropriateness of management’s
key controls over the determination of the recoverable
amount;
An impairment charge of $249.3 million was recorded as
at 31 December 2020 to the Orbost Gas Processing Plant.
The assessment of the recoverable amount requires the
exercise of significant judgement in respect of
assumptions such as forecast revenue, processing
capacity, inflation rates, operating costs, capital
expenditure and discount rates.
• Challenging the Group’s assumptions and estimates
used to determine the recoverable amount, including:
▪
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;
₋ our independently developed discount rates;
• Testing the mathematical accuracy of the cash flow
model and the impairment charge;
• Agreeing relevant data in the cash flow model to
board approved budgets and forecasts; and
• 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
116
INDEPENDENT AUDITOR’S REPORT
To the Unitholders of Australian Pipeline Trust
Australian Pipeline Trust and its Controlled Entities
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee
KKeeyy AAuuddiitt MMaatttteerr
DDeerriivvaattiivvee ttrraannssaaccttiioonnss aanndd tthhee aapppplliiccaattiioonn ooff hheeddggee
aaccccoouunnttiinngg ffoorr tthhee WWaalllluummbbiillllaa GGllaaddssttoonnee PPiippeelliinnee ((WWGGPP))
Our procedures, performed in conjunction with our
treasury specialists, included, but were not limited to:
As disclosed in Note 19 and 20, revenue 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 associated US dollar borrowings.
The application of hedge accounting in relation to the
WGP revenue and borrowings 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.
• Understanding management’s key controls over the
recording of derivative transactions and the
application of hedge accounting;
• Evaluating the appropriateness of management’s
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 and 20 to the financial statements.
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 2021, 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.
APA GROUP ANNUAL REPORT 2021
INDEPENDENT AUDITOR’S REPORT continued
To the Unitholders of Australian Pipeline Trust
Australian Pipeline Trust and its Controlled Entities
117
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 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
118
INDEPENDENT AUDITOR’S REPORT
To the Unitholders of Australian Pipeline Trust
Australian Pipeline Trust and its Controlled Entities
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 40 to 55 of the Directors’ Report for the year ended 30 June 2021.
In our opinion, the Remuneration Report of Australian Pipeline Limited for the year ended 30 June 2021, 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, 25 August 2021
Taralyn Elliott
Partner
Chartered Accountants
Sydney, 25 August 2021
APA GROUP ANNUAL REPORT 2021
DIRECTORS’ REPORT
APT Investment Trust and its Controlled Entities
119
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 2021. This
report refers to the consolidated results of APTIT, one of the two stapled entities of APA Group, with the other stapled entity being
Australian Pipeline Trust (together “APA”).
1. Directors
The names of the Directors of the Responsible Entity during the year and since the year end are:
Current Directors
First appointed
Michael Fraser
Robert (Rob) Wheals
Steven (Steve) Crane
James Fazzino
Debra (Debbie) Goodin
Shirley In’t Veld
Rhoda Phillippo
Peter Wasow
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
The Company Secretaries of the Responsible Entity during the year and since the year end are Nevenka Codevelle and Amanda Cheney.
2. Principal Activities
The Consolidated Entity operates as an investment and financing entity within the APA Group.
3. State of Affairs
On 16 November 2020, Adam Watson commenced as APA’s Chief Financial Officer, as a result of Peter Fredricson’s retirement on
31 December 2020.
4. Subsequent Events
On 25 August 2021, the Directors declared a final distribution of 8.37 cents per unit ($98.7 million). The distribution represents
a 1.67 cents per unit profit distribution and a 6.70 cents per unit capital distribution. The distribution is expected to be paid on
15 September 2021.
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 2021 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 42.9 million (FY20: $53.0 million) for the year ended 30 June 2021 and total
revenue of $42.9 million (FY20: $53.0 million).
6. Distributions
Distributions paid to Securityholders during the financial year were:
APTIT profit distribution
APTIT capital distribution
Total
Final FY20 distribution
payable 16 September 2020
Interim FY21 distribution
paid 17 March 2021
Cents per Total distribution
$000
security
Cents per Total distribution
$000
security
2.09
4.64
6.73
30,056
47,002
77,058
1.97
5.74
7.71
23,159
67,840
90,999
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
120
DIRECTORS’ REPORT continued
APT Investment Trust and its Controlled Entities
6. Distributions continued
On 25 August 2021, the Directors declared a final distribution for APTIT for the financial year of 8.37 cents per security which is
payable on 15 September 2021 and will comprise the following components:
APTIT profit distribution
APTIT capital distribution
Total
Final FY21 distribution
payable 15 September 2021
Cents per Total distribution
$000
security
1.67
6.70
8.37
19,742
79,010
98,752
Distribution information is presented on an accounting classification basis. The APA Group Annual Tax Statement (to be released
in September 2021) 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” as compared to the confirmed accurate information contained in APA’s Annual Tax Statement.
Securityholders should use their annual tax statement to complete their final tax return for the relevant tax year and consult professional
and financial services advisors for help relating to their individual particular tax or financial position. 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 FY21 distribution
(https://www.apa.com.au/investors/mysecurities/ 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 lawyer in Australia and overseas. She holds a Graduate Diploma of Applied
Corporate Governance and is a Fellow of the Governance Institute of Australia.
7.2 Directorships of other listed companies
Directorships of other listed companies held by Directors at any time in the three years immediately before the end of the financial
year are as follows:
Name
Company
Period of directorship
Michael Fraser
Aurizon Holdings Limited
Since February 2016
Robert Wheals
—
—
Steven Crane
nib holdings limited
SCA Property Group
September 2010 to July 2021
Since December 2018
James Fazzino
Tassal Group Limited
Since May 2020
Debra Goodin
Shirley In’t Veld
Senex Energy Limited
oOh!media Limited
Atlas Arteria Limited
May 2014 to November 2020
November 2014 to February 2020
Since September 2017, Chair since November 2020
Northern Star Resources Limited
Alumina Limited
Venturex Resources Limited
September 2016 to June 2021
Since August 2020
Since July 2021
Rhoda Phillippo
Vocus Group Ltd
March 2015 (previously as M2 Group Ltd) to August 2018
Peter Wasow
Oz Minerals Limited
Since November 2017
APA GROUP ANNUAL REPORT 2021
DIRECTORS’ REPORT continued
APT Investment Trust and its Controlled Entities
121
7. Directors continued
7.3 Directors’ meetings
During the financial year, 21 Board meetings, four Audit and Risk Management Committee meetings, four People and Remuneration
Committee meetings, four Health Safety, Environment and Heritage Committee meetings and nil Nomination Committee meetings were
held. The following table sets out the number of meetings attended by each Director while they were a Director or a committee member:
Board
People &
Remuneration
Committee
Audit & Risk
Management
Committee
Health Safety,
Environment
& Heritage
Committee
Nomination
Committee (1)
A
21
21
21
21
21
21
21
21
B
21
21
21
21
21
20
21
20
A
—
—
4
—
—
4
4
4
B
—
—
4
—
—
4
4
4
A
4
—
4
4
4
—
4
—
B
4
—
4
4
4
—
4
—
A
—
—
—
4
4
4
—
4
B
—
—
—
4
4
4
—
3
A
—
—
—
—
—
—
—
—
B
—
—
—
—
—
—
—
—
Directors
Michael Fraser
Robert Wheals
Steven Crane
James Fazzino
Debra Goodin
Shirley In’t Veld
Peter Wasow
Rhoda Phillippo
A) Number of meetings held during the time the Director held office or was a member of the committee during the financial year.
B) Number of meetings attended.
1) The Nominations Committee is required by its Charter to meet at least two times each year. No meetings were held in the Reporting Period, following the high
frequency of meetings during the preceding period, and scheduled meeting to be held in August 2021 (and later this calendar year).
7.4 Directors’ security holdings
The aggregate number of APA securities held directly, indirectly or beneficially by Directors or their Director related entities at
30 June 2021 is 318,468 (FY20: 385,260).
The following table sets out Directors’ relevant interests in APA securities as at 30 June 2021:
Directors
Michael Fraser
Robert Wheals
Steven Crane
Debra Goodin
James Fazzino
Shirley In’t Veld
Peter Wasow
Rhoda Phillippo
Fully paid securities
as at 1 July 2020
Securities
acquired
Securities
disposed
Fully paid securities
as at 30 June 2021
102,942
46,388
130,000
24,179
30,751
25,000
26,000
—
—
28,208
—
—
—
—
—
5,000
385,260
33,208
—
—
100,000
—
—
—
—
—
—
102,942
74,596
30,000
24,179
30,751
25,000
26,000
5,000
318,468
As at 30 June 2021, Robert Wheals held 432,966 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 40 to 55.
The Directors hold no other rights or options over APA securities. There are no contracts to which a Director is a party or under which
the Director is entitled to a benefit and that confer a right to call for or deliver APA securities.
8. Options Granted
In this report, the term “APA securities” refers to stapled securities each comprising a unit in Australian Pipeline Trust stapled to a unit
in APT Investment Trust and traded on the Australian Securities Exchange (ASX) under the code “APA”.
No options over unissued APA securities were granted during or since the end of the financial year, no unissued APA securities were
under option as at the date of this report, and no APA securities were issued during or since the end of the financial year as a result
of the exercise of an option over unissued APA securities.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
122
DIRECTORS’ REPORT continued
APT Investment Trust and its Controlled Entities
9. Indemnification of Officers
During the financial year, the Responsible Entity ensured a premium was paid in respect of a contract insuring the Directors and
Officers of the Responsible Entity and any APA Group entity against any liability incurred in performing those roles to the extent
permitted by the Corporations Act 2001. The contract of insurance prohibits specific disclosure of the nature of the liability and the
amount of the premium.
Australian Pipeline Limited, in its own capacity and as Responsible Entity of Australian Pipeline Trust and APT Investment Trust,
indemnifies each Director and Company Secretary, and certain other executives, former executives and officers of the Responsible
Entity or any APA Group entity under a range of deed polls and indemnity agreements which have been in place since 1 July 2000.
The indemnity operates to the full extent allowed by law but only to the extent not covered by insurance, and is on terms the Board
considers usual for arrangements of this type.
Under its constitution, Australian Pipeline Limited (in its personal capacity) indemnifies each person who is or has been a Director,
Company Secretary or executive officer of that company.
The Responsible Entity has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer
or external auditor of the Responsible Entity or any APA Group entity against a liability incurred by such an officer or auditor.
10. Information Required for Registered Schemes
Fees paid to the Responsible Entity and its associates (including Directors and Secretaries of the Responsible Entity, related bodies
corporate and Directors and Secretaries of related bodies corporate) out of APA scheme property during the financial year are
disclosed in note 18 to the financial statements.
Except as disclosed in this report, neither the Responsible Entity nor any of its associates holds any APTIT units.
The number of APTIT units issued during the financial year, and the number of APTIT units on issue at the end of the financial year,
are disclosed in note 13 to the financial statements.
The value of the Consolidated Entity’s assets as at the end of the financial year is disclosed in the balance sheet in total assets, and
the basis of valuation is disclosed in the notes to the financial statements.
11. Auditor’s Independence Declaration
A copy of the independence declaration of the auditor, Deloitte Touche Tohmatsu (“Auditor”) as required under section 307C of the
Corporations Act 2001 is included at page 139.
12. Rounding of Amounts
The Consolidated Entity is an entity of the kind referred to in ASIC Corporations Instrument 2016/191 and, in accordance with
that Class Order, amounts in the Directors’ report and the financial report are rounded to the nearest thousand dollars, unless
otherwise indicated.
13. Authorisation
The Directors’ Report is signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to section
298(2) of the Corporations Act 2001.
On behalf of the Directors
Michael Fraser
Chairman
Sydney, 25 August 2021
Robert Wheals
CEO and Managing Director
APA GROUP ANNUAL REPORT 2021 CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
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)
123
2020
$000
53,033
(12)
53,021
—
53,021
Note
4
4
5
2021
$000
42,914
(13)
42,901
—
42,901
42,901
53,021
42,901
42,901
53,021
53,021
42,901
53,021
6
2021
3.6
2020
4.5
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
124
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
APT Investment Trust and its Controlled Entities
As at 30 June 2021
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
2021
$000
2020
$000
8
8
11
9
13
894
852
5,177
778,994
784,171
785,065
10
10
6,073
905,631
911,704
912,556
25
25
785,055
912,531
765,313
19,742
785,055
887,845
24,686
912,531
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
APA GROUP ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
Balance at 1 July 2019
Profit for the year
Total comprehensive income for the year
Distributions to unitholders
Balance at 30 June 2020
Balance at 1 July 2020
Profit for the year
Total comprehensive income for the year
Distributions to unitholders
Balance at 30 June 2021
Note
7
7
Issued
capital
$000
964,219
—
—
(76,374)
887,845
887,845
—
—
(122,532)
765,313
125
Total
$000
994,275
53,021
53,021
(134,765)
912,531
912,531
42,901
42,901
(170,377)
Retained
earnings
$000
30,056
53,021
53,021
(58,391)
24,686
24,686
42,901
42,901
(47,845)
19,742
785,055
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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U
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E
R
A
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I
O
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P
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F
I
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A
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D
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F
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N
A
A
N
N
C
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A
L
L
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
126
CONSOLIDATED STATEMENT OF CASH FLOWS
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
Cash flows from operating activities
Trust distribution – related party
Interest received – related parties
Proceeds from repayments of finance leases
Receipts from customers
Payments to suppliers
Net cash provided by operating activities
Cash flows from investing activities
Receipts from related parties
Net cash provided by investing activities
Cash flows from financing activities
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
2021
$000
22,735
19,513
1,167
350
(25)
43,740
126,637
126,637
2020
$000
24,373
27,948
1,167
358
(12)
53,834
80,931
80,931
(170,377)
(170,377)
(134,765)
(134,765)
—
—
—
—
—
—
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.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
127
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
127
128
128
128
129
129
130
130
131
131
131
133
134
134
135
135
135
136
137
20. Adoption of new and revised Accounting Standards
137
21. Events occurring after reporting date
137
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
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 2021 was authorised for issue in accordance with a resolution of the directors on
25 August 2021.
This general purpose financial report has been prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB), and
also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The financial report has been prepared on the basis of historical cost, except for the revaluation of financial instruments. The financial
report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) in accordance with ASIC
Corporations Instrument 2016/191, unless otherwise stated.
Financial Performance
3. Segment information
The Consolidated Entity has one reportable segment being energy infrastructure investment.
The Consolidated Entity is an investing entity within the Australian Pipeline Trust stapled group. As the Trust only operates in one
segment, it has not disclosed segment information separately.
4. Profit from operations
Profit before income tax includes the following items of income and expense:
Revenue
Distributions
Trust distribution – related party
Finance income
Interest – related parties
Finance lease income – related party
Other revenue
Other
Total revenue
Expenses
Audit fees
Total expenses
2021
$000
2020
$000
22,735
22,735
19,513
315
19,828
351
42,914
(13)
(13)
24,373
24,373
27,948
355
28,303
357
53,033
(12)
(12)
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
129
Financial Performance
4. Profit from operations continued
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
2021
cents
3.6
2020
cents
4.5
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
Adjusted weighted average number of ordinary units used in the calculation of:
Basic earnings per unit
Diluted earnings per unit (1)
2021
$000
42,901
2020
$000
53,021
2021
No. of units
000
2020
No. of units
000
1,179,894
1,180,723
1,179,894
1,180,188
1)
Includes 1.3 million (2020: 0.5 million) performance rights granted under 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 and board approval. Further information can be found in the most recent annual
report. APA has historically instructed Link Market Services to acquire securities on-market to minimise dilution of existing securityholders.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
Financial Performance
7. Distributions
Recognised amounts
Final FY20 distribution payable on 16 September 2020 (1)
(30 June 2019: Final FY19 distribution paid on 11 September 2019)
Profit distribution (2)
Capital distribution
Interim distribution paid on 17 March 2021 (1)
(31 December 2019: Interim distribution paid on 11 March 2020)
Profit distribution (2)
Capital distribution
Total distributions recognised
Profit distributions (2)
Capital distributions (note 13)
Unrecognised amounts
Final FY21 distribution payable on 15 September 2021 (1)
(30 June 2020: Final FY20 distribution payable on 16 September 2020)
Profit distribution (2)
Capital distribution
2021
cents per
unit
2021
Total
$000
2020
cents per
unit
2020
Total
$000
2.09
4.64
6.73
1.97
5.74
7.71
4.06
10.38
14.44
1.67
6.70
8.37
24,686
54,692
79,378
23,159
67,840
90,999
47,845
122,532
170,377
19,742
79,010
98,752
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
1) Record date 30 June 2021.
2) Profit distributions unfranked (30 June 2020 and 31 December 2019: unfranked).
The final distribution in respect of the financial year has not been recognised in this financial report because the final distribution was
not declared, determined or publicly confirmed prior to the end of the financial year.
Operating Assets and Liabilities
8. Receivables
Finance lease receivable – related party (note 10)
Current
Finance lease receivable – related party (note 10)
Non-current
2021
$000
894
894
5,177
5,177
2020
$000
852
852
6,073
6,073
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.
APA GROUP ANNUAL REPORT 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
131
Operating Assets and Liabilities
9. Payables
Other payables
2021
$000
10
2020
$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 (1)
Less: Future finance income
Present value of lease receivables
Included in the Consolidated Statement of Financial Position as part of:
Current receivables (note 8)
Non-current receivables (note 8)
2021
$000
1,167
5,837
—
7,004
(933)
6,071
894
5,177
6,071
2020
$000
1,167
4,669
2,335
8,171
(1,246)
6,925
852
6,073
6,925
1) 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.
Capital Management
11. Other financial assets
Non-current
Advance to related party
Investment in related party
2021
$000
2020
$000
671,615
107,379
778,994
798,252
107,379
905,631
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
11. Other financial assets continued
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, with the exception of the initial investment. 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 on 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.
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.
APA GROUP ANNUAL REPORT 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
133
Capital Management
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
Risk management framework
Financial exposure
Market
Credit
Commercial transactions in foreign
currency and funding activities
Cash, receivables, interest bearing
liabilities and hedging
Liquidity Payables
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.
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.
Refer to liquidity risk section.
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 $3,656,000 or decrease by $3,618,000 (2020: increase by
$4,901,000 or decrease by $4,854,000 respectively). This is mainly attributable to the Consolidated Entity’s exposure to interest
rates on its variable rate inter-entity balances. The sensitivity has decreased due to lower inter-entity balances.
b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Consolidated Entity.
Credit risk management
The Consolidated Entity has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or
bank guarantees where appropriate as a means of mitigating the risk of loss. For financial investments or market risk hedging, the
Consolidated Entity’s policy is to only transact with counterparties that have a credit rating of A- (Standard & Poor’s)/A3 (Moody’s) or
higher unless specifically approved by the Board. Where a counterparty’s rating falls below this threshold following a transaction, no
other transactions can be executed with that counterparty until the exposure is sufficiently reduced or their credit rating is upgraded
above the Consolidated Entity’s minimum threshold. The Consolidated Entity’s exposure to financial instrument and deposit credit
risk is closely monitored against counterparty credit limits imposed by the Treasury Risk Management Policy approved by the ARMC.
These limits are regularly reviewed by the Board.
Overview of the Consolidated Entity’s exposure to credit risk
The carrying amount of financial assets recorded in the financial statements, net of any allowances, represents the Consolidated
Entity’s maximum exposure to credit risk in relation to those assets.
c) Liquidity risk
The Consolidated Entity’s exposure to liquidity risk is limited to other payables of $10,000 (2020: $25,000), all of which are due in
less than 1 year (2020: less than 1 year).
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
Capital Management
13. Issued capital
Units
1,179,893,848 units, fully paid (2020: 1,179,893,848 units, fully paid) (1)
2021
$000
2020
$000
765,313
887,845
Movements
Balance at beginning of financial year
Capital distributions paid (note 7)
Balance at end of financial year
2021
No. of units
000
2021
$000
2020
No. of units
000
1,179,894
—
1,179,894
887,845
(122,532)
765,313
1,179,894
—
1,179,894
2020
$000
964,219
(76,374)
887,845
1) 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
Country of registration
Ownership interest
2021
%
2020
%
Australia
100
100
APA GROUP ANNUAL REPORT 2021
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
Other
15. Commitments and contingencies
The Consolidated Entity had no material contingent assets, liabilities and commitments as at 30 June 2021 and 30 June 2020.
16. Director and Executive Key Management Personnel remuneration
Remuneration of Directors
The aggregate remuneration of Directors of the Consolidated Entity is set out below:
Short-term employment benefits
Post-employment benefits
Total remuneration: Non-Executive Directors
Short-term employment benefits
Post-employment benefits
Cash settled security-based payments
Equity settled security-based payments
Total remuneration: Executive Director (1)
Total Remuneration: Directors
Remuneration of Executive Key Management Personnel (1)
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
2021
$
1,747,871
166,046
1,913,917
2,531,865
25,000
232,375
715,473
2020
$
1,549,332
147,185
1,696,517
2,395,588
25,453
1,879,646
368,121
3,504,713
4,668,808
5,418,630
6,365,325
9,769,520
170,832
1,117,783
1,970,322
6,179,703
88,123
2,891,305
675,161
Total remuneration: Executive Key Management Personnel
13,028,457
9,834,292
1) 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.
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
2021
$
6,400
6,400
6,100
6,100
12,500
2020
$
6,300
6,300
6,000
6,000
12,300
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
Other
18. Related party transactions
a) Equity interest in related parties
Details of the percentage of ordinary securities held in subsidiaries are disclosed in note 14.
b) Responsible Entity – Australian Pipeline Limited
The Responsible Entity is wholly owned by APT Pipelines Limited (2020: 100% owned by APT Pipelines Limited).
c) Transactions with related parties within the Consolidated Entity
During the financial year, the following transactions occurred between the Trust and its other related parties:
– loans advanced and payments received on long-term inter-entity loans; and
– payments of distributions.
All transactions between the entities that comprise the Consolidated Entity have been eliminated on consolidation.
Refer to note 14 for details of the entities that comprise the Consolidated Entity.
d) Transactions with other related parties
APTIT and its controlled entities have a loan receivable balance with another entity in APA. This loan is repayable on agreement
between the parties. Interest is recognised by applying the effective interest method, agreed between the parties at the end of each
month and is determined by reference to market rates.
The following balances arising from transactions between APTIT and its other related parties are outstanding at reporting date:
– current receivables totalling $894,000 are owing from a subsidiary of APT for amounts due under a finance lease arrangement
(2020: $852,000);
– non-current receivables totalling $5,177,000 are owing from a subsidiary of APT for amounts due under a finance lease
arrangement (2020: $6,073,000); and
– non-current receivables totalling $671,615,000 (2020: $798,252,000) are owing from a subsidiary of APT for amounts due under
inter-entity loans.
Australian Pipeline Limited
Management fees of $2,025,000 (2020: $1,426,000) 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 $2,025,000 (2020: $1,426,000) were reimbursed by APT.
APA GROUP ANNUAL REPORT 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
137
Other
19. Parent entity information
The accounting policies of the parent entity, which have been applied in determining the financial information below, are the same as
those applied in the consolidated financial statements.
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Reserves
Total equity
Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
2021
$000
2020
$000
894
784,171
785,065
10
10
852
911,704
912,556
25
25
785,055
912,531
765,313
19,742
—
785,055
42,901
—
42,901
887,845
24,686
—
912,531
53,021
—
53,021
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.
Other
20. Adoption of new and revised Accounting Standards
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 25 August 2021, the Directors declared a final distribution for the 2021 financial year of 8.37 cents per unit ($98.8 million). The
distribution represents a 1.67 cents per unit unfranked profit distribution and 6.70 cents per unit capital distribution. The distribution
will be paid on 15 September 2021.
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 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
138
DECLARATION BY THE DIRECTORS OF AUSTRALIAN PIPELINE LIMITED
APT Investment Trust and its Controlled Entities
For the financial year ended 30 June 2021
The Directors declare that:
a) in the Directors’ opinion, there are reasonable grounds to believe that APT Investment Trust will be able to pay its debts as and
when they become due and payable;
b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001,
including compliance with Accounting Standards and giving a true and fair view of the financial position and performance of the
Consolidated Entity;
c) in the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board; and
d) the Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section
295A of the Corporations Act 2001.
Signed in accordance with a resolution of the Directors of the Responsible Entity made pursuant to section 295(5) of the
Corporations Act 2001.
On behalf of the Directors
Michael Fraser
Chairman
Sydney, 25 August 2021
Robert Wheals
CEO and Managing Director
APA GROUP ANNUAL REPORT 2021 AUDITOR’S INDEPENDENCE DECLARATION
To Australian Pipeline Limited as Responsible Entity for Australian Pipeline Trust
APT Investment Trust and its Controlled Entities
139
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
25 August 2021
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 2021, 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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
140
INDEPENDENT AUDITOR’S REPORT
To Australian Pipeline Limited as Responsible Entity for Australian Pipeline Trust
APT Investment Trust and its Controlled Entities
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 (APTIT) and its controlled entity (the Consolidated Entity),
which comprises the consolidated statement of financial position as at 30 June 2021, 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 consolidated 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 2021 and of their 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 Consolidated 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.
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 2021 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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
APA GROUP ANNUAL REPORT 2021
INDEPENDENT AUDITOR’S REPORT
To Australian Pipeline Limited as Responsible Entity for Australian Pipeline Trust
APT Investment Trust and its Controlled Entities
141
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.
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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
142
INDEPENDENT AUDITOR’S REPORT
To Australian Pipeline Limited as Responsible Entity for Australian Pipeline Trust
APT Investment Trust and its Controlled Entities
•
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, 25 August 2021
Taralyn Elliott
Partner
Chartered Accountants
Sydney, 25 August 2021
APA GROUP ANNUAL REPORT 2021
ADDITIONAL INFORMATION
143
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 19 August 2021).
Twenty largest holders
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
J P Morgan Nominees Australia Pty Ltd
Citicorp Nominees Pty Limited
Custodial Services Limited
National Nominees Limited
Argo Investments Limited
BNP Paribas Noms Pty Ltd
BKI Investment Company Limited
BNP Paribas Nominees Pty Ltd Six Sis Ltd
HSBC Custody Nominees (Australia) Limited
Australian Foundation Investment Company Limited
Netwealth Investments Limited
Citicorp Nominees Pty Limited
Australian Foundation Investment Company Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Milton Corporation Limited
ECapital Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
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
No. of securities
284,302,004
165,946,523
147,901,771
88,350,252
27,130,077
21,282,074
11,882,525
9,203,286
7,775,389
7,328,827
6,697,278
4,040,000
3,813,899
3,006,935
2,625,000
2,495,470
2,077,766
1,638,573
1,542,276
1,339,508
%
24.10
14.06
12.54
7.49
2.30
1.80
1.01
0.78
0.66
0.62
0.57
0.34
0.32
0.25
0.22
0.21
0.18
0.14
0.13
0.11
800,379,433
67.83
No. of holders
%
No. of securities
137
7,980
11,140
36,327
33,916
0.15
8.92
12.45
40.59
37.89
832,861,602
159,462,994
79,890,747
93,943,262
13,735,243
%
70.59
13.52
6.77
7.96
1.16
89,500
100.00
1,179,893,848
100.00
1,986 holders hold less than a marketable parcel of securities (market value less than $500 or 51 securities based on a market price
on 19 August 2021 of $9.85).
Substantial holders
By notice dated 16 July 2021, BlackRock Group advised that it had an interest in 82,844,967 stapled securities, as at 14 July 2021.
By notice dated 8 July 2021, State Street Corporation. advised that it had an interest in 70,802,929 stapled securities, as at 6 July 2021.
By notice dated 1 December 2020, UniSuper Limited as trustee for UniSuper and UniSuper Management Pty Limited advised that it
had an interest in 168,380,843 stapled securities, as at 27 November 2020.
By notice dated 10 March 2020, Vanguard Group advised that it had an interest in 71,349,836 stapled securities, as at 4 March 2020.
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.
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APA GROUP ANNUAL REPORT 2021AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST
144
FIVE YEAR SUMMARY
Financial Performance (Statutory)
Revenue
Revenue excluding pass-through (2)
Underlying EBITDA (3)
Total Report EBITDA (3)
Depreciation and amortisation expense
Reported EBIT (3)
Net Interest expense (3)
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 (4)
Total equity
Operating Cash Flow
Operating cash flow (5)
Free cash flow (6)
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Key Financial Ratios
Earnings per security including significant items (7) cents
Free cash flow per security (7)
cents
cents
Distribution per security
%
Funds From Operations to Net Debt
times
Funds From Operations to Interest
Weighted average number of securities (7)
m
EBITDA by Segment (Excluding Significant Items)
Underlying EBITDA (3)
Energy Infrastructure
East Coast Gas
West Coast Gas
Wallumbilla Gladstone Pipeline
Power Generation
Asset Management
Energy Investments
Corporate costs
Divested businesses
$m
$m
$m
$m
$m
$m
$m
$m
2021
2020 (1)
2019 (1)
2018 (1)
2017
2605.3
2144.5
1,633.0
1,643.0
(674.4)
968.7
(504.8)
(62.9)
3.7
(278.1)
281.8
2,590.6
2,129.5
1,653.9
1,656.0
(650.8)
1,005.2
(507.8)
(185.6)
311.8
—
311.8
2,452.2
2,031.0
1,573.8
1,569.0
(611.3)
957.7
(497.4)
(175.6)
284.7
—
284.7
2,386.7
1,941.4
1,518.5
1,518.0
(578.9)
939.1
(509.7)
(164.9)
264.5
—
264.5
2,326.4
1,888.3
1,470.1
1,470.1
(570.0)
900.1
(513.8)
(149.5)
236.8
—
236.8
14,742.9
9,665.7
2,969.2
15,994.3
9,983.6
3,214.9
15,429.2
9,352.1
3,596.1
15,226.7
8,810.4
4,126.5
15,045.9
9,249.7
3,978.2
1,051.0
901.9
1,087.5
956.6
1,007.3
893.7
0.3
76.4
51.0
11.3
3.1
1,179.9
627.5
270.8
549.7
174.6
80.3
30.9
(100.8)
—
26.4
81.1
50.0
12.2
3.3
1,179.9
648.8
271.5
538.9
170.6
63.3
35.7
(75.0)
—
24.1
75.7
47.0
10.7
3.0
1,179.9
650.4
236.4
542.4
143.3
53.0
28.4
(80.1)
—
1,031.1
919.0
23.3
80.8
45.0
10.7
3.0
1,136.9
655.3
214.1
515.9
111.8
66.2
23.1
(67.9)
—
973.9
905.1
21.2
80.9
43.5
10.8
3.0
1,118.5
643.6
212.3
488.0
109.8
58.7
24.4
(66.7)
—
1) Restated as a result of change in the APA Group's accounting policy following the IFRS Interpretations Committee's ("IFRIC") Agenda Decision published
in April 2021 related to accounting for Software-as-a-Service ("SaaS") arrangements.
2) Pass-through revenue is revenue on which no margin is earned. Pass-through revenue arises in the asset management operations in respect of costs incurred
and passed on to Australian Gas Networks Limited (AGN) and GDI in respect of the operation of the AGN and GDI assets respectively.
3) Excludes significant items.
4) 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.
5) Operating cash flow = net cash from operations after interest and tax payments.
6) Free cash flow is operating cash flow less SIB capex (SIB capex includes operational assets lifecycle replacement costs and technology lifecycle costs).
7) 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 FY17 to FY18
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.
APA GROUP ANNUAL REPORT 2021
INVESTOR INFORMATION
Calendar of events
Final distribution FY21 record date
Final distribution FY21 payment date
Annual meeting
Interim results announcement
Interim distribution FY22 record date
Interim distribution FY22 payment date
1) Subject to change.
Annual meeting details
Date: Thursday, 21 October 2021
Time: 10.30 am
To be held as a virtual meeting at https://agmlive.link/APA21
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
APA GROUP ANNUAL REPORT 2021
145
30 June 2021
15 September 2021
21 October 2021
23 February 2022 (1)
31 December 2021 (1)
17 March 2022 (1)
Securityholder details
It is important that Securityholders notify the APA Group registry
immediately if there is a change to their address or banking
arrangements. Securityholders with enquiries should also
contact the APA Group registry.
Distribution payments
Distributions will be paid semi-annually in March and
September. Securityholders will receive annual tax statements
with the final distribution in September. Payment to
Securityholders residing in Australia and New Zealand will be
made only by direct credit into an Australian or New Zealand
bank account. Securityholders with enquires should contact the
APA Group registry.
Online information
Further information on APA is available at apa.com.au, including:
– Results, market releases and news
– Asset and business information
– Corporate responsibility and sustainability reporting
– Securityholder information such as the current APA security
price, distribution and tax information.
Electronic communication
Securityholders can elect to receive communication
electronically by registering their email address with the APA
Group registry. Electing to receive annual reports electronically
will reduce the adverse impact we have on the environment.
This report is printed on ecoStar 100% recycled uncoated,
an environmentally responsible paper made carbon neutral
and the fibre source is FSC recycled certified. ecoStar
is manufactured from 100% post consumer recycled
paper in a process chlorine free environment under the
ISO 14001 environmental management system.
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.
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AUSTRALIAN PIPELINE TRUSTAPT INVESTMENT TRUST