APA Group

190 Pages·2010·13.41 MB·English

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Online Annual Review
and Annual Report
This document and further
information about APA’s
financial performance,
including details contained
in the Annual Report, are
available at www.apa.com.au
Our vision Our goals Our profile
To be Australia’s number one • Provide a safe, stimulating APA Group (APA) is
energy infrastructure business. and rewarding workplace Australia’s largest natural
Our success will be founded where our employees can gas infrastructure business,
upon the strengthening of our learn and grow owning and/or operating more
asset footprint. • Deliver value to our than $8 billion of natural gas
customers and create transmission and distribution
responsive solutions to assets. APA’s pipelines and
their needs assets span every state
and territory on mainland
• Continue to deliver an
Australia, delivering more than
environmentally responsible,
half the nation’s gas usage.
safe and essential service to
APA has direct management
the communities we serve
and operational control
• Continue to be a reliable and
over its assets. APA holds
attractive investment which
minority interests in energy
delivers superior returns for
infrastructure enterprises.
securityholders
APA is listed on the Australian
• Positively engaging the
Securities Exchange (ASX) .
communities within which
we operate
CONTENT
2 Performance highlights
4 APA Group profile
6 APA history
8 Chairman’s report
10 Managing Director’s report
12 Business report
21 Sustainability report
32 Board of directors
34 Executive management team
Front cover: APA Group’s delivery
35 Five year summary point for gas into the Uranquinty
Power Station, New South Wales
36 Securityholder information Inside cover: Culcairn compressor Inside cover: Culcairn compressor
station and New South Wales to station and New South Wales to
Victoria interconnect Victoria interconnect
APA has been delivering energy across Australia for 10 years. Since
listing in 2000, we have expanded our asset footprint and today we are
delivering more than half the natural gas used across the country.
For 10 years we have been delivering value to our investors with
sustainable and growing distributions.
APA has a strong position in the Australian energy infrastructure
industry, the people with the skills and know-how to manage and
operate the business profitably, and the platform for sustainable and
profitable growth.
We celebrate 10 years of APA’s successful operation and performance.
With APA’s assets, people and financial strength, together with a
growing demand for gas, I believe the best days for APA are ahead of us.
Mick McCormack
Managing Director APA Group
Online Annual Review
and Annual Report
This document and further
information about APA’s
financial performance,
including details contained
in the Annual Report, are
available at www .apa. com. au
APA annual Review 2010 1
PERFORMANCE HIGHLIGHTS
2010 2009
$million $million Change %
Financial results
Revenue 989.5 944.4 4.8
Revenue excluding pass-through 659.5 673.0 (2.0)
EBITDA 460.0 444.4 3.5
Profit 100.4 78.8 27.4
Operating cash flow 267.8 233.6 14.6
Financial position
Total assets 4,982.4 4,747.3 5.0
Net debt 3,156.8 3,056.7 3.3
Securityholders’ equity 1,395.1 1,278.5 9.1
Financial ratios
Operating cash flow per security (cents) 51.9 48.2 7.7
Earnings per security (cents) 19.4 22.7 (14.5)
Distribution per security (cents) 32.75 31.0 5.6
Distribution payout ratio 64.4% 65.6%
Gearing (net debt to net debt plus equity) 69.8% 70.3%
Interest cover 2.11 2.13
Strategic objectives Achievements
Enhancing our gas • Continued expansion of the Moomba Sydney Pipeline
infrastructure portfolio
• Commenced expansion of the southern lateral of the Moomba Sydney Pipeline
(Young to Wagga Wagga looping)
• Commenced augmentation of the northern section of the Victorian
Transmission System
• Acquired the Berwyndale Wallumbilla Pipeline
• Commenced construction of a lateral on the Roma Brisbane Pipeline
• Extended the APA Gas Network, Queensland
• Invested in Hastings Diversified Utilities Fund
Utilising our skills • Increased strategic energy investment management, with services to
and knowledge Energy Infrastructure Investments
Capturing revenue and • Contracted gas transportation and storage services across assets and
operating synergies state borders (New South Wales and Victoria)
• Implemented major national initiatives including customer interface, finance
systems, operational excellence across transmission and network operations
Leveraging our • Invested in North Brown Hill Wind Farm through EII2 partnership with Marubeni
infrastructure portfolio Corporation and Osaka Gas
Strengthening our • Refinanced $1 billion of debt
financial capability
• Obtained a Baa2 credit rating from Moody’s to sit alongside the BBB investment
grade credit rating from Standard & Poor’s
• Raised new equity from securityholders through DRP and SPP
2 APA annual Review 2010
Meter runs at
Watson Regulator station,
Australian Capital Territory.
2010
EBITDA
$460m
2001
2002
up 3.5%
2003
2004
2005
2006
2007
2008
2009
2010
Operating cash flow $268m
2001
up 14.6%
2002
2003
2004
2005
2006
2007
2008
2009
2010
Distribution per security
32.75c
2001
2002 up 5.6%
2003
2004
2005
2006
2007
2008
2009
2010
Operating cash flow per security
51.9c
2001
2002
up 7.7%
2003
2004
2005
2006
2007
2008
2009
2010
APA annual Review 2010 3
APA GROuP PROFIlE
Today, APA has a strong position in the Australian energy infrastructure industry, the people
with the skills and know-how to manage and operate the business profitably, and the platform
for sustainable growth.
Our strengths
Unrivalled natural gas Attractive growth opportunities Internally managed and
asset footprint APA’s existing pipelines serve major operated business
APA is the largest transporter of growth markets across Australia. Our APA employs more than 1,100 highly
natural gas across Australia, owning assets are uniquely positioned to grow skilled and experienced people
and/or operating over 12,700 km of as Australia’s demand for natural who are extracting greater value
gas pipelines and transporting more gas increases. from the business and responding
than half the natural gas used in to the requirements of a dynamic
Stable and secure revenue
the country. energy market.
In excess of 90% of APA’s revenue is
Integrated portfolio of natural derived from regulated assets and
gas pipeline assets from long-term contracts with large
Many of APA’s gas infrastructure creditworthy customers.
assets and investments are connected
to each other, providing revenue and
operating synergies.
Business Segments
Gas transmission and distribution
Assets Queensland New South Wales Victoria and Western Australia and
and Roma Brisbane Pipeline 1 Moomba Sydney Pipeline 5 South Australia Northern Territory
operations Carpentaria Gas Pipeline 2 Central West Pipeline 6 Victorian Transmission Goldfields Gas Pipeline (88.2%) 12
APA Gas Network 3 Central Ranges Pipeline 7 System 9 Mid West Pipeline (50%) 13
Berwyndale Wallumbilla New South Wales – Victoria Dandenong LNG facility 10 Parmelia Gas Pipeline 14
Pipeline 4 Interconnect 8 SESA Pipeline 11 Mondarra Gas Storage facility 15
Kalgoorlie Kambalda Pipeline 16
Amadeus Gas Pipeline (96%) 17
Transmission 1,707 km 2,578 km 2,037 km 4,111 km
pipelines
Distribution 2,800 km 40 km
networks
82,000 connections 1,000 connections
Contribution 23% 21% 23% 22%
to 2010
EBITDA
EBITDA
$103m $97m $106m $103m
0 20 40 60 80 100 120 0 20 40 60 80 100 120 0 20 40 60 80 100 120 0 20 40 60 80 100 120
2010 2009 2010 2009 2010 2009 2010 2009
4 APA annual Review 2010
APA GROUP ASSETS AND INVESTMENTS
20
Asset map
17
20 NORTHERN
TERRITORY 20
QUEENSLAND
2
18
WESTERN 18
12 AUSTRALIA
4 20
1 18
13
20 3
SOUTH AUSTRALIA
20
15 NEW SOUTH
5
WALES
14 16 21
18 22 6 7
18
20
18 8
19 9
18
APA Assets 11
VICTORIA
10
APA Investments
TASMANIA
Asset management Energy Investments
Assets Commercial and operational services to: Envestra Limited (32%) 18
and • Energy Infrastructure Investments • Gas distribution networks and pipelines
operations • Envestra limited
• Ethane Pipeline Income Fund SEA Gas Pipeline (33.3%) 19
Operational services to: Energy Infrastructure Investments (19.9%) 20
• Gas pipelines, electricity transmission, gas-fired power
• SEA Gas Pipeline
stations and gas processing plants
• other third parties
Ethane Pipeline Income Fund (6%) 21
Transmission EII2 (20.2%) 22
Services to:
pipelines 2,330 km (natural gas) and 1,375 km (ethane) • North Brown Hill Wind Farm
Distribution 20,440 km network Hastings Diversified Utilities Fund (17%)
networks
1,040,000 connections
Contribution 7% 4%
to 2010
EBITDA
EBITDA
$32m $19m
0 20 40 60 80 100 120 0 20 40 60 80 100 120
2010 2009 2010 2009
APA annual Review 2010 5
June 2OOO
APA was created when
AGl floated its gas
transmission assets.
2OO1 - 2OO3
On 13 June 2000, APA was
listed on the Australian
Acquired the minority interests
Securities Exchange
of major APA pipelines:
• Roma Brisbane Pipeline
• Goldfields Gas Pipeline
• Carpentaria Gas Pipeline
2OO4 - 2OO7
Consolidated APA’s asset
footprint by means
of acquisitions and
developments:
• Parmelia Gas Pipeline and
Mondarra Gas Storage facility
• APA Gas Network (Allgas)
• Victorian Transmission
OuR JOURNEY
System and Telfer/Nifty
Pipeline (GasNet)
Ten years of profitable growth
• Murraylink and Directlink
Compared to the long life of its assets, APA is a
• SEA Gas (33%) and SESA
relatively young organisation. Ten years ago, in
pipelines
June 2000, APA was formed when AGl listed its gas
• Envestra asset management
transmission assets in a separate company, Australian
agreement
Pipeline Trust (as APA was called at the time).
• Kogan North and Tipton West
As we have grown, we have also evolved – from an gas processing facilities
infrastructure owner and manager with six employees in • Daandine and X41 power
a city office and an external asset operator, to an stations
integrated operating business with more than 1,100
people working in over 50 locations across the country.
The assets we own and operate have been expanded
over the 10 years. In June 2000, APA had interests in
7,000 km of gas transmission pipelines – today we have
an interest in, and operate over 12,700 km of pipelines
and 23,000 km of gas distribution networks.
From its inception APA’s objective was to maximise
the value of these assets and hence the value to our
securityholders. This has been achieved and is
demonstrated by consistent, growing returns
to securityholders.
6 APA annual Review 2010
Total Securityholder Returns
500
400
300
200
100
0
0 1 2 3 4 5 6 7 8 9 0
0 0 0 0 0 0 0 0 0 0 1
- - - - - - - - - - -
n n n n n n n n n n n
u u u u u u u u u u u
J J J J J J J J J J J
APA total securityholder returns All Ordinaries accumulation index
Source: based on IRESS data
Indexed to 100 from 13 June 2000
2OO8 - 2O10
Internalised asset management and operation:
• Termination of agreement with external operator
Enhanced APA’s asset footprint by means of capacity
expansion, pipeline development and acquisitions:
• Expansion of Goldfields, Carpentaria, Moomba
Sydney pipelines and Victorian Transmission
System
• Development of Bonaparte Gas Pipeline and
Wickham Point Pipeline
• Acquisition of Central Ranges and Berwyndale
Wallumbilla pipelines
• Investment in Ethane Pipeline Income Fund,
Hastings Diversified Utilities Fund and Envestra
Strengthened financial capability:
• Funds released through the sale of assets to Energy
Infrastructure Investments (EII)
• Obtained investment grade credit ratings
Pipe stringing for the Young to Wagga Wagga
looping project, New South Wales.
APA annual Review 2010 7
ChAIRMAN’S
REPORT
APA has just celebrated Tenth year of record its distribution, and an average 16%
10 years of operations since financial performance per annum total securityholder return
listing in June 2000, and has which was well ahead of the broader
continued to deliver value to APA continues to be a strong and market and our peers.
secure cash generating business,
its securityholders each year.
Strengthening
achieving a 14.6% increase in
Our success is due to the fact that
operating cash flow to $268 million financial capability
we transport an essential fuel,
and a 3.5% increase in earnings
natural gas, across the country in Throughout the year, we maintained
before interest, tax, depreciation and
a market where both supply and our focus on further strengthening our
amortisation (EBITDA) to $460 million,
demand are increasing. We have balance sheet. Having successfully
despite the loss of earnings from
secure revenue streams due to completed the refinancing of $1 billion
assets sold to Energy Infrastructure
our long- term contracts and the of debt in August 2009, and with two
Investments in the 2009 financial
regulatory regimes in which we credit rating agencies confirming
year. After removing the contribution
operate, and we have the internal APA’s investment grade status, we
of these divested assets, the EBITDA
skills and knowledge to manage have focused on our next refinancing
of APA’s current business increased
and operate our assets and obligations, with the aim of reducing
by 8.7%.
investments. our debt costs, extending the maturity
of our debt, and diversifying our source
In 2010, APA maintained its reliable Increasing securityholder
of funds. An example of this was the
performance in the midst of challenging returns
strong interest and attractive pricing
times. We maintained our strategy
Based on APA’s performance, we achieved for the 10 year $300 million
of growing the business sustainably
declared a final distribution for the of Australian dollar bonds we issued in
and profitably and strengthening our
year of 17.0 cents per security taking July 2010. This issue is the first by
financial capability. As a result, APA is
the total distribution for the year to a BBB/Baa2 rated corporate in
now in a stronger position to continue
32.75 cents, an increase of 5.6% on Australia and has been described by
its steady growth.
last year. This represents APA’s sixth market commentators as both
It is pleasing to report that APA consecutive year of increasing “historic” and “ground breaking”.
delivered another record financial distributions.
Funding for APA’s growth projects was
result in 2010. This represents our
Distributions continued to be well sourced primarily from cash remaining
tenth successive year of record
covered by operating cash flow with a in the business after payment
performance. In light of these results,
payout ratio of 64.4% for the year. of distributions along with $142 million
we have again increased distributions
Since listing in 2000, APA has delivered of new capital raised through the
in line with the guidance provided
a 5% compound annual growth rate on Distribution Reinvestment Plan and
by APA in late 2009.
8 APA annual Review 2010