APA GROUP — Annual Report 2007

Aug 28, 2007

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29 August 2007

APA GROUP DELIVERS ANOTHER STRONG RESULT AND INCREASE IN ANNUAL DISTRIBUTIONS

FINANCIAL HIGHLIGHTS

• Total revenue: up 40.5% to $532.7 million;

• EBITDA: up 48.1% to $296.8 million;

• Operating profit after income tax and minorities: up 6.4% to $64.5 million;

• Underlying Operating Cash Flow: up 39.9% to $157.0 million;

• Underlying Operating Cash Flow per security: up 6.8% to 41.4 cents per security;

• Full-year distributions: up 16.7% to 28.0 cps.

(Figures above have been adjusted for significant items)

APA Group (APA) today announced another strong financial result with a 39.9 % rise in underlying operating cash flow for the year ended 30 June 2007 to $157.0 million and delivered a 16.7 % increase in full-year distributions to security holders.

Growth in operating cash flow, a key metric for the business, was boosted by a number of acquisitions during the year as well as a healthy increase in throughput on APA’s existing pipelines.

Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) rose 48.1% to $296.8 million while net profit after tax rose 6.4% to $64.5 million, the seventh consecutive increase since listing in 2000.

APA Directors declared a final unfranked distribution of 7.0 cents per security (cps), taking total distributions for the financial year to 28.0 cents, an increase of 4.0 cps, or 16.7 % over the previous year.

APA is one of Australia’s leading energy transmission companies, transporting nearly 40 % of the country’s natural gas through its 10,000 kilometres-long network of pipeline infrastructure. APA also has interests in a coal seam gas (CSG) processing plants, gas storage facilities and high voltage electricity transmission cables.

During fiscal 2007 APA expanded its portfolio of assets by acquiring the gas transmission business GasNet Australia, the Allgas gas distribution business, the Directlink electricity transmission cable linking the Queensland and New South Wales power markets and the Origin Energy Networks assets.

Each of these assets were carefully targeted for their growth potential and strategic fit with APA’s existing business.

Contributions from GasNet and Allgas were the primary drivers of a 40.5 % increase in total revenue over the year to $532.7 million. Strong performances across the majority of APA’s other pipelines especially in Queensland and Western Australia also contributed. This more than offset the contracted reductions in revenue on the Moomba to Sydney Pipeline (‘MSP’) in NSW and Amadeus Gas Pipeline (‘AGP’) in Northern Territory, which have been previously foreshadowed to the market.

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APA expects to build on this excellent revenue result in fiscal 2008 when full-year contributions from each of the recently acquired assets will flow through.

Significant items after income tax in fiscal 2007 amounted to a loss of $7.8 million compared with a gain of $1.9 million in the previous year. One off expenses in fiscal 2007 included legal and advisor costs associated with Alinta of $7 million, a $5.3 million provision for SCC (Stress, Corrosion and Cracking) repairs and a revaluation gain of $1.2 million on interest rate hedges.

Net profit after significant items was $56.8 million, down from $62.5 million in fiscal 2006.

Toward the end of fiscal 2007, APA and Alinta announced the conclusion of all operating and equity relationships, and the termination of all legal proceedings. This brought to an end a long period of uncertainty with regard to the long term ownership of APA.

As part of the settlement agreement, APA will acquire all the operating and maintenance service contracts on its pipelines which have been provided by Alinta, giving APA direct operational control over all of its assets.

As well as building its asset base in fiscal 2007, APA strengthened its balance sheet, raising more than $600 million in equity through a variety of offerings, and refinancing more than $2.8 billion in debt. APA is well protected against rising interest rates with over 72% of its current exposure hedged or at fixed rates.

APA Managing Director Mick McCormack said the 2007 fiscal year was a year of transition for the group which saw it expand through prudent and strategic acquisitions and deliver on its strategy of being a major player in developing, owning and operating infrastructure.

“APA doubled the value of its asset base to $4.2 billion over the past year and these assets were a key contributor to what is a very pleasing profit result.

“In fiscal 2007, APA extended its presence to every mainland state using a disciplined approach to target strategic acquisitions. At the same time we strengthened our balance sheet through effective capital management and, as promised, delivered an increased distribution to security holders.”

Mr McCormack said while fiscal 2008 will focus on bedding down and integrating new assets in the portfolio and leveraging the benefits they bring to the expanded APA Group, APA will continue to examine investment opportunities that arise as a result of industry consolidation.

OUTLOOK

Operating cashflows from the business are expected to remain strong in fiscal 2008, strengthened by recent acquisitions. APA directors are confident the group will continue to grow cash distributions in fiscal 2008 by at least CPI.

APA confirms market consensus for EBITDA in the range of $380 million to $390 million for the 2008 financial year, an increase of approximately 30%.

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FINANCIAL SUMMARY

The following table provides a summary of key financial data for the financial year:

	Year endedYear endedChange compared to
	30 June 200730 June 20062006
	$000$000$000%
Operating results before significant itemsPipeline transportation revenueElectricity transmission revenueOther tolling revenueOther pipeline revenue – passthroughOther revenueTotal revenueEBITDADepreciationEBITNet interest expensePre-tax profitIncome tax expenseOperating profit after tax and minorities, beforesignificant itemsSignificant itemsAlinta related legal actionsSCC repair and investigative workRevaluation gain – ’ineffective’ interest rate hedgesTariff dispute resolutionSignificant items before income taxTax effect of significant itemsTax-consolidation benefit – APA GroupSignificant items after income taxProfit after income taxandminorities	393,131278,956114,17540.917,1933,18814,005439.31,2091,199100.895,91185,72710,18411.925,2569,95815,298153.6532,700379,028153,67240.5296,842200,40296,44048.1(69,783)(38,849)(30,934)(79.6)227,059161,55365,50640.6(136,625)(71,120)(65,505)(92.1)90,43490,43310.0(25,802)(29,438)3,63612.464,53060,6613,8696.4(7,000)-(7,000)(5,265)(11,300)6,035-1,165-1,165--3,262(3,262)-(11,100)(8,038)(3,062)-3,3302,411919--7,512(7,512)-(7,770)1,885(9,656)(512.1)56,76062,546(5,787)(9.3)

Financial Measures

	FY 2007	FY 2006	Change comparedto 2006	Change comparedto 2006
Underlying operating cash flow (OCF) ($m)	$157.0m	$112.2m	$44.8m	39.9%
Underlying OCFpersecurity (cents)	41.4c	38.7c	2.6c	6.8%
NetTangibleAssetBacking persecurity	$1.99	$2.09	$(0.1)	(4.8)%
Earnings Per Security (cents) - beforesignificant items	17.0c	20.9c	(3.9)c	(18.8)%
Earnings per security (cents)	15.0c	21.6c	(6.6)c	(30.8)
Interest Cover Ratio (x)	2.0	2.3	-	-
GearingRatio (%)	69.0	67.9	-	-

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About APA Group (APA)

APA Group, comprised of Australian Pipeline Trust and APT Investment Trust, is the major ASX-listed energy transmission company in Australia with interests in more than 10,000 kms of natural gas pipeline infrastructure, over 2,300 kms of gas distribution networks in south east Queensland, Coal Seam Gas processing plants, gas fired power stations, gas storage facilities and two high voltage direct current interconnector systems. APA’s interests also extend to the provision of management and operations services to gas distribution and transmission company Envestra (which owns 19,100 km of natural gas distribution networks and 1,029 km of natural gas transmission pipelines), a 17.2 percent stake in Envestra and a one-third interest in the SEAGas pipeline. The Group has a varied and quality customer base including AGL Energy, Cooper Eromanga Basin Producers, Xstrata, Newmont, CS Energy, BHP Billiton, Zinifex, Incitec Pivot, Origin, RioTinto, Nickel West, Synergy and Verve Energy.

For further information please contact:

Mick McCormack, APA Group Telephone: (02) 9693 0000 Email: mick.mccormack@pipelinetrust.com.au

Stephen Woodhill, Gavin Anderson & Company Telephone: (02) 9552 4499 or Mob: 0411 052 362 Email: swoodhill@gavinanderson.com.au

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