APA GROUP — Annual Report 2012

Aug 21, 2012

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ASX RELEASE

22 August 2012

The Manager

ASX Market Announcements Australian Securities Exchange 4[th] Floor, 20 Bridge Street Sydney NSW 2000

Electronic Lodgement

Dear Sir or Madam

Company Announcement

I attach the following announcement for release to the market:

• 2012 Full Year Results Presentation

Yours sincerely

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Mark Knapman

Company Secretary

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Financial Results Year ended 30 June 2012

22 August 2012

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Result overview and strategic highlights

Mick McCormack Managing Director and CEO

 2

2012 Results Presentation

Developing opportunities, creating value

 Well positioned in a growing market

• Expanding our energy infrastructure portfolio across Australia in line with increasing demand for gas and energy

 Track record of consistent financial performance

• Remain a low risk but growing business, with revenue underpinned by long term contracts or regulatory arrangements

• Balance sheet strength to fund growth sustainably

 A range of opportunities with an eye on value for the long term

• Corporate structure – management, operating, engineering and construction capability across the portfolio

• Preserving or increasing value of APA’s infrastructure portfolio with core and adjacent developments and acquisitions

• Energy infrastructure solutions and service innovations for customers

 3

2012 Results Presentation

Another solid result

	2012 $ million	2011 $ million	Change
Operating cash flow	336	290	up	16 %
Revenue excluding pass-through(1)	758	720	up	5 %
EBITDA(2)	526	492	up	7 %
Profit(2)	131	109	up	20 %
Operating cash flow per security (cents)	52.5	52.6	down	(0)%
Distribution per security (cents)	35.0	34.4	up	2 %
Distribution payout ratio	67.0%	65.7%

• (1) Pass-through revenue is revenue on which no margin is earned

• (2) EBITDA and profit includes significant items: FY 2012 - Profit on the sale of APA Gas Network business (Allgas) less transaction costs; FY 2011 - APA’s equity accounted share of the Investment Allowance Concession benefit recognised on the commencement of generation of the North Brown Hill Wind Farm. APA has referenced the significant items to more accurately reflect the actual trading results of the Group. The significant items have been audited.

 4

2012 Results Presentation

Strong performance across the business

Increase due to:

• ↑ Full year contribution from asset expansions – Young Wagga lateral (November 2010) and Moomba Sydney Pipeline (ongoing)

• ↑ General tariff increase across most assets

• ↑ Increased contribution from Energy Investments – Envestra, Hastings Diversified Utilities Fund and GDI (EII) (6 months contribution)

• ↑ Acquisition earnings contribution – Emu Downs wind farm and Amadeus Gas Pipeline

• ↑ Lower borrowing costs – Reduction in net borrowings following sale of Allgas and reduction in average interest rate

Offset by:

• ↓ Reduced annual revenue (Allgas)

• ↓ Reduced customer contribution (Asset Management)

 5

2012 Results Presentation

Strategic and operational highlights

• Optimal use of assets: contracted and regulated assets near full capacity

– Expansions supply additional capacity to meet customer requirements

• ~ $300 million per annum over the next two years for committed and visible capital projects

Goldfields Gas Pipeline

2 x capacity expansion – compressor stations and compressor upgrades; 20-year and 15-year GTAs

Mondarra Gas Storage Facility Capacity expansion; 20-year GSA

Diamantina Power Station Joint development (APA/AGL) 242 MW gas-fired generation; 17- year ESA

Carpentaria Gas Pipeline

10-year GTA

Roma Brisbane Pipeline Capacity expansion completed; 2 GTAs up to 15 years

Moomba Sydney Pipeline Mainline capacity expansion Young compressor upgrade; Various GTAs up to 10 years

APA energy infrastructure APA investments Other natural gas pipelines

Victorian Transmission System Sunbury looping project and Euroa compressor station; Regulated revenue

All growth capital expenditure underpinned by secure revenue

 6

2012 Results Presentation

Strategic and operational highlights

Delivering on growth strategy

 Major projects progress

• Mondarra Gas Storage Facility expansion

• Diamantina Power Station development

• Takeover offer for Hastings Diversified Utilities Fund

Mondarra Gas Storage Facility, WA

• National customer system and operations focus

• Implementation of APA Gas grid

• Operational excellence

• Capital management

• Successful refinancing program

• Launched APA Subordinated Notes

Diamantina Power Station site, Qld

 7

2012 Results Presentation

Sustainability reporting

 Health and safety

• Long-term safety goal of Zero Harm - program of continuous improvement

• Decrease of LTIFR[(1) ] to 2.2, down from 6.2

• National APA health and safety system launched – “Safeguard”

 Natural gas and carbon reduction

• Carbon tax – direct cost impact expected to be immaterial due to cost recovery mechanisms

• Promoting the use of natural gas in reducing carbon emissions

 New organisational structure

• Better reflects APA’s discrete core businesses and significant infrastructure development activities

• New senior leadership appointments – leading plans for growth

 Community investment program

• Continued support of community partnerships through “Building brighter futures” program

• (1) Lost time injury frequency rate (LTIFR) is measured as the number of lost time injuries per million hours worked



2012 Results Presentation

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Financial performance

Peter Fredricson Chief Financial Officer



2012 Results Presentation

Diversified EBITDA

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|||||||
|---|---|---|---|---|---|
|2012|2011|
|FY 2012 EBITDA|
|$ million|$ million|Change|
|(continuing business)|
|Energy Infrastructure|
|Queensland|79.6|71.7|11.0 %|Energy|
|Investments|
|New South Wales|113.1|101.3|11.7 %|
|8.1%|
|Asset|
|Victoria & South Australia|123.1|115.9|6.2 %|
|Management|
|Qld|
|Western Australia & Northern Territory|125.9|99.8|26.2 %|
|6.2%|
|15.4%|
|Energy Infrastructure total|441.7|388.7|13.6 %|
|Asset Management|31.9|38.7|(17.6)%|
|WA & NT|
|NSW|
|Energy Investments|41.8|27.1|54.2 %|24.4%|21.9%|
|Total EBITDA continuing business|515.4|454.5|13.4 %|
|Vic & SA|
|Divested business - Allgas|20.1|35.1|23.9%|
|Total EBITDA before significant items|535.5|489.6|9.4 %|
|Energy|
|Significant items|(9.7)|2.5|Infrastructure|
|85.7%|
|Total EBITDA after significant items|525.8|492.1|6.9 %|

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APA’s portfolio diversity provides stability

 10

2012 Results Presentation

Solid, consistent result

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2012 2011
Change
$ million $ million
EBITDA before significant items 535.5 489.6 9.4 %
Depreciation and amortisation (110.4) (100.4) 10.0 %
EBIT 425.1 389.2 9.2 %
Net interest expense (234.3) (247.1) (5.2)%
Tax (50.4) (35.9) 40.6 %
Net profit 140.3 108.9 28.8 %
Significant items after tax (9.7) (0.4)
Net profit after significant items 130.6 108.5 20.4 %
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Significant items:

FY 2012 - Profit on the sale of APA Gas Network business (Allgas) less transaction costs;

FY 2011 - APA’s equity accounted share of the Investment Allowance Concession benefit recognised on the commencement of generation of the North Brown Hill Wind Farm. APA has referenced the significant items to more accurately reflect the actual trading results of the Group. The significant items have been audited.

 11

2012 Results Presentation

Energy Infrastructure

Queensland

 Roma Brisbane Pipeline expansion

• Completion of expansion project, including new revenue contracts, commenced August 2012

• Access Arrangement – AER’s final decision (10 August 2012) includes 8.75% tariff increase

Dalby compressor station

 APA Gas Network

• Sell down to (GDI) EII in December 2011

• APA retains 20% interest and long term asset management agreement

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 12

2012 Results Presentation

Energy Infrastructure

New South Wales

 Moomba Sydney Pipeline expansion

• 4th year in 5-year expansion program

• Young compressor upgrade

• Fully contracted – gas transportation and storage services

 Young to Wagga lateral

• Full year of operation – commissioned November 2010

Young compressor station and control centre

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 13

2012 Results Presentation

Energy Infrastructure

Victoria & South Australia

• Decreased gas flow due to milder weather and reduced gas use in generation

• 6.5% decrease in gas flows to 230 PJ

• Euroa compressor station construction

Victorian Transmission System

• Northern augmentation stage 2

• Sunbury looping project

• Completed first stage of expansion

 14

2012 Results Presentation

Energy Infrastructure

Western Australia & Northern Territory

• Goldfields Gas Pipeline

• Commenced two pipeline expansions

• Merits review process completed

• Mondarra Gas Storage Facility

Mondarra Gas Storage Facility

• First year construction of expanded facility

• Emu Downs wind farm and

Amadeus Gas Pipeline

• Operating substantially to investment case in first year of ownership

 15

2012 Results Presentation

Asset Management and Energy Investments

Asset Management

• Reduction in customer contributions

• Additional asset management – GDI (EII)

Energy Investments

• Increased investment returns – Envestra

• Increased investment holding – HDF

• Additional investment returns – GDI (EII)

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Meter calibration
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 16

2012 Results Presentation

Major capital expenditure[(1) ]

2012 $ million Description of 2012 major projects 2011 $ million	2012 $ million Description of 2012 major projects 2011 $ million
Growth capital expenditure
Regulated
Victoria Transmission System 35.1 Northern augmentation project, Sunbury looping	33.4
APA Gas Networks (Qld) 8.4 Includes southern network expansion	16.1
Major Projects 43.5	49.5
Queensland expansion 35.7 Roma Brisbane Pipeline expansion	19.6
New South Wales expansion 18.9 MSP mainline expansion	34.3
Western Australia expansion 116.4 Mondarra Gas Storage Facility, Goldfields Gas Pipeline expansions	39.8
Other 10.2 National customer management system, Victorian metering	12.2
Acquisitions 181.2	105.9
Energy Infrastructure 6.0 Amadeus Gas Pipeline, Emu Downs purchase adjustments	228.8
Energy investments 40.4 Envestra, Hastings Diversified Utilities Fund	113.9
46.4	342.7
Total growth capex 271.1	498.0
Stay in business capex 24.4	18.0
~~•2012 Results Presentation 17~~ Total 295.5	516.0

(1) Capital expenditure represents cash payments as disclosed in the cash flow statement for FY2011 and FY2012.

 17

2012 Results Presentation

Fully covered distributions

2012 distribution in line with guidance (at least 34.4 cps)

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60
51.9 52.6 52.5
50 48.2
42.7
40
35.0
34.4
30 32.8
31.0
29.5
20
10
0
2008 2009 2010 2011 2012
Operating cash flow per security Distribution per security
cents
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2012 distribution payout ratio[(1)] of 67.0% (2011: 65.7%)

• (1) Distribution payout ratio: total distribution payments as a percentage of operating cash flow

 18

2012 Results Presentation

Capital management

 Cash and committed undrawn facilities of $1,106 million at 30 June 2012

.	.	Metrics	30 Jun 2012	30 Jun 2011
		Gearing(1)	65.0 %	66.2 %
		Interest cover ratio	2.48 times	2.03 times
		Average interest rate applying to drawn debt	7.39 %	7.47 %
		Interest rate exposure fixed or hedged	80.9 %	73.5 %

 . Equity: $45 million equity raised through the Distribution Reinvestment Plan  Debt: . $1.9 billion of new debt facilities raised as part of 2012 refinancing program

• Refinanced $1.065 billion of debt maturing in FY 2012

• Replaced $515 million of higher cost debt due to mature in FY 2014

$415 million Medium Term Notes (MTN)

• A$126 million raised in January 2012 – JPY10 billion 6.5 year MTN

• A$289 million raised in June 2012 – CAD 300 million 7.1 year MTN

(1) Ratio of net debt to net debt plus book equity

 19

2012 Results Presentation

Capital management

• Refinancing program focused on extending debt maturity, diversifying funding sources and reducing borrowing costs

 20

2012 Results Presentation

Capital management

 Funding APA beyond 1 July 2012

~~.~~ Sources $m Existing cash and undrawn facilities 1,106 Subordinated notes net proceeds 460 New 1-year bank commitments 300 New 4-year bank commitments 300 Total 2,166	Uses $m
	Cash component of revised HDF bid 336 Repay existing drawn Epic facilities 1,375 Transaction completion costs 69 Headroom retained by APA 386
	Total 2,166

 21

2012 Results Presentation

Capital management strategy

• Managing balance sheet to maintain minimum investment grade credit rating metrics

• Standard & Poor’s BBB; Moody’s Baa2

• Refinancing program focused on extending debt maturity, diversifying funding sources and reducing borrowing costs

• Next refinancing obligation in September 2013 ($113 million)

• AMTN, EMTN and US 144A programs in place

• Optionality available – short term debt can be replaced with long term debt without penalty

Capital management policy

• Continue to target strong BBB/Baa2 investment grade ratings through maintaining sufficient flexibility to fund organic growth and investment from internally generated and retained cash flows and, where appropriate, additional debt and equity funding

 22

2012 Results Presentation

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Outlook and guidance

Mick McCormack Managing Director and CEO

 23

2012 Results Presentation

Sustainable long term growth and value

 Growth catalysts

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–
Carbon reducing policies
17,384 PJ 1,123 PJ
–
Gas supply developments
–
New market participants
72,559 PJ
– Resources projects 39,750 PJ
Pipeline Energy
Pipeline System
139
Enhancing our portfolio PJ
–
Optimal gas delivery between
1,735 PJ South West
gas sources and markets 41 Queensland PIpeline
PJ
Moomba to Adelaide 2,827 PJ
– Pipeline System
Infrastructure for gas fired power
generation
Disciplined investment APA Group energy infrastructure assets
APA Group energy investments
– HDF natural gas pipelines (excluding MAPS)
Strategic fit with APA’s portfolio and Other natural gas pipelines 884 PJ 258 PJ 4,124 PJ
PJ Natural gas reserves (proved and probable)
internal capability
–
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• Enhancing our portfolio

• Disciplined investment

• Appropriate economic returns

Source: APA data; Energy Quest May 2012

• Low risk, long term earnings

 24

2012 Results Presentation

APA’s off-market takeover offer for HDF

 Rationale

• Retained Epic Energy pipelines form a natural fit with APA’s assets

• Enhanced gas transmission pipeline network – benefits APA securityholders and customers

 Process update

• Takeover offer announced (14 December) – cash and scrip offer for HDF securities

• ACCC clearance (19 July) subject to MAPS divestment

• Revised offer (17 August) – increased price and reduced conditions

• Recommended by HDF board committee

 Next steps

• Release of supplementary Bidder’s Statement shortly

 25

2012 Results Presentation

Delivering value for securityholders

• Five years of growth

• Operating cash flow CAGR of 17.4%[(1) ]

• EBITDA CAGR of 12.1%[(1) ]

• Total securityholder return of 92%

Indexed to 100 from 30 June 2007 to 30 June 2012 Source: APA based on IRESS data

• (1) Compound annual growth rate (CAGR) calculated from 2007 base year to 2011

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 26

2012 Results Presentation

Outlook and guidance

Outlook

 Continued construction and development of expansion projects

• Progress takeover offer for HDF

Guidance

• EBITDA – expected within a range of $540 million to $550 million

• Compared with $515 million[(1) ] for FY12

• Based on APA’s continuing business, excluding HDF assets

• Net interest cost – expected within a range of $240 million to $245 million

• Distribution – at least equal to FY2012 total distributions per security

• Unchanged if HDF transaction proceeds

(1) Based on APA’s continuing business EBITDA for FY 2012 of $515 million

 27

2012 Results Presentation

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Supplementary information

 28

2012 Results Presentation

Financials

Key financial ratios

	2012	2011
Operating cash flow per security (cents)	52.5	52.6
Weighted average securities on issue (million)	639.7	551.2
Payout ratio	67.0 %	65.7 %
Earning per security (cents)	20.4	19.7
Interest cover ratio (times)	2.48	2.03
Gearing ratio	65.0 %	66.2 %
Total assets ($ million)	5,496	5,428
Net assets ($ million )	1,614	1,668
Net tangible asset backing per security	$1.58	$1.51

 29

2012 Results Presentation

Financials

Cash flow

	2012	2011
	$ million	$ million	Change
Operating cash flow	335.6	290.0	8.3 %
Distributions (net of DRP)	163.6	130.9
Available operating cash flow	172.0	159.2	(3.3%)
Operating cash flow per security (cents)	52.5	52.6	1.4 %
Distributions per security (cents)	35.0	34.4	5.0 %
Distribution payout ratio	67.0 %	65.7 %
Capital expenditure	249.1	173.3
Investments	40.4	113.9
Acquisitions	6.0	228.8

 30

2012 Results Presentation

Financials

Revenue anal sis b business se ment y y g

	2012	2011
	$ million	$ million	Change
Energy Infrastructure
Queensland(1)	112.2	107.7	4.2%
New South Wales	138.4	126.7	9.3%
Victoria & South Australia	163.4	153.3	6.6%
Western Australia & Northern Territory	195.9	157.5	24.4%
Energy Infrastructure total	610.0	545.1	11.9%
Asset Management	69.3	68.6	0.9%
EnergyInvestments	41.7	27.1	53.9%
Total segment revenue	721.0	640.9	12.5%
Pass-through revenue	302.6	381.7	(20.7%)
Unallocated revenue	6.3	12.9	(51.2%)
Divested business - Allgas	30.7	56.6
Significant item	-	9.8
Total revenue	1060.7	1,102.0	(3.8%)

(1) Queensland excludes revenue from Allgas

 31

2012 Results Presentation

Financials

Total committed debt facilities at 30 June 2012

	Facility	Drawn
Facility	amount	amount	Tenor
	$ million(1)	$ million(1)
2011 Bilateral borrowings(2)	300	157	3 years maturing July and August 2014
2011 Bilateral borrowing	150	0	5 years maturing October 2016
2011 Syndicated facility(3)	1,450	967	2, 3 and 4 year tranches maturing November 2013, 2014 and 2015
2003 US Private placement	394	394	10, 12 and 15 year tranches maturing Sept 2013, 2015 and 2018
2007 US Private placement	811	811	10, 12 and 15 year tranches maturing May 2017, 2019 and 2022
2009 US Private placement	185	185	7 and 10 year tranches maturing July 2016 and 2019
2010 AUD Medium Term Notes	300	300	10 year tranche maturing July 2020
2012 JPY Medium Term Notes	126	126	6.5 year tranche maturing in June 2018
2012 CAD Medium Term Notes	289	289	7.1 year tranche maturing in July 2019
Total	4,005	3,229

(1) Australian dollars. Any foreign notes issued have been hedged into fixed-rate Australian dollar obligations

(2) Comprises four facilities of $75 million each

(3) Comprises three facilities of $484 million each

 32

2012 Results Presentation

Regulatory update

APA’s major price regulated assets

 Regulatory resets over the next five years

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Calendar year 2012 2013 2014 2015 2016
Roma Brisbane Pipeline
Victorian Transmission System
Goldfields Gas Pipeline
Current regulatory period Next regulatory period
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 Roma Brisbane Pipeline access arrangement

• AER’s final decision (10 August 2012) includes 8.75% tariff increase

• Minimal impact to APA’s revenue – the majority of the pipeline’s revenue is derived from haulage contracts with set terms, including pricing

 Victorian Transmission System access arrangement

• AER draft decision expected mid September 2012; final decision expected March 2013

 Goldfields Gas Pipeline merits review

• Completed in April 2012 and favourable outcomes achieved on coverage tests for expansion and cost allocation methodology

 33

2012 Results Presentation

APA Group profile

 APA is Australia’s largest natural gas infrastructure business

• Energy Infrastructure : natural gas pipelines and interconnected gas storage facilities across Australia, and the Emu Downs wind farm in Western Australia

• Asset Management : provision of asset management, operating and maintenance services to the majority of APA’s investments and other third parties

• Energy Investments : minority interests in energy infrastructure investments, including Envestra, GDI (EII) (Allgas), SEA Gas Pipeline, Energy Infrastructure Investments, Hastings Diversified Utilities Fund, EII2 (North Brown Hill wind farm) and Ethane Pipeline Income Fund

• APA generates secure cash flows from contractual and regulatory arrangements on its assets

• with more than 90% of revenue from regulated (natural monopoly) assets and long term contracts

• APA has direct management and operational control over its assets and investments

• no fee leakage or conflicts that arise with external management model

• employing over 1,400 skilled and experienced people who perform all commercial, engineering and operational functions for APA’s assets and investments

APA delivers half of Australia’s domestic gas usage

 34

2012 Results Presentation

APA asset and investment portfolio

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21
17
24 21 NORTHERN 21
TERRITORY
25
QUEENSLAND
2
18
WESTERN 18
11 AUSTRALIA
24 3 21
1 18
12
SOUTH 21 19
14 AUSTRALIA NEW SOUTH 21
16 24 4 WALES
13 15 22
18 5 6
23
18
21
18 7
20 8
18
APA assets 10 VICTORIA
9
APA investments
TASMANIA
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APA Group assets and investments

Energy Infrastructure

Asset Management

Commercial and/or operational services to:

Queensland

• Envestra Limited

• (1) Roma Brisbane Pipeline

• GDI (EII) - Allgas

• (2) Carpentaria Gas Pipeline

• Energy Infrastructure Investments

• (3) Berwyndale Wallumbilla Pipeline

• Ethane Pipeline Income Fund

New South Wales

• SEA Gas Pipeline

• (4) Moomba Sydney Pipeline

• EII2

• (5) Central West Pipeline

• other third parties

• (6) Central Ranges Pipeline

Energy investments

• (7) NSW interconnect with Victoria

• (18) Envestra Limited (33.4%)

Victoria

• Gas distribution networks and pipelines (SA, Vic, Qld, NSW & NT)

• (8) Victorian Transmission System

• (9) Dandenong LNG facility

• (19) GDI (EII) (20.0%) Allgas

South Australia

Gas distribution network in Queensland

• (10) SESA Pipeline

(20) SEA Gas Pipeline (50%)

Western Australia

• (11) Goldfields Gas Pipeline (88.2%)

(21) Energy Infrastructure Investments (19.9%) Gas pipelines, electricity transmission, gas-fired power stations and gas processing plants

• (12) Mid West Pipeline (50%)

• (13) Parmelia Gas Pipeline

• (14) Mondarra Gas Storage

• (15) Kalgoorlie Kambalda Pipeline (16) Emu Downs wind farm

• (22) Ethane Pipeline Income Fund (6.1%)

• (23) EII2 (20.2%) North Brown Hill wind farm

Northern Territory

(17) Amadeus Gas Pipeline

• (24) Hastings Diversified Utilities Fund (20.7%)

Under development

• (25) Diamantina Power Station (50%)

 35

2012 Results Presentation

Disclaimer

This presentation has been prepared by Australian Pipeline Limited (ACN 091 344 704) the responsible entity of the Australian Pipeline Trust (ARSN 091 678 778) and APT Investment Trust (ARSN 115 585 441) ( APA Group ).

Summary information

This presentation contains summary information about APA Group and its activities current as at the date of this presentation. The information in this presentation is of a general background nature and does not purport to be complete. It should be read in conjunction with the APA Group’s other periodic and continuous disclosure announcements which are available at www.apa.com.au.

Not financial product advice

Please note that Australian Pipeline Limited is not licensed to provide financial product advice in relation to securities in the APA Group. This presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire APA Group securities and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and consult an investment adviser if necessary.

Past performance

Past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

Future performance

This presentation contains certain “forward-looking statements” such as indications of, and guidance on, future earnings and financial position and performance. Forward-looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions.

This presentation contains such statements that are subject to risk factors associated with the industries in which APA Group operates which may materially impact on future performance. Investors should form their own views as to these matters and any assumptions on which any forward-looking statements are based. APA Group assumes no obligation to update or revise such information to reflect any change in expectations or assumptions.

Investment risk

An investment in securities in APA Group is subject to investment and other known and unknown risks, some of which are beyond the control of APA Group. APA Group does not guarantee any particular rate of return or the performance of APA Group.

Not an offer

This presentation does not constitute an offer, invitation or recommendation to subscribe for or purchase any security.

 36

2012 Results Presentation

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For further information contact

Chris Kotsaris Investor Relations, APA Group Tel: +61 2 9693 0049 E-mail: chris.kotsaris@apa.com.au

Delivering Australia’s energy

or visit APA’s website www.apa.com.au