APA GROUP — Interim / Quarterly Report 2011

Feb 22, 2011

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ASX RELEASE 23 February 2011

The Manager

Company Announcements Office 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:

• Interim Results Presentation

Yours sincerely

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Mark Knapman Company Secretary

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Financial Results Half year ended 31 December 2010

23 February 2011

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Result overview and strategic highlights

Mick McCormack Managing Director and CEO

1H 2011 Result Presentation � 2

Steady and solid result

	1H11 $ million	1H10 $ million	Change	Change
Operating cash flow	170	160	up	6%
Revenue excluding pass‐through(1)	370	343	up	8%
EBITDA	264	244	up	8%
Profit(2)	70	64	up	10%
Operating cash flow per security (cents)	31.0	31.6	down	(2%)
Distribution per security (cents)	16.5	15.75	up	5%
Distribution payout ratio	53.6%	50.2%
Net tangible asset per security	$1.34	$1.23	up	9%

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

(2) Profit includes significant item – APA share of EII2 investment allowance benefit

1H 2011 Result Presentation � 3

Strategic and operational highlights

Expanded APA’s gas infrastructure portfolio

• Commissioned the Young Wagga looping project, New South Wales

• Progressed construction of Victorian Transmission System, northern augmentation project

• Completed Roma Brisbane Pipeline lateral to large industrial customer

• Continued the 5‐year Moomba Sydney Pipeline expansion project

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• Commenced initial stages of expanding Mondarra Gas Storage Facility, Western Australia

• Continued expansion of the gas network into new housing development areas, south Brisbane and Gold Coast, Queensland

1H 2011 Result Presentation � 4

Strategic and operational highlights

Capturing revenue and operating synergies

• Implemented national finance system

• Developing national customer interface for gas transport and storage services

• Operational excellence program across transmission operations

Leveraged APA’s infrastructure portfolio

• � Facilitating the development of gas‐fired power generation in the Mt Isa region proposed gas fired power station would be connected to the Carpentaria Gas Pipeline

Strengthened our financial capability

• Issued 10‐year $300 million Australian Medium Term Notes

• � Raised new equity Distribution Reinvestment Plan

1H 2011 Result Presentation � 5

Flood and weather impacts

Floods and extreme weather during November 2010 to February2011 has impacted APA’s assets and operations across three states

• Minimal disruption to gas services despite impact on APA’s assets

• Pipeline damage (Toowoomba) and flood damage to facilities at two gas inlet stations (Queensland)

• Easement wash‐outs (Queensland and New South Wales)

• Damage to 180 residential meters and regulators

• APA people skilled to manage emergency events and repairs

• Emergency management immediately in place

• APA engineering and operations personnel mobilised locally and interstate to assist in emergency management and repairs

• Repairs and remediation underway (most completed)

• Cost impact mainly limited to insurance deductibles

Quality APA people and portfolio

1H 2011 Result Presentation � 6

Flood and weather impacts

Roma Brisbane Pipeline – repair to damaged pipeline section and easement wash‐out on the Toowoomba escarpment

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Before flooding

After flooding

Repairing the pipeline

1H 2011 Result Presentation � 7

Flood and weather impacts

Arubial gas inlet station – continued operating while flooded

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During floods

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After flooding

1H 2011 Result Presentation � 8

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Financial performance

Peter Fredricson Chief Financial Officer

1H 2011 Result Presentation � 9

Consistent financial performance

	1H11 $ million	1H10 $ million	Change
Total revenue excluding pass‐through(1)	369.8	343.3	7.7 %
Total revenue	554.7	495.9	11.8 %
EBITDA	263.9	244.3	8.0 %
EBIT	219.0	197.4	10.9 %
Net interest expense	(124.5)	(111.1)	(12.1%)
Tax	(24.2)	(22.7)	(6.7 %)
Profit(2)	70.2	63.6	10.4 %
Operating cash flow	169.8	159.5	6.4 %
Operating cash flow per security (cents)	31.0	31.6	(2.0%)
Distribution per security (cents)	16.5	15.75	4.8 %
Distribution payout ratio	53.6%	50.2%
Net tangible asset per security	$1.34	$1.23	8.6 %

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

(2) Profit includes significant item – APA share of EII2 (North Brown Hill wind farm) investment allowance benefit

1H 2011 Result Presentation � 10

EII2 – significant item

		1H11
		$ million
	EBITDA	263.9
	Significant item	9.8
	EBITDA before significant item	254.0
	Profit after tax	70.2
	Significant item after tax	6.9
	Profit after tax, before significant item	63.3

• APA has a 20.2 % interest in EII2 which holds the North Brown Hill wind farm

• The wind farm was connected to the grid and commenced generation in December 2010, ahead of schedule

• EII2 generated a “once off” accounting profit due to that early availability of generation capacity

1H 2011 Result Presentation � 11

EBITDA by business segment

		1H11 $ million	1H10 $ million	Change
	Gas Transmission and Distribution
	Queensland	54.9	51.6	6.4 %
	New South Wales	52.9	53.1	(0.4 %)
	Victoria & South Australia	62.0	57.2	8.3 %
	Western Australia & Northern Territory	48.6	52.2	(6.9 %)
	Gas Transmission and Distribution	218.3	214.1	2.0 %
	Asset Management	19.5	16.3	19.2 %
	Energy Investments	16.2	13.8	17.3 %
	Total segment EBITDA	254.0	244.3	4.0 %

1H11 EBITDA split by segment

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Energy Investments,
7%
Asset Management,
7%
Qld, 22%
WA & NT, 19%
NSW, 21%
Vic & SA, 24%
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Gas Transmission and Distribution

86%

1H 2011 Result Presentation � 12

Gas transmission and distribution

Queensland

• Roma Brisbane Pipeline lateral addition

• Proposed energy solutions for Mt Isa underpinned by Carpentaria Gas Pipeline capacity

• Berwyndale Wallumbilla Pipeline contribution

• acquired April 2010

• Extension of APA Gas Network

• 25 km new gas mains

• 1,560 additional connections

• APA Gas Network access arrangement

• AER draft decision on APA’s proposed access arrangement, released February 2011

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60
54.9
50
40
30
20
10
‐
1H08 1H09 1H10 1H11
Roma Brisbane Pipeline Carpentaria Gas Pipeline
APA Gas Network Berwyndale Wallumbilla Pipeline
EBITDA $ million
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1H 2011 Result Presentation � 13

Gas transmission and distribution

New South Wales

• Continued mainline expansion program

• Completed Young Wagga lateral looping project

• Commissioning delayed due to weather

• ‘ ’

• � End of short term as available contract

• Short Term Trading Market commenced (Sydney, Adelaide) 1 September 2010

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60
52.9
50
40
30
20
10
‐
1H08 1H09 1H10 1H11
Moomba Sydney Pipeline Central West Pipeline
Central Ranges Pipeline
EBITDA $ million
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1H 2011 Result Presentation � 14

Gas transmission and distribution

Victoria & South Australia

• Increased gas volumes due to cooler winter weather impact

• Northern augmentation expansion program

• Commissioning by March 2011

• LNG storage facility

• Open access truck refueling

• Renegotiated storage contracts

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62.0
60
50
40
30
20
10
‐
1H08 1H09 1H10 1H11
Victorian assets SESA Pipeline
EBITDA $ million
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1H 2011 Result Presentation � 15

Gas transmission and distribution

Western Australia & Northern Territory

• Goldfields Gas Pipeline access arrangement

• 10% reduction in reference tariffs that apply to contracts that provide ~40% of APA’s GGP revenue

• APA is pursuing the merits review process within the regulatory framework

• Reduced use of the Parmelia Gas Pipeline

• Mondarra gas storage facility

• Completed initial stages of development

• – Commercial negotiations with cornerstone customers underway

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60
48.6
50
40
30
20
10
‐
1H08 1H09 1H10 1H11
Goldfields Gas Pipeline Parmelia Gas Pipeline
NGV WA Amadeus Gas Pipeline
EBITDA $ million
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• Amadeus Gas Pipeline access arrangement proposal submitted

1H 2011 Result Presentation � 16

Asset Management and Energy Investments

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20 19.5
15
Short term contracts
10
Long term contracts
5
‐
1H08 1H09 1H10 1H11
20
16.2
15
Other investments
10
Envestra
5
Envestra equity
‐
accounted since 2/09
1H08 1H09 1H10 1H11
EBITDA $ million
EBITDA $ million
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Asset Management

• Increased revenue from Envestra asset management

• Increased third party work

• Added Wagga gas network O&M to Envestra asset management

Energy Investments

• Contribution from additional investments

• Increased investment in Envestra (32.4%)

• Increased investment in Hastings Diversified Utilities Fund (19.8%)

• Acquired 16.7% SEA Gas interest

• Overall interest now 50%

1H 2011 Result Presentation � 17

Fully covered distributions

On target to deliver distribution growth guidance

60 51.9 � 1H11 distribution payout ratio 48.2 50 of 53.6% 42.7 39.7 � Distribution components 38.2 40 13.3 cents – profit distribution 31.0 3.2 cents – capital distribution 30 32.75 31.0 29.5 28.0 20 24.0 16.5* 10 0 FY2006 FY2007 FY2008 FY2009 FY2010 1H2011 a percentage of operating cash flow Operating cash flow per security Distribution per security 1H 2011 Result Presentation �

� 1H11 distribution payout ratio* of 53.6%

• Distribution payout ratio: distribution payments as a percentage of operating cash flow

1H 2011 Result Presentation � 18

Major capital expenditure for 1H11

Major capital expenditure for 1H11	Major capital expenditure for 1H11
Description of 1H11 major projects 1H11 $ million	1H10 $ million
Growth capital expenditure
Regulated
Northern augmentation project 13.5 Victoria Transmission System	16.6
Includes southern network expansion 11.6 APA Gas Networks(Qld)	8.7
Major Projects
Roma Brisbane Pipeline lateral; X41 expansion 13.2 Queensland expansion	8.4
MSP mainline expansion; Young to Wagga looping project 28.6 New South Wales expansion	11.4
Mondarra Gas Storage Facility 24.9 Western Australia expansion	9.0
National finance and customer systems 8.0 Other	‐
Investment
Increase in SEA Gas Pipeline interest 46.3 Gas pipelines	‐
Increase in Hastings Diversified Utilities Fund and Envestra 34.8 Listed energycompanies	10.9
180.9	65.0
6.3 Stay in business capex	11.6
187.2 Total	76.6

1H 2011 Result Presentation � 19

Funding 1H11 growth capital expenditure

1H11 $ million Growth capital expenditure 181

Funds

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Free operating cash flow retained in the business
(Operating cash flow less distributions and SIB capex) 73
Existing cash utilised 13
Cash 86 48%
New equity (Distribution Reinvestment Plan) 35 19%
New debt 60 33%
181
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Cash retained in the business is used to fund organic growth

1H 2011 Result Presentation � 20

Prudent capital management

• Cash and committed undrawn facilities of $340 million at 31 December 2010

• Reduced debt headroom by cancelling $412 million undrawn syndicated bank facilities

� 2010 metrics

• Gearing* of 70.1%, marginally higher compared to 69.8% at 30 June 2010

• Interest Cover Ratio of 2.1 times, relatively flat to 30 June 2010

• Average interest rate applying to drawn debt – 7.52%

• Interest rate exposure fixed or hedged – 78.7%

• $35 million equity raised through the Distribution Reinvestment Plan

• $300 million Australian dollar MTN raised in July 2010

• repaid $102 million USPP and refinanced existing facilities ahead of maturity to reduce debt costs

• Ratio of Net Debt to Net Debt plus Book Equity.

1H 2011 Result Presentation � 21

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

• Sufficient headroom to refinance debt maturing in FY11

• Next refinancing obligation in June 2012

• AMTN and EMTN programs in place for future refinancing

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FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25
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1H 2011 Result Presentation � 22

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Outlook and guidance

Mick McCormack Managing Director and CEO

1H 2011 Result Presentation � 23

Maintain strategy for profitable growth

Continue to maximise value for securityholders

• Enhancing APA’s portfolio of gas infrastructure assets in Australia’s growing gas market

• Capturing revenue and operational synergies from APA’s significant asset base

• Leveraging APA’s gas infrastructure portfolio to develop gas related projects

• Pursuing opportunities that leverage APA’s knowledge and skills base

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2,439 PJ
29,437 PJ
145
PJ
1,161 PJ
33
PJ
2,881 PJ
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69,183 PJ
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• Strengthening financial capability

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APA pipelines and networks
APA investments
Other pipelines
891 275
PJ Gas reserves (proved and probable) PJ 4,741 PJ
1,189 PJ
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Source: APA data; Energy Quest November 2010

1H 2011 Result Presentation � 24

Committed and planned capital projects

Roma Brisbane Pipeline Capacity expansion (2012)

Mondarra Gas Storage Facility

Expanding storage capacity and capability Interconnection with adjacent pipeline (2011‐2013)

Victorian Transmission System Sunbury looping project (2012)

APA Gas Network

Expansion into new housing areas (ongoing)

Moomba Sydney Pipeline Mainline capacity expansion (2009‐2013)

Victorian Transmission System Northern section augmentation (2010‐2012)

Expanding APA’s gas infrastructure portfolio

1H 2011 Result Presentation � 25

APA growth drivers

Growth drivers

Gas supply and demand

Gas fired power generation

Market developments

� Growth in mining projects

• Increasing electricity demand

� Renewable energy projects

Gas storage

� Gas producer contracting strategy

Integrated market

Strategic investment management

• Energy market integration

• Coal seam gas developments

1H 2011 Result Presentation � 26

Long‐term organic growth opportunities

Pipeline solutions for growth in mining and power generation Energy infrastructure development for growth in mining projects

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Energy infrastructure solutions

Energy solutions for mining regions

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Transportation opportunities for coal seam gas

Pipelines for gas transportation and storage

More than $1 billion capital projects in the medium term

1H 2011 Result Presentation � 27

Guidance for FY2011

EBITDA guidance revised

• EBITDA – expected towards the upper end of the range of $480 million to $490 million

No change to distribution and interest cost guidance

• Distribution – anticipate delivering 5% growth for 2011 full year distribution

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

1H 2011 Result Presentation � 28

Delivering value and long term growth

• Consistent financial performance ‐ stability

• Increasing key measures – operating cash flow, EBITDA and distributions

• Maintaining cash flow stability and revenue certainty

• Managing environment of higher borrowing costs

• Long term organic growth – investing for the future

• Expanding APA’s gas infrastructure portfolio in line with customer demand – adding gas transportation and storage capacity

• Enhancing APA’s existing portfolio – facilitating gas fired power generation

• Developing customer solutions in a dynamic energy market – gas related

• Quality APA people and portfolio

• In‐house skills developing the unique growth opportunities available to APA

• Safety and security of assets – minimal impact from weather events

1H 2011 Result Presentation � 29

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Supplementary information

1H 2011 Result Presentation � 30

APA profile

• APA is Australia’s largest natural gas infrastructure business

• Gas Transmission and Distribution : gas pipelines, interconnected gas storage facilities across Australia, and gas distribution networks in Queensland and New South Wales

• Asset Management : provides asset management, operating and maintenance services to the majority of its investments and other third parties

• Energy Investments : minority interests in energy infrastructure investments, including Envestra, 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 1,100 skilled and experienced people who perform all commercial, engineering and operations functions for APA’s assets and investments

APA delivers more than half of Australia’s domestic gas usage

1H 2011 Result Presentation � 31

Financials

Key financial ratios

	1H11	1H10
Operating cash flow per security (cents)	31.0	31.6
Weighted average securities on issue (million)	547.8	504.6
Payout ratio	53.6%	50.2%
Earning per security (cents)	12.8	12.6
Interest cover ratio (times)	2.06	2.16
Gearing ratio	70.1%	69.9%
Total assets ($ million)	5,113	4,792
Net assets ($ million )	1,432	1,315
Net tangible asset backing per security ($)	1.34	1.23

1H 2011 Result Presentation � 32

Financials

Cash flow

	1H11	1H10
	$ million	$ million	Change
Operating cash flow	169.8	159.5	6.4 %
Distributions (net of DRP)	57.6	50.6
Available operating cash flow	112.2	108.9	3.0 %
Operating cash flow per security (cents)	31.0	31.6	(2.0 %)
Distributions per security (cents)	16.5	15.75	4.8 %
Distribution payout ratio	53.6%	50.2%
Capital expenditure	106.1	65.7
Investments	81.7	32.9
Acquisitions	‐	‐

1H 2011 Result Presentation � 33

Financials

Revenue analysis by business segment

	1H11	1H10
	$ million	$ million	Change
Gas Transmission and Distribution
Queensland	83.3	76.8	8.4%
New South Wales	64.3	64.3	0.0%
Victoria & South Australia	79.6	73.8	7.8%
Western Australia & Northern Territory	77.4	78.1	(0.9%)
Gas Transmission and Distribution	304.6	293.0	3.9%
Asset Management	32.1	29.1	10.2%
EnergyInvestments	16.2	14.2	14.8%
Total segment revenue	352.9	336.3	4.9%
Share of EII2 investment allowance benefit	9.8	‐	‐
Pass‐through revenue	184.9	152.6	21.1%
Unallocated revenue	7.0	7.0	0.7%
Total revenue	554.7	495.9	11.8%

1H 2011 Result Presentation � 34

Financials

Total committed debt facilities

	Facility
Facility	amount	Tenor
2008 Bilateral borrowings(1)	$165 million	July 2011
2009 Bilateral borrowing(2)	$150 million	August 2014
2007 Syndicated facility(2)	$900 million	June 2012
2009 Syndicated facility(3)	$618 million	2 and 4 year tranches maturing July 2011 and 2013
2003 US private placement(4)	$394 million	10, 12 and 15 year tranches maturing September 2013, 2015 and 2018
2007 US private placement	$811 million	10, 12 and 15 year tranches maturing May 2017, 2019 and 2022
2009 US private placement	$185 million	7 and 10 year tranches maturing July 2016 and 2019
2010 Medium Term Notes	$300 million	10 year tranche maturing July 2020

(1) Comprises three facilities, fully drawn to $145m cash limit. $20m balance is fully utilised as a bank letter of credit. A refinancing process is underway. (2) These facilities are fully drawn.

• (3) Comprises a $103m commitment maturing in July 2011 ($412m of this tranche was cancelled in Dec 2010) and a $515m commitment maturing in July 2013. Total amount drawn under both tranches at 31 Dec 2010 was $337 million but subsequently reduced to $317m in Feb 2011.

• (4) $102m of 7 year Notes were repaid upon maturity on 9 Sep 2010.

1H 2011 Result Presentation � 35

Regulatory update

APA’s major price regulated assets

� Regulatory resets over the next five years

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• Regulatory resets are spread out over five years, with on average one reset per year

� Regulatory resets currently under review

• APA Gas Network (Qld) – AER draft decision released February 2011

• Amadeus Gas Pipeline (NT) – AER draft decision due March 2011

1H 2011 Result Presentation � 36

APA asset and investment portfolio

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

Gas transmission and distribution

Asset Management

Commercial and operational services to: ‐ Energy Infrastructure Investments ‐ Envestra Limited ‐ Ethane Pipeline Income Fund

Queensland

• (1) Roma Brisbane Pipeline

• (2) Carpentaria Gas Pipeline

• (3) APA Gas Network

• Operational services to: ‐ SEA Gas Pipeline ‐ other third parties

• (4) Berwyndale to Wallumbilla

New South Wales

• (5) Moomba Sydney Pipeline

Energy investments

• (6) Central West Pipeline

• (7) Central Ranges Pipeline

• (18) Envestra Limited (32.4%)

• (8) NSW interconnect with Victoria

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

Victoria

• (9) Victorian Transmission System

• (10) Dandenong LNG facility

• (19) SEA Gas Pipeline (50%)

South Australia

• (20) Energy Infrastructure Investments

(11) SESA Pipeline

• (19.9%)

Annuity gas pipelines, electricity transmission, small gas‐fired power stations and gas processing plants

Western Australia

• (12) Goldfields Gas Pipeline (88.2%) (13) Mid West Pipeline (50%) (14) Parmelia Pipeline

• (21) Ethane Pipeline Income Fund (6%) (22) EII2 ‐ North Brown Hill wind farm (20.2%) Hastings Diversified Utilities Fund (19.8%)

• (15) Mondarra Gas Storage (16) Kalgoorlie Kambalda

Northern Territory

• (17) Amadeus Gas Pipeline (96%)

1H 2011 Result Presentation � 37

Disclaimer

The information contained in this presentation is given without any liability whatsoever to Australian Pipeline Trust or APT Investment Trust or any of its related entities (collectively “APA Group”) or their respective directors or officers, and is not intended to constitute legal, tax or accounting advice or opinion. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or thoroughness of the content of the information. The recipient should consult with its own legal, tax or accounting advisers as to the accuracy and application of the information contained herein and should conduct its own due diligence and other enquiries in relation to such information.

The information in this presentation has not been independently verified by APA Group. APA Group disclaims any responsibility for any errors or omissions in such information, including the financial calculations, projections and forecasts set forth herein. No representation or warranty is made by or on behalf of APA Group that any projection, forecast, calculation, forward‐looking statement, assumption or estimate contained in this presentation should or will be achieved.

Please note that, in providing this presentation, APA Group has not considered the objectives, financial position or needs of the recipient. The recipient should obtain and rely on its own professional advice from its tax, legal, accounting and other professional advisers in respect of the addressee’s objectives, financial position or needs.

This presentation does not carry any right of publication. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by APA Group. Neither this presentation nor any of its contents may be reproduced or used for any other purpose without the prior written consent of APA Group.

1H 2011 Result Presentation � 38

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For further information contact

Delivering Australia’s energy

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

or visit APA’s website www.apa.com.au