APA GROUP — M&A Activity 2011

Dec 13, 2011

14 December 2011

==> picture [585 x 97] intentionally omitted <==

ASX RELEASE

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:

• Takeover offer for Hastings Diversified Utilities Fund (HDF) and Sale of 80% of APA Gas Network (Allgas)

Yours sincerely

==> picture [163 x 37] intentionally omitted <==

Mark Knapman Company Secretary

==> picture [842 x 186] intentionally omitted <==

Takeover offer for Hastings Diversified Utilities Fund (HDF) Sale of 80% of APA Gas Network (Allgas)

14 December 2011

Agenda

 Overview of APA’s takeover offer

• Strategic rationale for acquisition

• HDF Securityholder benefits

 Timetable and conditions

• Sale of 80% of APA Gas Network (Allgas)

• Impacts for APA

 2

APA, 14 December 2011

Takeover offer summary

Transaction	 An off-market takeover for Hastings Diversified Utilities Fund (HDF)  APA currently owns 20.7% of HDF securities  Takeover offer applies to all HDF securities APA does not already own
Offer consideration	 HDF securityholders will receive consideration with an implied value of $2.00 per HDF security(1), comprising: — $0.50 cash — 0.326 APA securities with an implied value of $1.50
Key conditions	 90% minimum acceptance  ACCC clearance and FIRB approval  Market disclosure of security arrangements of financing (including mezzanine debt)  Capping of performance fee for HDF external manager
Timing	 Bidder’s Statement to be lodged with ASIC soon  Bidder’s Statement dispatch to HDF securityholders in early January 2012  Offer open until 31 March 2012, unless extended or withdrawn

(1) Based on the closing price of APA securities of $4.60 on 13 December 2011.

 3

APA, 14 December 2011

Strategic rationale for the takeover offer

 Enhances APA’s gas infrastructure portfolio

• HDF pipelines connected to APA pipelines

• Enhance gas transmission pipeline network in east Australia

 Enhances APA’s services to customers

• Ease of transporting gas across pipelines and jurisdictions

• Ease of transporting gas from multiple gas sources to multiple markets

• Ability to supply more flexible and tailored services to better meet customer requirements

• Enhanced security of gas supply

 Leverages APA’s experience and industry skills

• Use of APA’s management, engineering and operating processes and experience across a larger portfolio

 Satisfies APA’s investment criteria

 4

APA, 14 December 2011

Benefits for HDF securityholders

 Receive a substantial premium for HDF securities

• 12.6% premium to the 5-day VWAP[(1) ] and 20.6% premium to the 3-month VWAP[(1) ]

• Exposure to APA, which has achieved superior total securityholder return in excess of HDF and the market[(2) ]

• Benefit from quality management, energy industry know-how & robust financial capability

• Benefit from the self-managed and transparent structure of the combined group, which is free from external management fees

• Become an investor in a significantly larger entity offering the benefits of scale and diversity, while retaining exposure to HDF assets

Consideration should be given to:

• APA’s 20.7 % interest in HDF, reducing the likelihood of alternative bids

 Risks in relation to the Offer

• (1) Premium of 12.6% based on the 5 day VWAP of HDUF Stapled Securities of $1.78 and premium of 20.6% based on the 3 month VWAP of $1.66 to the closing price of APA Stapled Securities of $4.60, in each case on 13 December 2011.

• (2) Total securityholder return (TSR) is the capital appreciation of the company’s security price, adjusted for capital management (such as security splits or consolidations) and assuming reinvestment of distributions at the declared distribution per security. The period analysed is from 10 December 2004 up to and including 13 December 2011.

 5

APA, 14 December 2011

Benefits – Substantial premium for HDF securities

APA Offer (implied value) of $2.00 represents a substantial premium to HDF security price[(1)]

==> picture [505 x 340] intentionally omitted <==

----- Start of picture text -----

$2.10
$2.00
$2.00
20.6%
12.6%
$1.90
premium
premium
$1.80
$1.78
$1.70
$1.66
$1.60
$1.50
APA Offer 5-day VWAP 3-month VWAP
Security price
----- End of picture text -----

• Since APA’s ownership of HDF securities was first publicly announced 2 years ago, there has been speculation regarding a possible takeover offer by APA

• APA believes this speculation has impacted HDF security price favourably

• APA believes HDF security price is likely to fall, in the absence of an alternate bid if the Offer is not successful

• APA currently holds a 20.7% interest in HDF, limiting the likelihood of alternate bids

(1) Based on the closing price of APA securities of $4.60 on 13 December 2011. APA, 14 December 2011

 6

Benefits – Substantial premium for HDF securities

APA Offer (implied value) of $2.00 impacted by HDF distributions

==> picture [222 x 313] intentionally omitted <==

----- Start of picture text -----

$2.10
$2.00
$2.00
$1.90
$1.80
$1.70
$1.60
$1.50
APA Offer
Security price
----- End of picture text -----

 HDF distributions

— APA’s Offer will be reduced by the amount of any HDF distribution received by HDF securityholders after 14 December 2011[(1) ]

 APA distributions

– HDF securityholders who accept the Offer will be entitled to receive any distributions paid to APA securityholders in the future, for each APA security received as part of the Offer[(2)]

• However, HDF securityholders will not receive the APA interim distribution for the 6 months ending 31 December 2011

• APA final distribution for the 6 months ending 30 June 2012 is expected to be at least 17.4 cents per security[(3) ]

• (1) Applies where HDF securities are held on the record date for a HDF distribution.

• (2) Applies where APA securities are held on the record date for an APA distribution.

• (3) Based on APA FY12 distribution guidance less FY12 interim distribution estimate of 17.0 cents per security.

 7

APA, 14 December 2011

Benefits – Exposure to APA, which has achieved superior total securityholder returns

APA has delivered total securityholder returns[(1)] in excess of HDF and the market

==> picture [749 x 267] intentionally omitted <==

----- Start of picture text -----

Total securityholder return
300  Comparison of total returns
APA since HDF’s listing on the ASX
HDF
S&P/ASX 200
Total CAGR [(2) ]
200
return
APA 163 % 15 %
HDF 51 % 6 %
100
S&P/ASX 200
Accumulation 46 % 6 %
Index [(3) ]
0
Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11
Rebased units
----- End of picture text -----

• (1) Total securityholder return (TSR) is the capital appreciation of the company’s security price, adjusted for capital management (such as security splits or consolidations) and assuming reinvestment of distributions at the declared distribution per security. The period analysed is from 10 December 2004 up to and including 13 December 2011.

• (2) CAGR – Compound annual growth rate

• (3) Similar to TSR, the S&P/ASX 200 Accumulation Index takes into account the notional security price movements, adjusted for capital management (such as security splits or consolidations) and assuming reinvestment of distributions at the declared distribution per security of the stocks that comprise the S&P/ASX 200 over a period of time.

 8

APA, 14 December 2011

Benefits – Exposure to APA, which has achieved superior total securityholder returns

APA has delivered total securityholder returns[(1)] in excess of HDF and the market

Value today of $1 invested at time of HDF listing

==> picture [422 x 290] intentionally omitted <==

----- Start of picture text -----

Original
Return
APA investment
$1.63 $2.63
$1.00
Original
Return
HDF investment
$0.51 $1.51
$1.00
----- End of picture text -----

• Using total securityholder return achieved since HDF listing as a basis for comparison, $1.00 investment in APA Group in December 2004 (when HDF was first listed) would today be worth $2.63

• This is compared to a $1.00 investment in HDF during the same period, which would today be worth $1.51

• (1) Total securityholder return uses figures from APA and HDF from 10 December 2004 to 13 December 2011

 9

APA, 14 December 2011

Benefits – Exposure to APA, which has achieved superior total securityholder returns

APA has a solid and consistent distribution record

==> picture [443 x 303] intentionally omitted <==

----- Start of picture text -----

APA and HDF annual distribution per security [(1) ]
40
APA
HDF
34.4
32.8
30
31.0
29.5
28.0 28.0
26.9
25.6
24.4 24.0
23.0
20
10 12.0 12.0
10.0
0
2005 2006 2007 2008 2009 2010 2011
cents per security
----- End of picture text -----

 APA distributions increased steadily from 23.0 cents per security in 2005 to 34.4 cents in 2011, representing a compound annual growth rate of 6%

• HDF distributions have reduced from 24.4 cents per security in 2005 to 10 cents in 2011, representing a compound annual growth rate of negative 12%

• (1) APA has a financial year end of 30 June compared to a HDF financial year end of 31 December. For clarity and in order to provide a basis of comparison, the historical figures for APA and HDF are based on figures as at their respective financial year end dates

• APA, 14 December 2011

 10

Benefits – Quality management, energy industry know-how and robust financial capability

Proven management expertise consistently delivering on APA’s strategy

• Increased assets owned and/or operated from $1.4 billion in June 2000 to approximately $9 billion today through organic growth and strategic acquisitions

• Extensive experience in the pipeline industry as owner and operator of an infrastructure business

• A national team of 1,200 employees working closely with assets and customers

• Responding to the dynamics of the gas market with innovative solutions and new services for customers

• Track record of successful integration of acquisitions

• Successful development and expansion of gas pipelines and associated assets

• Consistent strong business performance, adhering to strategy and generating value for customers and securityholders

 11

APA, 14 December 2011

Benefits – Quality management, energy industry know-how and robust financial capability

Robust financial capability – competitive funding of current and future growth opportunities

 Diversified funding structure, strongly supported by debt and equity markets, as seen in recent financing transactions

$300 million equity raising to fund acquisitions & organic growth projects

$150 million 5-year bilateral bank facility

$1.45 billion of syndicated bank debt facilities to refinance $900 million maturing in June 2012 and $515 million facilities maturing in July 2013

$300 million 10 year, fixedFour $75 million rate Australian dollar 3-year bilateral Medium Term Notes debt facilities JUL JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 2010 2011 2011

 All the above debt raisings were completed on market competitive terms.

 12

APA, 14 December 2011

Benefits – Self managed and transparent structure, free from external management fees

Transparent business structure

No external management fees

• Self-managed – directors, management and employees are part of APA

• No fee ‘leakage’ to external managers

• Securityholders benefit from the full financial performance of the business

Proposed business structure of the combined group

APA Securityholders

==> picture [316 x 110] intentionally omitted <==

----- Start of picture text -----

Combined Group
Directors,
APA HDF
management
assets assets
& workforce
----- End of picture text -----

• Parties external to HDF have benefited from HDF’s performance

  • To date, HDF payments (management fees and performance fees) to its responsible entity total $80 million[(1)] , equivalent to 25% of distributions paid to HDF securityholders

  • As a result of this Offer, it is expected HDF’s responsible entity will be entitled to substantial additional performance fees

  • A condition of the Offer includes a restriction on the timing, nature and amount of the performance fee

• (1) Figures based on HDF published accounts since listing in December 2004. Performance fees have historically been paid to the HDF Responsible Entity in HDF securities at a price of $2.56

 13

APA, 14 December 2011

Benefits – Invest in a significantly larger entity offering scale & diversity, while retaining exposure to HDF assets

Australia's largest gas pipeline owner and operator

• APA is Australia’s largest gas transmission business owning and/or operating over 12,800 km of gas pipelines

Australia’s largest natural gas pipeline owners

• Together with the HDF pipelines, the combined group will own and/or operate over 15,000 km of gas pipelines

==> picture [770 x 242] intentionally omitted <==

----- Start of picture text -----

 The combined group will have an
DUET 1,480 km – 80% Dampier Bunbury Pipeline
unrivalled asset portfolio
Singapore 1,800 km – Eastern Gas Pipeline, Queensland Gas Pipeline, Jemena pipelines
Power – Enhanced ability to transport
HDF 2,445 km – Epic Energy pipelines gas from all connected major
APA 12,855 km [(1)] gas fields to all connected major
gas markets across the country
Combined –
15,300 km [(1)] Well positioned to grow in line
Group
with the increasing demand for
2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 natural gas in Australia.
APA energy investments Pipeline length (km)
SEA Gas
Envestra
EII
HDF
----- End of picture text -----

• The combined group will have an unrivalled asset portfolio

• Enhanced ability to transport gas from all connected major gas fields to all connected major gas markets across the country

(1) Includes the 100% of the pipelines operated by APA Group which form part of its energy investments

 14

APA, 14 December 2011

Benefits – Invest in a significantly larger entity offering scale & diversity, while retaining exposure to HDF assets

Diversified sources of EBTIDA by both asset and geography

Pro forma FY11 EBITDA by business segment ($459 million)

==> picture [340 x 255] intentionally omitted <==

----- Start of picture text -----

Asset Other
Management 0%
Energy 9%
Investments
6%
Qld
Energy
16%
Infrastructure
85%
NSW
WA & NT
22%
22%
Vic & SA
25%
----- End of picture text -----

• APA has a diversified pro forma EBITDA by both asset and geography

• No single asset in its portfolio contributes more than 25% of EBITDA

• No single region contributes more than 25% of EBITDA

• The combined group should continue to deliver the benefits from its size and diversity to its customers and APA securityholders.

 15

APA, 14 December 2011

Benefits – Invest in a significantly larger entity offering scale & diversity, while retaining exposure to HDF assets

A larger combined group by market capitalisation

==> picture [434 x 279] intentionally omitted <==

----- Start of picture text -----

$3.6 bn
$2.9 bn
$2.7 bn
$1.9 bn
$1.7 bn
$1.1 bn
$0.9 bn
HDF (#167) ENV (#150) SKI (#108) DUE (#97) SPN (#76) APA (#71) Combined
Group
Listed Australian infrastructure utilities (~#55)
(rank by market capitalisation [(1)] )
----- End of picture text -----

• HDF has a market capitalisation of $0.9 billion[(2) ]

• The combined group will have a market capitalisation of around $3.6 billion[(3) ]

• Expected to be the largest listed energy infrastructure business, ranked in the top 60 entities in the ASX All Ordinaries

• (1) ASX All Ordinaries position based on closing market capitalisation as at 9 December 2011.

• (2) Based on the 5 day VWAP of HDF securities on 13 December 2011 of $1.78 and HDF securities on issue of 530,001,072.

• (3) The expected total securities on issue for the combined group is the sum of the existing number of APA securities on issue (639,334,625) and the APA securities expected to be issued to HDF securityholders as consideration and any APA securities issued to the HDF Responsible Entity under the Offer. The combined group market capitalisation is calculated by multiplying the expected total securities on issue by the closing price of APA securities on 13 December 2011 of $4.60.

 16

APA, 14 December 2011

Benefits – Invest in a significantly larger entity offering scale & diversity, while retaining exposure to HDF assets

Further enhances APA’s position as Australia’s largest gas infrastructure business

APA quick facts

ASX listed Stapled Trust Listed 13 June 2000

Self managed and operated

Investment portfolio:

Natural gas pipelines (12,800 km owned and/or operated), gas storage, power generation , energy investments and asset management

HDF quick facts

ASX listed Stapled Trust Listed 13 December 2004

An investment vehicle managed by Hastings Funds Management Limited, a subsidiary of Westpac Banking Corporation

APA energy infrastructure assets APA energy investments HDF gas transmission pipelines Other gas pipelines

Investment portfolio :

100% ownership of Epic (2,445 km of gas transmission pipelines) and cash

 17

APA, 14 December 2011

Offer conditions and timing

Key Offer conditions[(1) ]

• 90% minimum acceptance

• ACCC clearance and FIRB approval

 Market disclosure of security arrangements of financing (including mezzanine debt)

• Capping of performance fee for HDF

Timing

Announcement	14 December 2011
Bidder’s Statement dispatched to HDF securityholders	Early January 2012
Offer close	31 March 2012 unless extended or withdrawn

• (1) Full conditions attached to the ASX announcement and to be contained in the Bidder’s Statement

 18

APA, 14 December 2011

Sale of 80% of APA Gas Network (Allgas)

• Creation of APA’s third Energy Infrastructure Investment model

• Strong support by quality equity and debt investors

• Equity participants Marubeni Corporation and RREEF

• Project specific non-recourse funding provided by leading group of Australian and Asian banks

• APA will have continued exposure to the assets

==> picture [355 x 202] intentionally omitted <==

----- Start of picture text -----

Marubeni
APA Group RREEF
Corporation
20% 40% 40%
APA corporate, asset
management and
operating services
under a long term
agreement
GDI EII
Non-recourse
bank debt
Allgas Networks
----- End of picture text -----

• Minority equity interest of 20%

• 10-year asset management and operation agreement

• Net enterprise value of $526 million (after transaction costs)

• FY11 EBITDA multiple of 15 times

• Net proceeds of around $477 million

==> picture [359 x 228] intentionally omitted <==

----- Start of picture text -----

Oakey
distribution area
Brisbane
ROMA BRISBANE PIPELINE
Toowoomba
Brisbane
distribution area
distribution area
Gold Coast
distribution area
QUEENSLAND Tweed
Heads
NEW SOUTH WALES
----- End of picture text -----

 19

APA, 14 December 2011

Impacts for APA

 Financial strength maintained

– Cash component of acquisition funded by cash in the business and to be supported by Allgas transaction

• Gearing reduces to around 65%

• EBITDA and distribution guidance for financial year 2012 unchanged

• EBITDA guidance retained – $530 million to $540 million

• Distribution guidance maintained – at least 34.4 cents per security

 20

APA, 14 December 2011

==> picture [842 x 186] intentionally omitted <==

Questions

 21

APA, 14 December 2011

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, and the Bidder’s Statement to be lodged on or about the date of this presentation.

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.

 22

APA, 14 December 2011

==> picture [842 x 186] intentionally omitted <==

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