Australian Pipeline Ltd ACN 091 344 704 | Australian Pipeline Trust ARSN 091 678 778 | APT Investment Trust ARSN 115 585 441 Level 25, 580 George Street Sydney NSW 2000 | PO Box R41 Royal Exchange NSW 1225 Phone +61 2 9693 0000 | Fax +61 2 9693 0093 APA Group | apa.com.au

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25 August 2021

ASX ANNOUNCEMENT

APT Pipelines Limited (ASX: AP2)

ANNUAL REPORT

The following announcement is attached for release:

APT Pipelines Limited Annual Financial Report

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Authorised for release by Nevenka Codevelle

Company Secretary APT Pipelines Limited

For further information, please contact:

Investor enquiries: Mark Ley General Manager, Investor Relations Telephone: +61 2 8044 7045 Mob: +61 419 491 712 Email: [email protected]

Media enquiries:

Ben Pratt

General Manager, External Affairs & Reputation Telephone: +61 2 9228 8300 Mob: +61 419 968 734 Email: [email protected]

About APA Group (APA)

APA is a leading Australian Securities Exchange (ASX) listed energy infrastructure business. We own and/or manage and operate a diverse, $21 billion portfolio of gas, electricity, solar and wind assets. Consistent with our purpose to strengthen communities through responsible energy, we deliver approximately half of the nation’s gas usage and connect Victoria with South Australia and New South Wales with Queensland through our investments in electricity transmission assets. We are also one of the largest owners and operators of renewable power generation assets in Australia, with wind and solar projects across the country.

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APT Pipelines Limited is a wholly owned subsidiary of Australian Pipeline Trust and is the borrowing entity of APA Group.

For more information visit APA’s website, apa.com.au.

APT Pipelines Limited ABN 89 009 666 700

APT Pipelines Limited and its Controlled Entities (ABN 89 009 666 700) Annual Report for the year ended 30 June 2021

APT	PIPELINES LIMITED DIRECTORS’ REPORT	1
1	Directors	1
2	Principal Activities	1
3	State of Affairs	1
4	Subsequent Events	1
5	Review of Operations	2
5.1	Capital Management	2
5.2	Interest costs	3
5.3	Credit ratings	4
5.4	Dividends	4
6	Options Granted	4
7	Indemnification of Officers	4
8	Auditor’s independence declaration	4
9	Rounding of amounts	4
10	Authorisation	5

APT PIPELINES LIMITED CONSOLIDATED FINANCIAL STATEMENTS

APT Pipelines Limited and its Controlled Entities (ABN 89 009 666 700) Directors’ Report for the year ended 30 June 2021

APT PIPELINES LIMITED DIRECTORS’ REPORT

The Directors of APT Pipelines Limited (“APTPL”) submit their report and the annual financial report of APTPL and its controlled entities (together “Consolidated Entity”) for the financial year ended 30 June 2021.

1 Directors

The names of the Directors of the Consolidated Entity during the year and since the year end are:

	First appointed
Current Directors:
Michael Fraser	1 September 2015
	Chairman: 27 October 2017
Robert (Rob) Wheals	Chief Executive Officer and Managing Director: 6 July 2019
Steven (Steve) Crane	1 January 2011
James Fazzino	21 February 2019
Debra (Debbie) Goodin	1 September 2015
Shirley In’t Veld	19 March 2018
Rhoda Phillippo	1 June 2020
Peter Wasow	19 March 2018

The Company Secretaries of the Consolidated Entity during the year and since the year end is Nevenka Codevelle and Amanda Cheney.

2 Principal Activities

The principal activities of the Consolidated Entity during the course of the year were investment in controlled entities and acting as the borrowing entity for APA Group, that comprises Australian Pipeline Trust and APT Investment Trust and their controlled entities (“APA”). The principal activities of APA during the course of the year were the ownership and operation of energy infrastructure assets and businesses, including:

energy infrastructure, comprising gas transmission, gas storage and processing; gas-fired and renewable energy power generation businesses located across Australia;
asset management services for the majority of APA’s energy investments and for third parties; and
energy investments in unlisted entities.

There were no significant changes in the principal activities of the Consolidated Entity during the reporting period.

State of Affairs

On 16 November 2020, Adam Watson commenced as APA’s Chief Financial Officer, as a result of Peter Fredricson’s retirement on 31 December 2020.

Subsequent Events

Other than what is noted above and as disclosed elsewhere in this report, there has not arisen in the interval between the end of the full year to 30 June 2021 and the date of this report any matter or circumstance that has significantly affected, or may significantly affect, the Consolidated Entity’s

APT Pipelines Limited and its Controlled Entities (ABN 89 009 666 700) Directors’ Report for the year ended 30 June 2021

operations, the results of those operations, or the Consolidated Entity’s state of affairs, in future financial years.

5 Review of Operations

The Consolidated Entity reported a loss after tax of $19.4 million (FY20: $280.0 million profit) on total revenue of $2,602.2 million (FY20: $2,587.5 million).

5.1 Capital Management

As at 30 June 2021, APA had 1,179,893,848 securities on issue. This is unchanged from 30 June 2020.

APA funds its growth with appropriate levels of equity, cash retained in the business and debt, in order to maintain investment grade BBB and Baa2 credit ratings from Standard & Poor’s and Moody’s, respectively.

As at 30 June 2021, APA had $1.9 billion in cash and committed undrawn facilities available to assist in the ongoing funding of the business and planned growth activities.

As at 30 June 2021 APA had $9,665.8 million ($9,983.6 million as at 30 June 2020) of committed drawn debt facilities, with an additional $1,250 million of undrawn committed bank facilities available to the business.

APA has issued debt into a diverse range of global bond and banking markets, such as US Private Placement Notes, Medium Term Notes in several currencies (Australian dollars, Euros, Sterling and Japanese Yen), United States 144A Notes and Australian dollar Syndicated and Bilateral bank facilities. The debt portfolio has a broad spread of maturities extending out to FY36, with an average maturity of drawn debt of 7.8 years as at 30 June 2021.

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APA debt maturity profile and diversity of funding sources (1)
(2)
(3)
Notes: (1) APA debt maturity profile as at 30 June 2021.
(2) Debt capital market (DCM) bonds:
(3) USD denominated obligations translated to AUD at the prevailing rate at inception (USD144A - AUD/USD=0.7879, Euro &
Sterling MTNs at AUD/USD=0.7772).
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APA maintains a prudent treasury policy that requires high levels of interest rate hedging to minimise the potential impacts from adverse market movements. As at 30 June 2021, 100% (30 June 2020: 100%) of interest obligations on gross borrowings were either hedged into or issued at fixed interest rates for varying periods extending out to 2036.

In March 2021, APA priced and settled the EUR 1,100 million and GBP 250 million senior unsecured notes. The $2.2 billion of proceeds from the issuances, coupled with approximately $200 million of

APT Pipelines Limited and its Controlled Entities (ABN 89 009 666 700) Directors’ Report for the year ended 30 June 2021

available cash on hand, will be used to refinance all of APA’s debt that matures in calendar 2022 and terminate associated hedges. The facilities to be refinanced and associated hedges include:

EUR MTN 700m swapped into A$1,132m at a fixed rate of 4.45%
USPP Notes US$124m swapped into A$154m at a fixed rate of 7.39%
USPP Notes A$81m at a fixed rate of 7.45%
USPP Notes A$62m at a fixed rate of 7.45%
US 144A Notes US$750m swapped into A$735m at a fixed rate of 6.68%

Through its FY21 financing activities, APA has been able to extend the average tenor of its debt facilities and lower the average cost of its debt portfolio in difficult market conditions. The diverse debt portfolio and the strong BBB/Baa2 credit ratings enable APA to raise appropriate amounts of debt from the global debt capital markets in a timely and efficient manner to support growth and its existing operations.

APA acquired the Wallumbilla Gladstone Pipeline in June 2015, with revenues denominated in USD from the 20-year foundation contracts. Tariffs are escalated in January each year by US CPI, with operating costs passed through to the shippers. Today, around US$3 billion (i.e. US 144A Notes maturing in 2025 and 2035, Euro MTN maturing in 2027 and Sterling MTN maturing in 2030), of the original US$3.7 billion of debt that was borrowed to assist with funding of that acquisition, is retained in, or swapped into, US dollar denominated debt obligations at an all-in annual rate of around 4.61%. This USD debt is being managed as a “designated hedge” for those virtually certain US dollar denominated revenues.

APA has hedged the US dollar denominated Wallumbilla Gladstone Pipeline revenues receivable to March 2022 at the rates in the table below.

Period	Average forward USD/AUD exchange
	rate
FY21	0.7199
FY22 (to March 2022)	0.7099
April 2022 onwards(1)	designated hedge relationship

Note:1) For periods where the revenue has been designated against the debt repayments and in absence of any swap hedges that APA enters into, USD denominated obligations was translated to AUD at the prevailing rate at inception (USD144A – AUD/USD=0.7879, Euro & Sterling MTNs at AUD/USD=0.7772).

A large portion of the net revenue from April 2022 onwards remains in the designated hedge relationship with the remaining US$3 billion in debt and as such, when that revenue is received and hedged, it will be recognised in the statement of profit or loss at those future rates.

5.2 Interest costs

Net interest costs excluding significant items decreased in FY21 by $11.6 million to $524.6 million (FY20: $536.2 million). Net interest costs including significant items increased by $148.0 million to $672.6 million in FY21, due to one-off finance costs related to the bond note redemptions completed during the period.

The average interest rate (including credit margins) applying to drawn debt was 5.08%[ (1)] for FY21 (FY20: 5.43%), reflective of the partial year impact of the new lower interest cost attributable to the EUR 1,100 million and GBP 250 million senior unsecured Euro Medium Term Notes.

1 Excludes one-off finance cost related the bond note redemptions completed during FY21.

APT Pipelines Limited and its Controlled Entities (ABN 89 009 666 700) Directors’ Report for the year ended 30 June 2021

5.3 Credit ratings

APT Pipelines Limited, the borrowing entity of APA, maintained the following two investment grade credit ratings during FY21:

BBB long-term corporate credit rating assigned by Standard & Poor’s (S&P) in June 2009, and last confirmed on 19 November 2020; and
Baa2 long-term corporate credit rating (outlook Stable) assigned by Moody’s Investors Service (Moody’s) in April 2010, and last confirmed on 29 May 2021.

APA calculates the Funds From Operations (FFO) to Interest to be 3.1 times (FY20: 3.3 times) and FFO to Net Debt to be 11.3% for FY21 (FY20: 12.2%). FFO to Net Debt is the key quantitative measure used by S&P and Moody’s to assess APA’s credit worthiness and credit rating.

5.4 Dividends

Unfranked dividends of $97.0 million were paid to the sole shareholder, Australian Pipeline Trust, during the financial year (FY20: $235.2 million).

6 Options Granted

No options over unissued shares or interests in APTPL were granted during or since the end of the financial year, no unissued APTPL securities were under option as at the date of this report, and no APTPL securities were issued during or since the end of the financial year as a result of the exercise of an option over unissued APTPL securities.

Indemnification of Officers

During the financial year, the Responsible Entity of APA Group ensured a premium was paid in respect of a contract insuring the Directors and Officers of the Responsible Entity and any APA Group entity, of which APTPL is a part, against any liability incurred in performing those roles to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the specific nature of the liability and the amount of the premium.

Australian Pipeline Limited, in its own capacity and as Responsible Entity of Australian Pipeline Trust and APT Investment Trust, indemnifies each Director and Company Secretary, and certain other executives, former executives and officers of the Responsible Entity or any APA Group entity under a range of deed polls and indemnity agreements which have been in place since 1 July 2000. The indemnity operates to the full extent allowed by law but only to the extent not covered by insurance, and is on terms the Board considers usual for arrangements of this type.

Under its constitution, Australian Pipeline Limited (in its personal capacity) indemnifies each person who is or has been a Director, Company Secretary or executive officer of that company.

The Responsible Entity has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer or external auditor of the Responsible Entity or any APA Group entity against a liability incurred by such an officer or auditor.

Auditor’s independence declaration

A copy of the independence declaration of the auditor, Deloitte Touche Tohmatsu (“Auditor”) as required under section 307C of the Corporations Act 2001 is included at page 78.

APTPL is an entity of the kind referred to in ASIC Corporation’s Instrument 2016/191 and, in accordance with that Class Order, amounts in the Directors’ report and the financial report are rounded to the nearest thousand dollars, unless otherwise indicated.

9 Rounding of amounts

APT Pipelines Limited and its Controlled Entities (ABN 89 009 666 700) Directors’ Report for the year ended 30 June 2021

The Directors’ Report is signed in accordance with a resolution of the Directors of APTPL made pursuant to section 298(2) of the Corporations Act 2001.

On behalf of the Directors

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Michael Fraser Chairman

Robert Wheals CEO and Managing Director

SYDNEY, 25 August 2021

10 Authorisation

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 30 June 2021

For the financial year ended 30 June 2021
			Restated
		2021	2020
	Note	$000	$000
Revenue	4	2,575,236	2,559,919
Share of net profits of associates andjoint ventures usingthe equity method	4	26,946	27,540
		2,602,182	2,587,459
Asset operation and management expenses		(214,404)	(218,350)
Depreciation and amortisation expenses(a)	5	(674,370)	(650,806)
Other operating costs – pass-through	5	(460,465)	(461,155)
Finance costs(b)	5	(675,725)	(538,810)
Employee benefit expense	5	(286,549)	(249,690)
Other expenses(a)		(15,786)	(13,596)
Fair value gains on contract for difference	18	18,018	10,508
Impairment ofproperty,plant and equipment(c)	12	(249,322)	-
Profit before tax		43,579	465,560
Income tax expense(a)	6	(62,955)	(185,536)
(Loss)/profit for the year		(19,376)	280,024
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit plan		23,582	(28,103)
Income tax relatingto items that will not be reclassified subsequently		(7,075)	8,431
		16,507	(19,672)
Items that may be reclassified subsequently to profit or loss:
Transfer of gain on cash flow hedges to profit or loss		28,916	80,184
Gain/(loss) on cash flow hedges taken to equity		435,895	(206,864)
Gain/(loss) on associate hedges taken to equity		9,313	(5,139)
Income tax relatingto items that may be reclassified subsequently		(142,241)	39,545
		331,883	(92,274)
Other comprehensive income for the year(net of tax)		348,390	(111,946)
Total comprehensive income for theyear		329,014	168,078
(Loss)/profit attributable to:
Equityholders of the parent		(42,111)	255,651
Non-controlling– other		22,735	24,373
		(19,376)	280,024
Total comprehensive income attributable to:
Equityholders of the parent		306,279	143,705
Non-controlling– other		22,735	24,373
		329,014	168,078

(a) FY20 is restated as a result of change in the Consolidated Entity's accounting policy following the IFRS Interpretations Committee's ("IFRIC") Agenda Decision published in April 2021 related to accounting for Software-as-a-Service ("SaaS") arrangements. Refer to note 10.

(b) Includes a once-off interest charge of $148.0 million reflecting swap termination costs, realised net foreign exchange movements and make-whole charges associated with bond note redemptions completed during the year. Refer to note 2 for further details.

(c) An impairment loss of $249.3 million has been recognised for Orbost Gas Processing Plant. Refer to note 2 and 12 for further details.

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Financial Position

As at 30 June 2021

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Financial Position As at 30 June 2021
			Restated
		2021	2020
	Note	$000	$000
Current assets
Cash and cash equivalents	17	652,229	1,172,649
Trade and other receivables	8	277,303	264,137
Receivables from related parties	8	181,769	186,263
Other financial assets	19	56,717	32,748
Inventories		41,066	34,181
Other		26,976	22,101
Assets classified as held for sale(a)		343	-
Current assets		1,236,403	1,712,079
Non-current assets
Trade and other receivables	8	10,375	11,639
Other financial assets	19	218,900	581,027
Investments accounted for using the equity method	22	225,159	212,782
Property, plant and equipment(b)	10	9,500,772	9,766,411
Goodwill	11	1,183,604	1,183,604
Other intangible assets(b)	11	2,481,336	2,669,970
Other	14	31,458	29,151
Non-current assets		13,651,604	14,454,584
Total assets		14,888,007	16,166,663
Current liabilities
Trade and other payables(b)	9	314,894	278,313
Payables to related parties	9	2,209,924	2,578,536
Lease liabilities	16	14,723	14,397
Borrowings	17	2,721	310,613
Other financial liabilities	19	169,031	186,347
Provisions	13	93,759	89,636
Unearned revenue		10,750	10,753
Liabilities directlyassociated with assets classified as held for sale(a)		258	-
Current liabilities		2,816,060	3,468,595
Non-current liabilities
Trade and other payables	9	13,390	4,826
Payables to related parties	9	671,615	798,250
Lease liabilities	16	54,405	62,404
Borrowings	17	9,921,317	10,607,382
Other financial liabilities	19	262,117	427,638
Deferred tax liabilities	6	883,412	736,065
Provisions	13	102,352	115,905
Unearned revenue		63,336	56,737
Non-current liabilities		11,971,944	12,809,207
Total liabilities		14,788,004	16,277,802
Net assets/(liabilities)		100,003	(111,139)

(a) Relates to the Consolidated Entity's 50% ownership in Mid West Pipeline to be disposed of in the next 12 months.

(b) FY20 is restated as a result of change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for SaaS arrangements. Refer to note 10.

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Financial Position (continued)

As at 30 June 2021

As at 30 June 2021
			Restated
		2021	2020
	Note	$000	$000
Equity
APT Pipelines Limited equity:
Issued capital	20	117,330	117,330
Reserves		(354,632)	(688,378)
Retained earnings(a)		218,052	340,656
Equity attributable to equityholders of the parent		(19,250)	(230,392)
Non-controllinginterest	21	119,253	119,253
Total equity		100,003	(111,139)

(a) FY20 is restated as a result of change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for SaaS arrangements. Refer to note 10.

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Changes in Equity

For the financial year ended 30 June 2021

	Restated attributable Asset Share-based to owners Non- Issued revaluation payments Hedging Retained of the Issued Other Retained controlling capital reserve(a) reserve(b) reserve(c) earnings parent capital reserves earnings Interest Total $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 Non-controlling interest APT Pipelines Limited and its Controlled Entities
Balance at 1 July 2019 Impact of changes in accounting standards(d) Impact of changes in accounting policies(e)	117,330 8,669 - (605,425) 352,129 (127,297) 119,253 - - 119,253 (8,044) - - - - (8,610) (8,610) - - - - (8,610) (3,642) (3,642) - - - - (3,642)
Restated balance at 1 July 2019	117,330 8,669 - (605,425) 339,877 (139,549) 119,253 - - 119,253 (20,296)
Restated profit for the year(e) Other comprehensive income Income tax relating to components of other comprehensive income	- - - - 255,651 255,651 - - 24,373 24,373 280,024 - - - (131,819) (28,103) (159,922) - - - - (159,922) - - - 39,545 8,431 47,976 - - - - 47,976
Total comprehensive income for the year	- - - (92,274) 235,979 143,705 - - 24,373 24,373 168,078
Payment of dividends Equity settled long-term incentives (net of any tax)	~~-~~ - - - - (235,200) (235,200) - - (24,373) (24,373) (259,573) 652 652 652
Restated balance at 30 June 2020	117,330 8,669 652 (697,699) 340,656 (230,392) 119,253 - - 119,253 (111,139)
Restated balance at 1 July 2020 (Loss)/profit for the year Other comprehensive income Income tax relating to components of other comprehensive income	117,330 8,669 652 (697,699) 340,656 (230,392) 119,253 - - 119,253 (111,139) - - - - (42,111) (42,111) - - 22,735 22,735 (19,376) - - - 474,124 23,582 497,706 - - - - 497,706 - - - (142,241) (7,075) (149,316) - - - - (149,316)
Total comprehensive income for the year	- - - 331,883 (25,604) 306,279 - - 22,735 22,735 329,014
Payment of dividends Equity settled long-term incentives (net of any tax)	~~-~~ - - - - (97,000) (97,000) - - (22,735) (22,735) (119,735) 1,863 1,863 1,863
Balance at 30 June 2021	117,330 8,669 2,515 (365,816) 218,052 (19,250) 119,253 - - 119,253 100,003

(a) The asset revaluation reserve arose on the revaluation of the existing interest in a pipeline as a result of a business combination. Where revalued pipelines are sold, the portion of the asset revaluation reserve which relates to that asset is effectively realised and is transferred directly to retained earnings. The reserve can be used to pay distributions only in limited circumstances.

(b) The share-based payments reserve represents the expenses recognised in the Consolidated Statement of Profit or Loss equal to the portion of the services received based on the fair value of the equity instrument at grant date.

(c) The hedging reserve represents the effective portion of the cumulative net change in the fair value of cash flow hedges instruments related to hedged transactions that have not yet occurred. The cumulative deferred gain or loss on the hedge is recognised in the Consolidated Statement of Profit or Loss when the hedged transaction impacts profit or loss, consistent with the applicable accounting policy.

(d) The Consolidated Entity has adopted AASB 16 Leases on a modified retrospective basis. This resulted in a charge of $8.6 million to retained earnings as at 1 July 2019, being the cumulative effect on initial application of the standard.

(e) FY20 is restated as a result of change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for SaaS arrangements. Refer to note 10.

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Cash Flows

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Cash Flows For the financial year ended 30 June 2021
			Restated
		2021	2020
	Note	$000	$000
Cash flows from operating activities
Receipts from customers		2,868,751	2,791,066
Payments to suppliers and employees(a)		(1,272,350)	(1,220,675)
Dividends received from associates and joint ventures		23,882	59,224
Proceeds from repayments of finance leases		1,155	1,272
Interest received		6,629	7,912
Interest and other costs of finance paid		(501,731)	(496,373)
Net cashprovided by operating activities		1,126,336	1,142,426
Cash flows from investing activities
Payments for property, plant and equipment(a)		(418,316)	(408,167)
Proceeds from sale of property, plant and equipment		908	485
Payments for intangible assets(b)		(10,758)	(10,741)
Repayments of loans by related parties		-	122,284
Net cash used in investing activities		(428,166)	(296,139)
Cash flows from financing activities
Proceeds from borrowings		2,358,421	1,987,812
Repayments of borrowings		(2,866,999)	(1,368,836)
Repayments of lease liabilities		(16,046)	(13,482)
Transaction costs related to borrowings		(13,798)	(6,870)
Proceeds from early settlement of derivatives		1,085	8
Dividends paid to:
Equityholders of APT Pipelines Limited	7	(97,000)	(235,200)
Equityholders of the non-controlling interest		(22,735)	(24,373)
Advances to related parties		(561,244)	(367,599)
Net cash(used in)/provided by financing activities		(1,218,316)	(28,540)
Net (decrease)/increase in cash and cash equivalents		(520,146)	817,747
Cash and cash equivalents at beginning of financial year		1,172,649	354,854
Effect of exchange rate changes on cash and cash equivalents		(274)	48
Cash and cash equivalents at end of financialyear		652,229	1,172,649

(a) FY20 expense is restated as a result of change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for SaaS arrangements. Refer to note 10.

(b) Balance is re-presented to reflect the software and licences that are reclassified from property, plant and equipment to intangible assets.

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Cash Flows (continued) For the financial year ended 30 June 2021

Reconciliation of profit for the year to net cash provided by operating activities

			Restated
		2021	2020
	Note	$000	$000
(Loss)/profit for the year(a)		(19,376)	280,024
Impairment of property, plant and equipment(b)	12	249,322	-
Profit on disposal of property, plant and equipment		(606)	(464)
Share of net profits of joint ventures and associates using the equity method		(26,945)	(27,540)
Dividends/distributions received from equity accounted investments		23,882	59,224
Depreciation and amortisation expense(a)		674,370	650,806
Finance costs(b)		138,023	14,821
Effect of exchange rate changes		14,439	11,007
Amortisation of hedging loss		8,297	6,885
Equity settled long-term incentives		2,634	-
Changes in assets and liabilities:
Trade and other receivables		(13,167)	(19,285)
Inventories		(6,885)	(3,218)
Other assets		(4,291)	(4,639)
Trade and other payables		6,090	5,028
Provisions		5,747	(10,954)
Other liabilities		11,847	(4,805)
Income tax balances		62,955	185,536
Net cashprovided by operating activities		1,126,336	1,142,426

(a) FY20 is restated as a result of change in the Consolidated Entity accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for SaaS arrangements. Refer to note 10. (b) Refer to note 2 significant items section for details.

Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements For the financial year ended 30 June 2021

Basis of Preparation

1. About this report

In the following financial statements, note disclosures are grouped into six sections being: Basis of Preparation; Financial Performance; Operating Assets and Liabilities; Capital Management; Group Structure; and Other. Each note sets out the accounting policies applied in producing the results along with any key judgements and estimates used.

Basis of Preparation	Financial Performance Operating Assets and Liabilities
1. About this report 3. Segment information 8. Receivables 2. General information 4. Revenue 9. Payables 5. Expenses 10. Property, plant and equipment 6. Income tax 11. Goodwill and intangibles 7. Dividends 12. 13. Provisions 14. Other non-current assets 15. Employee superannuation plans 16. Leases Capital Management Group Structure Other 17. Net debt 21. Non-controlling interests 24. Commitments and contingencies 18. Financial risk management 22. 25. 19. Other financial instruments 23. Subsidiaries 20. Issued capital 26. Remuneration of external auditor 27. Related party transactions 28. Parent entity information 29. 30. Director and Executive Key Management Personnel remuneration Impairment of non-financial assets Joint arrangements and associates Adoption of new and revised Accounting Standards Events occurring after reporting date

Basis of Preparation

Financial Performance
Operating Assets and Liabilities

1. About this report
3. Segment information
8. Receivables
2. General information
4. Revenue
9. Payables
5. Expenses
10. Property, plant and equipment
6. Income tax
11. Goodwill and intangibles
7. Dividends
12.
13. Provisions
14. Other non-current assets
15. Employee superannuation plans
16. Leases
Capital Management
Group Structure
Other
17. Net debt
21. Non-controlling interests
24. Commitments and contingencies
18. Financial risk management
22.
25.
19. Other financial instruments
23. Subsidiaries
20. Issued capital
26. Remuneration of external auditor
27. Related party transactions
28. Parent entity information
29.
30.
Director and Executive Key
Management Personnel
remuneration
Impairment of non-financial assets
Joint arrangements and
associates
Adoption of new and revised
Accounting Standards
Events occurring after reporting
date

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Basis of Preparation

2. General information

APT Pipelines Limited ("APTPL") is a subsidiary of Australian Pipeline Trust ("APT"). APT is one of two stapled trusts of APA Group, the other being APT Investment Trust ("APTIT"). APA Group is listed on the Australian Securities Exchange (trading under the code "APA"), registered in Australia and operating in Australia.

The financial report represents the consolidated financial statements of APTPL, its respective subsidiaries and their share of joint arrangements, associates and joint ventures (together the "Consolidated Entity"). For the purposes of preparing the consolidated financial report, the Consolidated Entity is a for-profit entity.

All intragroup transactions and balances have been eliminated on consolidation. Where necessary, adjustments are made to the assets, liabilities, and results of subsidiaries, joint arrangements and associates to bring their accounting policies into line with those used by the Consolidated Entity.

APTPL's registered office and principal place of business are as follows:

Level 25 580 George Street SYDNEY NSW 2000 Tel: (02) 9693 0000

The consolidated general purpose financial report for the year ended 30 June 2021 was authorised for issue in accordance with a resolution of the directors on 25 August 2021.

This general purpose financial report has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board ("AASB") and also comply with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

The financial report has been prepared on the basis of historical cost, except for the revaluation of financial instruments. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) in accordance with ASIC Corporations Instrument 2016/191, unless otherwise stated.

Certain comparative amounts have been re-presented to conform with the current period’s presentation to better reflect the nature of the financial position and performance of the Consolidated Entity.

Working capital position

The working capital position as at 30 June 2021 for the Consolidated Entity is that current liabilities exceed current assets by $1,579.70 million (2020: $1,756.5 million). Excluding current related party loan balances held with Australian Pipeline Trust, the Consolidated Entity's current assets exceed current liabilities by $448.5 million (2020: current assets exceed current liabilities by $635.8 million primarily as a result of current borrowings of $310.6 million and $186.3 million (AUD equivalent) of cash flow hedge liabilities resulting in a net liability position of $1,132.70 million).

As at 30 June 2021, the Consolidated Entity had $1,902.2 million in cash and committed un-drawn bank facilities available (2020: $2,472.6 million) to assist in the ongoing funding of the business. APA continues to fund its growth with appropriate levels of equity, cash retained in the business, and debt in order to maintain strong Baa2/BBB credit ratings.

The Directors continually monitor the Consolidated Entity's working capital position, including forecast working capital requirements and have ensured that there are appropriate refinancing strategies and adequate committed funding facilities in place to accommodate debt repayments as and when they fall due. Further to this Australian Pipeline Limited, as the responsible entity for Australian Pipeline Trust and APT Investment Trust has agreed to provide financial support, to enable the Consolidated Entity to pay its debts as and when they fall due. The financial support is valid for a period of not less than twelve months from the date of signing the financial statements. Based on these factors the financial statements of the Consoldiated Entity have been prepared on a going concern basis.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Basis of Preparation

2. General information (continued)

Foreign currency transactions

Both the functional and presentation currency of the Consolidated Entity is Australian dollars (A$). All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at that date and resulting exchange differences are recognised in profit or loss in the period in which they arise, unless they qualify for hedge accounting.

Critical accounting judgements and key sources of estimation uncertainty

In the process of applying the Consolidated Entity’s accounting policies, a number of judgements and estimates have been made. Judgements and estimates which are material to the financial statements are found in the following disclosures:

●Property, plant and equipment (note 10)
●Impairment of non-financial assets (note 12)
●Fair value of financial instruments (note 18(c))
●Commitments and contingencies (note 24)

Judgements and estimates require assumptions to be made about highly uncertain external factors such as: discount rates; probability factors; the effects of inflation within Reserve Bank of Australia's guidance range; the outlook for global and regional gas market supply-and-demand conditions; contract renewals; asset useful lives; and climate-related risks. As such the actual outcomes may differ as a result of change in these judgements and assumptions.

These judgements, estimates and assumptions are based on most current facts and circumstances and are reassessed on an ongoing basis, the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions in respect of laws, regulations, climate change, licences and recognised practising codes including health, safety and environment, employee entitlements, environmental laws and regulations and asset construction and operation. This may materially affect financial results and the financial position to be reported in future periods.

COVID-19

As a supplier of an essential service of gas transportation and energy generation, the Consolidated Entity has the benefit of stable operating cash flows. There have been no material impacts on the Consolidated Entity’s ability to safely and reliably operate its assets and deliver services to its customers as a result of the COVID-19 pandemic.

Despite the relative stablity of the business, the Consolidated Entity continues to ensure it maintains an appropriate level of liquidity during the uncertainty created by COVID-19.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Basis of Preparation

2. General information (continued)

Significant items

Individually significant items included in profit after income tax expense are as follows:

	2021
	$000
Significant items impacting profit before tax
Impairment of property, plant and equipment(a)	(249,322)
Finance costs associated with bond note redemptions(b)	(147,987)
Total significant items impacting profit before tax	(397,309)
Income tax related to significant items above	119,193
Profit from significant items after income tax	(278,116)

(a) During the year, the Consolidated Entity impaired the carrying value of the Orbost Gas Processing Plant, reflecting the continuation of production levels and expenditure based on the current performance of the asset. Refer to note 12.
(b) In April 2021, APA Group refinanced all of APA’s debt that was due to mature in calendar year 2022 and terminated associated hedges. The facilities to be refinanced and associated hedges include:
EUR MTN 700m swapped into A$1,132m at a fixed rate of 4.45%
USPP Notes US$124m swapped into A$154m at a fixed rate of 7.39%
USPP Notes A$81m at a fixed rate of 7.45%
USPP Notes A$62m at a fixed rate of 7.45%
US 144A Notes US$750m swapped into A$735m at a fixed rate of 6.68%

A once-off interest charge was recognised in the year, reflecting swap termination costs, realised net foreign exchange movements and makewhole charges associated with bond note redemptions completed during the year. APA Group discontinued the application of hedge accounting, as the debt no longer existed and the associated hedges were terminated. The interest charge, cumulative gain or loss and deferred costs of hedging were immediately recognised as finance cost in the statement of profit or loss.

Financial Performance

3. Segment information

The Consolidated Entity operates in one geographical segment, being Australia and the revenue from major products and services is shown by the reportable segments.

The Consolidated Entity comprises the following reportable segments:

Energy infrastructure, includes all of the Consolidated Entity’s wholly or majority owned gas pipelines, gas storage assets, gas compression and processing assets and gas-fired and renewable energy power generation assets;
● Asset management, provides commercial, operating services and/or asset maintenance services to its energy investments and third parties for appropriate fees; and
Energy investments, includes the Consolidated Entity’s strategic stakes in a number of investment vehicles that house energy infrastructure assets, generally characterised by long-term secure cash flows, with low ongoing capital expenditure requirements.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Financial Performance

3. Segment information (continued)

Reportable segments

	Energy	Asset	Energy
	infrastructure	management	investments	Other	Consolidated
2021	$000	$000	$000	$000	$000
Segment revenue(a)
Revenue from contracts with customers	1,989,304	113,755	-	-	2,103,059
Equity accounted net profits	-	-	26,946	-	26,946
Pass-through revenue	52,982	407,483	-	-	460,465
Other income	3,610	2,750	-	-	6,360
Finance lease and investment interest income	1,078	-	1,144	-	2,222
Total segment revenue	2,046,974	523,988	28,090	-	2,599,052
Other interest income					3,130
Consolidated revenue					2,602,182
Segment result
Segment underlying EBITDA(b)	1,621,148	80,337	-	-	1,701,485
Share of net profits of joint ventures and associates using the equity method	-	-	26,946	-	26,946
Finance lease and investment interest income	1,078	-	1,144	-	2,222
Corporate costs	-	-	-	(100,848)	(100,848)
Total underlying EBITDA(b)	1,622,226	80,337	28,090	(100,848)	1,629,805
Fair value gains on contract for difference(c)	18,018	-	-	-	18,018
SaaS configuration/customisation costs(d)	-	-	-	(7,957)	(7,957)
Total reported EBITDA(e)	1,640,244	80,337	28,090	(108,805)	1,639,866
Depreciation and amortisation(d)	(657,781)	(16,589)	-	-	(674,370)
Total reported EBIT(f)	982,463	63,748	28,090	(108,805)	965,496
Net interest cost(g)					(524,608)
Profit before tax excluding significant items					440,888
Income tax expense excludingsignificant items					(182,148)
Profit after tax excluding significant items					258,740
Significant items before tax(h)					(397,309)
Reported profit before tax					43,579
Significant items after tax					(278,116)
Reportedprofit after tax					(19,376)

(a) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial. (b) Earnings before interest, tax, depreciation, and amortisation ("EBITDA") excludes recurring items arising from other activities, transactions that are not directly attributable to the performance of the Consolidated Entity's business operations and significant items. (c) The amount represents a net gain arising from a contract for difference in an electricity sales agreement with a customer that economically hedges the fair value of the electricity sales agreement for which hedge accounting is not applicable (see note 18).

(d) The amount represents the impact of the change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision in April 2021 related to accounting for SaaS arrangements. Refer to note 10.

(e) Earnings before interest, tax, depreciation, and amortisation ("EBITDA") excluding significant items.

(f) Earnings before interest and tax ("EBIT") excluding significant items.

(g) Excluding finance lease and investment interest income, any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting purposes, and interest charge on bond note redemption disclosed as a significant item, but including other interest income.

(h) Refer to note 2 significant items section for details.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

3. Segment information (continued)

Reportable segments (continued)

3. Segment information (continued) Reportable segments (continued)
	Energy	Asset	Energy
	infrastructure	management	investments	Consolidated
2021	$000	$000	$000	$000
Segment assets and liabilities
Segment assets	13,343,010	210,228	10,685	13,563,923
Carrying value of investments using the equity method	-	-	225,159	225,159
Unallocated assets(a)				1,098,925
Total assets				14,888,007
Segment liabilities	444,614	90,007	-	534,621
Unallocated liabilities(b)				14,253,383
Total liabilities				14,788,004

(a) Unallocated assets consist of cash and cash equivalents, fair value of cross currency swaps, foreign currency forward exchange contracts and equity forwards.

(b) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of cross currency swaps, foreign currency forward exchange contracts and equity forwards.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

3. Segment information (continued)

Reportable segments (continued)

3. Segment information (continued) Reportable segments (continued)
	Energy	Asset	Energy
	infrastructure	management	investments	Other	Consolidated
2020(Restated)	$000	$000	$000	$000	$000
Segment revenue(a)
Revenue from contracts with customers	1,973,722	112,367	-	-	2,086,089
Equity accounted net profits	-	-	27,540	-	27,540
Pass-through revenue	49,386	411,769	-	-	461,155
Other income	3,594	205	-	-	3,799
Finance lease and investment interest income	1,176	-	5,064	-	6,240
Total segment revenue	2,027,878	524,341	32,604	-	2,584,823
Other interest income					2,636
Consolidated revenue					2,587,459
Segment result
Segment underlying EBITDA(b)	1,628,291	63,343	-	-	1,691,634
Share of net profits of joint ventures and	-	-	27,540	-	27,540
associates using the equity method
Finance lease and investment interest income	1,176	-	5,064	-	6,240
Corporate costs	-	-	-	(74,972)	(74,972)
Total undelying EBITDA(b)	1,629,467	63,343	32,604	(74,972)	1,650,442
Fair value gains on contract for difference(c)	10,508	-	-	-	10,508
SaaS configuration/customisation costs(d)	760	-	-	(8,410)	(7,650)
Total reported EBITDA(e)	1,640,735	63,343	32,604	(83,382)	1,653,300
Depreciation and amortisation(d)	(634,808)	(16,758)	-	-	(651,566)
Total reported EBIT(f)	1,005,927	46,585	32,604	(83,382)	1,001,734
Net interest cost(g)					(536,174)
Profit before tax					465,560
Income tax expense					(185,536)
Profit for theyear					280,024

(a) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial.

(b) Earnings before interest, tax, depreciation, and amortisation ("EBITDA") excludes recurring items arising from other activities, transactions that are not directly attributable to the performance of the Consolidated Entity's business operations and significant items. (c) The amount represents a net gain arising from a contract for difference in an electricity sales agreement with a customer that economically hedges the fair value of the electricity sales agreement for which hedge accounting is not applicable (see note 18). (d) The amount represents the impact of the change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision in April 2021 related to accounting for SaaS arrangements. Refer to note 10.

(e) Earnings before interest, tax, depreciation, and amortisation ("EBITDA") excluding significant items.

(f) Earnings before interest and tax ("EBIT") excluding significant items.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

3. Segment information (continued)

Reportable segments (continued)

3. Segment information (continued) Reportable segments (continued)
	Energy	Asset	Energy
	infrastructure	management	investments	Consolidated
2020(Restated)	$000	$000	$000	$000
Segment assets and liabilities
Segment assets(a)	13,782,301	198,893	10,685	13,991,879
Carrying value of investments using the equity method	-	-	212,782	212,782
Unallocated assets(b)				1,962,002
Total assets				16,166,663
Segment liabilities	382,446	110,022	-	492,468
Unallocated liabilities(c)				15,785,334
Total liabilities				16,277,802

(b) Unallocated assets consist of cash and cash equivalents, fair value of cross currency swaps, foreign currency forward exchange contracts and equity forwards.

(c) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of cross currency swaps, foreign currency forward exchange contracts and equity forwards.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

4. Revenue

Disaggregation of revenue

Revenue is disaggregated below by business unit and region.

4. Revenue Disaggregation of revenue Revenue is disaggregated below by business unit and region.
	Total
2021	$000
Energy Infrastructure
Wallumbilla Gladstone Pipeline(a)	552,307
East Coast	768,638
West Coast	328,795
Power Generation	339,564
Energy Infrastructure revenue from contracts with customers	1,989,304
Asset Management revenue from contracts with customers	113,755
Energy Investments	28,090
Other non-contract revenue	7,438
Total segment revenue	2,138,587
Pass-through revenue	460,465
Unallocated revenue	3,130
Total revenue	2,602,182
Underlying EBITDA(b)
Wallumbilla Gladstone Pipeline(a)	549,651
East Coast	627,468
West Coast	270,485
Power Generation	174,622
Energy Infrastructure revenue from contracts with customers	1,622,226
Asset Management revenue from contracts with customers	80,337
Energy Investments	28,090
Corporate costs	(100,848)
Total underlying EBITDA(b)	1,629,805

(a) Wallumbilla Gladstone Pipeline is separated from East Coast Grid in this note as a result of the significance of its revenue and EBITDA in the Consolidated Entity. It is categorised as part of the East Coast Grid cash-generating unit for impairment assessment in note 11.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

4. Revenue (continued)

Disaggregation of revenue (continued)

4. Revenue (continued) Disaggregation of revenue (continued)
	Total
2020(Restated)	$000
Energy Infrastructure
Wallumbilla Gladstone Pipeline(a)	541,588
East Coast	771,503
West Coast	323,177
Power Generation	337,454
Energy Infrastructure revenue from contracts with customers	1,973,722
Asset Management revenue from contracts with customers	112,367
Energy Investments	32,604
Other non-contract Revenue	4,975
Total segment revenue	2,123,668
Pass-through revenue	461,155
Unallocated revenue	2,636
Total revenue	2,587,459
Underlying EBITDA(b)
Wallumbilla Gladstone Pipeline	538,924
East Coast	648,778
West Coast	271,164
Power Generation	170,601
Energy Infrastructure revenue from contracts with customers	1,629,467
Asset Management revenue from contracts with customers	63,343
Energy Investments	32,604
Corporate costs(c)	(74,972)
Total underlying EBITDA(b)	1,650,442

(c) FY20 is restated as a result of change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for SaaS arrangements. Refer to note 10.

Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity expects to be entitled in exchange for the provision of services or for the transferring of goods to a customer (the performance obligations) under a contract. The Consolidated Entity recognises revenue when control of a product or service is transferred to the customer. Amounts disclosed as revenue are net of duties, goods and services tax (“GST”) and other taxes paid, except where the amount of GST incurred is not recoverable from the taxation authority. Given the nature of the Consolidated Entity’s services there is no significant right of return or warranty provided.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

4. Revenue (continued)

Revenue from contracts with customers is derived from the major business activities as follows:

Energy Infrastructure revenue from contracts with customers, is derived from the transportation, processing and storage of gas and other related services (transmission revenue), and the generation of electricity and other related services (power generation revenue). Revenue from contracts with customers may either be identified as separate performance obligations or a series of distinct performance obligations that are substantially the same, have the same pattern of transfer and are therefore treated as a single performance obligation that is satisfied over time. This includes both firm and interruptible services. The consideration is primarily volume based and is recognised as revenue in a manner that depicts the transfer based on output to the customer. This method most accurately depicts the progress towards satisfaction of the performance obligation of the services provided, as the customer simultaneously receives and consumes the benefits of the Consolidated Entity’s service and obtains value as each volume of output is transported. The amount billed corresponds directly to the value of the performance to date;
Asset Management revenue from contracts with customers , is derived from the provision of commercial services, operating services, asset management services and/or asset maintenance services to the Consolidated Entity's energy investments and other third parties. The Consolidated Entity applies the practical expedient to recognise revenue at the amount to which the Consolidated Entity has a right to invoice; and
Pass-through revenue, revenue from contracts with customers for which no margin is earned, and is recognised when the services are provided. The Consolidated Entity applies the practical expedient to recognise revenue at the amount to which the Consolidated Entity has a right to invoice. The Consolidated Entity is determined to be the principal in these relationships.

Other types of revenue is recognised as follows:

Other non-contract revenue: includes dividend income, which is recognised when the right to receive the payment has been established, net cost reimbursement of development work for the Crib Point project; and
Unallocated revenue: interest income, which is recognised as it accrues and is determined using the effective interest method and finance lease income, which is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.

Contract liabilities – unearned revenue

Where amounts have been received in advance of fulfilling the contract obligation these amounts are deferred in the balance sheet as unearned revenue until the performance obligation is fulfilled. Where the period between the payment by the customer and the fulfilment of the obligation is expected to exceed one year any amounts associated with the finance component of this deferred revenue are recognised as interest expense.

Included in the unearned revenue are customer upfront contributions on contracts with customers and government grants received in advance. During the year, the Consolidated Entity recognised $8.2 million (2020: $13.2 million) in revenue from contracts with customers from unearned revenue balance at 30 June 2021.

Contract assets – accrued revenue

Contract assets primarily relate to the Consolidated Entity’s right to consideration for work completed but not billed at the reporting date. These amounts are known as accrued revenue and are disclosed in note 8 within Trade and other receivables.

Accrued revenue is transferred to trade receivables when the rights become unconditional. This usually occurs when the Consolidated Entity issues an invoice to the customer.

Accounting for costs to obtain contracts

The Consolidated Entity generally expenses costs to obtain contracts as they are incurred, as they tend to be incurred whether the contract is obtained or not (e.g. staff salaries, professional fees, etc.).

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

4. Revenue (continued)

Future revenues from remaining performance obligations

As at 30 June 2021, future contracted Energy Infrastructure revenues extending through to 2049 are approximately $17.6 billion, of which $1.6 billion is expected to be recognised in 2022. These amounts relate to Energy Infrastructure revenue from contracts, with the bulk of the customers being high credit worthy counterparties.

Future contracted Energy Infrastructure revenues outlined above are in nominal 2021 dollars escalated by CPI. Variable revenues, potential future revenues from new contracts, contract renewals, extensions, and revenues from potential new assets or expansions where a contract does not currently exist with a customer are not included. As such, the future contract revenues only form part of the Consolidated Entity's expected revenues for FY22 and beyond.

Information about major customers

Included in revenues from contracts with customers arising from Energy Infrastructure of $1,989.3 million (2020: $1,973.7 million) are revenues of approximately $720.1 million (2020: $718.8 million) which arose from sales to the Consolidated Entity's top three customers.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Financial Performance

5. Expenses

5. Expenses
		Restated
	2021	2020
	$000	$000
Depreciation of non-current assets(a)	474,978	454,534
Amortisation of non-current assets(b)	199,392	196,272
Depreciation and amortisation expense	674,370	650,806
Energy infrastructure costs – pass-through	52,982	49,386
Asset management costs – pass-through	407,483	411,769
Other operating costs – pass-through	460,465	461,155
Interest on bank overdrafts and borrowings(c)	500,424	498,940
Finance costs associated with bond note redemptions(d)	147,987	-
Interest on related party loans	19,513	27,949
Amortisation of deferred borrowing costs	9,545	7,366
Finance lease charges – related party	315	355
Other finance costs	7,793	7,008
	685,577	541,618
Less: amounts included in the cost of qualifyingassets	(16,330)	(23,208)
	669,247	518,410
(Gain)/loss on derivatives(e)	(5,389)	7,815
Unwinding of discount on non-current liabilities	6,869	7,322
Unwinding of discount on deferred revenue	2,603	2,625
Interest incurred on lease liabilities	2,395	2,638
Finance costs	675,725	538,810
Defined contribution plans	18,128	16,159
Defined benefit plans(note 15)	3,027	2,348
Post-employment benefits	21,155	18,507
Termination benefits	1,728	1,497
Cash settled long-term incentives(f)	25,322	16,442
Equity settled long-term incentives(f)	3,802	992
Other employee benefits	234,542	212,252
Employee benefit expenses(g)	286,549	249,690

(b) Balance is re-presented to reflect the software and licences that are reclassified from property, plant and equipment to intangible assets. (c) The average interest rate applying to drawn debt is 5.09% p.a. (2020: 5.33% p.a.) excluding finance costs associated with bond note redemption, amortisation of borrowing costs and other finance costs.

(d) Refer to note 2 significant items section for details.

(e) Represents unrealised gains and losses on the mark-to-market valuation of derivatives.

(f) The Consolidated Entity provides benefits to certain employees in the form of long-term incentives. For cash settled long-term incentives, a liability equal to the portion of services received is recognised at the current fair value determined at each reporting date. For equity settled long-term incentives, a reserve is recognised equal to the portion of services received based on the fair value of the equity instrument at grant date.

(g) Employee benefit expense of $69.0 million (2020: $70.0 million) is recharged as pass-through revenue and presented as part of other operating costs – pass-through.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

6. Income tax

The major components of tax expense are:

The major components of tax expense are:
		Restated
	2021	2020
	$000	$000
Income statement
Current tax expense in respect of the current year	(65,522)	(115,394)
Adjustments recognised in the current year in relation to current tax of prior years	(7)	29
Deferred tax expense relatingto the origination and reversal of temporarydifferences(a)	2,574	(70,171)
Total tax expense	(62,955)	(185,536)
Tax reconciliation
Profit before tax(a)	43,579	465,560
Income tax expense calculated at 30%	(13,074)	(139,668)
Non-deductible expenses	(58,231)	(59,667)
Non-assessable income	6,720	7,426
	(64,585)	(191,909)
Franking credits received	1,043	5,310
Previously unbooked losses now recognised	594	1,034
Adjustments recognised in the current year in relation to the current tax of prior years	(7)	29
	(62,955)	(185,536)

Income tax expense comprises of current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in equity. Current tax represents the expected taxable income at the applicable tax rate for the financial year, and any adjustment to tax payable in respect of previous financial years.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Financial Performance

6. Income tax (continued)

Deferred tax balances

Deferred tax (liabilities)/assets arise from the following:

6. Income tax (continued) Deferred tax balances Deferred tax (liabilities)/assets arise from the following:
	Opening	Charged to	Charged to	Transfer to	Closing
	balance	income	equity	head entity	balance
2021	$000	$000	$000	$000	$000
Gross deferred tax liabilities
Property, plant and equipment and intangible assets	(1,072,954)	1,425	-	-	(1,071,529)
Deferred expenses	(53,712)	2,678	-	-	(51,034)
Other	(117)	967	-	-	850
	(1,126,783)	5,070	-	-	(1,121,713)
Gross deferred tax assets
Provisions	66,505	4,766	-	-	71,271
Cash flow hedges	292,350	(6,698)	(140,403)	-	145,249
Deferred revenue	13,669	(1,035)	-	-	12,634
Investments equity accounted	6,638	(96)	(1,838)	-	4,704
Defined benefit obligation	11,556	(38)	(7,075)	-	4,443
Tax losses	-	605	-	(605)	-
	390,718	(2,496)	(149,316)	(605)	238,301
Net deferred tax liability	(736,065)	2,574	(149,316)	(605)	(883,412)

2020(Restated)
Gross deferred tax liabilities
Property, plant and equipment and intangible assets(a)(b)	(984,119)	(70,184)	(18,651)	-	(1,072,954)
Deferred expenses	(55,631)	1,919	-	-	(53,712)
Other	(285)	168	-	-	(117)
	(1,040,035)	(68,097)	(18,651)	-	(1,126,783)
Gross deferred tax assets
Provisions(a)	48,639	(4,475)	22,341	-	66,505
Cash flow hedges	254,217	(800)	38,933	-	292,350
Deferred revenue	14,531	(862)	-	-	13,669
Investments equity accounted	3,178	2,848	612	-	6,638
Defined benefit obligation	2,938	187	8,431	-	11,556
Tax losses	-	1,028	-	(1,028)	-
	323,503	(2,074)	70,317	(1,028)	390,718
Net deferred tax liability	(716,532)	(70,171)	51,666	(1,028)	(736,065)

(a) Amounts charged to equity relate to the deferred tax on the transition adjustment from the adoption of AASB 16 Leases.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

6. Income tax (continued)

Deferred tax

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:

initial recognition of goodwill;
initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
● differences relating to investments in wholly-owned entities to the extent that they will probably not reverse in the foreseeable future.

Deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using the appropriate tax rates at the end of the reporting period.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Tax consolidation

The parent of APT Pipelines Limited, Australian Pipeline Trust and its wholly-owned Australian resident entities formed a taxconsolidated group with effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Australian Pipeline Trust. Members of the tax-consolidated group are identified at note 23.

Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial reports of the members of the tax-consolidated group using the 'separate taxpayer within group' approach, by reference to the carrying amounts in the separate financial reports of each entity and the tax values applying under tax consolidation.

Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the wholly-owned entities are assumed by the head entity in the tax-consolidated group and are recognised as amounts payable/(receivable) to/(from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts.

The head entity recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the assets can be utilised.

Nature of tax funding arrangement and tax sharing agreement

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, APT Pipelines Limited and each of the entities in the taxconsolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from, or payable to, other entities in the tax-consolidated group.

The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member's liability for the tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

7. Dividends

7. Dividends
		APT Pipelines Limited
	2021	2021	2020	2020
	cents per	Total	cents per	Total
	share	$000	share	$000
Recognised amounts
Final FY20 dividend paid on 25 August 2020
(30 June 2019: Final FY19 dividend paid on 20 August 2019)
Dividend(a)	156.1	97,000	161.0	100,000
Interim FY21 dividend
(31 December 2019: Interim FY20 dividend paid on 17 February 2020)
Dividend(a)	-	-	217.6	135,200
Unrecognised amounts
Final FY21 dividend
(30 June 2020: Final FY20 dividend paid on 25 August 2020)
Dividend(a)	-	-	156.1	97,000

(a) Profit dividends were unfranked (30 June 2019, 31 December 2019 and 30 June 2020: unfranked).

The final dividend in respect of the financial year has not been recognised in this financial report because the final dividend was not declared, determined or publicly confirmed prior to the end of the financial year.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

8. Receivables

8. Receivables
	2021	2020
	$000	$000
Trade receivables	41,235	31,313
Accrued revenue	223,337	218,013
Loss allowance	(500)	(700)
Trade receivables	264,072	248,626
Receivables from associates and other related parties	11,689	12,985
Finance lease receivables (note 16)	1,275	1,166
Interest receivable	62	1,340
Other debtors	205	20
Trade and other receivables	277,303	264,137
Receivables from related parties	181,769	186,263
Current	459,072	450,400
Finance lease receivables(note 16)	10,375	11,639
Non-current	10,375	11,639

Trade receivables are non-interest bearing and are generally on 14 to 30 day terms. There are no material trade receivables past due and not provided for.

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Trade and other receivables are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are stated at amortised cost less impairment.

Impact from COVID-19 has been considered in assessing the loss allowance. There is no material impact identified to the date of the issuance of these financial statements.

9. Payables

9. Payables
	2021	2020
	$000	$000
Trade payables(a)	59,296	35,561
Income tax payable	347	643
Other payables	255,251	242,109
Trade and other payables	314,894	278,313
Payables to relatedparties(b)	2,209,924	2,578,536
Current	2,524,818	2,856,849
Other payables	13,390	4,826
Payables to related parties	671,615	798,250
Non-current	685,005	803,076

(a) Trade payables are non-interest bearing and are normally settled on 15 - 30 day terms.

(b) Payables to related parties mainly consists of a loan from Australian Pipeline Trust and APT Investment Trust.

Trade and other payables are recognised when the Consolidated Entity becomes obliged to make future payments resulting from the purchase of goods and services. Trade and other payables are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are stated at amortised cost.

Payables are recognised inclusive of GST, except for accrued revenue and accrued expense at balance dates which exclude GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. GST receivable or GST payable is only recognised once a tax invoice has been issued or received.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

10. Property, plant and equipment

	Freehold				ROU	ROU
	land and	Leasehold	Plant and	Work in	land and	plant and
	buildings	improvements	equipment	progress	buildings	equipment
	– at cost	– at cost	– at cost	– at cost	– at cost(a)	– at cost(a)	Total
	$000	$000	$000	$000	$000	$000	$000
Gross carrying amount
Balance at 1 July 2019 (Restated)(a)(b)	261,704	10,787	11,491,776	529,178	54,646	7,619	12,355,710
Reclassified to intangible assets(c)	-	-	(70,740)	(8,999)	-	-	(79,739)
Additions(b)	-	-	30,597	376,427	3,437	3,400	413,861
Disposals	-	-	(1,511)	-	(102)	(246)	(1,859)
Transfers(b)	5,514	-	197,013	(208,512)	-	5,985	-
Balance at 30 June 2020 (Restated)	267,218	10,787	11,647,135	688,094	57,981	16,758	12,687,973
Balance at 1 July 2020 (Restated)	267,218	10,787	11,647,135	688,094	57,981	16,758	12,687,973
Additions	-	-	34,064	415,932	4,166	5,216	459,378
Disposals	-	-	(2,639)	-	(81)	(1,680)	(4,400)
Reclassified as held for sale(d)	-	-	(104)	(229)	-	-	(333)
Transfers	9,184	52	759,322	(768,558)	-	-	-
Balance at 30 June 2021	276,402	10,839	12,437,778	335,239	62,066	20,294	13,142,618
Accumulated depreciation and impairment
Balance at 1 July 2019 (Restated
and impairment)(a)(b)	(53,889)	(4,919)	(2,443,768)	-	-	-	(2,502,576)
Reclassified to intangible assets(c)			33,999				33,999
Disposals	-	-	1,490	-	51	66	1,607
Depreciation expense (note 5)(b)	(7,950)	(800)	(433,222)	-	(9,108)	(3,454)	(454,534)
Amounts included in the cost of
other assets	-	-	-	-	-	(58)	(58)
Balance at 30 June 2020	(61,839)	(5,719)	(2,841,501)	-	(9,057)	(3,446)	(2,921,562)
Balance at 1 July 2020	(61,839)	(5,719)	(2,841,501)	-	(9,057)	(3,446)	(2,921,562)
Disposals	-	-	2,337	-	81	1,605	4,023
Depreciation expense (note 5)	(7,741)	(802)	(451,935)	-	(10,447)	(4,053)	(474,978)
Impairment expense (note 12)	-	-	(249,322)	-	-	-	(249,322)
Reclassified as held for sale(d)	-	-	26	-	-	-	26
Amounts included in the cost of
other assets	-	-	-	-	-	(33)	(33)
Balance at 30 June 2021	(69,580)	(6,521)	(3,540,395)	-	(19,423)	(5,927)	(3,641,846)
Net book value
As at 30 June 2020 (Restated)(a)(b)	205,379	5,068	8,805,634	688,094	48,924	13,312	9,766,411
As at 30 June 2021	206,822	4,318	8,897,383	335,239	42,643	14,367	9,500,772

(a) The Consolidated Entity adopted AASB 16 Leases on 1 July 2019 and recognised right of use ("ROU") assets using the modified retrospective approach as such there is no restatement of the comparative information.

(b) This is restated as a result of change in the Consolidated Entity's accounting policy following the IFRIC Agenda Decision published in April 2021 related to accounting for SaaS arrangements.

(c) $36.1m of non-Saas software, $0.7m of licences net of accumulated amortisation, and $9.0m of non-SaaS software related work in progress are reclassified to intangible assets.

(d) Relates to the Consolidated Entity's 50% ownership in Mid West Pipeline to be disposed of in the next 12 months.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Operating Assets and Liabilities

10. Property, plant and equipment (continued)

Property, plant and equipment is stated at cost, less accumulated depreciation and impairment losses. Work in progress is stated at cost. Cost includes expenditure that is directly attributable to the acquisition or construction of the item.

The right-of-use (ROU) asset is initially measured at cost comprising the initial measurement of the lease liability (as outlined in note 16) adjusted for any lease payments made before the commencement date and reduced by any lease incentives received plus initial direct costs incurred in obtaining the lease. Any make good requirements are recognised and measured under AASB 137 Provisions, Contingent Liabilities and Contingent Assets and to the extent that the costs relate to a ROU asset these are included in the related ROU asset.

A ROU asset is subsequently measured using the cost model less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability.

Subsequently, the Consolidated Entity applies AASB 136 Impairment of Assets to determine whether a ROU asset is impaired and accounts for any impairment as described in note 12 Impairment of non-financial assets of the annual report for the financial year end 30 June 2021.

Where the ROU is adjusted due to changes in the lease liability, the depreciation for the ROU asset is adjusted on a prospective basis.

Depreciation is provided on property, plant and equipment excluding land. Depreciation is calculated on a straight-line or throughput basis depending on the nature of the asset so as to write off the net cost of each asset over its estimated useful Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. The estimated useful lives and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes recognised on a prospective basis.

Where the ROU asset is adjusted due to changes in the lease liability, the depreciation for the ROU asset is adjusted on a prospective basis.

The depreciation charge for each period is recognised in profit or loss unless it is included in the cost of another asset.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets (i.e. assets that take a substantial period of time to get ready for their intended use or sale) are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Critical accounting judgements and key sources of estimation uncertainty – useful lives of non-current assets

The Consolidated Entity reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. Physical, economic and environmental factors are taken into consideration in assessing the useful lives of the assets, including but not limited to asset condition and obsolescence, technology changes, commercial contract lives and renewals, global and regional gas supply-and-demand, and climate-related risks under three divergent climate scenarios for 2020-2050 detailed in the APA Group Climate Change Resilience Report published in October 2020. The Report provides a comprehensive analysis of the resilience of APA’s current asset portfolio under a series of scenarios and uses a range of assumptions considering external factors and data sources, e.g. economic activities and growth projections ranging from 1.7% to 5.5% sourced from Shared Socioeconomic Pathways database, emission trajectory defined by Representative Concentration Pathways, carbon budget and offsets, key social and political characteristics, and Asian gas demand. Any reassessment of useful lives in a particular year will affect the depreciation expense.

The following estimated useful lives are used in the calculation of depreciation:

●Buildings 30 – 50 years; ●Compressors 10 – 50 years; ●Gas transportation systems 10 – 80 years;
● Meters 20 – 30 years; ● Power generation facilities 3 – 25 years; ●Gas processing facilities 10 – 25 years;
● Other plant and equipment 3 – 20 years; ●ROU land and buildings 1 – 40 years; and
● ROU property, plant and equipment 1 – 4 years.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Operating Assets and Liabilities

10. Property, plant and equipment (continued)

Change in accounting policy – Software-as-a-Service arrangements (SaaS)

IFRIC issued an Agenda Decision in April 2021 summarising IFRIC considerations and decisions relating to customisation and configuration costs in a SaaS arrangement where an intangible asset is not recognised under AASB 138 Intangible Assets. The standard requires the costs be recognised as an expense when services are received where these costs do not create a resource controlled by the company that is separate to the software.

During the year, the Consolidated Entity revised its accounting policy to record the configuration and customisation costs incurred in implementing SaaS arrangements as an operating expenses within profit or loss in response to the IFRIC Agenda Decision.

Costs incurred to configure or customise the cloud provider's application software, are now recognised as operating expenses when the services are received. Previously, the Entity capitalised the configuration and customisation costs as and when they are incurred during implementation and amortised them over the term of the SaaS arrangement outlined in the service contract, where material modifications and incremental capability was being added to the application software.

Some of these costs incurred are for the set-up of current IT environment or the development of software code that enhances or modifies, or creates the incremental capability to, existing on-premise systems or network and meets the definition of and recognition criteria for an intangible asset. These costs create a resource controlled by the Consolidated Entity and are recognised as intangible software assets and amortised over the useful life of the software on a straight-line basis. The useful lives of these assets are reviewed at least at the end of each financial year, and any change is for prospectively as a change in accounting estimate.

APA Group has implemented the IFRIC Agenda Decision retrospectively as a change in accounting policy. Historical financial information has been restated to account for the impact of the change in accounting policy. The amount of the movements resulting for the change in accounting policy are as follows:

	30 June	30 June	1 July
	2021	2020	2019
	$000	$000	$000
Financial statement item
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Other expenses	(7,957)	(8,410)
Depreciation and amortisation expense	3,008	760
Profit before tax	(4,949)	(7,650)
Income tax benefit	1,485	2,295
Profit after tax	(3,464)	(5,355)
Consolidated Statement of Financial Position
Property, plant and equipment	(17,802)	(12,853)	(5,203)
Deferred tax balance	5,341	3,856	1,561
Net assets	(12,461)	(8,997)	(3,642)
Retained earnings	12,461	8,997	3,642
Total equity	12,461	8,997	3,642
Consolidated Statement of Cash Flows
Payments to suppliers and employees	(7,957)	(8,410)
Net cashprovided by operating activities	(7,957)	(8,410)
Payments for property, plant and equipment	7,957	8,410
Net cash used in investing activities	7,957	8,410

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

11. Goodwill and Intangibles

11. Goodwill and Intangibles
	2021	2020
	$000	$000
Goodwill
Balance at beginningof financial year	1,183,604	1,183,604
Balance at end of financial year	1,183,604	1,183,604

Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes to individual cash-generating units.

The East Coast Grid is an interconnected pipeline network that includes, inter alia, the Wallumbilla Gladstone, Moomba Sydney, Roma Brisbane, Carpentaria Gas and South West Queensland pipelines and the Victorian Transmission System. Since the acquisition of the South West Queensland Pipeline to complete the formation of APA’s East Coast Grid in December 2012, APA has installed facilities to enable bi-directional transportation of gas to meet the demand of our major customers who now operate portfolios of gas supply and demand. Through the provision of multi-asset services, bidirectional transportation, capacity trading and gas storage and parking facilities, APA’s East Coast Grid delivers options for customers to choose from, and move gas between, more than 60 receipt points and over 170 delivery points on the east coast of Australia. The East Coast Grid is categorised as an individual cash-generating unit.

Goodwill acquired in a business combination is initially measured at cost and subsequently at cost less accumulated impairment.

The carrying amounts of goodwill allocated to cash-generating units that are significant individually or in aggregate are as follows:

follows:
	2021	2020
	$000	$000
Asset management business	21,456	21,456
Energy infrastructure
East Coast Grid	1,060,681	1,060,681
Diamantina Power Station	43,104	43,104
Other energyinfrastructure(a)	58,363	58,363
	1,183,604	1,183,604

(a) Primarily represents goodwill relating to the Pilbara Pipeline System ($32.6 million) and Goldfields Gas Pipeline ($18.5 million).

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Operating Assets and Liabilities

11. Goodwill and Intangibles (continued)

Software, licences, contract and other intangibles

			Work in	Contract
	Software	Licences	progress	and other
	– at cost	– at cost	– at cost	– at cost	Total
	$000	$000	$000	$000	$000
Gross carrying amount
Balance at 1 July 2019	-	-	-	3,591,278	3,591,278
Reclassified from property, plant and equipment	69,831	909	8,999	-	79,739
Additions	880	526	9,082	253	10,741
Transfer	3,873	716	(4,589)	-	-
Balance at 30 June 2020	74,584	2,151	13,492	3,591,531	3,681,758
Balance at 1 July 2020	74,584	2,151	13,492	3,591,531	3,681,758
Additions	1,122	144	9,101	391	10,758
Transfer	5,510	-	(5,510)	-	-
Balance at 30 June 2021	81,216	2,295	17,083	3,591,922	3,692,516
Accumulated amortisation
Balance at 1 July 2019	-	-	-	(781,517)	(781,517)
Reclassified to property, plant and equipment	(33,767)	(232)	-	-	(33,999)
Amortisation expense (note 5)	(13,104)	(433)	-	(182,735)	(196,272)
Balance at 30 June 2020	(46,871)	(665)	-	(964,252)	(1,011,788)
Balance at 1 July 2020	(46,871)	(665)	-	(964,252)	(1,011,788)
Amortisation expense(note 5)	(16,359)	(551)	-	(182,482)	(199,392)
Balance at 30 June 2021	(63,230)	(1,216)	-	(1,146,734)	(1,211,180)
Net book value
As at 30 June 2020	27,713	1,486	13,492	2,627,279	2,669,970
As at 30 June 2021	17,986	1,079	17,083	2,445,188	2,481,336

Intangible assets acquired separately are carried at cost less accumulated amortisation and impairment losses. Intangible assets acquired in a business combination are identified and recognised separately from goodwill and are initially recognised at their fair value at the acquisition date and subsequently at cost less accumulated amortisation and impairment losses.

Amortisation is recognised on a straight-line basis over the estimated useful life of each asset. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effects of any changes in estimate being accounted for on a prospective basis. Amortisation expense is not a cash item, and is included in the line item of depreciation and amortisation expense in the statement of profit or loss and other comprehensive income.

The following useful lives are used in the calculation of amortisation:

●Contract and other intangibles	1 – 20 years;
●Software	4 – 7 years; and
●Licences	4 years.

Contract and other intangibles

The Consolidated Entity holds various third party operating and maintenance contracts. The combined gross carrying amount of $3,591.9 million amortises over terms ranging from 1 to 20 years. Useful life is determined based on the underlying contractual terms plus estimations of renewal of up to two terms where considered probable by management.

Software

Software is measured at cost less accumulated amortisation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition or development of software.

Licences

Licences are carried at cost less any accumulated amortisation and impairment losses.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Operating Assets and Liabilities

12. Impairment of non-financial assets

The Consolidated Entity tests property, plant and equipment, intangibles and goodwill for impairment at least annually or whenever there is an indication that the asset may be impaired. Assets other than goodwill that have previously reported an impairment are reviewed for possible reversal of the impairment at each reporting period.

If the asset does not generate independent cash inflows and its value in use cannot be estimated to be close to its fair value, the asset is tested for impairment as part of the cash-generating unit (CGU) to which it belongs.

Assets are impaired if their carrying value exceeds their recoverable amount. The recoverable amount of an asset or CGU is determined as the higher of its fair value less costs of disposal or value-in-use.

Determining whether identifiable intangible assets and goodwill are impaired requires an estimation of the value-in-use or fair value of the cash-generating units. The calculations require the Consolidated Entity to estimate the future cash flows expected to arise from cash-generating units and suitable discount rates in order to calculate the present value of cashgenerating units. These estimates and assumptions are reviewed on an ongoing basis.

The recoverable amounts of cash-generating units are determined based on the higher of value-in-use calculations and fair value less costs of disposal. Value-in-use calculations use cash flow projections based on a five year financial business plan and thereafter a further 15 year financial model inclusive of appropriate terminal values. This is the basis of the Consolidated Entity's forecasting and planning processes which represents the underlying long term nature of associated customer contracts on these assets. Fair value less costs to dispose calculations utilise comparable market transactions less estimated costs of disposal.

In accordance with the requirements of AASB 136 Impairment of Assets, the Consolidated Entity reviewed its CGUs for indicators of impairment at the end of the reporting period. No such indicators were identified and no impairment recognised.

Critical accounting judgements and key sources of estimation uncertainty – impairment of assets

The key estimates and assumptions used in the assessment of impairment include but are not limited to: asset capacity; asset lives; forecast operating costs and margins; gas field reserve estimates; the effect of inflation; discount rates; customer contract terms and renewals; residual value; and asset construction costs. Where the key assumptions for the assessment of new assets such as expected construction costs, expected time to commissioning, expected revenues, expected operating and capital costs at the time of investment differs from the final outcomes, significant variances to the key assumptions may cause triggers for impairment.

These assumptions have been determined with reference to historic information, current performance and expected changes taking into account external information such as market inputs on discount rates, the effects of inflation within Reserve Bank of Australia's guidance range, the outlook for global and regional gas market supply-and-demand conditions, internal information such as contract renewals, forecast input costs and climate-related risks under three divergent scenarios for 2020-2050 detailed in the APA Group Climate Change Resilience Report published in October 2020. The Report provides a comprehensive analysis of the resilience of APA’s current asset portfolio under a series of scenarios and uses a range of assumptions considering external factors and data sources, e.g. economic activities and growth projections ranging from 1.7% to 5.5% sourced from Shared Socioeconomic Pathways database, emission trajectory defined by Representative Concentration Pathways, carbon budget and offsets, key social and political characteristics, and Asian gas demand. Such estimates may change as new information becomes available.

Cash flow projections are estimated for a period of up to 20 years, with a terminal value, recognising the long term nature of the assets. The pre-tax discount rates used are 7.00% p.a. (2020: 7.75% p.a.) for Energy Infrastructure assets and 7.00% p.a. (2020: 7.75% p.a.) for Asset Management.

For fully regulated assets, cash flows have been extrapolated on the basis of existing transportation contracts and government policy settings, and expected contract renewals with a resulting average annual growth rate of -0.1% p.a. (2020: 0.3% p.a.). APA Group has assumed prudent capital and operating expenditure, appropriate regulated rates of return, and forecast inflation over the existing and renewal contract terms. These expected cash flows are factored into the regulated asset base and do not exceed management's expectations of the long-term average growth rate for the market in which the cash-generating unit operates.

For non-regulated assets, the Consolidated Entity has assumed no capacity expansion and firming costs beyond installed and committed levels; utilisation of capacity is based on existing contracts and renewals, contractual renewal terms based on management's expectations, government policy settings and the Consolidated Entity’s expected market outcomes.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

12. Impairment of non-financial assets (continued)

Critical accounting judgements and key sources of estimation uncertainty – impairment of assets (continued)

As contracts mature, given ongoing demand for capacity, it is assumed that the majority of the capacity is resold at similar pricing levels.

Asset Management cash flow projections reflect long term agreements with assumptions of renewal on similar terms and conditions based on management's expectations.

Orbost Gas Processing Plant

As at 31 December 2020, APA determined the recoverable amount to be $233.3 million on a pre-tax basis based on valuein-use calculation which results in a pre-tax impairment charge of $249.3 million. This has been disclosed as a significant item in the interim financial report.

The impairment charge reflects the continuation of production levels and expenditure based on the current performance of the asset since re-configuration and resumption of the processing plant, where current production is expected to achieve 45 TJ/day, and contractual renewal terms based on management's expectations. APA has applied a pre-tax discount rate of 7.25% in both December 2020 and June 2021 assessments.

The key sensitivity, holding all other assumptions constant, that could result in a further change in the carrying value of the asset based on a reasonably possible change, is a 1% increase to the discount rate, which could result in a further impairment charge in the order of $10 million.

No further impairment triggers have been identified in the second half of 2021 and the recoverable amount remains supportable. APA will continue to monitor the project and will revise estimates should new material information become available.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

13. Provisions

13. Provisions
	2021	2020
	$000	$000
Employee benefits	85,154	77,878
Other	8,605	11,758
Current	93,759	89,636
Employee benefits	35,267	60,082
Other(a)	67,085	55,823
Non-current	102,352	115,905
Employee benefits
Incentives	25,986	21,204
Cash settled long-term incentives	5,447	7,132
Leave balances	53,721	49,009
Termination benefits	-	533
Current	85,154	77,878
Cash settled long-term incentives	4,587	8,414
Defined benefit liability (note 15)	19,686	41,052
Leave balances	10,994	10,616
Non-current	35,267	60,082

(a) This amount represents the restoration provision of the Consolidated Entity's assets.

A provision is recognised when there is a legal or constructive obligation as a result of a past event, it is probable that future economic benefits will be required to settle the obligation and the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the financial year, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is probable that recovery will be received and the amount of the receivable can be measured reliably.

Provision is made for benefits accruing to employees in respect of wages and salaries, incentives, annual leave and long service leave when it is probable that settlement will be required. Provisions made in respect of employee benefits expected to be settled within 12 months, are recognised for employee services up to reporting date at the amounts expected to be paid when the liability is settled. Provisions made in respect of employee benefits which are not expected to be wholly settled within 12 months are measured as the present value of the estimated future cash outflows using a discount rate based on the corporate bond yield in respect of services provided by employees up to reporting date.

14. Other non-current assets

14. Other non-current assets
	2021	2020
	$000	$000
Line pack gas	20,571	20,607
Gas held in storage	6,010	6,010
Defined benefit asset (note 15)	4,877	2,534
Other assets
	31,458	29,151

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

15. Employee superannuation plans

All employees of the Consolidated Entity are entitled to benefits on retirement, disability or death from an industry sponsored fund, or an alternative fund of their choice. The Consolidated Entity has three plans with defined benefit sections (due to the acquisition of businesses) and a number of other plans with defined contribution sections. The defined benefit sections provide lump sum benefits upon retirement based on years of service. The defined contribution sections receive fixed contributions from the Consolidated Entity and the Consolidated Entity's legal and constructive obligations are limited to these amounts.

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligations were determined at 30 June 2021. The present value of the defined benefit obligations, and the related current service cost and past service cost, were measured using the projected unit credit method.

The following sets out details in respect of the defined benefit plans only:

	2021	2020
	$000	$000
Amounts recognised in the statement of profit or loss and other comprehensive income
Current service cost	2,032	2,054
Net interest expense/(income)	995	294
Components of defined benefit costs recognised in profit or loss(note 5)	3,027	2,348
Amounts recognised in the statement of financial position
Fair value of plan assets	139,336	124,358
Present value of benefit obligation	(154,145)	(162,876)
Defined benefit asset – non-current (note 14)	4,877	2,534
Defined benefit liability – non-current(note 13)	(19,686)	(41,052)
Opening defined benefit obligation	162,876	146,282
Current service cost	2,032	2,054
Interest cost	4,613	4,329
Contributions from plan participants	572	669
Actuarial (gain)/loss	(4,554)	21,914
Benefits paid	(10,748)	(11,905)
Administrative expenses, taxes and premiums paid	(646)	(467)
Closing defined benefit obligation	154,145	162,876
Movements in the present value of the plan assets in the current period were as follows:
Opening fair value of plan assets	124,358	136,487
Interest income	3,618	4,035
Actual return on plan assets excluding interest income	19,028	(6,189)
Contributions from employer	3,154	1,728
Contributions from plan participants	572	669
Benefits paid	(10,748)	(11,905)
Administrative expenses, taxes and premiums paid	(646)	(467)
Closing fair value of plan assets	139,336	124,358

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

15. Employee superannuation plans (continued)

Defined contribution plans

Contributions to defined contribution plans are expensed when incurred. The percentage rate for superannuation guarantee contribution by the Consolidated Entity remain at 9.5% until 30 June 2021, increasing to 10% from 1 July 2021, and eventually to 12% from 1 July 2025.

Defined benefit plans

Actuarial gains and losses and the return on plan assets (excluding interest) are recognised immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement, comprising of actuarial gains and losses and the return on plan assets (excluding interest), is recognised in other comprehensive income and immediately reflected in retained earnings and will not be reclassified to profit or loss.

Past service cost is recognised in profit or loss in the period of a plan amendment.

The defined benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus in the Consolidated Entity's defined benefit plans. Any asset resulting from this calculation is limited to the present value of economic benefits available in the form of refunds and reductions in future contributions to the plan.

Key actuarial assumptions used in the determination of the defined benefit obligation is a discount rate of 3.2% gross of tax (2020: 3.0%), based on the corporate bond yield curve published by Milliman, an expected salary increase rate of 2.7% (2020: 2.7%), and pension indexation rate of 1.8% (2020: 2.0%). The sensitivity analysis below has been determined based on reasonable possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant:

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by $8,479,000 (increase by $9,455,000).
If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $1,437,000 (decrease by $1,386,000).
If the expected pension indexation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by $7,744,000 (decrease by $7,033,000).

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the statement of financial position.

The Consolidated Entity expects to pay $3.1 million in contributions to the defined benefit plans during the year ending 30 June 2022.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

16. Leases

The Consolidated Entity as a lessee

16. Leases The Consolidated Entity as a lessee
	2021	2020
	$000	$000
Lease liabilities
Not longer than 1 year	17,432	16,975
Longer than 1 year but not longer than 5 years	42,368	47,340
Longer than 5 years	20,329	24,810
Minimum future lease payments payable	80,129	89,125
Less: Future finance cost	11,001	12,324
Present value of the future lease payments	69,128	76,801
Included in the consolidated statement of financial position:
Current lease liabilities	14,723	14,397
Non-current lease liabilities	54,405	62,404
	69,128	76,801

In FY20, the Consolidated Entity adopted AASB 16 using the modified retrospective approach.

The Consolidated Entity has no material short-term leases, lease for low-value assets or variable lease payments.

At inception of a contract, the Consolidated Entity assesses whether a lease has been entered into if:

The contract involves the use of an identified asset – the asset may be explicitly or implicitly specified in the contract. Capacity portions of larger assets would be considered an identified asset if the portion is physically distinct or if the portion represents substantially all of the capacity of the asset. An asset is not considered an identified asset if the supplier has the substantive right to substitute the asset throughout the period of use;
The Consolidated Entity has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and
The Consolidated Entity has the right to direct the use of the asset throughout the period of use. The Consolidated Entity considers itself to have the right to direct the use of the asset only if either:
(i) The Consolidated Entity has the right to direct how and for what purpose the identified asset is used throughout the period of use; or
(ii) The relevant decisions about how and for what purposes the asset is used are predetermined and the Consolidated Entity has the right to operate the asset, or the Consolidated Entity designed the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use.

Where the Consolidated Entity has determined that a lease exists, a right-of-use asset and a corresponding lease liability is recognised at the commencement date of the lease for all leases other than short-term or low-value asset leases.

The lease liability is initially measured at the present value of future lease payments at the commencement date, comprising the following:

Fixed payments, including in-substance fixed payments;
Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date (e.g. payments which vary due to changes in CPI, or commodity prices);
Amounts expected to be payable by the lessee under residual value guarantees, purchase options and termination penalties (where relevant); and
Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Operating Assets and Liabilities

16. Leases (continued)

The Consolidated Entity as a lessee (continued)

To calculate the present value, the future lease payments are discounted using the interest rate implicit in the lease (IRIL), if the rate is readily determinable. If the IRIL cannot be readily determined, the incremental borrowing rate (IBR) at the commencement date is used. The IBR is calculated based on the prevailing swap rate for a tenor that closely aligns with the term of the lease and then adjusted for the Consolidated Entity credit spreads in a currency that matches the currency of the liability.

Subsequently, the lease liability is measured in a manner similar to other financial liabilities, at amortised cost using the effective interest rate method. The liability is remeasured to reflect any reassessment of lease payments or lease modifications, or to reflect revised in-substance fixed lease payments.

Variable payments other than those included in the measurement of the lease liability above (i.e. those not based on an index or rate) are recognised in the statement of profit or loss in the period in which the event or condition that triggers those payments occur.

Short term leases (i.e. where the lease term is less than 12 months) and low-value asset leases are recognised as an expense in the statement of profit or loss on a straight-line basis.

Total cash outflow for leases amounted to $15.3 million, excluding payments for short term leases, low-value asset leases and variable payments leases.

The Consolidated Entity as a lessor

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to the ownership of the leased asset to the lessee. All other leases are classified as operating leases.

Finance lease receivables relate to the lease of a metering station, natural gas vehicle refuelling facilities and two pipeline laterals.

	2021	2020
	$000	$000
Finance lease receivables
Not longer than 1 year	2,237	2,232
Longer than 1 year and not longer than 5 years	7,016	7,542
Longer than 5 years	7,699	9,410
Minimum future leasepayments receivable(a)	16,952	19,184
Less: unearned finance lease receivables	(5,302)	(6,379)
Present value of lease receivables	11,650	12,805
Included in the consolidated statement of financial position:
Current trade and other receivables (note 8)	1,275	1,166
Non-current receivables(note 8)	10,375	11,639
	11,650	12,805

(a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual.

The Consolidated Entity does not have any operating leases where it is the lessor.

Amounts due from a lessee under finance leases are recorded as receivables. Finance lease receivables are initially recognised at amounts equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual value expected to accrue at the end of the lease term. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the leases.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

The Consolidated Entity's objectives when managing capital are to safeguard its ability to continue as a going concern whilst maximising the return to equityholders through the optimisation of the debt to equity structure.

The Consolidated Entity's overall capital management strategy is to continue to target Baa2/BBB investment grade credit ratings through maintaining sufficient flexibility to fund organic growth and investment from internally generated and retained cash flows, debt funding and, where appropriate, additional equity.

The capital structure of the Consolidated Entity consists of cash and cash equivalents, borrowings and equity attributable to equityholders of the parent. The Consolidated Entity's policy is to maintain balanced and diverse funding sources through raising funds locally and from overseas from a variety of capital markets including bank loan facilities, to meet anticipated funding requirements. This funding plus operating cash flows are used to maintain and expand the Consolidated Entity's assets, make distributions to equityholders, repay maturing debt and meet anticipated funding requirements.

Controlled entities are subject to externally imposed capital requirements. These relate to the Australian Financial Services Licence held by Australian Pipeline Limited, the Responsible Entity of APA Group, and were adhered to for the entirety of the 2020 and 2019 periods.

The Consolidated Entity's capital management strategy has been refreshed during the year, taking into consideration the cost of capital and the state of the capital markets. It remains focused on maintaining Baa2/BBB investment grade credit ratings.

The main aspects are:

Distribution policy balances organic growth capex funding with strong investor returns;
Lower cost of capital and competitive investment hurdle rates;
Investment grade credit metrics provides prudent levels of gearing and access to capital markets;
Treasury policies ensures strong levels of liquidity and minimises risk; and
Insightful communications ensuring strong investor engagement.

APA Group's Funds From Operations to Net Debt exceed the minimum threshold levels that Moody's and Standard & Poor's consider appropirate for APA Group's Baa2/BBB credit ratings. Funds From Operations to Net Debt is a leverage metric that measures cash flows generated by the business that are available to service debt (note: each rating agency calculates credit metrics slightly differently using their own proprietary methods). The ability to service debt and therefore creditworthiness, improves as the percentage of Funds From Operations to Net Debt increases (and vice versa).

17. Net debt

Cash and cash equivalents comprise of cash on hand, at call bank deposits and investments in money market instruments that are readily convertible to known amounts for cash. Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows are reconciled to the related items in the statement of financial position detailed in the table below. The Consolidated Entity had no restricted cash as at 30 June 2021 and 30 June 2020.

Borrowings are recorded initially at fair value less attributable transaction costs and subsequently stated at amortised cost. Any difference between the initial recognised cost and the redemption value is recognised in the statement of profit or loss and other comprehensive income over the period of the borrowing using the effective interest method.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

17. Net debt (continued)

17. Net debt (continued)
	2021	2020
	$000	$000
Cash at bank and on hand	212,815	502,643
Short-term deposits	439,414	670,006
Cash and cash equivalents	652,229	1,172,649
Guaranteed senior notes(a)	-	(299,954)
Other financial liabilities	(2,721)	(10,659)
Current borrowings	(2,721)	(310,613)
Guaranteed senior notes(b)	(9,960,728)	(10,591,648)
Other financial liabilities	(10,467)	(55,585)
Less: unamortised borrowingcosts	49,878	39,851
Non-current borrowings	(9,921,317)	(10,607,382)
Total borrowings	(9,924,038)	(10,917,995)
Current lease liabilities	(14,723)	(14,397)
Non-current lease liabilities	(54,405)	(62,404)
Total lease liabilities	(69,128)	(76,801)
Net debt	(9,340,937)	(9,822,147)

(a) AUD denominated private placement notes and AUD MTN of A$300 million

(b) Represents JPY MTN of ¥10,000 million, GBP MTN of £1,600 million, EUR MTN of €2,350 million and USD denominated 144a notes of US$2,250 million measured at the exchange rate at reporting date, and AUD MTN of A$200 million (2020: Includes USD denominated private placement notes of US$124 million, JPY MTN of ¥ 10,000 million, GBP MTN of £1,350 million, EUR MTN of €1,950 million and USD denominated 144a notes of US$3,000 million measured at the exchange rate at reporting date, and A$143 million of AUD denominated private placement notes and AUD MTN of A$200 million).

Reconciliation of net debt

Reconciliation of net debt
	Cash and	Borrowings	Borrowings
	cash	due within	due after	Lease
	equivalents	1 year	1 year	Liabilities	Net debt
	$000	$000	$000	$000	$000
Net debt as at 1 July 2019	354,854	(444,502)	(9,865,813)	(82,301)	(10,037,762)
Cash movements	817,747	398,836	(1,017,812)	13,482	212,253
Non cash changes — leases	-	-	-	(7,982)	(7,982)
Foreign exchange movements due to fair value changes	48	45,666	(33,527)	-	12,187
Transfer from due after 1 year to due within 1 year	-	(310,613)	310,659	-	46
Movement of deferred borrowingcosts	-	-	(889)	-	(889)
Net debt as at 30 June 2020	1,172,649	(310,613)	(10,607,382)	(76,801)	(9,822,147)
Net debt as at 1 July 2020	1,172,649	(310,613)	(10,607,382)	(76,801)	(9,822,147)
Cash movements	(520,146)	2,866,999	(2,358,421)	274	(11,294)
Non cash changes — leases		-	-	7,399	7,399
Foreign exchange movements due to fair value changes	(274)	(354,168)	829,520	-	475,078
Transfer from due after 1 year to due within 1 year	-	(2,204,939)	2,204,939	-	-
Movement of deferred borrowingcosts	-	-	10,027	-	10,027
Net debt as at 30 June 2021	652,229	(2,721)	(9,921,317)	(69,128)	(9,340,937)

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

17. Net debt (continued)

17. Net debt (continued)
	2021	2020
Financing facilities available	$000	$000
Total facilities
Guaranteed senior notes(a)	9,960,728	10,891,602
Bank borrowings(b)	1,250,000	1,300,000
	11,210,728	12,191,602
Facilities used at balance date
Guaranteed senior notes(a)	9,960,728	10,891,602
Bank borrowings(b)	-	-
	9,960,728	10,891,602
Facilities unused at balance date
Guaranteed senior notes(a)	-	-
Bank borrowings(b)	1,250,000	1,300,000
	1,250,000	1,300,000

(a) Represents JPY MTN of ¥10,000 million, GBP MTN of £1,600 million, EUR MTN of €2,350 million and USD denominated 144a notes of US$2,250 million measured at the exchange rate at reporting date, and AUD MTN of A$200 million (2020: Includes USD denominated private placement notes of US$124 million, USD denominated 144a notes of US$750 million, EUR MTN of €700 million, A$143 million of AUD denominated private placement notes and AUD MTN of A$300 million). Refer to note 18 for details of interest rates and maturity profiles.

(b) Refer to note 18 for interest rates and maturity profiles.

18. Financial risk management

The Consolidated Entity's corporate Capital Markets department is responsible for the overall management of the Consolidated Entity’s capital raising activities, liquidity, lender relationships and engagement, debt portfolio management, interest rate and foreign exchange hedging, credit rating maintenance and third party indemnities (bank guarantees) within risk management parameters approved by the Audit and Risk Management Committee ("ARMC") and reviewed by the Board.

Based on Treasury Risk Management Policy, the Consolidated Entity's activities generate financial instruments comprising of cash, receivables, payables and interest bearing liabilities which expose it to various risks as summarised below:

(a) Market risk including currency risk, interest rate risk and price risk;

(b) Credit risk; and

Risk	Sources	Risk management framework	Financial exposure
Market	Commercial transactions in foreign currency and funding activities	The ARMC approves written principles for overall risk management, as well as policies covering specific areas such as liquidity risk, funding risk, foreign currency risk, interest rate risk and credit risk. The Consolidated Entity's ARMC ensures there is an appropriate Risk Management Policy for the management of treasury risk and compliance with the policy through the review of monthly reporting to the Board from the Capital Markets department.	Refer to 19 (a) Market risk section
Credit	Cash, receivables, interest bearing liabilities and hedging		The carrying amount of financial assets recorded in the financial statements, net of any collateral held or bank guarantees held by the Consolidated Entity, represents the Consolidated Entity's maximum exposure to credit risk in relation to those assets.
Liquidity	Ongoing business operations, financial market disruptions and new investment opportunities		A detailed table shows the Consolidated Entity's remaining contractual maturities for its non-derivative financial liabilities at the end of this section.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

18. Financial risk management (continued)

(a) Market risk

The Consolidated Entity's market risk exposure is primarily due to changes in market prices such as interest and foreign exchange rates. The Consolidated Entity is also exposed to price risk arising from its forward purchase contracts over listed equities and electricity price risk arising from an electricity contract for difference. The table below summarises these risks by nature of exposure and provides information about the risk mitigation strategies being applied.

Nature	Sources of financial exposure	Risk management strategy
Foreign exchange	The Consolidated Entity's foreign exchange risk arises from future commercial transactions (including revenue, interest payments and principal debt repayments on long-term borrowings and the purchases of capital equipment and operating cost).	Exchange rate exposures are managed within approved policy parameters utilising foreign currency forward exchange contracts (FECs), cross currency swap contracts (CCIRS) and foreign currency denominated borrowings. All foreign currency exposure was managed in accordance with the Treasury Risk Management Policy, including: ● FECs to hedge the exchange rate risk arising from foreign currency cash flows, mainly US dollars, derived from revenues, interest payments and capital equipment purchases; ● CCIRS to manage the currency risk associated with foreign currency denominated borrowings; and ● Foreign currency denominated borrowings to manage the currency risk associated with foreign currency denominated revenue and receivables.
Interest rate	The Consolidated Entity's interest rate risk is derived predominately from borrowings subject to floating interest rates.	This risk is managed by the Consolidated Entity by maintaining an appropriate mix between fixed and floating rate borrowings, through the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined policy, ensuring appropriate hedging strategies are applied.
Equity price and electricity price	The Consolidated Entity is exposed to price risk arising from its forward purchase contracts over listed equities and electricity price risk arising from a contract for difference in an electricity sales agreement with a customer.	The equity price risk is managed by forward purchase contracts held to hedge the long-term incentive awards rather than for trading purposes. Electricity price risk is managed with electricity sales agreements with creditworthy counterparties. The Consolidated Entity does not actively trade these holdings. The key assumptions of the commercial contract for difference are provided in the fair value of financial instrument section.

There has been no change to the nature of the market risks to which the Consolidated Entity is exposed or the manner in which these risks are managed and measured.

Foreign currency risk

Foreign currency forward exchange contracts

To manage foreign exchange risk arising from future commercial transactions such as forecast capital purchases and operating cost, revenue and interest payments, the Consolidated Entity uses FECs. Gains and losses recognised in the cash flow hedge reserve (statement of comprehensive income) on these derivatives will be released to profit or loss when the underlying anticipated transaction affects the statement of profit or loss or will be included in the carrying value of the asset or liability acquired.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

18. Financial risk management (continued)

(a) Market risk (continued)

Foreign currency forward exchange contracts (continued)

The carrying amount of the Consolidated Entity's foreign currency denominated monetary assets, monetary liabilities and derivative notional amounts at the reporting date is as follows (converted to AUD at the spot rate at reporting date):

			Cross	Forward	Net foreign
	Cash & cash	Total	currency	exchange	currency
	equivalents	borrowings	swaps	contract	position
2021	$000	$000	$000	$000	$000
US dollar (USD)(a)	3,139	(3,001,400)	(959,268)	(105,014)	(4,062,543)
Japanese yen (JPY)	-	(120,079)	120,079	-	-
British pound (GBP)	-	(2,945,695)	2,945,695	75	75
Euro (EUR)	-	(3,715,047)	3,715,047	4,313	4,313
Swedish Krona(SEK)	-	-	-	1,767	1,767
	3,139	(9,782,221)	5,821,553	(98,859)	(4,056,388)
(a) Foreign currency denominated borrowings to manage the currency risk associated with foreign			currency denominated revenue and		receivables.
			Cross	Forward	Net foreign
	Cash & cash	Total	currency	exchange	currency
	equivalents	borrowings	swaps	contract	position
2020	$000	$000	$000	$000	$000
US dollar (USD)(a)	2,934	(4,530,162)	224,601	(589,300)	(4,891,927)
Japanese yen (JPY)	-	(134,338)	134,338	-	-
British pound (GBP)	-	(2,423,481)	2,423,481	127	127
Euro (EUR)	-	(3,174,688)	3,174,688	3,162	3,162
Swedish Krona(SEK)	-	-	-	25,575	25,575
	2,934	(10,262,669)	5,957,108	(560,436)	(4,863,063)

(a) The net foreign currency position (comprising USD denominated borrowings and forward exchange contracts) are used to manage foreign currency risk associated with USD revenue and receivables.

It is the policy of the Consolidated Entity to hedge 100% of all foreign exchange exposures in excess of US$1 million equivalent that are certain. Forecast foreign currency denominated revenues and interest payments will be hedged by FECs on a rolling basis with the objective being to lock in the AUD gross cash flows and manage liquidity.

For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and underlying currency) of the FECs and their corresponding hedged items are the same, the Consolidated Entity performs a qualitative assessment of effectiveness and it is expected that the value of the FECs and the value of the corresponding hedged items will systematically change in opposite directions in response to movements in the underlying exchange rates.

The main source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the Consolidated Entity's own credit risk on the fair value of the FECs, which is not reflected in the fair value of the hedged item attributable to changes in foreign exchange rates. The effect of credit risk does not dominate the value changes that result from that economic relationship.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

18. Financial risk management (continued)

(a) Market risk (continued)

Foreign currency forward exchange contracts (continued)

The following table details the FECs outstanding at reporting date:

Cash flow hedges	Average		Contract Value		Fair value
	contract rate	< 1 year	1 - 2 years	2 - 5 years
2021	$	$000	$000	$000	$000
Forecast revenue and associated receivable
Sell USD	0.7103	204,710	698	-	10,876
Forecast capital purchases and operating cost
Buy USD	0.7646	(87,464)	(42)	(42)	2,032
Buy EUR	0.6197	(4,402)	-	-	(79)
Buy SEK	5.7152	(1,984)	-	-	(216)
Buy GBP	0.4054	(74)	-	-	1
		110,786	656	(42)	12,614
	Average		Contract Value		Fair value
	contract rate	< 1 year	1 - 2 years	2 - 5 years
2020	$	$000	$000	$000	$000
Forecast revenue and associated receivable
Sell USD	0.7162	318,735	253,313	-	(22,284)
Forecast capital purchases and operating cost
Buy USD	0.6500	(4,991)	(42)	(84)	(295)
Buy EUR	0.5974	(2,755)	(496)	-	(71)
Buy SEK	5.7959	(24,696)	(3,684)	-	(2,718)
Buy GBP	0.5259	(135)	-	-	(8)
		286,158	249,091	(84)	(25,376)

As at the reporting date, the Consolidated Entity has entered into FECs to hedge the foreign currency exposure arising from anticipated future transactions, which are designated in cash flow hedge relationships.

Cross currency swap contracts

The Consolidated Entity enters into cross currency swap contracts to mitigate the risk of movements in foreign exchange rates in relation to principal and interest payments arising from foreign currency borrowings. The Consolidated Entity receives fixed amounts in the various foreign currencies and pays both variable interest rates (based on Australian BBSW) and fixed interest rates for the full term of the underlying borrowings. In certain circumstances borrowings are retained in the foreign currency, or hedged from one foreign currency to another to match payments of interest and principal against expected future business cash flows in that foreign currency.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Capital Management

18. Financial risk management (continued)

(a) Market risk (continued)

Cross currency swap contracts (continued)

The following table details the cross	currency swap	contract principal payments	contract principal payments	due as at the	reporting date:
Cash flow hedges		Exchange	Less than			More than
	Foreign	rate	1 year	1 - 2 years	2 - 5 years	5 years
2021	currency	$	$000	$000	$000	$000
Pay AUD / receive foreign currency
2012 GBP Medium Term Notes	AUD/GBP	0.6530	-	-	(535,988)	-
2017 US144A	AUD/USD	0.7668	-	-	-	(1,108,503)
2019 GBP Medium Term Notes	AUD/GBP	0.5388	-	-	-	(742,390)
2019 JPY Medium Term Notes	AUD/JPY	75.2220	-	-	-	(132,940)
2020 EUR Medium Term Notes	AUD/EUR	0.5895	-	-	-	(1,017,812)
2021 EUR Medium Term Notes	AUD/EUR	0.6464	-	-	-	(1,701,733)
2021 GBP Medium Term Notes	AUD/GBP	0.5530	-	-	-	(452,080)
Pay USD / receive foreign currency
2015 EUR Medium Term Notes	USD/EUR	0.9514	-	-	-	(911,379)
2015 GBP Medium Term Notes	USD/GBP	0.6773	-	-	-	(1,181,751)
			-	-	(535,988)	(7,248,588)
		Exchange	Less than			More than
	Foreign	rate	1 year	1 - 2 years	2 - 5 years	5 years
2020	currency	$	$000	$000	$000	$000
Pay AUD / receive foreign currency
2007 USPP Notes	AUD/USD	0.8068	-	(153,694)	-	-
2009 USPP Notes	AUD/USD	0.7576	-	-	-	-
2012 CAD Medium Term Notes	AUD/CAD	1.0363	-	-	-	-
2012 US144A	AUD/USD	1.0198	-	-	(735,438)	-
2012 GBP Medium Term Notes	AUD/GBP	0.6530	-	-	(535,988)	-
2015 EUR Medium Term Notes	AUD/EUR	0.6183	-	(1,132,141)	-	-
2017 US144A	AUD/USD	0.7668	-	-	-	(1,108,503)
2019 GBP Medium Term Notes	AUD/GBP	0.5388	-	-	-	(742,390)
2019 JPY Medium Term Notes	AUD/JPY	75.2220	-	-	-	(132,940)
2020 EUR Medium Term Notes	AUD/EUR	0.5895	-	-	-	(1,017,812)
Pay USD / receive foreign currency
2015 EUR Medium Term Notes	USD/EUR	0.9514	-	-	-	(990,741)
2015 GBP Medium Term Notes	USD/GBP	0.6773	-	-	-	(1,284,658)
			-	(1,285,835)	(1,271,426)	(5,277,044)

Foreign currency denominated borrowings

The Consolidated Entity maintains a level of borrowings in foreign currency, or swapped from one foreign currency to another to match payments of interest and principal against expected future business cash flows in that foreign currency. This mitigates the risk of adverse movements in foreign exchange rates in relation to principal and interest payments arising from these foreign currency borrowings as well as future revenues.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

18. Financial risk management (continued)

(a) Market risk (continued)

Foreign currency sensitivity analysis

The analysis below shows the effect on profit and total equity of retranslating cash, receivables, payables and interestbearing liabilities denominated in USD, JPY, GBP, EUR, SEK into AUD, had the rates been 20 percent higher or lower than the relevant year end rate, with all other variables held constant, and taking into account all underlying exposures and related hedges. A sensitivity of 20 percent has been selected and represents management's assessment of the possible change in rates taking into account the current level of exchange rates and the volatility observed both on an historical basis and on market expectations for possible future movements:

There would be no impact on net profit as all foreign currency exposures are fully hedged (2020: nil); and
Equity reserves would decrease by $1,036.2 million with a 20 percent depreciation of the A$ or increase by $691.1 million with a 20 percent increase in foreign exchange rates (2020: decrease by $1,229.6 million or increase by $820.1 million respectively).

Interest rate risk

The Consolidated Entity's interest rate risk is derived predominately from borrowings subject to floating interest rates. This risk is managed by the Consolidated Entity maintaining an appropriate mix between fixed and floating rate borrowings, through the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined policy, ensuring appropriate hedging strategies are applied.

The Consolidated Entity's exposures to interest rate risk on financial liabilities are detailed in the liquidity risk management section of this note. Exposure to financial assets is limited to cash and cash equivalents amounting to $652.2 million as at 30 June 2021 (2020: $1,172.6 million).

Cross currency swap and interest rate swap contracts

Cross currency swap and interest rate swap contracts have the economic effect of converting borrowings from floating to fixed rates and/or fixed rate foreign currency to fixed or floating AUD rates on agreed notional principal amounts enabling the Consolidated Entity to mitigate the risk of cash flow exposures on variable rate debt held. The fair value of cross currency swap and interest rate swap contracts at the reporting date is determined by discounting the future cash flows using the yield curves at reporting date. The average interest rate is based on the drawn debt balances at the end of the financial year.

There is an economic relationship between the hedged item and the hedging instrument. Based on the Consolidated Entity's qualitative assessment of effectiveness, it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite directions in response to movements in the underlying interest rates. The main source of hedge ineffectiveness in these hedge relationships is the effect of the counterparty and the Consolidated Entity's own credit risk on the fair value of the cross currency swap and interest rate swap contracts, which is not reflected in the fair value of the hedged item attributable to the change in interest rates and difference in timing of the future cash flows. The effect of credit risk does not dominate the value changes that result from that economic relationship.

The following table details the notional principal amounts and remaining terms of the cross currency swap contracts outstanding as at the end of the financial year:

	Weighted average	Weighted average		Notional
		interest rate	principal amount		Fair	value
	2021	2020	2021	2020	2021	2020
	% p.a.	% p.a.	$000	$000	$000	$000
Cash flow hedges–Pay fixed AUD interest - receive floating AUD or fixed foreign currency
Less than 1 year	-	-	-	-	-	-
1 year to 2 years	-	4.65	-	1,285,835	-	(7,622)
2 years to 5 years(a)	4.25	4.03	535,988	1,271,426	69,513	382,490
5years and more(a)	2.94	3.66	7,248,588	5,277,044	(262,750)	(354,157)
			7,784,576	7,834,305	(193,237)	20,711

(a) This amount includes a notional amount of USD 1.6 billion (2020: USD 1.6 billion) which is subject to USD interest rate risk.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

18. Financial risk management (continued)

(a) Market risk (continued)

Cross currency swap and interest rate swap contracts (continued)

The cross currency swap and interest rate swap contracts settle on a quarterly or semi-annual basis. The floating rate benchmark on the interest rate swaps is Australian BBSW. The Consolidated Entity will settle the difference between the fixed and floating interest rate on a net basis.

All cross currency swap and interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the Consolidated Entity's cash flow exposure on borrowings.

The following tables detail before tax information of the Consolidated Entity (excluding share of hedge reserves of associates) regarding derivative financial instruments outstanding at the end of the reporting period, their related hedged items and the effectiveness of the hedging relationships.

		Fair value of	Fair value of hedge	Fair value of hedge
		instrument		item	Reserve balance
	2021	2020	2021	2020	2021	2020
	$000	$000	$000	$000	$000	$000
Foreign exchange risk
Hedging foreign currency	(193,237)	20,711	204,225	(5,088)	398,468	633,540
borrowings (cross currency swap)
Hedging revenue and	(90,663)	(253,287)	90,663	253,287	90,663	253,287
associated receivables
(foreign currency borrowings)
Hedging revenue and associated	10,876	(22,284)	(10,789)	22,326	(10,423)	21,253
receivables (FECs)
Hedgingcapitalpurchases(FECs)	1,738	(3,092)	(1,739)	3,092	(1,738)	3,092
	(271,286)	(257,952)	282,360	273,617	476,970	911,172
			Change in fair values of		Change in fair values of
			hedging instruments(a)		hedged items(a)
			2021	2020	2021	2020
			$000	$000	$000	$000
Foreign exchange risk
Hedging foreign currency borrowings (cross currency swap)			114,389	(150,737)	(137,314)	164,733
Hedging revenue and associated receivables			162,624	(35,150)	(162,624)	35,150
(foreign currency borrowings)
Hedging revenue and associated receivables (FECs)			33,160	(10,411)	(33,115)	10,437
Hedgingcapitalpurchases(FECs)			4,830	698	(4,831)	(708)
			315,003	(195,600)	(337,884)	209,612
(a) This table excludes change in fair values of forecast transactions no longer expected to occur.
			Hedge ineffectiveness		Balance relating to
				gain / (loss)	cash flow hedges
			2021	2020	2021	2020
			$000	$000	$000	$000
Foreign exchange risk
Hedging foreign currency borrowings (cross currency swap)			(926)	(417)	2,349	17,906
Hedgingrevenue and associated receivables(FECs)			87	-	-	-
			(839)	(417)	2,349	17,906
			2021	2020	2021	2020
			$000	$000	$000	$000
Interest rate risk
HedgingUS$denominated borrowings(interest rate swap)			-	-	33,108	46,289
			-	-	33,108	46,289

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

18. Financial risk management (continued)

(a) Market risk (continued)

Interest rate sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and nonderivative instruments held. A 100 basis point increase or decrease is used and represents management's assessment of the greatest possible change in interest rates over the short term. At reporting date, if interest rates had been 100 basis points lower or higher and all other variables were held constant, the Consolidated Entity's equity reserves would increase by $46,784,000 with a 100 basis point decrease in interest rates or decrease by $4,943,000 with a 100 basis point increase in interest rates (2020: increase by $15,776,000 or increase by $4,528,000 respectively). This is due to the changes in the fair value of derivative interest instruments.

The Consolidated Entity's profit sensitivity to interest rates has decreased during the current year as the Consolidated Entity has no unhedged floating rate borrowings outstanding at the end of the financial year. The increase/decrease in equity reserves is based on 1.00% p.a. increase/decrease in the yield curve at the reporting date.

Price risk – equity price

The Consolidated Entity is exposed to price risk arising from its forward purchase contracts over listed equities. The forward purchase contracts are held to hedge long-term incentive awards rather than for trading purposes. The Consolidated Entity does not actively trade these holdings.

Price risk – electricity price

The Consolidated Entity is exposed to electricity price risk arising from a contract for difference in an electricity sales agreement with a customer. The contract guarantees the Consolidated Entity a fixed price for electricity offtake. The key assumptions of the contract for difference are provided in the fair value of financial instrument section.

(b) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Consolidated Entity.

Credit risk management

The Consolidated Entity has adopted the policy of dealing with creditworthy counterparties or obtaining sufficient collateral or bank guarantees where appropriate as a means of mitigating the risk of loss. For financial investments or market risk hedging, the Consolidated Entity's policy is to only transact with counterparties that have a credit rating of A- (Standard & Poor's)/A3 (Moody's) or higher unless specifically approved by the Board. Where a counterparty's rating falls below this threshold following a transaction, no other transactions can be executed with that counterparty until the exposure is sufficiently reduced or their credit rating is upgraded above the Consolidated Entity's minimum threshold. The Consolidated Entity's exposure to financial instrument and deposit credit risk is closely monitored against counterparty credit limits imposed by the Treasury Risk Management Policy approved by the ARMC. These limits are regularly reviewed by the Board.

Overview of the Consolidated Entity's exposure to credit risk

In order to minimise credit risk, the Consolidated Entity categorised exposures according to their degree of risk of default. The Consolidated Entity's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

The Consolidated Entity's current credit risk grading framework comprises the following categories:

Performing – the counterparty has a low risk of default and does not have any past-due amounts; Doubtful – amount is >30 days past due or there has been a significant increase in credit risk since initial recognition;
● and
Write-off – there is evidence indicating that the debtor is in severe financial difficulty and the Consolidated Entity has no realistic prospect of recovery.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

18. Financial risk management (continued)

(b) Credit risk (continued)

Overview of the Consolidated Entity's exposure to credit risk (continued)

The table below details the credit quality of the Consolidated Entity's financial assets.

	External	Internal	ECL
	credit rating	credit rating	method(a)
2021
Cash and cash equivalents and cash on deposit	A- (Standard & Poor's)/	Performing	12-month ECL
	A3 (Moody's) or higher
Trade receivables	N/A	(b)	Lifetime ECL
			(simplified
			approach)
Finance lease receivables	N/A	(b)	Lifetime ECL
			(simplified
			approach)
Contract assets	N/A	(b)	Lifetime ECL
			(simplified
			approach)
Loans advanced to related parties	N/A	Performing	12-month ECL
Redeemable preference shares (GDI)	N/A	Performing	12-month ECL

(a) Lifetime ECL represents the expected credit losses (ECL) that will result from possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

(b) For trade receivables, finance lease receivables and contract assets, the Consolidated Entity has applied the simplified approach in AASB 9 to measure the loss allowance at lifetime ECL. The Consolidated Entity determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision matrix. Note 8 includes further details on the loss allowance for these assets respectively if any.

There is no material ECL for any of the financial assets listed in the table above.

Cross guarantee

In accordance with a deed of cross guarantee, APT Pipelines Limited has agreed to provide financial support, when and as required, to all wholly-owned controlled entities with either a deficit in shareholders’ funds or an excess of current liabilities over current assets. The fair value of the financial guarantee as at 30 June 2021 has been determined to be immaterial and no liability has been recorded (2020: $nil).

(c) Liquidity risk

The Consolidated Entity has a policy of dealing with liquidity risk which requires an appropriate liquidity risk management framework for the management of the Consolidated Entity's short, medium and long-term funding and liquidity management requirements. Liquidity risk is managed by maintaining adequate cash reserves and banking facilities, by monitoring and forecasting cash flow and where possible, by arranging liabilities with longer maturities to more closely match the underlying assets of the Consolidated Entity.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

18. Financial risk management (continued)

(c) Liquidity risk (continued)

Detailed in the table following are the Consolidated Entity's remaining contractual maturities for its non-derivative financial liabilities. The table is presented based on the undiscounted cash flows of financial liabilities taking account of the earliest date on which the Consolidated Entity can be required to pay. The table includes both interest and principal cash flows.

The table below shows the undiscounted Australian dollar cash flows associated with the AUD and foreign currency denominated notes, cross currency swaps and fixed interest rate swaps in aggregate.

		Average	Less than		More than
		interest rate	1 year	1 - 5 years	5 years
	Maturity	% p.a.	$000	$000	$000
2021
Unsecured financial liabilities
Trade and other payables		-	314,894	-	-
Unsecured bank borrowings(a)		-	-	-	-
Denominated in A$
Other financial liabilities			3,146	9,349	2,063
Denominated in US$
Guaranteed Senior Notes(c)
Denominated in A$
2016 AUD Medium Term Notes	20-Oct-23	3.75	7,500	211,250	-
Denominated in US$
2015 US 144A(b)	23-Mar-25	4.20	61,629	1,652,409	-
2015 US 144A(b)	23-Mar-35	5.00	20,009	80,037	580,493
2017 US 144A	15-Jul-27	4.25	59,037	234,380	1,196,239
Denominated in stated foreign currency
2012 GBP Medium Term Notes	26-Nov-24	4.25	39,459	634,904	-
2015 GBP Medium Term Notes(b)	22-Mar-30	3.50	52,992	212,073	1,393,824
2015 EUR Medium Term Notes(b)	22-Mar-27	2.00	40,059	160,237	951,438
2019 GBP Medium Term Notes	18-Jul-31	3.13	33,595	135,026	927,438
2019 JPY Medium Term Notes	13-Jun-34	1.03	5,606	22,518	177,913
2020 EUR Medium Term Notes	15-Jul-30	2.00	39,666	157,155	1,194,801
2021 EUR Medium Term Notes	15-Mar-29	0.75	27,388	109,702	1,010,382
2021 EUR Medium Term Notes	15-Mar-33	1.25	29,249	117,155	978,336
2021 GBP Medium Term Notes	15-Mar-36	2.50	19,184	76,842	644,132
			753,413	3,813,037	9,057,059

(a) Bank facilities mature or expire on 16 May 2022 ($50 million limit), 18 July 2022 ($150 million limit), 30 June 2023 ($500 million limit) and 31 December 2023 ($500 million limit) and 19 December 2025 ($50 million limit).

(b) Facilities are denominated in or fully swapped by way of cross currency swap into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at 30 June 2021. These amounts are fully hedged by FECs or future US$ revenues.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

18. Financial risk management (continued)

(c) Liquidity risk (continued)

(c) Liquidity risk (continued)
		Average	Less than		More than
		interest rate	1 year	1 - 5 years	5 years
	Maturity	% p.a.	$000	$000	$000
2020
Unsecured financial liabilities
Trade and other payables		-	278,313	-	-
Unsecured bank borrowings(a)		-	-	-	-
Denominated in A$
Other financial liabilities			3,610	10,924	3,634
Denominated in US$
Other financial liabilities(b)			8,473	27,355	18,900
Guaranteed Senior Notes(c)
Denominated in A$
2007 Series G	15-May-22	7.45	6,002	86,584	-
2007 Series H	15-May-22	7.45	4,617	66,603	-
2010 AUD Medium Term Notes	22-Jul-20	7.75	311,625	-	-
2016 AUD Medium Term Notes	20-Oct-23	3.75	7,500	218,750	-
Denominated in US$
2007 Series F	15-May-22	6.14	11,354	165,079	-
2009 Series B	1-Jul-19		-		-
2012 US 144A	11-Oct-22	3.88	48,854	809,057	-
2015 US 144A(b)	23-Mar-25	4.20	66,995	1,863,295	-
2015 US 144A(b)	23-Mar-35	5.00	21,752	87,007	652,794
2017 US 144A	15-Jul-27	4.25	58,812	234,765	1,254,891
Denominated in stated foreign currency
2012 GBP Medium Term Notes	26-Nov-24	4.25	39,459	674,363	-
2015 GBP Medium Term Notes(b)	22-Mar-30	3.50	57,606	230,528	1,572,792
2015 EUR Medium Term Notes	22-Mar-22	1.38	50,290	1,182,555	-
2015 EUR Medium Term Notes(b)	22-Mar-27	2.00	43,548	174,190	1,077,836
2019 GBP Medium Term Notes	18-Jul-31	3.13	33,595	135,026	961,033
2019 JPY Medium Term Notes	13-Jun-34	1.03	5,622	22,471	183,566
2020 EUR Medium Term Notes	15-Jul-30	2.00	28,025	157,479	1,234,143
			1,086,052	6,146,031	6,959,589

(a) Bank facilities mature or expire on 19 December 2020 ($100 million limit), 16 May 2022 ($50 million limit), 18 July 2022 ($150 million limit), 30 June 2023 ($500 million limit) and 31 December 2023 ($500 million limit). (b) Facilities are denominated in or fully swapped by way of CCIRS into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at 30 June 2020. These amounts are fully hedged by FECs or future US$ revenues.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

18. Financial risk management (continued)

Critical accounting judgements and key sources of estimation uncertainty – fair value of financial instruments

The Consolidated Entity has financial instruments that are carried at fair value in the statement of financial position. The best evidence of fair value is quoted prices in an active market. If the market for a financial instrument is not active, the Consolidated Entity determines fair value by using various valuation models. The objective of using a valuation technique is to establish the price that would be received to sell an asset or paid to transfer a liability between market participants. The chosen valuation models make maximum use of market inputs and rely as little as possible on entity specific inputs. The fair values of all positions include assumptions made as to recoverability based on the counterparty’s and the Consolidated Entity’s credit risk.

Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Transfers between levels of the fair value hierarchy occur at the end of the reporting period. There have been no transfers between the levels during 2021 (2020: none). Transfers between Level 1 and Level 2 are triggered when there are changes to the availability of quoted prices in active markets. Transfers into Level 3 are triggered when the observable inputs become no longer observable, or vice versa for transfer out of Level 3.

Fair value of the Consolidated Entity's financial assets and liabilities that are measured at fair value on a recurring basis

The fair values of financial assets and financial liabilities are measured at the end of each reporting period and determined as follows:

The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices. These instruments are classified in the fair value hierarchy at Level 1;
The fair values of FECs included in hedging assets and liabilities are calculated using discounted cash flow analysis based on observable forward exchange rates at the end of the reporting period and contract forward rates discounted at a rate that reflects the credit risk of the various counterparties. These instruments are classified in the fair value hierarchy at Level 2;
The fair values of interest rate swaps, cross currency swaps, equity forwards and other derivative instruments included in hedging assets and liabilities are calculated using discounted cash flow analysis using observable market inputs (yield curves, foreign exchange rates, equity prices and historical inflation indices) at the end of the reporting period and contract rates discounted at a rate that reflects the credit risk of the various counterparties. These instruments are classified in the fair value hierarchy at Level 2;
The fair value of indexed revenue contract is derived from present value of expected future cash flows based on observable inflation indices and yield curve at the end of the reporting period. These instruments are classified in the fair value hierarchy at Level 2;
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current markets discounted at a rate that reflects the credit risk of the various counterparties. These instruments are classified in the fair value hierarchy at Level 2;
The fair value of financial guarantee contracts is determined based upon the probability of default by the specified counterparty extrapolated from market-based credit information and the amount of loss, given the default. These instruments are classified in the fair value hierarchy at Level 2; and
The carrying value of financial assets and liabilities recorded at amortised cost in the financial statements approximate their fair value having regard to the specific terms of the agreements underlying those assets and liabilities.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

18. Financial risk management (continued)

Contract for difference

The financial statements include a contract for difference arising from an electricity sales agreement with a customer that guarantees the Consolidated Entity a fixed price for electricity offtake for the agreed term which is measured at fair value. The fair value of the contract for difference is derived from internal discounted cash flow valuation methodology, which includes some assumptions that are not able to be supported by observable market prices or rates.

In determining the fair value, the following assumptions were used:

Estimated long term forecast electricity pool prices are applied as market prices are not readily observable for the corresponding term;
Forecast electricity volumes are estimated based on an internal forecast output model;
The discount rates are based on observable market rates for risk-free instruments of the appropriate term;
Credit adjustments are applied to the discount rates to reflect the risk of default by either the Consolidated Entity or a specific counterparty. Where a counterparty specific credit curve is not observable, an estimated curve is applied which takes into consideration the credit rating of the counterparty and its industry; and
These instruments are classified in the fair value hierarchy at Level 3.

Changes in any of the aforementioned assumptions may be accompanied by changes in other assumptions which may have an offsetting impact.

Fair value hierarchy

	Level 1	Level 2	Level 3	Total
2021	$000	$000	$000	$000
Financial assets measured at fair value
Equity forwards designated as fair value through profit or loss	-	-	-	-
Cross currency interest rate swap contracts used for hedging	-	193,004	-	193,004
Foreign currency forward exchange contracts used for hedging	-	22,724	-	22,724
Contract for difference	-	-	29,742	29,742
	-	215,728	29,742	245,470
Financial liabilities measured at fair value
Equity forwards designated as fair value through profit or loss	-	2,211	-	2,211
Cross currency interest rate swap contracts used for hedging	-	386,241	-	386,241
Foreign currency forward exchange contracts used for hedging	-	10,110	-	10,110
Indexed revenue contract	-	3,365	-	3,365
Contract for difference	-	-	1,216	1,216
	-	401,927	1,216	403,143
2020
Financial assets measured at fair value
Equity forwards designated as fair value through profit or loss	-	1,667	-	1,667
Cross currency interest rate swap contracts used for hedging	-	557,336	-	557,336
Foreign currency forward exchange contracts used for hedging	-	15,236	-	15,236
Contract for difference	-	-	10,508	10,508
	-	574,239	10,508	584,747

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

18. Financial risk management (continued)

Fair value hierarchy (continued)

18. Financial risk management (continued) Fair value hierarchy (continued)
	Level 1	Level 2	Level 3	Total
2020	$000	$000	$000	$000
Financial liabilities measured at fair value
Equity forwards designated as fair value through profit or loss	-	74	-	74
Cross currency interest rate swap contracts used for hedging	-	536,625	-	536,625
Foreign currency forward exchange contracts used for hedging	-	40,612	-	40,612
Indexed revenue contract	-	8,090	-	8,090
	-	585,401	-	585,401

Reconciliation of Level 3 fair value measurements

	2021	2020
	$000	$000
Opening balance	10,508	1,742
Revaluation	13,943	9,288
Settlement	4,075	(522)
Closingbalance	28,526	10,508

Fair value measurements of financial instruments measured at amortised cost

The financial liabilities included in the following table are fixed rate borrowings. Other debts held by the Consolidated Entity are floating rate borrowings and amortised cost as recorded in the financial statements approximate their fair values.

	Carryingamount Fair value(Level 2) (a)
	2021 2020 2021 2020 $000 $000 $000 $000
Financial liabilities Unsecured long term Private Placement Notes Unsecured Australian Dollar Medium Term Notes Unsecured Japanese Yen Medium Term Notes Unsecured US Dollar 144A Medium Term Notes Unsecured British Pound Medium Term Notes Unsecured Euro Medium Term Notes	- 322,353 - 351,357 200,000 500,000 212,150 515,311 120,079 134,338 123,105 136,838 3,001,400 4,350,348 3,405,782 4,821,607 2,945,695 2,423,481 3,173,349 2,620,897 3,715,047 3,174,688 3,790,914 3,253,322
	9,982,221 10,905,208 10,705,300 11,699,332

(a) The fair values have been determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current markets, discounted at a rate that reflects the Consolidated Entity's credit risk. The instruments are classified in the fair value hierarchy at Level 2.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Capital Management

19. Other financial instruments

19. Other financial instruments
		Assets		Liabilities
	2021	2020	2021	2020
	$000	$000	$000	$000
Derivatives at fair value:
Contract for difference	3,885	2,813	-	-
Equity forward contracts	-	1,336	498	-
Derivatives at fair value designated as hedging instruments:
Cross currency interest rate swaps - cash flow hedges	19,463	18,343	158,433	159,305
Foreign exchange contracts - cash flow hedges	22,684	9,971	10,100	27,042
Financial assets carried at amortised cost:
Redeemable preference shares	10,400	-	-	-
Redeemable preference share interest	285	285	-	-
Current	56,717	32,748	169,031	186,347
Derivatives – at fair value:
Contract for difference	25,857	7,695	1,216	-
Equity forward contracts	-	331	1,713	74
Indexed revenue contracts	-	-	3,365	8,090
Derivatives at fair value designated as hedging instruments:
Cross currency interest rate swaps - cash flow hedges	193,004	557,336	255,813	405,904
Foreign exchange contracts - cash flow hedges	39	5,265	10	13,570
Financial items carried at amortised cost:
Redeemable preference shares	-	10,400	-	-
Non-current	218,900	581,027	262,117	427,638

Redeemable preference shares relate to the Consolidated Entity's 20% interest in GDI (EII) Pty Ltd. In December 2011, APA sold 80% of its gas distribution network in South East Queensland (Allgas) into an unlisted investment entity, GDI (EII) Pty Ltd. At that date GDI issued 52 million Redeemable Preference Shares (RPS) to its owners. The shares attract periodic interest payments and have a redemption date 10 years from issue.

Recognition and measurement

Classification of financial assets

Debt instruments that meet the following conditions are subsequently measured at amortised cost:

The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Debt instruments that meet the following conditions are subsequently measured at fair value through other comprehensive income ("FVTOCI"):

The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

By default, all other financial assets are subsequently measured at fair value through profit or loss ("FVTPL").

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognised in profit or loss to the extent they are not part of a designated hedging relationship.

Derivatives that the Consolidated Entity does not elect to apply hedge accounting to or do not meet the hedge accounting criteria, are classified as 'financial assets/liabilities' for accounting purposes and accounted for at FVTPL.

Fair value measurement

For information about the methods and assumptions used in determining the fair value of financial instruments refer to note 18.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

19. Other financial instruments (continued)

Recognition and measurement (continued)

Fair value measurement

For information about the methods and assumptions used in determining the fair value of financial instruments refer to note 18.

Hedge accounting

The Consolidated Entity designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges or cash flow hedges. There are no fair value hedges in the current or prior year, hedges of foreign exchange and interest rate risk are accounted for as cash flow hedges.

At the inception of the hedge relationship, the Consolidated Entity formally designates and documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Consolidated Entity expects the hedging instrument is effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all of the following hedge effectiveness requirements:

There is an economic relationship between the hedged item and the hedging instrument;
The effect of credit risk does not dominate the value changes that result from that economic relationship; and
The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Consolidated Entity actually hedges and the quantity of the hedging instrument that the Consolidated Entity actually uses to hedge that quantity of hedged item.

If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective for that designated hedging relationship remains the same, the Consolidated Entity adjusts the hedge ratio of the hedging relationship (i.e. rebalances the hedge) so that it meets the qualifying criteria again.

Derivatives are initially recognised at fair value at the date a derivatives contract is entered into and subsequently remeasured to fair value at each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. A derivative with a positive fair value is recognised as a financial asset, a derivative with a negative fair value is recognised as a financial liability.

The fair value of hedging derivatives is classified as either current or non-current based on the timing of the underlying discounted cash flows of the instrument. Cash flows due within 12 months of the reporting date are classified as current and cash flows due after 12 months of the reporting date are classified as non-current.

IBOR reform impact

AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform Phase 2 was issued in September 2020 and will be effective for the Consolidated Entity from 1 July 2021. Phase 2 amendments enable the Group to reflect the effects of transitioning IBORs to risk free rates (RFRs) without giving rise to accounting impacts that would not provide useful information to users of financial statements. The Consolidated Entity does not have any debt or derivative instruments directly linked to US LIBOR, EURIBOR, GBP LIBOR or JPY LIBOR (collectively ‘IBORs’). The Consolidated Entity only has an indirect exposure to the IBORs in relation to the valuation of Cross Currency Interest Rate Swaps that are designated in hedging relationships.

The Consolidated Entity's Capital Markets department will work closely with banks and swap counterparties to review the process of replacing the IBORs with replacement RFRs and implications on the pricing and valuation of existing hedging instruments.

Cash flow hedges

The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the cash flow hedge reserve, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, and is included in the 'finance costs' line item.

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

19. Other financial instruments (continued)

Recognition and measurement (continued)

Cash flow hedges (continued)

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are removed from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. This transfer does not affect other comprehensive income. Furthermore, if the Consolidated Entity expects that some or all of the loss accumulated in the cash flow hedging reserve will not be recovered in the future, that amount is immediately reclassified to profit or loss.

The Consolidated Entity discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in cash flow hedge reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to profit or loss.

Accounting for the forward element of foreign currency forward exchange contracts and foreign currency basis spreads of financial instruments

The Consolidated Entity designates the full change in the fair value of an FEC (i.e. including the forward elements) as the hedging instrument for all of its hedging relationships involving FECs.

The Consolidated Entity separates the foreign currency basis spread from a financial instrument and excludes it from the designation of that financial instrument as the hedging instrument. Changes in the value of the undesignated aligned foreign currency basis spread associated with cross currency interest rate swaps are deferred in other comprehensive income.

Cash flow hedge and cost of hedging reserve

The cash flow hedge reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the hedged transaction impacts the profit or loss, or is included directly in the initial cost or other carrying amount of the hedged non-financial items (basis adjustment).

The cost of hedging reserve represents the effect of the changes in fair value of the forward currency basis spread of a financial instrument when the foreign currency basis spread of a financial instrument is excluded from the designation of that financial instrument as the hedging instrument (consistent with the Consolidated Entity's accounting policy to recognise non-designated component of foreign currency derivative in equity). The changes in fair value of the foreign currency basis spread of a financial instrument, in relation to a time-period related hedged item accumulated in the cash flow hedging reserve, are amortised to profit or loss on a rational basis over the term of the hedging relationship.

relationship.
	2021	2020
	$000	$000
Balance at beginning of financial year	(697,699)	(605,425)
(Gain)/loss recognised taken to equity:
(Gain)/loss arising on changes in fair value of hedging instruments	421,547	(183,108)
Changes in fair value of foreign currency basis spread during the period	(46,941)	(23,757)
Share of hedge reserve of associate	9,313	(5,139)
Amount reclassified to P&L for forecast transactions no longer expected to occur	61,289
Amount reclassified to P&L for effective hedges	28,916	80,184
Tax effect	(142,240)	39,546
Balance at end of financialyear	(365,815)	(697,699)

The foreign currency basis spread reserve balance at beginning of financial year is ($58.2 million) and at end of financial year is ($70.0 million) in 2021 (2020: ($56.2m) and ($58.2m) respectively).

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Capital Management

19. Other financial instruments (continued)

Recognition and measurement (continued)

Hedge ineffectiveness

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.

In hedges of foreign currency capital equipment purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of the Consolidated Entity or the derivative counterparty.

Hedge ineffectiveness for cross currency interest rate swaps is assessed using the same principles as for hedges of foreign currency capital equipment purchases. It may occur due to the credit value/debit value adjustment on the swap contracts which is not matched by the debts.

Impairment of financial assets

In relation to the impairment of financial assets, it is no longer necessary for a credit event to have occurred before credit losses are recognised. The Consolidated Entity applies an ECL model to account for ECL and changes in those ECL at each reporting date to reflect changes in credit risk since initial recognition of a financial asset.

The Consolidated Entity recognises a loss allowance for ECL on investments in debt instruments that are measured at amortised cost, for example, loans advanced to related parties and trade receivables. No impairment loss is recognised for investments in equity instruments. For trade receivables, finance lease receivables and contract assets, the Consolidated Entity applies the simplified approach to assessing ECL. Under the simplified approach, ECL on these financial assets is estimated using a provision matrix. This matrix is based on the Consolidated Entity’s historical credit losses and reasonable and supportable information that is available without undue cost.

The amount of ECL under either approach is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Consolidated Entity recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account. Aside from the additional disclosure requirements in note 19, the history of collection rates and forward-looking information that is available without undue cost or effort shows that the Consolidated Entity does not have an expected loss on collection of debtors or loans.

Significant increase in credit risk

An actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating.

Definition of default

When there is a breach of financial covenants by the debtor.

Write-off policy

The Consolidated Entity writes off a financial asset when all reasonable attempts at recovery have been taken and failed e.g. debts that are considered irrecoverable, or where the cost of recovery is uneconomic, must be written off as a bad debt.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Capital Management

20. Issued capital

20. Issued capital
			2021	2020
			$000	$000
Shares
62,127,252 shares, fully paid (2020: 62,127,252 shares, fully paid)(a)			117,330	117,330
	2021		2020
	No. of		No. of
	shares	2021	shares	2020
	000	$000	000	$000
Movements
Balance at beginningof financial year	62,127	117,330	62,127	117,330
Balance at end of financial year	62,127	117,330	62,127	117,330

(a) Fully paid shares carry one vote per share and carry the right to distributions.

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to issued capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Group Structure

21. Non-controlling interests

21. Non-controlling interests
	2021	2020
	$000	$000
Issued capital
Balance at beginning of financial year	119,253	119,253
Return of capital	-	-
Balance at end of financial year	119,253	119,253
	119,253	119,253
Retained earnings
Balance at beginning of financial year	-	-
Profit for the year	22,735	24,373
Distributions paid	(22,735)	(24,373)
Balance at end of financial year	-	-
	119,253	119,253

22. Joint arrangements and associates

The table below lists the Consolidated Entity's interest in joint ventures and associates that are reported as part of the Energy Investments segment. The Consolidated Entity provides asset management, operation and maintenance services and corporate services, in varying combinations, to the majority of energy infrastructure assets housed within these entities.

			Ownership	interest %
Name of entity	Principal activity	Country of incorporation	2021	2020
Joint ventures:
SEA Gas	Gas transmission	Australia	50.00	50.00
SEA Gas (Mortlake)	Gas transmission	Australia	50.00	50.00
EII 2	Powergeneration(wind)	Australia	20.20	20.20
Associate:
GDI(EII)	Gas distribution	Australia	20.00	20.00
			2021	2020
			$000	$000
Investment injoint ventures and associate using the equity method			225,159	212,782

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Group Structure

22. Joint arrangements and associates (continued)

Aggregated information in respect of the joint ventures and associate is set out below:

	2021	2020
	$000	$000
Joint Ventures
Aggregate carrying amount of investment	202,660	191,180
The Consolidated Entity's aggregated share of:
Profit from continuing operations	22,434	22,726
Other comprehensive income	7,119	(3,470)
Total comprehensive income	29,553	19,256
Associate
Aggregate carrying amount of investment	22,499	21,602
The Consolidated Entity's aggregated share of:
Profit from continuing operations	4,512	4,814
Other comprehensive income	2,194	(1,669)
Total comprehensive income	6,706	3,145

Investment in associates

An associate is an entity over which the Consolidated Entity has significant influence and that is neither a subsidiary nor a joint arrangement. Investments in associates are accounted for using the equity accounting method.

Under the equity accounting method the investment is recorded initially at cost to the Consolidated Entity, including any goodwill on acquisition. In subsequent periods the carrying amount of the investment is adjusted to reflect the Consolidated Entity’s share of the retained post-acquisition profit or loss and other comprehensive income, less any impairment.

Losses of an associate or joint venture in excess of the Consolidated Entity’s interests (which includes any long-term interests, that in substance, form part of the net investment) are recognised only to the extent that there is a legal or constructive obligation or the Consolidated Entity has made payments on behalf of the associate or joint venture.

Carrying value of the investment in joint arrangement and associates are subject to impairment testing if there is objective evidence of impairments. No material indicators identified in the joint arrangements and associates as at the date of the issuance of these financial statements.

Contingent liabilities and capital commitments

The Consolidated Entity's share of the contingent liabilities, capital commitments and other expenditure commitments of jointly controlled operations is disclosed in note 24.

The Consolidated Entity is a venturer in the following joint operations and assets:

		Output	interest
		2021	2020
Name of venture	Principal activity	%	%
Goldfields Gas Transmission(a)	Gas pipeline operation – Western Australia	88.2	88.2
Mid West Pipeline(b)	Gas pipeline operation – Western Australia	50.0	50.0

(a) On 17 August 2004, the Consolidated Entity acquired a direct interest in the Goldfields Gas Transmission joint operations as part of the SCP Gas Business acquisition.

(b) Pursuant to the joint venture agreement, the Consolidated Entity receives a 70.8% share of operating income and expenses.

Interest in joint arrangements

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control such that decisions about the relevant activities of the arrangement (those that significantly affect the returns) require the unanimous consent of the parties sharing control. The Consolidated Entity has two types of joint arrangements:

Joint ventures: A joint arrangement in which the parties that share joint control have rights to the net assets of the arrangement. Joint Ventures are accounted for using the equity accounting method; and

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Group Structure

22. Joint arrangements and associates (continued)

Joint operations: A joint arrangement in which the parties that share joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement. In relation to its interest in a joint operation, the Consolidated Entity recognises its share of assets and liabilities, its share of revenue generated from the sale of the output by the joint operation and its share of expenses. These are incorporated into the Consolidated Entity's financial statements under the appropriate headings.

23. Subsidiaries

Subsidiaries are entities controlled by the Consolidated Entity. Control exists where the Consolidated Entity has power over the entities, i.e. existing rights that give them the current ability to direct the relevant activities of the entities (those that significantly affect the returns); exposure, or rights, to variable returns from their involvement with the entities; and the ability to use their power to affect those returns.

	Country of	Ownership	interest
	registration/	2021	2020
Name of entity	incorporation	%	%
Parent entity
APT Pipelines Limited(a)
Subsidiaries
Agex Pty. Ltd.(b),(c)	Australia	100	100
APA (BWF Holdco) Pty Ltd(b),(c)	Australia	100	100
APA (EDWF Holdco) Pty Ltd(b),(c)	Australia	100	100
APA (EPX) Pty Limited(b),(c)	Australia	100	100
APA (NBH) Pty Limited(b),(c)	Australia	100	100
APA (Pilbara Pipeline) Pty Ltd(b),(c)	Australia	100	100
APA (SWQP) Pty Limited(b),(c)	Australia	100	100
APA (WA) One Pty Limited(b),(c)	Australia	100	100
APA AIS 1 Pty Limited(b),(c)	Australia	100	100
APA AIS 2 Pty Ltd(b),(c)	Australia	100	100
APA AIS Pty Limited(b),(c)	Australia	100	100
APA AM (Allgas) Pty Limited(b),(c)	Australia	100	100
APA BIDCO Pty Limited(b),(c)	Australia	100	100
APA Biobond Pty Limited(b),(c)	Australia	100	100
APA Country Pipelines Pty Limited(b),(c)	Australia	100	100
APA DPS Holdings Pty Limited(b),(c)	Australia	100	100
APA DPS2 Pty Limited(b),(c)	Australia	100	100
APA East Pipelines Pty Limited(b),(c)	Australia	100	100
APA EE Australia Pty Limited(b),(c)	Australia	100	100
APA EE Corporate Shared Services Pty Limited(b),(c)	Australia	100	100
APA EE Holdings Pty Limited(b),(c)	Australia	100	100
APA EE Pty Limited(b),(c)	Australia	100	100
APA Ethane Pty Limited(b),(c)	Australia	100	100
APA Facilities Management Pty Limited(b),(c)	Australia	100	100
APA Midstream Holdings Pty Limited(b),(c)	Australia	100	100
APA Operations (EII) Pty Limited(b),(c)	Australia	100	100
APA Operations Pty Limited(b),(c)	Australia	100	100
APA Orbost Gas Plant Pty Ltd(b),(c)	Australia	100	100

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Group Structure

23. Subsidiaries (continued)

	Country of	Ownership	interest
	registration/	2021	2020
Name of entity	incorporation	%	%
APA Pipelines Investments (BWP) Pty Limited(b),(c)	Australia	100	100
APA Power Holdings Pty Limited(b),(c)	Australia	100	100
APA Power PF Pty Limited(b),(c)	Australia	100	100
APA Reedy Creek Wallumbilla Pty Limited(b),(c)	Australia	100	100
APA SEA Gas (Mortlake) Holdings Pty Ltd(b),(c)	Australia	100	100
APA SEA Gas (Mortlake) Pty Ltd(b)	Australia	100	100
APA Services (Int) Inc.	United States	100	100
APA Sub Trust No 1(b),(d)	-	100	100
APA Sub Trust No 2(b),(d)	-	100	100
APA Sub Trust No 3(b),(d)	-	100	100
APA Transmission Pty Limited(b),(c)	Australia	100	100
APA VTS A Pty Limited(b),(c)	Australia	100	100
APA VTS Australia (Holdings) Pty Limited(b),(c)	Australia	100	100
APA VTS Australia (NSW) Pty Limited(b),(c)	Australia	100	100
APA VTS Australia (Operations) Pty Limited(b),(c)	Australia	100	100
APA VTS Australia Pty Limited(b),(c)	Australia	100	100
APA VTS B Pty Limited(b),(c)	Australia	100	100
APA Western Slopes Pipeline Pty Limited(b),(c)	Australia	100	100
APA WGP Pty Ltd(b),(c)	Australia	100	100
APT (MIT) Services Pty Limited(b),(c)	Australia	100	100
APT AM (Stratus) Pty Limited(b),(c)	Australia	100	100
APT AM Employment Pty Limited(b),(c)	Australia	100	100
APT AM Holdings Pty Limited(b),(c)	Australia	100	100
APT Facility Management Pty Limited(b),(c)	Australia	100	100
APT Goldfields Pty Ltd(b),(c)	Australia	100	100
APT Management Services Pty Limited(b),(c)	Australia	100	100
APT O&M Holdings Pty Ltd(b),(c)	Australia	100	100
APT O&M Services (QLD) Pty Ltd(b),(c)	Australia	100	100
APT O&M Services Pty Ltd(b),(c)	Australia	100	100
APT Parmelia Holdings Pty Ltd(b),(c)	Australia	100	100
APT Parmelia Pty Ltd(b),(c)	Australia	100	100
APT Parmelia Trust(b),(d)	-	100	100
APT Petroleum Pipelines Holdings Pty Limited(b),(c)	Australia	100	100
APT Petroleum Pipelines Pty Limited(b),(c)	Australia	100	100
APT Pipelines (NSW) Pty Limited(b),(c)	Australia	100	100
APT Pipelines (NT) Pty Limited(b),(c)	Australia	100	100
APT Pipelines (QLD) Pty Limited(b),(c)	Australia	100	100
APT Pipelines (SA) Pty Limited(b),(c)	Australia	100	100
APT Pipelines (WA) Pty Limited(b),(c)	Australia	100	100
APT Pipelines Investments (NSW) Pty Limited(b),(c)	Australia	100	100
APT Pipelines Investments (WA) Pty Limited(b),(c)	Australia	100	100
APT Sea Gas Holdings Pty Limited(b),(c)	Australia	100	100
APT SPV2 Pty Ltd(b)	Australia	100	100

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Group Structure

23. Subsidiaries (continued)

	Country of	Ownership	interest
	registration/	2021	2020
Name of entity	incorporation	%	%
APT SPV3 Pty Ltd(b)	Australia	100	100
APA US Investments Inc.	United States	100	-
Australian Pipeline Limited(b)	Australia	100	100
Central Ranges Pipeline Pty Ltd(b),(c)	Australia	100	100
Darling Downs Solar Farm Pty Ltd(b),(c)	Australia	100	100
Diamantina Holding Company Pty Limited(b),(c)	Australia	100	100
Diamantina Power Station Pty Limited(b),(c)	Australia	100	100
East Australian Pipeline Pty Limited(b),(c)	Australia	100	100
EDWF Holdings 1 Pty Ltd(b),(c)	Australia	100	100
EDWF Holdings 2 Pty Ltd(b),(c)	Australia	100	100
EDWF Manager Pty Ltd(b),(c)	Australia	100	100
Epic Energy East Pipelines Trust(b),(d)	-	100	100
EPX Holdco Pty Limited(b),(c)	Australia	100	100
EPX Member Pty Limited(b),(c)	Australia	100	100
EPX Trust(b),(d)	-	100	100
Gasinvest Australia Pty Ltd(b),(c)	Australia	100	100
GasNet A Trust(d)	-	100	100
GasNet Australia Trust(b),(d)	Australia	100	100
Goldfields Gas Transmission Pty Ltd(b)	Australia	100	100
Gorodok Pty. Ltd.(b),(c)	Australia	100	100
Griffin Windfarm 2 Pty Ltd(b)	Australia	100	100
N.T. Gas Distribution Pty Limited(b),(c)	Australia	100	100
N.T. Gas Easements Pty. Limited(b),(c)	Australia	100	100
N.T. Gas Pty Limited	Australia	96	96
Northern Goldfiends Interconnect Pty Ltd(b)(c)	Australia	100	-
Roverton Pty. Ltd.(b),(c)	Australia	100	100
SCP Investments (No. 1) Pty Limited(b),(c)	Australia	100	100
SCP Investments (No. 2) Pty Limited(b),(c)	Australia	100	100
SCP Investments (No. 3) Pty Limited(b),(c)	Australia	100	100
Sopic Pty. Ltd.(b),(c)	Australia	100	100
Southern Cross Pipelines (NPL) Australia Pty Limited(b),(c)	Australia	100	100
Southern Cross Pipelines Australia Pty Limited(b),(c)	Australia	100	100
Trans Australia Pipeline Pty Ltd(b),(c)	Australia	100	100
Votraint No. 1606 Pty Limited	Australia	100	100
Votraint No. 1613 Pty Limited(b)	Australia	100	100
Western Australian Gas Transmission Company 1 Pty Ltd(b),(c)	Australia	100	100
Wind Portfolio Pty Ltd(b),(c)	Australia	100	100

(a) The parent of APT Pipelines Limited, Australian Pipeline Trust and its wholly-owned Australian resident entities formed a tax-consolidated group with effect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Australian (b) These entities are members of the tax-consolidated group.

(c) These wholly-owned subsidiaries have entered into a deed of cross guarantee with APT Pipelines Limited pursuant to ASIC Corporations Instrument 2016/785 and are relieved from the requirement to prepare and lodge an audited financial report.

(d) These trusts are unincorporated and not required to be registered.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Group Structure

23. Subsidiaries (continued)

The consolidated statement of profit or loss and other comprehensive income of the entities party to the deed of cross guarantee is set out below.

	Cross Guarantee Group	Cross Guarantee Group
		Restated
	2021	2020
	$000	$000
Continuing operations
Revenue	2,575,236	2,559,919
Share of net profits of associates andjoint ventures usingthe equity method	12,587	12,958
	2,587,823	2,572,877
Asset operation and management expenses	(213,990)	(216,919)
Depreciation and amortisation expenses(a)	(674,235)	(650,697)
Other operating costs – pass-through	(460,466)	(461,152)
Finance costs(b)	(698,355)	(563,080)
Employee benefit expense	(287,723)	(251,819)
Other expenses(a)	(15,786)	(13,595)
Fair value gains or losses on contract for difference	18,018	10,508
Impairment ofproperty,plant and equipment(b)	(249,322)	-
Profit before tax	5,964	426,123
Income tax expense(a)	(58,076)	(181,046)
(Loss)/profit for the year	(52,112)	245,077
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit plan	23,581	(28,104)
Income tax relatingtogain on defined benefit plan	(7,075)	8,431
	16,506	(19,673)
Items that may be reclassified subsequently to profit or loss:
Transfer of gain on cash flow hedges to profit or loss	28,916	80,184
Gain/(loss) on cash flow hedges taken to equity	435,895	(206,864)
Gain/(loss) on associate hedges taken to equity	6,128	(2,037)
Income tax relatingitems that may be reclassified subsequently	(141,282)	38,615
	329,657	(90,102)
Other comprehensive income/(expense)for the year(net of tax)	346,163	(109,775)
Total comprehensive income for theyear	294,051	135,302

(b) Refer to note 2 significant items section for details.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Group Structure

23. Subsidiaries (continued)

The consolidated statement of financial position of the entities party to the deed of cross guarantee is set out below.

	Cross Guarantee Group	Cross Guarantee Group
		Restated
	2021	2020
	$000	$000
Current assets
Cash and cash equivalents	649,382	1,169,747
Trade and other receivables	777,891	772,259
Other financial assets	56,717	32,748
Inventories	41,066	34,181
Other	26,976	22,101
Assets classified as held for sale(a)	343	-
Current assets	1,552,375	2,031,036
Non-current assets
Receivables	10,375	11,639
Other financial assets	768,798	1,130,925
Investments accounted for using the equity method	92,887	86,440
Property, plant and equipment(b)	9,500,588	9,766,287
Goodwill	1,183,058	1,183,058
Other intangible assets	2,481,336	2,669,970
Other	31,458	29,151
Non-current assets	14,068,500	14,877,470
Total assets	15,620,875	16,908,506
Current liabilities
Trade and other payables	3,974,056	4,279,437
Lease liabilities	14,723	14,397
Borrowings	3,615	310,613
Other financial liabilities	169,031	186,347
Provisions	93,316	88,824
Unearned revenue	10,750	10,753
Liabilities directly associated with assets classified as held for sale(a)	258	-
Current liabilities	4,265,749	4,890,371

(a) Relates to the Consolidated Entity's 50% ownership in Mid West Pipeline to be disposed in the next 12 months.

(b) FY20 was revised as a result of change in the Consolidated Entity's accounting policy following the IFRIC guidance on accounting for SaaS arrangements in April 2021. Refer to note 10.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Group Structure

23. Subsidiaries (continued)

23. Subsidiaries (continued)
	Cross Guarantee Group
		Restated
	2021	2020
	$000	$000
Non-current liabilities
Trade and other payables	296,723	437,528
Lease liabilities	54,405	62,404
Borrowings	9,921,317	10,607,382
Other financial liabilities	262,118	427,638
Deferred tax liabilities(a)	868,896	723,202
Provisions	101,735	115,391
Unearned revenue	63,336	56,737
Non-current liabilities	11,568,530	12,430,282
Total liabilities	15,834,279	17,320,653
Net liabilities(b)	(213,404)	(412,147)
Equity
Issued capital	117,330	117,330
Reserves	(355,667)	(687,015)
Retained earnings(a)	24,933	157,538
Deficiency in equity attributable to equityholders of the parent(b)	(213,404)	(412,147)

(a) FY20 was revised as a result of change in the Consolidated Entity's accounting policy following the IFRIC guidance on accounting for SaaS arrangements in April 2021. Refer to note 10.

(b) The working capital position as at 30 June 2021 for the Cross Guarantee Group is that current liabilities exceed current assets by $2,713.4 million (2020: $2,859.3 million) and total liabilities exceed total assets for the Cross Guarantee Group by $213.4 million (2020: $412.2 million). Excluding related party loan from Australian Pipeline Trust, total assets exceed total liabilities by $2,007.5 million (2020: $2,376.1 million).

The Cross Guarantee Group has access to available committed, un-drawn bank facilities of $1,250.0 million as at 30 June 2021 (2020: $1,300.0 million). Further to this, Australian Pipeline Limited, as the responsible entity for Australian Pipeline Trust and APT Investment Trust, has agreed to provide financial support, to enable the Cross Guarantee Group to pay its debts as and when they fall due. Refer to note 2, Working capital position, for further details.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Other
24. Commitments and contingencies
	2021	2020
	$000	$000
Capital expenditure commitments
The Consolidated Entity – plant and equipment	231,871	168,391
The Consolidated Entity's share ofjointly controlled operations – plant and equipment	19,708	11,107
	251,579	179,498
Contingent liabilities
Bank guarantees	46,207	51,483

The Consolidated Entity is subject to a range of operational matters, which can at times raise exposure to assets and liabilities that are uncertain and cannot be measured reliably. This includes our exposure to matters such as regulatory requirements, changes in law, climate change policy, changes to licencing and recognised practising codes including health, safety and environment, employee entitlements, environmental laws and regulations, occupational health and safety requirements, technical and safety standards and asset construction and operation compliance requirements. The preparation of the financial statements requires management to make judgements and estimates and form assumptions that affect the amounts of contingent assets and liabilities reported in the financial statements.

These judgements, estimates and assumptions are based on the most current facts and circumstances and are reassessed on an ongoing basis, the results of which form the basis of the reported amounts that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. This may materially affect financial results and the financial position to be reported in future periods. The Consolidated Entity continues to assess these judgements, estimates and assumptions relating to the disclosure of contingent assets and liabilities.

Contingent assets and liabilities relate predominantly to possible benefits or obligations whose existence will only be confirmed by uncertain future events and present obligations where the transfer of economic resources is not probable or cannot be reliably estimated. Therefore such amounts are not recognised in the financial statements.

On 18 May 2021, a statement of claim was filed against the Consolidated Entity in respect of construction of the Orbost Gas Processing Plant. The statement of claim is subject to significant uncertainty, and it is not currently possible to make a reasonable estimate of the outcome, quantum or timing of any potential determination as at 30 June 2021. As at 30 June 2021 and 30 June 2020 the Consolidated Entity had no material contingent liabilities, other than those disclosed above.

The Consolidated Entity had no contingent assets as at 30 June 2021 and 30 June 2020.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Other

25. Director and Executive Key Management Personnel remuneration

Remuneration of Directors

The aggregate remuneration of Directors of the Consolidated Entity is set out below:

	2021	2020
	$	$
Short-term employment benefits	1,747,871	1,549,332
Post-employment benefits	166,046	147,185
Total remuneration: Non-Executive Directors	1,913,917	1,696,517
Short-term employment benefits	2,531,865	2,395,588
Post-employment benefits	25,000	25,453
Cash settled security-based payments	232,375	1,879,646
Equity settled security-based payments	715,473	368,121
Total remuneration: Executive Director(a)	3,504,713	4,668,808
Total remuneration: Directors	5,418,630	6,365,325

Remuneration of Executive Key Management Personnel[(a)(b)]

The aggregate remuneration of Executive Key Management Personnel of the Consolidated Entity is set out below:

Short-term employment benefits	9,769,520	6,179,703
Post-employment benefits	170,832	88,123
Cash settled security-based payments	1,117,783	2,891,305
Equity settled security-based payments	1,970,322	675,161
Total remuneration: Executive Key Management Personnel	13,028,457	9,834,292

(a) In FY20, the remuneration for the former Chief Executive Officer and Managing Director, Michael (Mick) McCormack to 5 July 2019 and current Chief Executive Officer and Managing Director, Rob Wheals from 6 July 2019, are included in both the remuneration disclosure for Directors and Executive Key Management Personnel.

(b) In FY21, the remuneration for the former Chief Financial Officer, Peter Fredricson to 31 December 2020, current Chief Financial Officer, Adam Watson from 16 November 2020, and Group Executive Strategy & Commercial, Julian Peck from 20 August 2020, are included in the remuneration disclosure for Executive Key Management Personnel.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Other
26. Remuneration of external auditor
	2021	2020
	$	$
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
Audit or review of the financial reports:
Group	754,900	691,000
Subsidiaries	8,300	8,100
Total audit or review of the financial reports	763,200	699,100
Audit or review of the regulatory financial reporting to the Australian Energy Regulator
and Economic Regulation Authority
Subsidiaries(a)	911,766	2,170,000
Total audit or review of the financial reports	911,766	2,170,000
Audit or review of the National Greenhouse and Energy Reporting(b)
Group	224,258	-
Subsidiaries	30,000	-
Total audit or review of the National Greenhouse and Energy Reporting	254,258	-
Amounts received or due and receivable by Deloitte Touche Tohmatsu for (continued):
Statutory assurance services required by legislation to be provided by the auditor
Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements(c)	11,100	84,800
Financial services licence audit	8,300	8,100
Total statutory assurance services required by legislation to be provided by the auditor	19,400	92,900
Other assurance services (d)	534,253	106,600
Total remuneration of external auditor	2,482,877	3,068,600

(a) Service provided in FY20 includes one-off procedures covering 7-year historical period. Represent total fees for contracted services, partly incurred at period end.

(b) Service provided includes assurance procedures on the energy and emissions reports and submissions required under the relevant National Greenhouse and Energy Reporting legislations, and review of APA Group's National Greenhouse and Energy Reporting systems and controls. Service

(c) provided includes Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements (FY20 includes triennial procedures required under RG231, procedures last undertaken in FY17).

(d) Services provided were in accordance with the external auditor independence policy. Other assurance services mainly comprise assurance services in relation to corporate funding activities for debt and potential equity raising.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Other

27. Related party transactions

(a) Equity interest in related parties

Details of the percentage of ordinary securities held in subsidiaries are disclosed in note 23 and the details of the percentage held in joint operations, joint ventures and associates are disclosed in note 22.

(b) Responsible Entity – Australian Pipeline Limited

The Responsible Entity is wholly owned by APT Pipelines Limited.

(c) Transactions with related parties within the Consolidated Entity

Transactions between the entities that comprise the Consolidated Entity during the financial year consisted of:

●Dividends;
●Asset lease rentals;
●Loans advanced and payments received on long-term inter-entity loans;
●Management fees;
●Operational services provided between entities; and
●payments of distributions.

The above transactions were made on normal commercial terms and conditions. The Consolidated Entity charges interest on inter-entity loans from time to time.

All transactions between the entities that comprise the Consolidated Entity have been eliminated on consolidation.

Refer to note 23 for details of the entities that comprise the Consolidated Group.

Australian Pipeline Limited

Management fees of $8,529,313 (2020: $5,909,078) were paid to the Responsible Entity of APT and APTIT as reimbursement of costs incurred on behalf of the Consolidated Entity. No amounts were paid directly by the Consolidated Entity to the Directors of the Responsible Entity, except as disclosed at note 25.

Australian Pipeline Limited, in its capacity as trustee and Responsible Entity of APT and APTIT, has guaranteed the payment of principal, interest and other amounts as provided in the senior debt facilities of APT Pipelines Limited, the principal borrowing entity of APA Group.

(d) Transactions with associates and joint ventures

The following transactions occurred with the Consolidated Entity's associates and joint ventures on normal market terms and conditions:

and conditions:
	Dividends		Purchases	Amount	Amount
	from	Sales to	from	owed by	owed to
	related	related	related	related	related
	parties	parties	parties	parties	parties
2021	$000	$000	$000	$000	$000
SEA Gas	14,050	2,253	-	28	-
Energy Infrastructure Investments	-	31,855	-	5,506	-
EII 2	4,023	1,071	-	351	-
GDI (EII)	5,809	50,522	-	5,804	-
	23,882	85,701	-	11,689	-
2020
SEA Gas	49,162	6,666	86	23	-
Energy Infrastructure Investments	-	45,666	-	7,085	-
EII 2	3,933	803	-	343	-
GDI(EII)	6,129	53,715	-	5,534	-
	59,224	106,850	86	12,985	-

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Other

28. Parent entity information

The accounting policies of the parent entity, which have been applied in determining the financial information below, are the same as those applied in the consolidated financial statements.

	2021	2020
	$000	$000
Financial position
Assets
Current assets	782,955	1,341,472
Non-current assets	18,883,296	19,238,974
Total assets	19,666,251	20,580,446
Liabilities
Current liabilities	398,898	690,738
Non-current liabilities	19,023,835	19,735,305
Total liabilities	19,422,733	20,426,043
Net assets	243,518	154,403
Equity
Issued capital	117,330	117,330
Retained earnings	291,400	148,455
Reserves	(165,212)	(111,382)
Total equity	243,518	154,403
Financial performance
Profit for the year	239,945	235,445
Other comprehensive income	(53,830)	72,530
Total comprehensive income	186,115	307,975

Guarantees entered into by the parent entity in relation to the debts of its subsidiaries

APT Pipelines Limited has entered into a deed of cross guarantee with a number of its wholly-owned subsidiaries. These subsidiaries are listed in full in note 23.

Contingent liabilities of the parent entity

Refer to note 24 for contingent liabilities. Bank guarantees are issued by the parent entity.

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2021

Other

29. Adoption of new and revised Accounting Standards

Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)

The Consolidated Entity has adopted the following new standards on their applicable start date.

		Effective for annual
		reporting periods
	Standard/Interpretation	beginning on or after	Adoption date
●	AASB 2018-6 Amendments – Definition of a Business	1 January 2020	1 July 2020
●	AASB 2019-3 Amendments – Interest Rate Benchmark Reform	1 January 2020	1 July 2020
●	AASB 2020-8 Amendments – Interest Rate Benchmark Reform Phase	1 January 2021	1 July 2020
●	Amendments to AASB 116 Property, Plant and Equipment: Proceeds	1 January 2022	1 July 2020
	before Intended Use

The adoption of the above Standards and Interpretations do not have material impact on the Consolidated Entity's accounting policies or any of the amounts recognised in the financial statements.

AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform & AASB 2020-8 Amendments – Interest Rate Benchmark Reform Phase 2

The impact of Interbank Offered Rate (IBOR) reform is considered immaterial as all long term borrowings are at fixed rate and AASB has provided relief to continue the application of hedge accounting. The Consolidated Entity will continue to monitor the development and outcomes of the reform.

Standards and Interpretations issued not yet adopted

At the date of authorisation of the financial statements, the Standards and Interpretations on issue but not yet effective are not expected to have material impact on the Consolidated Entity's accounting policies or any of the amounts recognised in the financial statements.

30. Events occurring after reporting date

As at the time of reporting, the developing and uncertain situation in respect of COVID-19 pandemic continues to be closely monitored by management and the directors of the Consolidated Entity. Nothing has come to the attention of the Consolidated Entity that would require adjustment or additional disclosure in these financial statements as a result of any recent COVID-19 developments.

Other than the events disclosed above, there have not been any events or transactions that have occurred subsequent to year end that would require adjustment to or disclosure in the financial statements.

APT Pipelines Limited and its Controlled Entities Declaration by the Directors of APT Pipelines Limited

For the financial year ended 30 June 2021

The Directors declare that:

(a) in the Directors’ opinion, there are reasonable grounds to believe that APT Pipelines Limited will be able to pay its debts as and when they become due and payable;
(b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with Accounting Standards and giving a true and fair view of the financial position and performance of the Consolidated Entity;
(c) in the Directors' opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board;
(d) the Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001; and
(e) At the date of this declaration, APT Pipelines Limited is within the class of companies affected by ASIC Corporations Instrument 2016/785. The nature of the deed of cross guarantee is such that each company, which is party to the deed, guarantees to each creditor, payment in full of any debt in accordance with the deed of cross guarantee. In the Directors’ opinion, there are reasonable grounds to believe that APT Pipelines Limited and the companies to which the ASIC Class Order applies, as detailed in note 23 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001.

On behalf of the Directors

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Michael Fraser
Chairman
Robert Wheals
CEO and Managing Director
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SYDNEY, 25 August 2021

Deloitte Touche Tohmatsu ABN 74 490 121 060

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Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia

DX: 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au

25 August 2021

The Directors APT Pipelines Limited Level 25, 580 George Street Sydney NSW 2000

Dear Directors

Auditor’s Independence Declaration to APT Pipelines Limited

In accordance with section 307C of the Corporations Act 2001 , we are pleased to provide the following declaration of independence to the directors of APT Pipelines Limited.

As lead audit partners for the audit of the financial statements of APT Pipelines Limited for the financial year ended 30 June 2021, we declare that to the best of our knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.

Yours faithfully

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DELOITTE TOUCHE TOHMATSU

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Jamie Gatt Partner Chartered Accountants

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Taralyn Elliott Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation.

Deloitte Touche Tohmatsu ABN 74 490 121 060

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Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia

DX: 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au

Independent Auditor’s Report to the Members of APT Pipelines Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of APT Pipelines Limited (“APTPL”) and its subsidiaries (the “Consolidated Entity”), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the directors’ declaration.

In our opinion, the accompanying financial report of the Consolidated Entity is in accordance with the Corporations Act 2001 , including:

(i) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2021 and of their financial performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Consolidated Entity in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

The directors of APT Pipelines Limited (“the Directors”) are responsible for the other information. The other information comprises the information included in the Consolidated Entity’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The directors are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Consolidated Entity to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Consolidated Entity or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Consolidated Entity’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Consolidated Entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Consolidated Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

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We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

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DELOITTE TOUCHE TOHMATSU

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Jamie Gatt Partner Chartered Accountants Sydney, 25 August 2021

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Taralyn Elliott Partner Chartered Accountants Sydney, 25 August 2021

AI assistant

APA INFRASTRUCTURE LIMITED — Annual Report 2021

64397_rns_2021-08-24_ceaf7e01-da7c-4b14-960f-4a12854290e4.pdf

APT Pipelines Limited (ASX: AP2)

ANNUAL REPORT

Authorised for release by Nevenka Codevelle

Ben Pratt

About APA Group (APA)

APT Pipelines Limited ABN 89 009 666 700

APT PIPELINES LIMITED DIRECTORS’ REPORT

1 Directors

2

Principal Activities

State of Affairs

Subsequent Events

5 Review of Operations

5.1 Capital Management

5.2 Interest costs

5.3 Credit ratings

5.4 Dividends

6 Options Granted

Indemnification of Officers

Auditor’s independence declaration

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Financial Position

As at 30 June 2021

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Financial Position (continued)

As at 30 June 2021

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Changes in Equity

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Cash Flows

For the financial year ended 30 June 2021

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Cash Flows (continued) For the financial year ended 30 June 2021

Reconciliation of profit for the year to net cash provided by operating activities

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements For the financial year ended 30 June 2021

Basis of Preparation

1. About this report

Basis of Preparation

2. General information

Working capital position

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Basis of Preparation

2. General information (continued)

Foreign currency transactions

Critical accounting judgements and key sources of estimation uncertainty

COVID-19

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Basis of Preparation

2. General information (continued)

Significant items

Financial Performance

3. Segment information

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Financial Performance

3. Segment information (continued)

Reportable segments

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Financial Performance

3. Segment information (continued)

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Financial Performance

3. Segment information (continued)

Reportable segments (continued)

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Financial Performance

3. Segment information (continued)

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

4. Revenue

Disaggregation of revenue

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

Financial Performance

4. Revenue (continued)

Disaggregation of revenue (continued)

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued)

For the financial year ended 30 June 2021

Financial Performance

4. Revenue (continued)

APA INFRASTRUCTURE LIMITED Annual Report 2021