APA INFRASTRUCTURE LIMITED — Annual Report 2020

Mar 30, 2021

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APT Pipelines Limited ABN 89 009 666 700

Financial Report For the financial year ended 30 June 2020

APT Pipelines Limited and its Controlled Entities Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 30 June 2020

		2020	2019
	Note	$000	$000
Revenue	4	2,559,919	2,428,888
Share of net profits of associates and joint ventures using the equity method	4	27,540	20,904
		2,587,459	2,449,792
Asset operation and management expenses		(218,350)	(213,834)
Depreciation and amortisation expense	5	(651,566)	(611,358)
Other operating costs - pass-through	5	(461,155)	(421,198)
Finance costs	5	(528,302)	(537,934)
Employee benefit expense	5	(249,690)	(235,034)
Other expenses		(5,186)	(6,060)
Profit before tax		473,210	424,374
Income tax expense	6	(187,831)	(176,305)
Profit for theyear		285,379	248,069
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit plan		(28,103)	(11,418)
Income tax relating to items that will not be reclassified subsequently		8,431	3,425
		(19,672)	(7,993)
Items that may be reclassified subsequently to profit or loss:
Transfer of gain on cash flow hedges to profit or loss		80,184	74,347
Loss on cash flow hedges taken to equity		(206,864)	(448,940)
Loss on associate hedges taken to equity		(5,139)	(6,356)
Income tax relatingto items that maybe reclassified subsequently		39,545	114,296
		(92,274)	(266,653)
Other comprehensive income for the year (net of tax)		(111,946)	(274,646)
Total comprehensive income for the year		173,433	(26,577)
Profit attributable to:
Equityholders of the parent		261,006	221,236
Non-controlling- other		24,373	26,833
		285,379	248,069
Total comprehensive income attributable to:
Equityholders of the parent		149,060	(53,410)
Non-controlling- other		24,373	26,833
		173,433	(26,577)

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

7

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

As at 30 June 2020

		2020	2019
	Note	$000	$000
Current assets
Cash and cash equivalents	17	1,172,649	354,854
Trade and other receivables	8	264,137	249,959
Receivables from related parties	8	186,263	189,434
Other financial assets	19	32,748	68,039
Inventories		34,181	30,963
Other		22,101	13,593
Current assets		1,712,079	906,842
Non-current assets
Trade and other receivables	8	11,639	130,131
Other financial assets	19	581,027	502,161
Investments accounted for using the equity method	22	212,782	249,605
Property, plant and equipment	10	9,821,955	9,796,072
Goodwill	11	1,183,604	1,183,604
Other intangible assets	11	2,627,279	2,809,761
Other	14	29,151	30,674
Non-current assets		14,467,437	14,702,008
Total assets		16,179,516	15,608,850
Current liabilities
Trade and other payables	9	278,313	270,148
Payables to related parties	9	2,578,536	2,753,299
Lease liabilities	16	14,397	812
Borrowings	17	310,613	444,502
Other financial liabilities	19	186,347	152,782
Provisions	13	89,636	94,841
Unearned revenue		10,753	12,320
Current liabilities		3,468,595	3,728,704
Non-current liabilities
Trade and other payables	9	4,826	3,230
Payables to related parties	9	798,250	879,183
Lease liabilities	16	62,404	6,924
Borrowings	17	10,607,382	9,865,813
Other financial liabilities	19	427,638	264,703
Deferred tax liabilities	6	739,921	718,093
Provisions	13	115,905	89,663
Unearned revenue		56,737	60,581
Non-current liabilities		12,813,063	11,888,190
Total liabilities		16,281,658	15,616,894
Net (liabilities)/assets		(102,142)	(8,044)

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

8

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

As at 30 June 2020

		2020	2019
	Note	$000	$000
Equity
APT Pipelines Limited equity:
Issued capital	20	117,330	117,330
Reserves		(688,378)	(596,756)
Retained earnings		349,653	352,129
Equity attributable to equityholders of the parent		(221,395)	(127,297)
Non-controllinginterest	21	119,253	119,253
Total deficiency in equity		(102,142)	(8,044)

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

9

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

For the financial year ended 30 June 2020

	APT Pipelines Limited and its Controlled Entities	Non- Issued Other Retained Controlling Capital Reserves earnings Interest Total $000 $000 $000 $000 $000 Non-controlling interest
	Attributable Asset Share Based to owners Issued Revaluation Payments Hedging Retained of the Capital Reserve Reserve Reserve earnings parent $000 $000 $000 $000 $000 $000
Balance at 1 July 2018 Impact of changes in accounting standards(a)	117,330 8,669 - (338,772) 354,650 141,877 - - - (2,164) (2,164)	119,257 1 48 119,306 261,183 - - - - (2,164)
Adjusted balance at 1 July 2018	117,330 8,669 - (338,772) 352,486 139,713	119,257 1 48 119,306 259,019
Profit for the year Other comprehensive income Income tax relating to components of other comprehensive income	- - - - 221,236 221,236 - - - (380,949) (11,418) (392,367) - - - 114,296 3,425 117,721	- - 26,833 26,833 248,069 - - - - (392,367) - - - - 117,721
Total comprehensive income for the year	- - - (266,653) 213,243 (53,410)	- - 26,833 26,833 (26,577)
Transfer to retained earnings Payment of dividends	- - - - - - - - - - (213,600) (213,600)	- (1) 1 - - (4) - (26,882) (26,886) (240,486)
Balance at 30 June 2019	117,330 8,669 - (605,425) 352,129 (127,297)	119,253 - - 119,253 (8,044)
Balance at 1 July 2019 Impact of changes in accounting standards(b)	117,330 8,669 - (605,425) 352,129 (127,297) - - - - (8,610) (8,610)	119,253 - - 119,253 (8,044) - - - - (8,610)
Adjusted balance at 1 July 2019	117,330 8,669 - (605,425) 343,519 (135,907)	119,253 - - 119,253 (16,654)
Profit for the year Other comprehensive income Income tax relating to components of other comprehensive income	- - - - 261,006 261,006 - - - (131,819) (28,103) (159,922) - - - 39,545 8,431 47,976	- - 24,373 24,373 285,379 - - - - (159,922) - - - - 47,976
Total comprehensive income for the year	- - - (92,274) 241,334 149,060	- - 24,373 24,373 173,433
Payment of dividends Equity settled security based payments (net of any tax)	- - - - (235,200) (235,200) 652 652	- - (24,373) (24,373) (259,573) 652
Balance at 30 June 2020	117,330 8,669 652 (697,699) 349,653 (221,395)	119,253 - - 119,253 (102,142)

(a) The Consolidated Entity has adopted AASB 15 Revenue from Contracts with Customers on a modified retrospective basis. This resulted in a charge of $2.2 million to retained earnings as at 1 July 2018, being the cumulative effect on initial application of the standard.

(b) 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 (refer to Note 29). The comparative results are not restated as permitted by the standard.

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

10

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

For the financial year ended 30 June 2020

		2020	2019
	Note	$000	$000
Cash flows from operating activities
Receipts from customers		2,791,066	2,662,596
Payments to suppliers and employees		(1,212,265)	(1,139,622)
Dividends received from associates and joint ventures		59,224	17,984
Proceeds from repayment of finance leases		1,272	1,469
Interest received		7,912	8,764
Interest and other costs of finance paid		(496,373)	(508,426)
Net cash provided by operating activities		1,150,836	1,042,765
Cash flows from investing activities
Payments for property, plant and equipment		(427,065)	(581,380)
Proceeds from sale of property, plant and equipment		485	652
Payments for intangible assets		(253)	(318)
Repayment/(advancement)of loans with related parties		122,284	(122,002)
Net cash used in investing activities		(304,549)	(703,048)
Cash flows from financing activities
Proceeds from borrowings		1,987,812	1,669,706
Repayments of borrowings		(1,368,836)	(1,175,854)
Payments of lease principal		(13,482)	-
Payment of debt issue costs		(6,870)	(11,955)
Proceeds from early settlement of derivatives		8	1,157
Dividends paid to:
Equityholders of APT Pipelines Limited	7	(235,200)	(213,600)
Equityholders of the non-controlling interest		(24,373)	(26,833)
Distributions paid to:
Securityholders of other non-controlling interests		-	(53)
Advances to related parties		(367,599)	(327,979)
Net cash used in financing activities		(28,540)	(85,411)
Net increase in cash and cash equivalents		817,747	254,306
Cash and cash equivalents at beginning of financial year		354,854	100,604
Unrealised exchangegains/(losses)on cash held		48	(56)
Cash and cash equivalents at end of financial year		1,172,649	354,854

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

11

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

For the financial year ended 30 June 2020

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

		2020	2019
	Note	$000	$000
Profit for the year		285,379	248,069
Profit on disposal of property, plant and equipment		(464)	(583)
Share of net profits of joint ventures and associates using the equity method		(27,540)	(20,904)
Dividends/distributions received from equity accounted investments		59,224	17,985
Depreciation and amortisation expense		651,566	611,358
Finance costs		14,821	16,858
Unrealised foreign exchange loss		11,007	7,241
Realised hedging loss		6,885	6,846
Security based payments		-	-
Changes in assets and liabilities:
Trade and other receivables		(19,285)	6,923
Inventories		(3,218)	(2,429)
Other assets		(4,639)	2,228
Trade and other payables		5,028	(17,684)
Provisions		(10,954)	11,199
Other liabilities		(4,805)	(20,647)
Income tax balances		187,831	176,305
Net cash provided by operating activities		1,150,836	1,042,765

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.

12

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements For the financial year ended 30 June 2020

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 26. Remuneration of external auditor 20. Issued capital 27. Related party transactions 28. Parent entity information 29. 30. Adoption of new and revised Accounting Standards Events occurring after reporting date Director and Executive Key Management Personnel remuneration Impairment of non-financial assets Joint arrangements and associates

13

For the financial year ended 30 June 2020

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

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 2020 was authorised for issue in accordance with a resolution of the directors on 26 August 2020.

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.

Working capital position

The working capital position as at 30 June 2020 for the Consolidated Entity is that current liabilities exceed current assets by $1,756.5 million (2019: $2,821.9 million). Excluding current related party loan balances held with Australian Pipeline Trust, the Consolidated Entity's current assets exceed current liabilities by $635.8 million (2019: current liabilities exceed current assets by $258.0 million primarily as a result of current borrowings of $444.5 million and $152.8 million (AUD equivalent) of cash flow hedge liabilities resulting in a net liability position of $339.3 million).

As at 30 June 2020, the Consolidated Entity had $2,472.6 million in cash and committed un-drawn bank facilities available (2019: $1,904.9 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.

14

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

For the financial year ended 30 June 2020

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))

Judgements and estimates require assumptions to be made about highly uncertain external factors such as: discount rates; probability factors; the effects of inflation; commercial contract lives and renewals; market supply-and-demand conditions; changing technology; timing of occurrence; input costs; political and social trends; and climate change based on TCFD scenario testing to 2030. As such the actual outcomes may differ as a result of these judgements and assumptions.

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.

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.

15

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

For the financial year ended 30 June 2020

Financial Performance

3. Segment information (continued)

Reportable segments

	Energy	Asset	Energy
	infrastructure	management	investments	Other	Consolidated
2020	$000	$000	$000	$000	$000
Segment revenue(a)
Revenue from contracts with customers	1,973,721	112,368	-	-	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	2,027,877	524,342	32,604	-	2,584,823
Other interest income					2,636
Consolidated revenue					2,587,459
Segment result
Earnings before interest, tax, depreciation and
amortisation ("EBITDA")	1,628,291	63,343	-	-	1,691,634
Share of net profits of joint ventures and associates					-
using the equity method	-	-	27,540	-	27,540
Finance lease and investment interest income	1,176	-	5,064	-	6,240
Corporate costs	-	-	-	(74,972)	(74,972)
Total EBITDA	1,629,467	63,343	32,604	(74,972)	1,650,442
Depreciation and amortisation	(634,808)	(16,758)	-	-	(651,566)
Earnings before interest and tax ("EBIT")	994,659	46,585	32,604	(74,972)	998,876
Net interest cost(b)					(525,666)
Profit before tax					473,210
Income tax expense					(187,831)
Profit for the year					285,379
		Energy	Asset	Energy
		infrastructure	management	investments	Consolidated
2020		$000	$000	$000	$000
Segment assets and liabilities
Segment assets		13,795,154	198,893	10,685	14,004,732
Carrying value of investments using the equity method				212,782	212,782
Unallocated assets(c)					1,962,002
Total assets					16,179,516
Segment liabilities		382,446	110,022	-	492,468
Unallocated liabilities(d)					15,789,190
Total liabilities					16,281,658

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

(b) Excluding finance lease and investment interest income, and any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting purposes, but including other interest income.

(c) Unallocated assets consist of cash and cash equivalents, fair value of interest rate swaps, foreign exchange contracts ("FECs"), equity forwards and inter-company balances.

(d) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps, foreign exchange contracts and inter-company balances.

16

For the financial year ended 30 June 2020

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

Financial Performance

3. Segment information (continued)

Reportable segments (continued)

Reportable segments (continued)
	Energy	Asset	Energy
	infrastructure	management	investments	Other	Consolidated
2019	$000	$000	$000	$000	$000
Segment revenue(a)
Revenue from contracts with customers	1,899,071	94,398	-	-	1,993,469
Equity accounted net profits	-	-	20,904	-	20,904
Pass-through revenue	27,881	393,317	-	-	421,198
Other income	4,775	391	-	-	5,166
Finance lease and investment interest income	1,305	-	5,210	-	6,515
Total segment revenue	1,933,032	488,106	26,114	-	2,447,252
Other interest income					2,540
Consolidated revenue					2,449,792
Segment result
Earnings before interest, tax, depreciation and
amortisation ("EBITDA")	1,570,827	52,954	-	-	1,623,781
Share of net profits of joint ventures and associates
using the equity method	-	-	20,904	-	20,904
Finance lease and investment interest income	1,305	-	5,210	-	6,515
Corporate costs	-	-	-	(80,074)	(80,074)
Total EBITDA	1,572,132	52,954	26,114	(80,074)	1,571,126
Depreciation and amortisation	(600,248)	(11,110)	-	-	(611,358)
Earnings before interest and tax ("EBIT")	971,884	41,844	26,114	(80,074)	959,768
Net interest cost(b)					(535,394)
Profit before tax					424,374
Income tax expense					(176,305)
Profit for theyear					248,069
		Energy	Asset	Energy
		infrastructure	management	investments	Consolidated
2019		$000	$000	$000	$000
Segment assets and liabilities
Segment assets		13,938,778	183,669	132,993	14,255,440
Carrying value of investments using the equity method		-	-	249,605	249,605
Unallocated assets(c)					1,103,805
Total assets					15,608,850
Segment liabilities		344,663	60,707	-	405,370
Unallocated liabilities(d)					15,211,524
Total liabilities					15,616,894

(a) The revenue reported above represents revenue generated from external customers. Any intersegment sales were immaterial. (b) Excluding finance lease and investment interest income, and any gains or losses on revaluation of derivatives included as part of EBIT for segment reporting purposes, but including other interest income. (c) Unallocated assets consist of cash and cash equivalents, current tax assets, fair value of interest rate swaps, forward exchange contracts and intercompany balances.

(d) Unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps, forward exchange contracts and inter-company balances.

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APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Financial Performance

4. Revenue

Disaggregation of revenue

Revenue is disaggregated below by state, business unit and geography.

Revenue is disaggregated below by state, business unit and geography.
	Energy Infrastructure
		Power
	Transmission	Generation	Total
2020	$000	$000	$000
Energy Infrastructure
Queensland	949,384	255,320	1,204,704
New South Wales	183,251	-	183,251
Victoria	145,664	-	145,664
South Australia	3,143	-	3,143
Western Australia	323,176	82,134	405,310
Northern Territory	31,649	-	31,649
Energy Infrastructure revenue from contracts with customers	1,636,267	337,454	1,973,721
Asset Management revenue from contracts with customers			112,368
Pass-through revenue			461,155
Other income			3,799
Operating revenue			2,551,043
Interest income			2,636
Interest income from related parties			5,064
Finance lease income			1,176
Finance income			8,876
Total Revenue			2,559,919
Share of net profits of joint ventures and associates using the equity method			27,540
			2,587,459

18

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Financial Performance

4. Revenue (continued)

Disaggregation of revenue (continued)

Disaggregation of revenue (continued)
	Energy Infrastructure
		Power
	Transmission	Generation	Total
2019	$000	$000	$000
Energy Infrastructure
Queensland	960,933	246,174	1,207,107
New South Wales	173,594	-	173,594
Victoria	144,380	-	144,380
South Australia	3,004	-	3,004
Western Australia	288,997	51,688	340,685
Northern Territory	30,301	-	30,301
Energy Infrastructure revenue from contracts with customers	1,601,209	297,862	1,899,071
Asset Management revenue from contracts with customers			94,398
Pass-through revenue			421,198
Other income			5,166
Operating revenue			2,419,833
Interest income			2,540
Interest income from related parties			5,210
Finance lease income			1,305
Finance income			9,055
Total Revenue			2,428,888
Share of netprofits ofjoint ventures and associates usingthe equitymethod			20,904
			2,449,792

19

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

For the financial year ended 30 June 2020

Financial Performance

4. Revenue (continued)

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.

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 volume based and is recognised as revenue in a manner that depicts the transfer based on volume of 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:

• Interest income , which is recognised as it accrues and is determined using the effective interest method;

• Dividend income , which is recognised when the right to receive the payment has been established; and

• Finance lease income , which is allocated to accounting periods so as to reflect a constant periodic rate of return on the Consolidated Entity'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 received in advance and government grants received. During the year, the Consolidated Entity recognised $13.2 million (2019: $19.5 million) in revenue from contracts with customers from unearned revenue at the beginning of the financial year.

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 fulfil 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.).

20

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

For the financial year ended 30 June 2020

Financial Performance

4. Revenue (continued)

Future Revenues from Remaining Performance Obligations

As at 30 June 2020, future contracted Energy Infrastructure revenues extending through to 2049 are approximately $19.7 billion, of which $1.7 billion is expected to be recognised in 2021. These amounts relate to Energy Infrastructure revenue from long term contracts with highly credit worthy counterparties.

Future contracted Energy Infrastructure revenues outlined above are in nominal 2020 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 FY2021 and beyond.

Information about major customers

Included in revenues from contracts with customers arising from Energy Infrastructure of $1,973.7 million (2019: $1,899.1 million) are revenues of approximately $718.8 million (2019: $708.6 million) which arose from sales to the Consolidated Entity's top three customers.

5. Expenses

5. Expenses
	2020	2019
	$000	$000
Depreciation of non-current assets	468,831	428,370
Amortisation of non-current assets	182,735	182,988
Depreciation and amortisation expense	651,566	611,358
Energy infrastructure costs – pass-through	49,386	27,881
Asset management costs – pass-through	411,769	393,317
Other operating costs - pass-through	461,155	421,198
Interest on bank overdrafts and borrowings(a)	498,940	507,245
Interest on related party loans	27,949	37,523
Amortisation of deferred borrowing costs	7,366	7,631
Finance lease charges - related party	355	392
Other finance costs	7,008	7,748
	541,618	560,539
Less: amounts included in the cost of qualifyingassets	(23,208)	(31,468)
	518,410	529,071
(Loss)/gain on derivatives(b)	(2,693)	47
Unwinding of discount on non-current liabilities	7,322	6,197
Unwinding of discount on deferred revenue balances	2,625	2,619
Interest incurred on lease liabilities	2,638	-
Finance costs	528,302	537,934
Defined contribution plans	16,159	14,264
Defined benefitplans(Note 15)	2,348	1,944
Post-employment benefits	18,507	16,208
Termination benefits	1,497	3,823
Cash settled security-based payments(c)	16,442	25,555
Equity settled security-based payments(c)	992	-
Other employee benefits	212,252	189,448
Employee benefit expenses(d)	249,690	235,034

(a) The average interest rate applying to drawn debt is 5.33% p.a. (2019: 5.53% p.a.) excluding amortisation of borrowing costs and other finance costs. (b) Represents unrealised gains and losses on the mark-to-market valuation of derivatives, including contract for difference arrangements. (c) The Consolidated Entity provides benefits to certain employees in the form of security-based payments. For cash settled security-based payments, a liability equal to the portion of services received is recognised at the current fair value determined at each reporting date. For equity settled securitybased payments, a reserve is recognised equal to the portion of services received based on the fair value of the equity instrument at grant date.

(d) Employee benefit expense of $70.0 million (2019: $64.5 million) is recharged as pass-through revenue and presented as part of other operating costs - pass-through.

21

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

For the financial year ended 30 June 2020

Financial Performance

6. Income tax

The major components of tax expense are:

The major components of tax expense are:
	2020	2019
	$000	$000
Income statement
Current tax expense in respect of the current year	(115,394)	(95,976)
Adjustments recognised in the current year in relation to current tax of prior years	29	157
Deferred tax expense relating to the origination and reversal of temporary differences	(72,466)	(80,486)
Total tax expense	(187,831)	(176,305)
Tax reconciliation
Profit before tax	473,210	424,374
Income tax expense calculated at 30%	(141,963)	(127,312)
Non deductible expenses	(59,667)	(58,158)
Non assessable income	7,426	8,050
	(194,204)	(177,420)
Franking credits received	5,310	105
Previously unbooked losses now recognised	1,034	853
Adjustments recognised in the current year in relation to the current tax of prior years	29	157
	(187,831)	(176,305)

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.

22

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Financial Performance

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
2020	$000	$000	$000	$000	$000
Gross deferred tax liabilities
Property, plant and equipment(a)	(985,680)	(72,479)	(18,651)	-	(1,076,810)
Deferred expenses	(55,631)	1,919	-	-	(53,712)
Other	(285)	168	-	-	(117)
	(1,041,596)	(70,392)	(18,651)	-	(1,130,639)
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	(718,093)	(72,466)	51,666	(1,028)	(739,921)

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

2019

Gross deferred tax liabilities
Property, plant and equipment	(899,767)	(85,913)	-	-	(985,680)
Deferred expenses	(55,040)	(591)	-	-	(55,631)
Other	(219)	(66)	-	-	(285)
	(955,026)	(86,570)	-	-	(1,041,596)
Gross deferred tax assets
Provisions	43,390	5,249	-	-	48,639
Cash flow hedges	141,235	858	112,124	-	254,217
Deferred revenue	13,748	(144)	927	-	14,531
Investments equity accounted	1,749	(743)	2,172	-	3,178
Defined benefit obligation	(498)	11	3,425	-	2,938
Tax losses	-	853	-	(853)	-
	199,624	6,084	118,648	(853)	323,503
Net deferred tax liability	(755,402)	(80,486)	118,648	(853)	(718,093)

23

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

For the financial year ended 30 June 2020

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 tax-consolidated 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.

24

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

For the financial year ended 30 June 2020

Financial Performance

7. Dividends

7. Dividends
		APT Pipelines Limited
	2020	2020	2019	2019
	cents per	Total	cents per	Total
	share	$000	share	$000
Recognised amounts
Final FY2019 dividend paid on 20 August 2019
(2019: Final FY2018 dividend paid 21 August 2018)
Dividend(a)	161.0	100,000	166.6	103,500
Interim FY2020 dividend paid on 11 March 2020
(2019: Interim FY2019 dividend paid on 19 February 2019)
Dividend(a)	217.6	135,200	177.2	110,100
Unrecognised amounts
Final FY2020 dividend paid on 25 August 2020
(2019: Final FY2019 dividend paid 20 August 2019)
Dividend(a)	156.1	97,000	161.0	100,000

(a) Profit dividends were unfranked (2019: 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.

25

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

For the financial year ended 30 June 2020

Operating Assets and Liabilities

8. Receivables

8. Receivables
	2020	2019
	$000	$000
Trade receivables	31,313	26,080
Accrued revenue	218,013	198,816
Loss allowance	(700)	(10)
Trade receivables	248,626	224,886
Receivables from associates and other related parties	12,985	23,373
Finance lease receivables (Note 16)	1,166	1,246
Interest receivable	1,340	375
Other debtors	20	79
Trade and other receivables	264,137	249,959
Receivables from related parties	186,263	189,434
Current	450,400	439,393
Finance lease receivables (Note 16)	11,639	12,794
Loan receivable - related party	-	117,337
Non-current	11,639	130,131

At 30 June 2020, the Consolidated Entity had no loan receivable from SEA Gas (2019: $122.3 million).

Trade receivables are non-interest bearing and are generally on 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 loss allowance. There is no material impact identified to the date of the issuance of these financial statements.

9. Payables

9. Payables
Trade payables(a)	35,561	39,934
Other payables	242,752	230,214
Trade and other payables	278,313	270,148
Payables to relatedparties(b)	2,578,536	2,753,299
Current	2,856,849	3,023,447
Other payables	4,826	3,230
Payables to related parties	798,250	879,183
Non-current	803,076	882,413

(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.

26

For the financial year ended 30 June 2020

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

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 2018	248,667	10,660	10,650,056	856,378	-	-	11,765,761
Additions	-	-	29,345	503,500	-	-	532,845
Disposals	(1)	-	(950)	-	-	-	(951)
Transfers	12,988	127	812,782	(825,897)	-	-	-
Balance at 30 June 2019	261,654	10,787	11,491,233	533,981	-	-	12,297,655
Balance at 1 July 2019(a)	261,654	10,787	11,491,233	533,981	54,646	7,619	12,359,920
Additions	-	-	32,262	393,660	3,437	3,400	432,759
Disposals	-	-	(1,511)	-	(102)	(246)	(1,859)
Transfers	5,514	-	204,466	(215,965)	-	5,985	-
Balance at 30 June 2020	267,168	10,787	11,726,450	711,676	57,981	16,758	12,790,820
Accumulated depreciation
Balance at 1 July 2018	(46,295)	(3,953)	(2,023,847)	-	-	-	(2,074,095)
Disposals	-	-	882	-	-	-	882
Depreciation expense(Note 5)	(7,544)	(967)	(419,859)	-	-	-	(428,370)
Balance at 30 June 2019	(53,839)	(4,920)	(2,442,824)	-	-	-	(2,501,583)
Balance at 1 July 2019(a)	(53,839)	(4,920)	(2,442,824)	-	-	-	(2,501,583)
Disposals	-	-	1,490	-	51	66	1,607
Depreciation expense (Note 5)	(7,950)	(800)	(447,519)	-	(9,108)	(3,454)	(468,831)
Amounts included in the cost of
other assets	-	-	-	-	-	(58)	(58)
Balance at 30 June 2020	(61,789)	(5,720)	(2,888,853)	-	(9,057)	(3,446)	(2,968,865)
Net book value
As at 30 June 2019	207,815	5,867	9,048,409	533,981	-	-	9,796,072
As at 30 June 2020	205,379	5,067	8,837,597	711,676	48,924	13,312	9,821,955

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

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 13 Impairment of non-financial assets of the annual report for the financial year end 30 June 2020.

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

27

For the financial year ended 30 June 2020

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

Operating Assets and Liabilities

10. Property, plant and equipment (continued)

Depreciation is provided on property, plant and equipment excluding land. Depreciation is calculated on a straight-line basis depending on the nature of the asset so as to write off the net cost of each asset over its estimated useful life.

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 change based on TCFD scenario testing to 2030. 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;
●ROU land and buildings	1 - 40 years;
● meters	20 - 30 years;
● power generation facilities	3 - 25 years;
● other plant and equipment	3 - 20 years; and
● ROU property, plant and equipment	1 - 4 years.

11. Goodwill and Intangibles

11. Goodwill and Intangibles
	2020	2019
	$000	$000
Goodwill
Balance at beginning of financial year	1,183,604	1,183,604
Balance at end of financialyear	1,183,604	1,183,604

28

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Operating Assets and Liabilities

11. Goodwill and Intangibles (continued)

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 100 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:

as follows:
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 energy infrastructure(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).

Contract and other intangibles
Gross carrying amount
Balance at beginning of financial year	3,591,278	3,590,960
Additions	253	318
Balance at end of financial year	3,591,531	3,591,278
Accumulated amortisation and impairment
Balance at beginning of financial year	(781,517)	(598,529)
Amortisation expense (Note 5)	(182,735)	(182,988)
Balance at end of financial year	(964,252)	(781,517)
	2,627,279	2,809,761

The Consolidated Entity holds various third party operating and maintenance contracts. The combined gross carrying amount of $3,591.5 million amortises over terms ranging from one to 15 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. 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.

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.

29

For the financial year ended 30 June 2020

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

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 value-in-use calculations. These 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.

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, climate change based on TCFD scenario testing to 2030, the outlook for global and regional gas market supply-and-demand conditions, and internal information such as contract renewals, and forecast input costs. 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 7.75% p.a. (2019: 7.75% p.a.) for Energy Infrastructure assets and 7.75% p.a. (2019: 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 0.3% p.a. (2019: 1.0% p.a.). 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 beyond installed and committed levels; utilisation of capacity is based on existing contracts and renewals, government policy settings and the Consolidated Entity’s expected market outcomes.

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.

30

For the financial year ended 30 June 2020

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

Operating Assets and Liabilities

12. Impairment of non-financial assets (continued)

Orbost Gas Processing Plant

As part of the April 2020 market update, APA Group flagged that it was yet to complete the performance tests required for the Orbost Gas Processing Plant to meet commercial operations under the agreement with Cooper Energy. APA Group continues to work with Cooper Energy in reaching the plant nameplate capacity of 68 TJ/day.

The recoverable amount of the Orbost Gas Processing Plant has been assessed for impairment using a forward-looking discounted cash flow analysis, based on operating at levels up to nameplate capacity over its 25 year technical life from completion of commissioning.

The key estimates and assumptions used in the assessment of impairment include: a pre-tax discount rate of 7.75%; plant nameplate processing capacity 68 TJ/day; completed plant construction costs; future re-contracting revenues based on current option agreements; gas field reserve estimates; inflation; forecast operating and capital costs.

As at 30 June 2020 the estimated recoverable value of the plant is in excess of its carrying value of $443.9 million.

The estimated recoverable value of the plant comprises of the value attributed to the Cooper Energy Sole gas processing agreements and in the order of $90 million of value attributed to future, as yet, uncontracted revenues.

The assessment of the recoverable amount represents management's best estimates. Management will continue to assess the progress of the plant against these estimates. Sensitivity analysis of these estimates, holding all other assumptions constant, indicate that a future 15% reduction in the plant’s nameplate capacity could result in a future impairment charge in the order of $65 million; or a future 1% increase to the discount rate could result in a future impairment charge in the order of $27 million.

31

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

For the financial year ended 30 June 2020

Operating Assets and Liabilities

13. Provisions

13. Provisions
	2020	2019
	$000	$000
Employee benefits	77,878	86,625
Other	11,758	8,216
Current	89,636	94,841
Employee benefits	60,082	33,672
Other	55,823	55,991
Non-current	115,905	89,663
Employee benefits
Incentives	21,204	33,126
Cash settled security-based payments	7,132	7,042
Leave balances	49,009	46,137
Termination benefits	533	320
Current	77,878	86,625
Cash settled security-based payments	8,414	9,695
Defined benefit liability (Note 15)	41,052	13,852
Leave balances	10,616	10,125
Non-current	60,082	33,672

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
Line pack gas	20,607	20,607
Gas held in storage	6,010	6,010
Defined benefit asset (Note 15)	2,534	4,057
	29,151	30,674

32

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

For the financial year ended 30 June 2020

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 2020. 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:

The following sets out details in respect of the defined benefit plans only: and past service cost, were measured using the projected unit credit method.
	2020	2019
	$000	$000
Amounts recognised in the statement of profit or loss and other comprehensive income
Current service cost	2,054	1,955
Net interest expense/(income)	294	(11)
Components of defined benefit costs recognised in profit or loss(Note 5)	2,348	1,944
Amounts recognised in the statement of financial position
Fair value of plan assets	124,358	136,487
Present value of benefit obligation	(162,876)	(146,282)
Defined benefit asset - non-current (Note 14)	2,534	4,057
Defined benefit liability - non-current(Note 13)	(41,052)	(13,852)
Opening defined benefit obligation	146,282	133,959
Current service cost	2,054	1,955
Interest cost	4,329	5,312
Contributions from plan participants	669	744
Actuarial loss	21,914	15,837
Benefits paid	(11,905)	(11,044)
Administrative expenses, taxes and premiums paid	(467)	(481)
Closing defined benefit obligation	162,876	146,282
Movements in the present value of the plan assets in the current period were as follows:
Opening fair value of plan assets	136,487	135,620
Interest income	4,035	5,323
Actual return on plan assets excluding interest income	(6,189)	4,420
Contributions from employer	1,728	1,905
Contributions from plan participants	669	744
Benefits paid	(11,905)	(11,044)
Administrative expenses, taxes and premiums paid	(467)	(481)
Closing fair value ofplan assets	124,358	136,487

33

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

For the financial year ended 30 June 2020

Operating Assets and Liabilities

15. Employee superannuation plans (continued)

Defined contribution plans

Contributions to defined contribution plans are expensed when incurred.

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 3.0% gross of tax (2019: 3.1%), based on the corporate bond yield curve published by Milliman, an expected salary increase rate of 2.7% (2019: 3.0%), and pension indexation rate of 2.0% (2019 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 $9,627,000 (increase by $10,818,000).

• If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by $1,875,000 (decrease by $1,766,000).

• If the expected pension indexation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by $8,586,000 (decrease by $7,776,000).

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 $3.4 million in contributions to the defined benefit plans during the year ending 30 June 2021.

34

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

For the financial year ended 30 June 2020

Operating Assets and Liabilities

16. Leases

The Consolidated Entity as a lessee

16. Leases The Consolidated Entity as a lessee
	2020	2019
	$000	$000
Lease Liability
Not longer than 1 year	16,975	1,167
Longer than 1 year but not longer than 5 years	47,340	4,669
Longer than 5 years	24,810	3,502
Minimum future leasepaymentspayable(a)	89,125	9,338
Less: Future finance cost	12,324	1,602
Present value of the future lease payments	76,801	7,736
Included in the financial statements:
Current lease liabilities	14,397	812
Non-current lease liabilities	62,404	6,924
	76,801	7,736

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

The Consolidated Entity adopted AASB 16 'Leases' using the modified retrospective approach as such there is no restatement of the comparative information.

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).

35

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

For the financial year ended 30 June 2020

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 $16.1 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.

	2020	2019
	$000	$000
Finance lease receivables
Not longer than 1 year	2,232	2,411
Longer than 1 year and not longer than 5 years	7,542	8,063
Longer than 5 years	9,410	11,121
Minimum future lease payments receivable(a)	19,184	21,595
Less: unearned finance lease receivables	(6,379)	(7,555)
Present value of lease receivables	12,805	14,040
Included in the financial statements as part of:
Current trade and other receivables (Note 8)	1,166	1,246
Non-current receivables (Note 8)	11,639	12,794
	12,805	14,040

(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.

36

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

For the financial year ended 30 June 2020

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 borrowing locally and from overseas, using a variety of capital markets and 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 remains unchanged from the previous period.

The Consolidated Entity's Board of Directors reviews the capital structure on a regular basis. As part of the review, the Board considers the cost of capital and the state of the markets. The Consolidated Entity's Funds From Operations to Net Debt exceed the minimum threshold levels that Moody's and S&P consider appropriate for the Consolidated Entity'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). The Consolidated Entity balances its overall capital structure through equity issuance, new debt or the redemption of existing debt and through a disciplined distribution payment policy.

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 2020 and 30 June 2019.

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.

37

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

For the financial year ended 30 June 2020

Capital Management

17. Net debt (continued)

17. Net debt (continued)
	2020	2019
	$000	$000
Cash at bank and on hand	502,643	354,610
Short-term deposits	670,006	244
Cash and cash equivalents	1,172,649	354,854
Guaranteed senior notes (a)	(299,954)	(433,550)
Other financial liabilities	(10,659)	(10,952)
**Current borrowings **	(310,613)	(444,502)
Guaranteed senior notes(a)	(10,591,648)	(9,841,174)
Other financial liabilities	(55,585)	(65,379)
Less: unamortised borrowing costs	39,851	40,740
Non-current borrowings	(10,607,382)	(9,865,813)
Total borrowings	(10,917,995)	(10,310,315)
Current lease liabilities	(14,397)	(812)
Non-current lease liabilities	(62,404)	(6,924)
Total lease liabilities	(76,801)	(7,736)
Net debt	(9,822,147)	(9,963,197)

(a) Represents 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$500 million (2019: Includes USD denominated private placement notes of US$75 million and CAD MTN of C$300 million). Refer to Note 18 for details of interest rates and maturity profiles.

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 2018	100,604	(329,219)	(9,321,377)	(8,510)	(9,558,502)
Cash movements	254,306	325,854	(819,706)	-	(239,546)
Non cash changes - leases	-	-	-	774	774
Foreign exchange movements due to fair value changes	(56)	(41,700)	(122,835)	-	(164,591)
Transfer from due after 1 year to due within 1 year	-	(399,437)	399,437	-	-
Amortisation of deferred borrowing costs	-	-	(1,332)	-	(1,332)
Net debt as at 30 June 2019	354,854	(444,502)	(9,865,813)	(7,736)	(9,963,197)
Transition at adoption of AASB 16(a)				(74,565)	(74,565)
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
Amortisation of deferred borrowing costs	-	-	(889)	-	(889)
Net debt as at 30 June 2020	1,172,649	(310,613)	(10,607,382)	(76,801)	(9,822,147)

(a) The Consolidated Entity adopted AASB 16 'Leases' using the modified retrospective approach as such there is no restatement of the comparative information.

38

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

For the financial year ended 30 June 2020

Capital Management

17. Net debt (continued)

17. Net debt (continued)
	2020	2019
Financing facilities available	$000	$000
Total facilities
Guaranteed senior notes (a)	10,891,602	10,274,724
Bank borrowings(b)	1,300,000	1,550,000
	12,191,602	11,824,724
Facilities used at balance date
Guaranteed senior notes (a)	10,891,602	10,274,724
Bank borrowings(b)	-	-
	10,891,602	10,274,724
Facilities unused at balance date
Guaranteed senior notes(a)	-	-
Bank borrowings(b)	1,300,000	1,550,000
	1,300,000	1,550,000

(a) Represents 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$500 million (2019: Includes USD denominated private placement notes of US$75 million and CAD MTN of C$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 Treasury 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.

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

(c) Liquidity risk.

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 Treasury department.	Refer to 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.

39

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

For the financial year ended 30 June 2020

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).	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 meet hedging objectives rather than for trading purposes. Electricity price risk is managed with power purchase 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, 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.

40

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

For the financial year ended 30 June 2020

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
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)
			Cross	Forward	Net foreign
	Cash & cash	Total	currency	exchange	currency
	equivalents	borrowings	swaps	contract	position
2019	$000	$000	$000	$000	$000
US dollar (USD)(a)	12,458	(4,558,603)	327,588	(955,218)	(5,173,775)
Japanese yen (JPY)	-	(132,196)	132,196	-	-
Canadian dollar (CAD)	-	(326,675)	326,675	-	-
British pound (GBP)	-	(2,442,600)	2,442,600	262	262
Euro (EUR)	-	(2,187,895)	2,187,895	2,956	2,956
Swedish Krona(SEK)	-	-	-	36,690	36,690
	12,458	(9,647,969)	5,416,954	(915,310)	(5,133,867)

(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.

41

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

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
2020	$	$000	$000	$000	$000
Forecast revenue and associated receivable
Sell USD	0.7162	318,735	253,313	-	(22,284)
Forecast capital purchases
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)
	Average		Contract Value		Fair value
	contract rate	< 1 year	1 - 2 years	2 - 5 years
2019	$	$000	$000	$000	$000
Forecast revenue and associated receivable
Sell USD	0.7169	319,697	364,587	253,313	(11,873)
Forecast capital purchases
Buy USD	0.7124	(2,594)	-	-	35
Buy EUR	0.6018	(942)	(1,522)	(567)	(1)
Buy SEK	5.7712	(7,217)	(30,528)	(3,684)	(3,818)
Buy GBP	0.5431	(267)	-	-	(4)
		308,677	332,537	249,062	(15,661)

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. The hedged anticipated transactions are expected to occur at various dates between one month to two years from reporting date.

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.

42

For the financial year ended 30 June 2020

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)

Cross currency swap contracts (continued)

The following table details the cross	currency swap	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
2020	currency	$	$000	$000	$000	$000
Pay AUD / receive foreign currency
2007 USPP Notes	AUD/USD	0.8068	-	(153,694)	-	-
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)
		Exchange	Less than			More than
	Foreign	rate	1 year	1 - 2 years	2 - 5 years	5 years
2019	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	(98,997)	-	-	-
2012 CAD Medium Term Notes	AUD/CAD	1.0363	(289,494)	-	-	-
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)
Pay USD / receive foreign currency
2015 EUR Medium Term Notes	USD/EUR	0.9514	-	-	-	(973,587)
2015 GBP Medium Term Notes	USD/GBP	0.6773	-	-	-	(1,262,415)
			(388,491)	-	(2,021,273)	(4,755,823)

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.

43

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

For the financial year ended 30 June 2020

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, CAD, GBP, EUR and 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 (2019: nil); and

• Equity reserves would decrease by $1,229.6 million with a 20 percent depreciation of the A$ or increase by $820.1 million with a 20 percent increase in foreign exchange rates (2019: decrease by $1,296.4 million or increase by $864.7 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 $1,172.6 million as at 30 June 2020 (2019: $354.9 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:

outstanding as at the end of the	financial year:	financial year:
	Weighted average			Notional
	interest rate		principal amount			Fair value
	2020	2019	2020	2019	2020	2019
	% p.a.	% p.a.	$000	$000	$000	$000
Cash flow hedges - Pay fixed AUD interest - receive floating AUD or fixed
Less than 1 year	-	5.42	-	388,491	-	44,604
1 year to 2 years	4.65	-	1,285,835	-	(7,622)	-
2 years to 5 years(a)	4.03	4.37	1,271,426	2,021,273	382,490	260,645
5years and more(a)	3.66	4.08	5,277,044	4,755,823	(354,157)	(133,801)
			7,834,305	7,165,587	20,711	171,448

(a) This amount includes a notional amount of USD 1.6 billion (2019: USD 1.6 billion) which is subject to USD interest rate risk.

44

For the financial year ended 30 June 2020

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)

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 hedge	Fair	value of hedge
		instrument		item	Reserve balance
	2020	2019	2020	2019	2020	2019
	$000	$000	$000	$000	$000	$000
Foreign exchange risk
Hedging foreign currency	20,711	171,448	(5,088)	(169,821)	633,540	533,795
borrowings (cross currency swap)
Hedging revenue and	(253,287)	(218,137)	253,287	218,137	253,287	218,137
associated receivables
(foreign currency borrowings)
Hedging revenue and associated	(22,284)	(11,873)	22,326	11,889	21,253	11,873
receivables (FECs)
Hedgingcapitalpurchases(FECs)	(3,092)	(3,790)	3,092	3,800	3,092	3,756
	(257,952)	(62,352)	273,617	64,005	911,172	767,561
					Balance relating to
			Hedge ineffectiveness			discontinued
				gain / (loss)	cash flow hedges
			2020	2019	2020	2019
			$000	$000	$000	$000
Foreign exchange risk
Hedging foreign currency borrowings (cross currency swap)			(417)	1,033	17,906	28,217
Hedgingcapitalpurchases(FECs)			-	(34)	-	-
			(417)	999	17,906	28,217
					Balance relating to
			Hedge ineffectiveness			discontinued
				gain / (loss)	cash flow hedges
			2020	2019	2020	2019
			$000	$000	$000	$000
Interest rate risk
HedgingUS$denominated borrowings(interest rate swap)			-	-	46,289	52,912
			-	-	46,289	52,912

45

For the financial year ended 30 June 2020

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 higher or lower and all other variables were held constant, the Consolidated Entity's equity reserves would increase by $15,776,000 with a 100 basis point decrease in interest rates or increase by $4,528,000 with a 100 basis point increase in interest rates (2019: increase by $54,170,000 or decrease by $35,640,000 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 meet hedging objectives 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 only dealing with creditworthy counterparties and 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.

46

For the financial year ended 30 June 2020

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)
2020
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 9 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 2020 has been determined to be immaterial and no liability has been recorded (2019: $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.

47

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

For the financial year ended 30 June 2020

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	$000
2020
Unsecured financial liabilities
Trade and other payables		-	278,313	-	-
Unsecured bank borrowings(a)		-	-	-	-
Denominated in A$
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	-
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 ($500 million limit). (b) Facilities are denominated in or fully swapped by way of cross currency swap into US$. 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.

(c) Rates shown are the coupon rate in the currency of issuance.

48

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

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	$000
2019
Unsecured financial liabilities
Trade and other payables		-	270,148	-	-
Unsecured bank borrowings(a)		-	-	-	-
Denominated in A$
Other financial liabilities			4,285	12,207	5,961
Denominated in US$
Other financial liabilities(b)			8,327	29,023	24,757
Guaranteed Senior Notes(c)
Denominated in A$
2007 Series G	15-May-22	7.45	6,002	92,586	-
2007 Series H	15-May-22	7.45	4,617	71,220	-
2010 AUD Medium Term Notes	22-Jul-20	7.75	23,250	311,625	-
2016 AUD Medium Term Notes	20-Oct-23	3.75	7,500	226,250	-
Denominated in US$
2007 Series F	15-May-22	6.14	11,354	176,433	-
2009 Series B	1-Jul-19	8.86	104,797	-	-
2012 US 144A	11-Oct-22	3.88	49,661	857,911	-
2015 US 144A(b)	23-Mar-25	4.20	65,835	263,342	1,633,528
2015 US 144A(b)	23-Mar-35	5.00	21,375	85,501	662,867
2017 US 144A	15-Jul-27	4.25	58,715	234,894	1,313,477
Denominated in stated foreign currency
2012 CAD Medium Term Notes	24-Jul-19	4.25	299,179	-	-
2012 GBP Medium Term Notes	26-Nov-24	4.25	39,351	158,159	555,663
2015 GBP Medium Term Notes(b)	22-Mar-30	3.50	56,713	226,539	1,602,172
2015 EUR Medium Term Notes	22-Mar-22	1.38	50,676	1,232,845	-
2015 EUR Medium Term Notes(b)	22-Mar-27	2.00	42,794	171,174	1,101,968
2019 GBP Medium Term Notes	18-Jul-31	3.13	28,519	134,564	995,090
2019 JPY Medium Term Notes	13-Jun-34	1.03	5,668	22,471	189,188
			1,158,766	4,306,744	8,084,671

(a) Bank facilities mature or expire on 19 December 2019 ($100 million limit), 18 May 2020 ($150 million limit), 19 December 2020 ($100 million limit) and 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 cross currency swap into US$. Cashflows represent the US$ cashflow translated at the USD/AUD spot rate as at 30 June 2019. These amounts are fully hedged by FECs or future US$ revenues.

(c) Rates shown are the coupon rate in the country of issuance.

49

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

For the financial year ended 30 June 2020

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 2020 (2019: 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 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.

50

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

For the financial year ended 30 June 2020

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

Fair value hierarchy
	Level 1	Level 2	Level 3	Total
2020	$000	$000	$000	$000
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
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
	-	577,311	-	577,311
2019
Financial assets measured at fair value
Equity forwards designated as fair value through profit or loss	-	2,245	-	2,245
Cross currency interest rate swap contracts used for hedging	-	527,857	-	527,857
Foreign currency forward exchange contracts used for hedging	-	10,209	-	10,209
Contract for difference	-	-	2,144	2,144
	-	540,311	2,144	542,455

51

For the financial year ended 30 June 2020

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

Capital Management

18. Financial risk management (continued)

18. Financial risk management (continued)
Fair value hierarchy (continued)
	Level 1	Level 2	Level 3	Total
2019	$000	$000	$000	$000
Financial liabilities measured at fair value
Cross currency interest rate swap contracts used for hedging	-	356,409	-	356,409
Foreign currency forward exchange contracts used for hedging	-	25,872	-	25,872
Contract for difference	-	-	402	402
	-	382,281	402	382,683
Reconciliation of Level 3 fair value measurements
			2020	2019
			$000	$000
Opening balance			(1,742)	6,536
Revaluation			(9,288)	(3,708)
Settlement			522	(4,570)
Closing balance			(10,508)	(1,742)

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.

values.
	Carrying amount		Fair value	(level 2)(a)
	2020	2019	2020	2019
	$000	$000	$000	$000
Financial liabilities
Unsecured long term Private Placement Notes	322,353	426,115	351,357	460,583
Unsecured Australian Dollar Medium Term Notes	500,000	500,000	515,311	530,459
Unsecured Japanese Yen Medium Term Notes	134,338	132,196	136,838	134,944
Unsecured Canadian Dollar Medium Term Notes	-	326,675	-	327,014
Unsecured US Dollar 144A Medium Term Notes	4,350,348	4,275,027	4,821,607	4,489,354
Unsecured British Pound Medium Term Notes	2,423,481	2,442,600	2,620,897	2,602,390
Unsecured Euro Medium Term Notes	3,174,688	2,187,895	3,253,322	2,255,715
	10,905,208	10,290,508	11,699,332	10,800,459

(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.

52

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Capital Management

19. Other financial instruments

19. Other financial instruments
		Assets		Liabilities
	2020	2019	2020	2019
	$000	$000	$000	$000
Derivatives at fair value:
Contract for difference	2,813	-	-	402
Equity forward contracts	1,336	1,513	-	-
Derivatives at fair value designated as hedging instruments:
Cross currency interest rate swaps - cash flow hedges	18,343	61,664	159,305	141,860
Foreign exchange contracts - cash flow hedges	9,971	4,577	27,042	10,520
Financial assets carried at amortised cost:
Redeemable preference share interest	285	285	-	-
Current	32,748	68,039	186,347	152,782
Derivatives - at fair value:
Contract for difference	7,695	2,144	-	-
Equity forward contracts	331	732	74	-
Indexed revenue contracts	-	-	8,090	3,459
Derivatives at fair value designated as hedging instruments:
Cross currency interest rate swaps - cash flow hedges	557,336	483,253	405,904	245,892
Foreign exchange contracts - cash flow hedges	5,265	5,632	13,570	15,352
Financial items carried at amortised cost:
Redeemable preference shares	10,400	10,400	-	-
Non-current	581,027	502,161	427,638	264,703

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.

53

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

For the financial year ended 30 June 2020

Capital Management

19. Other financial instruments (continued)

Recognition and measurement (continued)

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 Replacement Impact

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.

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.

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.

54

For the financial year ended 30 June 2020

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)

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 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.

	2020	2019
	$000	$000
Balance at beginning of financial year	(605,425)	(338,772)
Gain/(loss) recognised taken to equity:
Gain/(loss) arising on changes in fair value of hedging instruments	(183,108)	(464,642)
Changes in fair value of foreign currency basis spread during the period	(23,757)	15,719
Share of hedge reserve of associate	(5,139)	(6,357)
Amount reclassified to P&L for effective hedges	80,184	74,347
Tax effect	39,546	114,280
Balance at end of financialyear	(697,699)	(605,425)

The foreign currency basis spread balance at the beginning of the financial year is ($56.2 million) and at the end of the financial year is ($58.2 million) in 2020 (2019: ($93.3 million) and ($56.2 million) respectively).

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.

55

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

For the financial year ended 30 June 2020

Capital Management

19. Other financial instruments (continued)

Recognition and measurement (continued)

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.

20. Issued capital

20. Issued capital
			2020	2019
			$000	$000
Shares
62,127,252 shares, fully paid (2019: 62,127,252 shares, fully paid)(a)			117,330	117,330
	2020		2019
	No. of		No. of
	shares	2020	shares	2019
	000	$000	000	$000
Movements
Balance at beginningof financialyear	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.

56

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

For the financial year ended 30 June 2020

Group Structure

21. Non-controlling interests

21. Non-controlling interests
	2020	2019
	$000	$000
Issued capital
Balance at beginning of financial year	119,253	119,257
Return of capital	-	(4)
	119,253	119,253
Reserves
Balance at beginning of financial year	-	1
Transferred to retained earnings	-	(1)
	-	-
Retained earnings
Balance at beginning of financial year	-	48
Profit for the year	24,373	26,833
Transferred from reserves	-	1
Distributionspaid	(24,373)	(26,882)
Balance at end of financialyear	-	-
	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.

entities.
			Ownership	interest %
Name of entity	Principal activity	Country of incorporation	2020	2019
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
			2020	2019
			$000	$000
Investment injoint ventures and associate using the equity method			212,782	249,605

57

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

For the financial year ended 30 June 2020

Group Structure

22. Joint arrangements and associates (continued)

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

	2020	2019
	$000	$000
Joint Ventures
Aggregate carrying amount of investment	191,180	225,019
The Consolidated Entity's aggregated share of:
Profit from continuing operations	22,726	16,312
Other comprehensive income	(3,470)	(2,221)
Total comprehensive income	19,256	14,091
Associate
Aggregate carrying amount of investment	21,602	24,586
The Consolidated Entity's aggregated share of:
Profit from continuing operations	4,814	4,592
Other comprehensive income	(1,669)	(4,135)
Total comprehensive income	3,145	457

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
		2020	2019
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

58

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

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/	2020	2019
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

59

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Group Structure

23. Subsidiaries (continued)

	Country of	Ownership	interest
	registration/	2020	2019
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

60

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Group Structure

23. Subsidiaries (continued)

	Country of	Ownership	interest
	registration/	2020	2019
Name of entity	incorporation	%	%
APT SPV3 Pty Ltd(b)	Australia	100	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
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 Pipeline Trust.

(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.

61

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

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.

23. Subsidiaries (continued) The consolidated statement of profit or loss and other comprehensive income of the guarantee is set out below.	entities party to the deed of cross	entities party to the deed of cross
	Cross Guarantee Group
	2020	2019
	$000	$000
Continuing operations
Revenue	2,559,919	2,428,924
Share of net profits of associates andjoint ventures usingthe equity method	12,958	11,156
	2,572,877	2,440,080
Asset operation and management expenses	(216,919)	(215,402)
Depreciation and amortisation expense	(651,457)	(611,144)
Other operating costs - pass-through	(461,152)	(421,197)
Finance costs	(552,572)	(564,668)
Employee benefit expense	(251,819)	(234,429)
Other expenses	(5,185)	(6,587)
Profit before tax	433,773	386,653
Income tax expense	(183,341)	(173,157)
Profit for the year	250,432	213,496
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit plan	(28,104)	(11,417)
Income tax relatingtogain on defined benefit plan	8,431	3,425
	(19,673)	(7,992)
Items that may be reclassified subsequently to profit or loss:
Transfer of gain on cash flow hedges to profit or loss	80,184	74,347
Loss on cash flow hedges taken to equity	(206,864)	(448,940)
Gain on associate hedges taken to equity	(2,037)	(7,224)
Income tax relatingitems that may be reclassified subsequently	38,615	114,545
	(90,102)	(267,272)
Other comprehensive income/(expense)for the year(net of tax)	(109,775)	(275,264)
Total comprehensive income for the year	140,657	(61,768)

62

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

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.

23. Subsidiaries (continued) The consolidated statement of financial position of the entities party to the deed	of cross guarantee is set out below.	of cross guarantee is set out below.
	Cross Guarantee Group
	2020	2019
	$000	$000
Current assets
Cash and cash equivalents	1,169,747	353,991
Trade and other receivables	336,084	766,464
Other financial assets	32,748	68,039
Inventories	34,181	30,963
Other	22,101	13,589
Current assets	1,594,861	1,233,046
Non-current assets
Receivables	11,639	130,131
Other financial assets	1,130,925	1,052,061
Investments accounted for using the equity method	86,440	97,974
Property, plant and equipment	9,821,831	9,796,054
Goodwill	1,183,058	1,183,058
Other intangible assets	2,627,279	2,809,761
Other	29,151	30,674
Non-current assets	14,890,323	15,099,713
Total assets	16,485,184	16,332,759
Current liabilities
Trade and other payables	3,843,262	4,394,197
Lease liabilities	14,397	812
Borrowings	310,613	444,502
Other financial liabilities	186,347	152,783
Provisions	88,824	94,842
Unearned revenue	10,753	12,319
Current liabilities	4,454,196	5,099,455
Non-current liabilities
Trade and other payables	437,528	541,238
Lease liabilities	62,404	6,924
Borrowings	10,607,382	9,865,813
Other financial liabilities	427,638	264,703
Deferred tax liabilities	727,058	704,944
Provisions	115,391	89,662
Unearned revenue	56,737	60,581
Non-current liabilities	12,434,138	11,533,865
Total liabilities	16,888,334	16,633,320
Net liabilities(a)	(403,150)	(300,561)
Equity
Issued capital	117,330	117,330
Reserves	(687,015)	(597,478)
Retained earnings	166,535	179,587
Deficiency in equity attributable to equityholders of the parent(a)	(403,150)	(300,561)

(a) The working capital position as at 30 June 2020 for the Cross Guarantee Group is that current liabilities exceed current assets by $2,859.3 million (2019: $3,866.4 million) and total liabilities exceed total assets for the Cross Guarantee Group by $403.2 million (2019: $300.6 million). Excluding related party loan from Australian Pipeline Trust, total assets exceed total liabilities by $2,376.1 million (2019: $2,550.8 million).

The Cross Guarantee Group has access to available committed, un-drawn bank facilities of $1,300.0 million as at 30 June 2020 (2019: $1,550.0 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.

63

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

For the financial year ended 30 June 2020

Other

24. Commitments and contingencies

24. Commitments and contingencies
	2020	2019
	$000	$000
Capital expenditure commitments
The Consolidated Entity - plant and equipment	168,391	172,774
The Consolidated Entity's share ofjointly controlled operations - plant and equipment	11,107	8,596
	179,498	181,370
Contingent liabilities
Bank guarantees	51,483	52,233

As at 30 June 2020 and 30 June 2019 APA Group had no material contingent liabilities, other than those disclosed above.

The Consolidated Entity had no contingent assets as at 30 June 2020 and 30 June 2019.

25. Director and Executive Key Management Personnel remuneration

Remuneration of Directors

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

Remuneration of Directors The aggregate remuneration of Directors of the Consolidated Entity is set out below:
	2020	2019
	$	$
Short-term employment benefits	1,549,332	1,664,631
Post-employment benefits	147,185	158,168
Total remuneration: Non-Executive Directors	1,696,517	1,822,799
Short-term employment benefits	2,395,588	3,629,920
Post-employment benefits	25,453	25,000
Cash settled security-based payments	1,879,646	1,515,047
Equity settled security-based payments	368,121	-
Total remuneration: Executive Director(a)	4,668,808	5,169,967
Total remuneration: Directors	6,365,325	6,992,766
Remuneration of Executive Key Management Personnel(a)
The aggregate remuneration of Executive Key Management Personnel of the Consolidated Entity is set out below:
Short-term employment benefits	6,179,703	7,763,114
Post-employment benefits	88,123	101,666
Cash settled security-based payments	2,891,305	2,864,008
Equity settled security-based payments	675,161	-
Total remuneration: Executive Key Management Personnel	9,834,292	10,728,788

(a) 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. In addition Mr McCormack is entitled to his outstanding reference units, due to be paid in August 2021, August 2022 and August 2023, with a total value of $3,632,979 (based on a VWAP of $11.1579).

64

For the financial year ended 30 June 2020

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

Other

26. Remuneration of external auditor

26. Remuneration of external auditor
	2020	2019
	$	$
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
Audit or review of the financial repors:
Group	691,000	679,300
Subsidiaries	8,100	7,800
Total audit or review of the financial reports	699,100	687,100
Statutory assurance services required by legislation to be provided by the auditor
Assurance services in relation to the AER financial reporting requirements (a)	2,170,000	250,000
Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements (b)	84,800	10,400
Financial services licence audit	8,100	7,800
Total statutory assurance services required by legislation to beprovided by the auditor	2,262,900	268,200
Other assurance services (c)	106,600	246,300
Total remuneration of external auditor	3,068,600	1,201,600

(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 Agreed-upon procedures in relation to ASIC Regulatory Guide 231 requirements (FY2020 includes triennial procedures required under RG231, procedures last undertaken in FY2017). (c) Services provided were in accordance with the external auditor independence policy. Other assurance services mainly comprise assurance services in relation to security related transactions (debt raisings).

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 $5,909,078 (2019: $4,696,351) 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.

65

APT Pipelines Limited and its Controlled Entities Notes to the consolidated financial statements (continued) For the financial year ended 30 June 2020

Other

27. Related party transactions (continued)

(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
2020	$000	$000	$000	$000	$000
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	-
2019
SEA Gas	9,551	7,809	-	122,626	-
Energy Infrastructure Investments	-	39,198	-	7,627	-
EII 2	3,732	1,020	-	335	-
GDI(EII)	4,701	53,654	-	10,122	-
	17,984	101,681	-	140,710	-

At 30 June 2020, the Consolidated Entity had no loan receivable from SEA Gas (2019: $122.3 million).

66

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

For the financial year ended 30 June 2020

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.

	2020	2019
	$000	$000
Financial position
Assets
Current assets	1,341,472	553,744
Non-current assets	19,238,974	18,528,415
Total assets	20,580,446	19,082,159
Liabilities
Current liabilities	690,738	780,951
Non-current liabilities	19,735,305	18,219,580
Total liabilities	20,426,043	19,000,531
Net assets	154,403	81,628
Equity
Issued capital	117,330	117,330
Retained earnings	148,455	148,210
Reserves	(111,382)	(183,912)
Total equity	154,403	81,628
Financial performance
Profit for the year	235,445	213,845
Other comprehensive income	72,530	(18,477)
Total comprehensive income	307,975	195,368

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.

67

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

For the financial year ended 30 June 2020

Other

29. Adoption of new and revised Accounting Standards

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

AASB 16 'Leases'

From 1 July 2019, the Consolidated Entity has adopted AASB 16 ‘Leases’ (AASB 16) that is effective for annual periods that begin on or after 1 July 2019. AASB 16 replaced AASB 117 ‘Leases’ (AASB 117), IFRIC 4 Determining Whether an Arrangement Contains a Lease (IFRIC 4) and other related interpretations.

Under AASB 16, the Consolidated Entity’s accounting for leases as a lessee results in the recognition of a Right-of-Use (ROU) asset and an associated lease liability in the Consolidated Statement of Financial Position, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. The lease liability represents the present value of future lease payments. An interest expense is recognised on the lease liabilities and a depreciation charge is recognised for the ROU assets. There are additional disclosure requirements under the new standard. The Consolidated Entity’s accounting for leases as a lessor remains unchanged under AASB 16.

Previously under AASB 117, operating leases were off-balance sheet, the Consolidated Entity recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.

The Consolidated Entity adopted AASB 16 using the modified retrospective approach. There is no restatement of the comparative information. Under this approach, the lease liability is measured at present value of future lease payments on the initial date of application, being 1 July 2019, and discounted using the Consolidated Entity’s incremental borrowing rate as of that date. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 3.69%.

For leases other than motor vehicles, the ROU asset is measured as if AASB 16 has been applied from the commencement of the lease with any difference between the ROU asset and the liability recognised as an adjustment to opening retained earnings. An adjustment of $8.6 million net of tax was recognised as a debit to opening retained earnings on transition. For motor vehicle leases, the ROU asset is measured at an amount equal to the lease liability with nil impact on opening retained earnings. The Consolidated Entity has recognised a temporary difference on initial recognition of lease assets and liabilities on adoption of AASB 16.

Practical expedients applied

In applying AASB 16 for the first time, the Consolidated Entity has used the following practical expedients permitted by the standard:

• The use of a single discount rate to a portfolio of leases with reasonably similar characteristics;

• The accounting for operating leases with a remaining lease term of 12 months or less as at 1 July 2019 as short-term leases;

• The reliance on the previous assessment whether a contract is or contains a lease, on contracts entered into before 1 July 2019 applying AASB 117 and Interpretation 4;

• The reliance on previous assessments of whether leases are onerous (of which there were none); and

• The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

Impact on initial adoption of AASB 16 at 1 July 2019

Impact on initial adoption of AASB 16 at 1 July 2019
	1 Jul
	2019
	$000
Assets
Right-of-Use assets - Property, plant and equipment	62,265
Deferred tax assets	3,690
Total assets recognised on transition	65,955
Liabilities
Current lease liabilities	10,537
Non-current lease liabilities	66,227
Derecognition of other liabilities - lease incentive	(2,199)
Total liabilities recognised on transition	74,565
Retained earnings	8,610

68

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

For the financial year ended 30 June 2020

Other

29. Adoption of new and revised Accounting Standards (continued)

AASB 16 'Leases' (continued)

The difference between the Consolidated Entity’s undiscounted non-cancellable operating lease commitments at 30 June 2019 and lease liabilities upon transition are set out below:

June 2019 and lease liabilities upon transition are set out below:
Operating lease commitments disclosed as at 30 June 2019	65,803
Discounted using lessee's incremental borrowing rate at the date of initial application	59,763
Add: Extension options reasonably certain to be exercised	10,987
(Less): short-term leases recognised on a straight-line basis as expense	(1,094)
(Less): low-value assets recognised on a straight-line basis as expense	(553)
Lease liabilities as at 30 June 2019	69,103
Add: leases commencingon 1 July2019	7,661
Lease liabilities recognised as at 1 July 2019	76,764

Impact on the consolidated statement of profit or loss and other comprehensive income

The following table sets out the amount of adjustment for each major financial statement line item affected by the application of AASB 16:

application of AASB 16:
	2020
	$000
Decrease in asset operation and management expenses	16,120
Increase in EBITDA	16,120
Increase in finance costs	(2,638)
Increase in depreciation and amortisation expense	(12,562)
Increase in Profit before tax	920
Increase in income tax expense	(276)
Increase in Profit after tax	644

The Consolidated Entity does not have any material expense relating to short-term leases, leases of low-value assets and variable lease payments not included in the measurement of lease liabilities, nor material income from subleasing right-ofuse assets.

Impact on the statement of cash flows

The application of AASB 16 has an impact on the consolidated statement of cash flows of the Consolidated Entity. Under AASB 16, lessees must present:

• Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liabilities as part of the operating activities. The Consolidated Entity has included these payments as part of payments to suppliers and employees;

• ● Cash paid for the interest portion of lease liabilities as either operating activities or financing activities, as permitted by AASB 107 Statement of Cash Flows. The Consolidated Entity has included interest paid as part of operating activities, consistent with the presentation of other interest paid; and

• Cash payments for the principal portion of lease liabilities, as part of financing activities.

Under AASB 117, all lease payments on operating leases were presented as part of cash flows from operating activities. Consequently, the net cash generated by operating activities has increased by $13.5 million and net cash used in financing activities increased by the same amount. Interest payments of $2.6 million continue to be included in net cash generated by operating activities (previously forming part of payments to suppliers and employees, a subcategory of net cash generated by operating activities). AASB 16 does not have any impact on net cash flows.

69

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

For the financial year ended 30 June 2020

Other

29. Adoption of new and revised Accounting Standards (continued)

AASB 16 'Leases' (continued)

New Accounting policies as a result of adoption of AASB 16

Refer to the accounting policies in Note 10 for ROU assets and Note 16 for lease liabilities. The Consolidated Entity’s accounting for leases as a lessor remains unchanged under AASB 16.

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

On 25 August 2020, the Directors declared and paid a final dividend of 156.13 cents per share ($97.0 million) to the sole equityholder, Australian Pipeline Limited as Responsible Entity and Trustee of Australian Pipeline Trust.

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.

70

APT Pipelines Limited and its Controlled Entities Declaration by the Directors of APT Pipelines Limited For the financial year ended 30 June 2020

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
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Debra Goodin Director

SYDNEY, 26 August 2020

71

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

26 August 2020

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 2020, 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.

72

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 (the “consolidated entity”), which comprises the consolidated statement of financial position as at 30 June 2020, 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 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 Group’s financial position as at 30 June 2020 and of its 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.

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

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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 2020, 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.

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.

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• 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.

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.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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DELOITTE TOUCHE TOHMATSU

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Jamie Gatt Partner Chartered Accountants Sydney, 26 August 2020

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Taralyn Elliott Partner Chartered Accountants Sydney, 26 August 2020

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