Apa Group · ASX:APA
Apa — H1 FY2011 Earnings Presentation
39 slides from Apa's earnings presentation, Feb 23, 2011
Slide 1: Financial Results Half year ended 31 December 2010
Financial Results Half year ended 31 December 2010 23 February 2011
Slide 2: Result overview and strategic highlights
Result overview and strategic highlights Mick McCormack Managing Director and CEO 1H 2011 Result Presentation Æ 2
Slide 3: Steady and solid result
Steady and solid result 1H11 1H10 Change $ million $ million Operating cash flow 170 160 up 6% Revenue excluding pass‐through (1) 370 343 up 8% EBITDA 264 244 up 8% Profit (2) 70 64 up 10% Operating cash flow per security (cents) 31.0 31.6 down (2%) Distribution per security (cents) 16.5 15.75 up 5%
Slide 4: Strategic and operational highlights
Strategic and operational highlights Expanded APA’s gas infrastructure portfolio Commissioned the Young Wagga looping project, New South Wales Progressed construction of Victorian Transmission System, northern augmentation project Completed Roma Brisbane Pipeline lateral to large industrial cu
Slide 5: Strategic and operational highlights
Strategic and operational highlights Capturing revenue and operating synergies Implemented national finance system Developing national customer interface for gas transport and storage services Operational excellence program across transmission operations Leveraged APA’s infrastructure portfoli
Slide 6: Flood and weather impacts
Flood and weather impacts Floods and extreme weather during November 2010 to February2011 has impacted APA’s assets and operations across three states Minimal disruption to gas services despite impact on APA’s assets – Pipeline damage (Toowoomba) and flood damage to facilities at two gas inlet sta
Slide 7: Flood and weather impacts
Flood and weather impacts Roma Brisbane Pipeline – repair to damaged pipeline section and easement wash‐out on the Toowoomba escarpment Before flooding After flooding Repairing the pipeline 1H 2011 Result Presentation Æ 7
Slide 8: Flood and weather impacts
Flood and weather impacts Arubial gas inlet station – continued operating while flooded During floods After flooding 1H 2011 Result Presentation Æ 8
Slide 9: Financial performance
Financial performance Peter Fredricson Chief Financial Officer 1H 2011 Result Presentation Æ 9
Slide 10: Consistent financial performance
Consistent financial performance 1H11 1H10 Change $ million $ million Total revenue excluding pass‐through (1) 369.8 343.3 7.7 % Total revenue 554.7 495.9 11.8 % EBITDA 263.9 244.3 8.0 % EBIT 219.0 197.4 10.9 % Net interest expense (124.5) (111.1) (12.1%) Tax (24.2) (22.7) (6.7 %) Profit (2) 70.2 63
Slide 11: EII2 – significant item
EII2 – significant item 1H11 APA has a 20.2 % interest in EII2 $ million which holds the North Brown EBITDA 263.9 Hill wind farm Significant item 9.8 The wind farm was connected EBITDA before significant item 254.0 to the grid and commenced Profit after tax 70.2 generation in December 2010, ahea
Slide 12: EBITDA by business segment
EBITDA by business segment 1H11 1H10 1H11 EBITDA split by segment Change $ million $ million Energy Investments, Gas Transmission and Distribution 7% Queensland 54.9 51.6 6.4 % Asset Management, 7% New South Wales 52.9 53.1 (0.4 %) Qld, 22% Victoria & South Australia 62.0 57.2 8.3 % Western Australi
Slide 13: Gas transmission and distribution – Queensland
Gas transmission and distribution Queensland 60 54.9 Roma Brisbane Pipeline lateral addition 50 Proposed energy solutions for Mt Isa underpinned by Carpentaria Gas Pipeline 40 EBITDA $ million capacity 30 Berwyndale Wallumbilla Pipeline contribution 20 – acquired April 2010 10 Extension of A
Slide 14: Gas transmission and distribution – New South Wales
Gas transmission and distribution New South Wales 60 52.9 Continued mainline expansion program 50 Completed Young Wagga lateral looping project 40 EBITDA $ million – Commissioning delayed due to weather 30 End of short term ‘as available’ contract 20 Short Term Trading Market commenced (Sydn
Slide 15: Gas transmission and distribution – Victoria & South Australia
Gas transmission and distribution Victoria & South Australia 60 62.0 Increased gas volumes due to cooler 50 winter weather impact Northern augmentation expansion 40 EBITDA $ million program – Commissioning by March 2011 30 LNG storage facility 20 – Open access truck refueling – Renegotiated st
Slide 16: Gas transmission and distribution – Western Australia & Northern Territory
Gas transmission and distribution Western Australia & 60 Northern Territory 48.6 50 Goldfields Gas Pipeline access arrangement – 10% reduction in reference tariffs that 40 apply to contracts that provide ~40% of EBITDA $ million APA’s GGP revenue 30 – APA is pursuing the merits review process with
Slide 17: Asset Management and Energy Investments
Asset Management and Energy Investments Asset Management 20 19.5 Increased revenue from Envestra asset 15 EBITDA $ million management Short term contracts 10 Increased third party work Long term contracts 5 Added Wagga gas network O&M to Envestra asset management ‐ 1H08 1H09 1H10 1H11 Energy I
Slide 18: Fully covered distributions
Fully covered distributions On target to deliver distribution growth guidance 60 51.9 1H11 distribution payout ratio* 48.2 50 of 53.6% 42.7 39.7 Distribution components 38.2 cents per security 40 13.3 cents – profit distribution 31.0 3.2 cents – capital distribution 30 32.75 29.5 31.0 28.0 20 24
Slide 19: Major capital expenditure for 1H11
Major capital expenditure for 1H11 1H11 1H10 Description of 1H11 major projects $ million $ million Growth capital expenditure Regulated Victoria Transmission System 13.5 Northern augmentation project 16.6 APA Gas Networks (Qld) 11.6 Includes southern network expansion 8.7 Major Projects Queensland
Slide 20: Funding 1H11 growth capital expenditure
Funding 1H11 growth capital expenditure 1H11 $ million Growth capital expenditure 181 Funds Free operating cash flow retained in the business (Operating cash flow less distributions and SIB capex) 73 Existing cash utilised 13 Cash 86 48% New equity (Distribution Reinvestment Plan) 35 19% New debt 60
Slide 21: Prudent capital management
Prudent capital management Cash and committed undrawn facilities of $340 million at 31 December 2010 – Reduced debt headroom by cancelling $412 million undrawn syndicated bank facilities 2010 metrics – Gearing* of 70.1%, marginally higher compared to 69.8% at 30 June 2010 – Interest Cover Ratio
Slide 22: Capital management strategy
Capital management strategy Managing balance sheet to maintain minimum investment grade credit rating metrics – Standard &Poor’s BBB; Moody’s Baa2 Refinancing program focused on extending debt maturity, diversifying funding sources and reducing borrowing costs – Sufficient headroom to refinance
Slide 23: Outlook and guidance
Outlook and guidance Mick McCormack Managing Director and CEO 1H 2011 Result Presentation Æ 23
Slide 24: Maintain strategy for profitable growth
Maintain strategy for profitable growth Continue to maximise value for securityholders Enhancing APA’s portfolio of gas infrastructure assets in Australia’s growing gas market Capturing revenue and operational synergies from APA’s significant 2,439 PJ asset base 69,183 PJ Leveraging APA’s gas
Slide 25: Committed and planned capital projects
Committed and planned capital projects Roma Brisbane Pipeline Capacity expansion (2012) Mondarra Gas Storage Facility APA Gas Network Expanding storage Expansion into new housing capacity and capability areas Interconnection with (ongoing) adjacent pipeline (2011‐2013) Moomba Sydney Pipeline Mainlin
Slide 26: APA growth drivers
APA growth drivers Growth drivers Market developments Gas supply and demand Growth in mining projects Gas fired power generation Increasing electricity demand Renewable energy projects Gas storage Gas producer contracting strategy Integrated market Energy market integration Coal seam gas devel
Slide 27: Long‐term organic growth opportunities
Long‐term organic growth opportunities Pipeline solutions for growth in mining and power generation Energy infrastructure Energy solutions for development for growth mining regions in mining projects Transportation opportunities for coal seam gas Energy infrastructure Pipelines for gas solutions tra
Slide 28: Guidance for FY2011
Guidance for FY2011 EBITDA guidance revised EBITDA – expected towards the upper end of the range of $480 million to $490 million No change to distribution and interest cost guidance Distribution – anticipate delivering 5% growth for 2011 full year distribution Net interest cost – expected with
Slide 29: Delivering value and long term growth
Delivering value and long term growth Consistent financial performance ‐ stability – Increasing key measures – operating cash flow, EBITDA and distributions – Maintaining cash flow stability and revenue certainty – Managing environment of higher borrowing costs Long term organic growth – investi
Slide 30: Supplementary information
Supplementary information 1H 2011 Result Presentation Æ 30
Slide 31: APA profile
APA profile APA is Australia’s largest natural gas infrastructure business – Gas Transmission and Distribution: gas pipelines, interconnected gas storage facilities across Australia, and gas distribution networks in Queensland and New South Wales – Asset Management: provides asset management, oper
Slide 32: Financials – Key financial ratios
Financials Key financial ratios 1H11 1H10 Operating cash flow per security (cents) 31.0 31.6 Weighted average securities on issue (million) 547.8 504.6 Payout ratio 53.6% 50.2% Earning per security (cents) 12.8 12.6 Interest cover ratio (times) 2.06 2.16 Gearing ratio 70.1% 69.9% Total assets ($ mil
Slide 33: Financials – Cash flow
Financials Cash flow 1H11 1H10 $ million $ million Change Operating cash flow 169.8 159.5 6.4 % Distributions (net of DRP) 57.6 50.6 Available operating cash flow 112.2 108.9 3.0 % Operating cash flow per security (cents) 31.0 31.6 (2.0 %) Distributions per security (cents) 16.5 15.75 4.8 % Distribu
Slide 34: Financials – Revenue analysis by business segment
Financials Revenue analysis by business segment 1H11 1H10 $ million $ million Change Gas Transmission and Distribution Queensland 83.3 76.8 8.4% New South Wales 64.3 64.3 0.0% Victoria & South Australia 79.6 73.8 7.8% Western Australia & Northern Territory 77.4 78.1 (0.9%) Gas Transmission and Distr
Slide 35: Financials – Total committed debt facilities
Financials Total committed debt facilities Facility Facility amount Tenor 2008 Bilateral borrowings (1) $165 million July 2011 2009 Bilateral borrowing (2) $150 million August 2014 2007 Syndicated facility (2) $900 million June 2012 2009 Syndicated facility (3) $618 million 2 and 4 year tranches mat
Slide 36: Regulatory update
Regulatory update APA’s major price regulated assets Regulatory resets over the next five years Regulatory resets are spread out over five years, with on average one reset per year Regulatory resets currently under review – APA Gas Network (Qld) – AER draft decision released February 2011 – Am
Slide 37: APA asset and investment portfolio
APA asset and investment portfolio APA Group assets and investments 20 Gas transmission and Asset Management distribution Commercial and operational services to: 17 Queensland ‐ Energy Infrastructure Investments 20 NORTHERN (1) Roma Brisbane Pipeline ‐ Envestra Limited TERRITORY 20 (2) Carpentaria G
Slide 38: Disclaimer
Disclaimer The information contained in this presentation is given without any liability whatsoever to Australian Pipeline Trust or APT Investment Trust or any of its related entities (collectively “APA Group”) or their respective directors or officers, and is not intended to constitute legal, tax o
Slide 39: Delivering Australia’s energy
For further information contact Delivering Australia’s energy Chris Kotsaris Investor Relations, APA Group Tel: +61 2 9693 0049 E‐mail: [email protected] or visit APA’s website www.apa.com.au