Energy Infrastructure is at the core of APA, housing our key gas infrastructure assets including gas transmission pipelines, compression facilities and storage facilities. Our national and interconnected portfolio of assets enables APA to provide various infrastructure services to our customers, including transportation, storage, compression or metering.
Over the last 15 years, APA has extended its infrastructure footprint so gas can be seamlessly transported to the various markets where it is required from every major gas supply source in Australia. And we continue to invest in our interconnected gas infrastructure grids across the country that connects resources to markets and markets to resources. In doing so, we are contributing to the energy security of Australia's economy and assisting the domestic market to adapt to the dynamic times that have developed with the onset of east coast LNG exports.
We now own and/or operate over 14,700 kilometres of gas transmission pipelines as well as a substantial portfolio of energy-related infrastructure assets. To achieve this sustainable growth, we listen to our customers and work with them, leveraging APA's diversified assets and know-how to solve their logistical challenges. Our strategy of expansion and enhancement of our portfolio has remained consistent since we listed in 2000, developing organic growth opportunities surrounding our assets and prudent acquisitions. From 2006, when we acquired the asset management business, we have also become skilled operators. Now we own and/or operate around $19 billion of assets when we include APA's latest and largest acquisition, the Wallumbilla Gladstone Pipeline ("WGP", renamed by APA from the Queensland Curtis LNG Pipeline post completion of the acquisition).
APA has been busy working with our customers to provide more flexible and value-add services across this extensive infrastructure portfolio. Pipelines worldwide, including Australia, were originally built to deliver gas from one point to another. But APA has rewritten the guidelines of tradition by developing an interconnected grid and flexible solutions. Our East Coast Grid has now become a 7,500 kilometre gas superhighway, with customers able to take advantage of the many service offerings along its routes.
It is our technical and commercial 'smarts' that APA applies to our assets that transforms their functionality and capabilities from simple point to point pipelines to an interconnected gas grid. Our customers continually respond to the current dynamic energy markets and associated demand and supply movements, as well as seek to take advantage of short term price differentials across the gas market. By listening to our customers, APA can now seamlessly manage their gas transportation requirements, providing park and loan services, storage services and bi-directional services across our connected gas grids. We can now offer additional services such as capacity and in-pipe trading that enables customers to more efficiently and effectively manage their energy needs.
APA's various teams across commercial, engineering and operational disciplines have always worked together to deliver solutions to our customers' needs. And now with the opening of the Integrated Operations Centre ("IOC") in April 2015, APA expects that our coordinated solutions approach will be further enhanced, and our service delivery even more responsive to changes in operations and gas markets. The IOC currently services APA’s infrastructure assets in Queensland, New South Wales, the Northern Territory and the Pilbara Pipeline System in Western Australia with further assets transitioning to the IOC during FY2016. By integrating the service teams we aim to maximise commercial opportunities and minimise operational impact.
Not only are our pipelines expanding in length and capacity, but we're changing their flow direction capability as well which increases the flexibility of services we can offer to customers. Today, the majority of APA's key pipelines have bi-directional capabilities allowing gas to flow in both directions rather than simply point to point. We achieve this with a combination of additional compression capacity as well as installation of flow redirection skids.
In addition to the extra compression capacity installed at Moomba and Wallumbilla this year, both the South West Queensland Pipeline and the Berwyndale Wallumbilla Pipeline underwent bi-directional transformation. Currently works are underway on both the Roma Brisbane Pipeline and Moomba Sydney Pipeline to convert to bi-directional capability which are due for completion early FY2016.
EAST COAST GRID
Three years ago, APA created the East Coast Grid by interconnecting the majority of our existing assets in eastern Australia through the acquisition of the South West Queensland Pipeline. This has allowed our customers on the east coast of Australia to move gas seamlessly between different markets and states, enabling them to manage their energy portfolios with a high degree of flexibility. This year, we added some 500 kilometres to the East Coast Grid as well as a gateway to the LNG export market at Gladstone through the acquisition of the WGP.
The acquisition of the WGP is the largest pipeline transaction in Australia. But more impressive than the size of the transaction is the strategic value it adds to our East Coast Grid, adding a delivery point at Gladstone, extending our strong customer base with the addition of two international customers in BG Group and China National Offshore Oil Corporation and enhancing APA's ability to capture further opportunities for the growing LNG export market as it connects with the other two LNG transmission pipelines due to come online in FY2016. These connections, together with other potential connections that we may develop in the future, provide us with opportunities for additional enhancements of the Wallumbilla Gladstone Pipeline, be they for the foundation shippers or new shippers.
The WGP transports gas to BG's Queensland Curtis LNG export facility on Curtis Island, just off Gladstone, from the Surat Basin, and is fully contracted in the form of long term take-or-pay gas transportation agreements. After the first twenty years, the shippers have two optionsto extend the contracts by a further ten years. So APA has 20 years of guaranteed revenues and potentially up to forty, with the extensions clearly designed for the shippers to take advantage of the technical life of the pipeline. We will earn a return on capital spent to ensure the pipeline operates for that additional 20 years.
This acquisition is consistent with the strategy that has created value for our investors and underpinned our growth for years. That is, it leverages our core skills in gas infrastructure assets to deliver appropriate commercial returns. The existing contracts provide that return, and the potential enhancements that come from our ownership and integration with our existing platform give further commercial opportunities.
Following commissioning of the pipeline in 2014, QGC Pty Limited, an Australian subsidiary of BG Group will continue to operate the WGP for the next 12 or so months after which APA has the option to take over the operatorship (from June 2016). As we're first and foremost a pipeline operator, we're likely to do so when that time arrives and we are comfortable that all the usual issues around commissioning have been settled.
"We are very pleased that APA Group, as one of the most experienced owners and operators of pipeline infrastructure in Australia, has purchased the QCLNG Pipeline.
The newly-named Wallumbilla Gladstone Pipeline is a critical piece of infrastructure connecting our upstream CSG wells to our LNG plant on Curtis Island. APA Group has been an important partner as we have started up and commissioned the world's first integrated, large - scale CSG - to - LNG project – partnering with us on key commercial arrangements; being a pragmatic and highly responsive counterparty; and a first-rate operator of an extensive pipeline network.
APA Group has demonstrated that it is deeply invested in supporting the success of the QCLNG Project - this was evident even before we completed the pipeline sale and we look forward to deepening our relationship with APA Group even further over the next 20 years and beyond."
The network of our pipelines is not just getting bigger in length and reach, but we are also expanding the capacity of our pipelines - where that capacity is required. During the year, our Infrastructure Development team completed an expansion of the connection between Victoria and New South Wales (the Victoria-New South Wales Interconnect, "VNI") that has increased the asset's capacity by 145 per cent to nearly 120 terajoules per day. This involved looping around 60 per cent of the pipeline as well as increasing capacity at Culcairn in southern New South Wales.
APA has recently signed a fourth contract that will support 30 terajoules per day of further capacity expansion. On completion of this project, the capacity of the VNI will have trebled in three years, by responding to our customers' needs to transport more gas from southern gas resource basins into northern markets with the benefit of APA's flexible and seamless services. Also in Victoria, new compression facilities were completed at Winchelsea on APA's South West Pipeline which connects to the Victorian Transmission System.
Major capital works were also undertaken and completed at both Moomba in South Australia and Wallumbilla in Queensland with the commissioning of three Solar Mars compressors at each location to enhance the overall capacity of the South West Queensland Pipeline in the LNG ramp up. In Western Australia on the Goldfields Gas Pipeline, additional compression capacity was also increased. All of these expansion projects were underwritten by long term agreements with our customers.
BENEFIT TO LOCAL COMMUNITIES
As APA grows, we're able to bring an economic boost to the local communities where our expansion projects are taking place. We understand that we are long term members of the communities in which our assets and operations exist and therefore where possible, we utilise the services and skills of those regional communities. It is very pleasing to get feedback such as was reported in the Euroa Gazette 17 December 2014 during the VNI expansion project works:
Gas pipe workers bring economic boost – Euroa benefiting economically from gas pipe construction.
Shoppers in Euroa will have noticed a sea of flouro yellow work shirts when they've gone to buy their bread or café lattes. The town is in the grip of a mini economic boom thanks to the influx of hundreds of workers who are stationed at the gas pipe site outside Euroa. Almost 300 people are working on a project to construct a gas pipeline which will run 119 kilometres from Mangalore to Glenrowan.
Euroa Hot Bread owner David Mawson said many local businesses had extended their trading hours to accommodate the workers. "It's brought a lot of money into the town, whether it's the take-away shops or the petrol stations because they’re buying all their fuel locally."
WEST COAST GRID
A grid is roughly defined as a network of horizontal and perpendicular lines and the Goldfields Gas Pipeline in Western Australia with all its expansions over the years inresponse to mining customer requirements has certainly seen it emerge as a key asset of APA's West Coast Grid. Together with APA's other assets and investments notably the Pilbara Pipeline System, Telfer and Nifty Pipelines, the Parmelia Gas Pipeline, Mid-West Pipeline and the Mondarra Gas Storage Facility, Western Australia is becoming an interconnected gas market.
The latest adjunct to the Goldfields Gas Pipeline is the 293 kilometre Eastern Goldfields Pipeline, APA's latest greenfield project. In mid-2014, we were able to announce construction of the new pipeline on the back of two gas transportation agreements signed with AngloGold Ashanti, who took a long term view about energy supply and appreciated the reliability and cost stability that gas offered.
Once completed, APA will deliver gas from north-west of Western Australia to mines in the eastern Goldfields region via three of its interconnected pipelines spanning 1,500 kilometres - the Goldfields Gas Pipeline, the Murrin Murrin Lateral and the Eastern Goldfields Pipeline. Construction is expected to involve laying approximately 16,500 18-metre lengths of carbon steel pipe. The construction is well under way with completion prior to January 2016.
LINKING NORTH TO EAST
Listening to customers and observing gas market needs, APA commenced a feasibility study into a pipeline connection between our Amadeus Gas Pipeline in he Northern Territory and the East Coast Grid in early 2014 ("NT Link"). The study has been ongoing during this financial year.
APA has been short listed as one of four bidders to the Northern Territory Government's process, the North East Gas Interconnect ("NEGI"), which was launched in late 2014 with final bids due in September 2015. Our feasibility work has gone into formulating our bid for this process.
The genesis of the NT Link concept was to address the supply dynamics in the eastern Australia gas market, given the development of the LNG projects around Gladstone. By connecting the Northern Territory with the east coast, those markets will effectively have additional gas basins to source their gas from and, conversely, the gas fields will have new markets they can access. This is another example of APA connecting more resources with more markets.
IN THE PIPELINE
2016 - BEYOND
We only look forward at APA as to what opportunities for growth lay ahead, never resting on our laurels of what we've achieved. However, we also believe it's healthy to acknowledge our significant growth and success since listing 15 years ago. That's why our celebratory timeline starts at financial year 2015 - like you, we're keen to see what's next in 2016 and beyond, but we're proud of our achievements over the last 15 years.
MARKET CAP $9.2B
SECURITY PRICE $8.24
Wallumbilla Gladstone Pipeline acquisition, underpinned by
20 year take-or-pay gas transportation agreements. APA's largest acquisition
Diamantina and Leichhardt Power
Stations officially opened, underpinned
long term electricity supply contracts until 2030.
SECURITY PRICE $5.73
2013 - 2011
Maximising the value of APA's portfolio through consolidation and expansion - we're more than the sum of our parts.
Completed acquisition of Hastings Diversified Utilities Fund. Creation of APA's East Coast Grid through the addition of the South West Queensland Pipeline. Emergence of the West Coast Grid with acquisition of Pilbara Pipeline System.
Commenced expansion of APA's compression capacity at the Wallumbilla Gas Hub.
Capacity expansion of the Goldfields Gas Pipeline.
Emu Downs wind farm acquisition in the Perth area energy precinct, underpinned by 20 year electricity supply contracts.
Acquisition of the Amadeus Gas Pipeline in the Northern Territory.
Fivefold capacity expansion of Mondarra Gas Storage Facility in the Perth area energy precinct.
Capacity expansion of the Roma Brisbane Pipeline.
SECURITY PRICE $3.45
2010 - 2009
APA obtained investment grade credit ratings from Standard & Poor's (June 2009) and Moody's (April 2010).
2010 - 2008
Enhanced APA's asset footprint by means of capacity expansion, pipeline development and acquisitions.
Acquired the Berwyndale to Wallumbilla Pipeline.
Established Energy Infrastructure Investments (EII) for APA annuity style assets.
Completed construction of the Bonaparte Gas Pipeline.
Acquired the Central Ranges Pipeline.
2007 - 2006
Start of ongoing acquisition and development of complementary assets for the APA portfolio.
APA fully internalised asset management and operational services.
APA acquired Origin Energy Network (Jun/Jul 2007) assets including interests in SEA Gas Pipeline and the Envestra gas distribution network along with the long term operations and management contract for Envestra assets.
APA completed construction and commissioning of Daandine (Jan 2007) and X41 (Nov 2007) Power Stations.
APA completed construction and commissioning of Kogan North (Mar 2006) and Tipton West (Mar 2007) gas processing facilities.
APA acquired the Murraylink (Mar 2006) and Directlink (May 2007) electricity interconnectors.
Acquisition of the Victorian Transmission System (formerly GasNet).
Acquisition of Allgas gas distribution network in Queensland.
2005 - 2001
Period of acquisition of minority interests in major APA pipelines consolidating our ownership positions across Australia.
Acquired the remaining 30% interest in the Carpentaria Gas Pipeline.
SECURITY PRICE $3.45
Goldfields Gas Pipeline interest increased to 88.2%.
Acquired Mondarra Gas Storage Facility, along with the Parmelia Gas Pipeline.
Acquired the remaining 15% interest in the Roma Brisbane Pipeline.
SECURITY PRICE $2.10
13 JUN 2000
APA was listed on the Australian Stock Exchange. Foundation contract was on the only 100% owned Moomba Sydney Pipeline.