APA Group

Thank you for standing by, and welcome to the APA Group 2026 Half Year Results. All participants are in a listening mode. There will be a presentation, followed by a question and answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Adam Watson, Managing Director and CEO. Please go ahead.

Thank you and good morning everyone. Thank you for joining us for today's first half FY26 results presentation. I'm joined by Garrick Rollison, our CFO, as well as our investor relations team. Let me start by acknowledging the Gadigal people of the Eora Nation, traditional custodians of the land on which I'm speaking. First Nations people have taken care of our land and waterways for the past 60,000 years. We acknowledge and pay our respects to their elders past and present. As always, I'll start today's presentation with a safety share on slide four. To prepare for extreme weather conditions, we conduct a summer readiness program including activities such as site clearing and weed prevention. I'm pleased to say that we haven't had any weather related customer impacts so far this summer. I'd like to thank the APA operations team for the fantastic work they do to keep our people and our assets safe and to keep our customers' operations going 24-7. Suffice to say we are very pleased with today's results. I'll highlight three key takeaways to slide five. First, we've delivered a strong financial result. we're continuing to deliver against our commitments. Underlying EBITDA is up 7.6% and our EBITDA margins have expanded by 280 basis points. Much of this has been driven by our cost reduction initiatives, which included a 13.6% reduction in corporate costs. Looking forward, we expect to see our FY26 EBITDA above our guided midpoint. Second, we have a compelling growth outlook. The ongoing role of gas in the energy transition is now well understood and this has been reinforced by outcomes at the Federal Government's recent gas market review and the move to establish a domestic gas reservation. These thematics together with strong customer demand give us confidence to move ahead with the next phase of our east coast gas grid expansion plan. We've completed the first stage of our Betaloo development. We've announced an agreement with CS Energy to deliver the Brigolo peaking power plant and our organic growth pipeline has increased from $2.1 billion to $3 billion, reflecting the strong growth we see in our target markets. The third highlight is that we have ample capacity available to fund our growth. The S&P threshold modification announced in December 2025 has provided an additional $1 billion of capacity to fund new growth. This threshold modification reflects our discipline's focus on our core growth markets of gas transmission and storage and contracted power generation. By focusing on our core markets and applying our competitive advantages, we have delivered returns well above our cost of capital, creating value for our security holders. Slide 6 sets out our financial highlights. The strength of our business is demonstrated by our 7.6% growth in underlying EBITDA for the half. and we have the confidence to say we can expect to exceed the midpoint of guidance for the full year. It's worth noting that the midpoint of guidance would represent growth of more than 7% on FY25, which would be another very strong result. Our EBITDA margins are now at 77.3%. The great progress we've made with our cost reductions coupled with strong contributions from our recently commissioned assets and our inflation-linked revenues, puts the business in a strong position. Free cash flow is higher in line with expectations, noting we had a one-off working capital timing impact relating to the divestment of our networks business. Our distribution of 27.5 cents per security is up 1.9%, and our distribution guidance for FY26 is reaffirmed at 58 cents per security, which will be our 23rd consecutive year of distribution growth. Let's move to slide 8 to cover our strategy. The key point to note is that our strategy remains unchanged. we remain extremely confident in our ability to create long-term value. And while it's easy to think about our business in terms of markets, our strategy is about creating value by developing energy infrastructure assets with inflation-linked revenues under long-term contracts with Tier 1 counterparties. Underpinning this is our focus on core assets and projects that deliver returns well above our cost of capital. We remain focused on growth markets where APA has a clear competitive advantage. Examples of what we're focused on are set out on the slide. APA has businesses. The first has been the foundation of our growth for the past 25 years. and that's our gas transmission and storage business. The growth here is centred on our east coast gas grid expansion, supporting new basin developments such as the Beetaloo and Taroom trough and building laterals to support growing customer demand for GPG on Australia's east and west coasts. Our other focus is on contracted power generation. This includes growth coming from new gas powered generation projects across the country. AMO forecast the need for 13 gigawatts of new GPG investment in the NEM alone. More recent analysis from Griffith University suggests up to around 20 gigawatts may be required and this is all largely before factoring in the likely growth in energy demand to support new data centre developments. Demand for a remote contracted power generation presents similar growth opportunities. Slide 10 demonstrates the strong long-term demand for gas in Australia and the significant domestic supply available to service it. and this supports the investment case for expanding our east coast gas grid. The chart on the right shows the significant volumes of domestic gas reserves and resources available to meet domestic demand. These reserves will also continue to supply Australia's critically important LNG export market. Over 68,000 petajoules of 2P reserves and 2C resources are available in eastern Australia to serve an east coast domestic market that consumes around 500 petajoules of natural gas each year. Domestic gas supply is simply not a constraint. And taking steps to unlock this supply, including expansion of our east coast gas grid, and the proposed domestic reservation for the east coast is in Australia's national interest. Moving to slide 11. Given our announcement today of our east coast gas grid expansion plans, I want to ensure we address the debate regarding LNG import terminals relative to the transportation of domestic gas. As was said at APA we're somewhat agnostic as to whether we transport domestic gas or imported LNG. Most of these molecules will end up flowing through our network in any event. What we advocate for however is the delivery of the lowest cost, lowest emissions and most reliable energy source to service gas demand and that without question comes from domestic gas supply. Now some of the arguments used to advocate for LNG import terminals don't withstand close to scrutiny and the main argument is that imported LNG can be cost competitive. The truth is multiple data points confirm that in the short and long terms, LNG imports will continue to present a higher cost option than pipeline infrastructure expansion and domestic gas. Asian LNG spot prices have rarely been lower than domestic wholesale gas prices and modelling from Rystad forecast long-term pricing somewhere between 8 and 12 US dollars per gigajoule to spot LNG arriving into Asia. This is before you factor in transport and re-gasification costs and foreign exchange which take the forecast delivered cost into Australia to be an average of over 20 Australian dollars per gigajoule. Australian manufacturers and consumers generally cannot afford such high prices. Another argument for import terminals is that domestic supply to meet southern market demand is entirely dependent on the Beteloo. While opening the Beteloo will no doubt benefit Australia's gas market, domestic gas demand on our east coast can be met from multiple existing basins. including the Surratt and Bowen basins in Queensland. Quite simply, domestic gas is the clear solution for the Australian market. Slide 12 provides detail about Stage 3 of our East Coast Gas Grid Expansion Plan, which would increase the capacity of the East Coast network by around 30%. Final investment decision has been reached on stage 3A with an investment of $260 million to deliver three new compressors. This will increase north to south capacity by 11% including a 20% increase in capacity for northern gas into Victoria and it will be ready by winter 2028. We're also investing $220 million in stage 3B. to enable continued early works and procurement of long lead items for the Baloo interlink, including the purchase of 342 kilometres of 28-inch line pipe. It's worth acknowledging that the favourable regulatory outcomes for the Baloo development, along with the Federal Government's support to implement a domestic gas reservation on the east coast, builds confidence to make these investments. strong interest from customers is also driving our progress on the balloon. The demand for stage 3 is clear and domestic gas supply is not a constraint. This expansion plan is a timely and cost competitive solution to our predicted southern market supply shortfalls. APA's expansion plan would deliver the capacity that ensures certainty of supply into Victoria and the east coast more broadly. Gas supply, whether it be molecules or transport, is no longer a constraint and it's now up to our federal government to bring this to life. Moving to slide 13. We're also continuing to support new basin developments in Australia including the beta loop, which is showing particularly strong near-term momentum. We've completed construction of the Sturt-Tato pipeline with gas to flow to Darwin from mid-2026. We're now working on plans to expand the SPP with additional compression that would increase capacity to around 100 terajoules a day. We announced that the Northern Territory Government granted APA a pipeline permit to survey a potential route for the north to east Australian pipeline. The NEAP, as we call it, has the potential to connect to APA's east coast gas grid, utilising our existing Carpentaria corridor. We're also planning work for a new pipeline to go north to Darwin. with one option being to utilise the same existing corridor as our Amadeus pipeline. The key point is that we're well prepared to support our Beteloo customers with either a northern or eastern transport route as developments in the basin continue to progress. Moving to slide 14. We were pleased to announce late last year that we're partnering with CS Energy in Queensland to develop the 400 megawatt Brigolo peaking power plant. The project expands APA's footprint in GPG and deepens our partnership with CS Energy. The peaker will connect into APA's Roma Brisbane pipeline via a new transport and storage lateral which is currently being developed separately by APA. There's a strong list of opportunities for similar GPG developments that we're currently investigating across the country. Moving to slide 15. Our Pilbara business continues to perform strongly and in line with our acquisition business case. It's worth noting that the vast majority of the value ascribed to the Pilbara acquisition was allocated to existing assets, not to growth. These assets are generating a lot of cash, about $140 million of EBITDA last year, representing a yield of around 10%, which is obviously very strong. And while demand for new power generation developments by our customers in the Pilbara is a little slower than anticipated, the development pipeline is now larger, supported by new opportunities such as the Borup transmission lines. We remain confident about the opportunities ahead in the Pilbara and other remote regions such as Kalgoorlie and Mount Isa. With that, I'll now hand to Garrick for a deeper dive into our financial performance. Thanks, Adam, and good morning, everyone. I'll start with our headline financials on slide 17. In the first half, we've delivered strong growth in underlying EBITDA, up 7.6% for the half year as the benefits of inflation-linked tariffs, earnings from new assets and cost reductions were realised. Pleasingly, underlying EBITDA margin increased to 77.3%. Free cash flow was up slightly as the benefits of higher earnings were offset by increased funding costs and cash tax payments, as well as movements in working capital and SID capex. I'll add more to say on this on a subsequent slide. Moving to slide 18, where I'll step through the drivers of our 7.6% uplift in underlying EBITDA. 1H26 represents a strong, clean result, and I'll call out some of the key period-on-period movements. We delivered new earnings from the Currie-Currie Lateral and Atlas-Seredi-Currie Pipelines, as well as the Port Hedland solar and battery, alongside inflation-linked tariff escalations and savings from cost reduction initiatives. Offset in this was the non-recurring $13 million in insurance proceeds relating to the Moomba-Sydney ethane pipeline that was received and disclosed in the corresponding period. Corporate costs of $70 million decreased by 13.6% in the half compared with 1H25. We are making strong progress with our enterprise-wide cost reduction initiatives and I'll touch on this further later in the presentation. Slide 19 summarises the drivers of free cash flow, which was up slightly half on half to $556 million. Consistent with our previous statements, The uplift in underlying EBITDA was partially offset by higher interest and cash tax paid. Higher interest costs reflects increases in net debt fund growth and a marginally higher average cost of debt. Higher cash tax reflects the continuation of tax instalment payments, which recommenced in the second half of last year. The change in working capital in the first half is primarily related to one-off timing impacts arising from the divested networks business.

This will unwind upon the conclusion of this service under the TSA, which is expected in the first half of FY27.