APA Group To Pay 28c Final Distribution For 6mths Ending June 2022

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APA Group To Pay 28c Final Distribution For 6mths Ending June 2022

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  • Full year distribution 53 cents per security, up 3.9 percent on previous year
  • $1.4B in organic growth infrastructure investment opportunities in FY22-24
  • 25 years of natural gas resources ensures that gas remains critical in future energy mix
  • Australia has the highest solar radiation per square metre of any continent on the planet
  • Energy transmission infrastructure development is essential to a net zero emissions target by 2050.

APA Group (‘APA ‘or the ‘Group‘) is an energy infrastructure business that owns and operates an extensive portfolio of gas, electricity, solar and wind assets, valued at about $21 billion. APA currently delivers approximately 50 percent of Australia’s gas usage. Its infrastructure covers over 15,000 kilometres of pipelines and 27,000 kilometres of gas distribution mains and pipelines, alongside gas storage facilities, gas-fired power stations, and wind and solar farms. APA           connects Victoria with South Australia and NSW with Queensland through the Group’s electricity transmission assets.

The Group comprises two trusts, AP Infrastructure Trust and APA Investment Trust. Units in APA Infrastructure Trust are stapled to units in APA Investment Trust on a one-to-one basis and trade as a single stapled security listed on ASX under the code APA.

28 cents final distribution for 6 months to 30 June 2022

APA has announced a final distribution of 28 cents per stapled security for the 6 months to 30 June 2022. The distribution is payable on 14 September. Details of franking credits and distribution tax deferral status will be released on 24 August, at the same time as the 2022 financial results.

This final distribution takes the full year distribution amount to 53 cents per security. This is a 2 cent, or 3.9 percent increase per security over the previous financial year. The Distribution Reinvestment plan remains suspended.

Looking Ahead

APA Group is well positioned for the future on several fronts, in the current operating environment.

Rising inflation and higher interest rates present little or no immediate problem to APA. Most of APA’s revenue is regulated, however the regulator allows for inflation indexation of regulated revenue. For example, the Wallumbilla Gladstone Pipeline, which generated revenue of $280 million in the 6 months to December 2021, has a 7.5 percent indexation clause under the distribution agreement with customers. Existing debt facilities are at fixed interest rates, with an average maturity out to approximately 7 years. The next major re-financing is not due until FY2025.

APA directors in their half-year report to December 2021 noted that COVID related supply chain interruptions and the tight labour market, have not had a material impact on APA’s operations.

APA has a strong organic growth development pipeline as Australia transitions itself to a low carbon future. APA estimates its organic growth infrastructure investment opportunities in gas, electricity and renewables are in excess of $1.4 billion over the FY22-24 financial reporting period.

Australia is rich in energy sources and APA’s strategy is to capture the vast opportunities to invest in contracted and regulated energy infrastructure across the country. Australia already has more than 25 years of natural gas resources at current production levels. Onshore and off-shore wind resources are substantial while Australia has the highest solar radiation per square metre of any continent on the planet.

APA is central to Australia’s net zero emissions target by 2050 and its dominant incumbent position in energy transmission infrastructure supports strong cashflows and steadily rising distributions well into the future.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at l.mosmann@kosec.com.au.

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