APA to benefit over the long-term from bundled energy solutions for transition to net zero

About APA Group

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.

Net zero requires bundled energy solutions

Australia’s decarbonisation strategy to deliver net zero requires the prolonged dependency on existing energy infrastructure assets and an accelerated build out of new renewable energy infrastructure to facilitate the exit of coal. This overlap provides APA with a significant market opportunity to provide bundled energy solutions for Australia’s energy transition in the decades ahead.

Achieving net zero by 2050 requires significant investment in renewable power sources and gas infrastructure to replace the retirement of coal-based energy solutions. This means that natural gas remains critical in Australia’s future energy mix. The ‘cross-over’ period will require a significant increase in gas generation, 10,000 kilometres of additional transmission infrastructure and significant new battery energy storage capability by 2050. The challenge is that this energy transition is occurring at a time of rising costs, skilled labour shortages, transmission constraints, and requires land approvals, and access to equipment and materials. These circumstances provide potential for significant economic upside for APA. This is because as an established, dependable, large-scale operator, APA is a preferred partner for governments, communities, and major resource companies to deliver on the requirements necessary to accelerate the energy transition and decarbonize Australia’s energy system.

Pilbara Energy $15 billion market opportunity

APA have estimated the acquisition of 100 percent of Alinta Energy Pilbara provides a $15 billion electricity generation infrastructure investment opportunity to decarbonise one of the world’s leading mining geographies, being the renowned Pilbara region. This encompasses an existing pipeline of more than $3 billion of renewables focused growth opportunities that include strategic sites and approvals secured for key growth projects, as well as projects currently under construction.

Alinta Energy Pilbara has long term Power Purchase Agreements with Australia’s most significant resources companies seeking to decarbonise their energy systems using Alinta’s low emissions infrastructure assets. Apart from the economic benefit of these relationships, Alinta Energy Pilbara provides the strategic benefit of the technology, scale, and capability to be the leading provider of bundled energy infrastructure solutions for the remote energy generation regions of Australia. This includes energy infrastructure assets for gas and solar power generation, gas transmission, and battery energy storage systems.

The Alinta Energy Pilbara acquisition is consistent with APA’s strategy to be the partner of choice in delivering infrastructure solutions for the energy transition required by the resources industry. APA considers the resources industry as a key strategic customer group, given the significant forecast demand for low emissions infrastructure as resource companies decarbonise their energy systems.

Looking ahead

On the back of a solid operating and financial performance for the six months to 31 December 2023, including a 26.5 cents per share interim dividend, APA Group has reaffirmed its FY24 dividend guidance at 56 cents per share.

With $20 billion of total assets comprising 15,000 kilometres of transmission pipelines, 29,500 kilometres of gas mains and pipelines, 12,000 tonnes of LNG storage facilities, as well as 290 kilometres of deep-sea cable, and 800 kilometres of high voltage electricity transmission infrastructure, complemented by extensive renewable energy and gas fired power generation assets, APA’s operational footprint leaves the Group ideally positioned to maintain its 19 years of distribution growth.