It has become even more important for APA's national footprint of assets to be able to respond to customers' needs to deliver energy safely, and in a timely and cost-effective manner.

Innovative solutions like APA's multi asset and services contracts that are replacing basic point-to-point gas transportation contracts, IT systems and facilities such as our Integrated Operations Centre, coupled with in-house expertise has meant that APA has been able to support our customers through these dynamic times, whilst insulating our business from this uncertainty.

APA has maintained its low risk business model, generating stable and predictable returns for our Securityholders. Our assets are geographically diverse and can operate as interconnected infrastructure or point-to-point assets, with all major pipelines now having the ability to flow gas in dual directions. We have a mix of energy infrastructure assets and businesses including gas pipeline transportation, gas storage, gas-fired power production, electricity transmission, network operations and renewable electricity generation. The majority of the contracts that we have across these assets are long term take-or-pay contracts with investment grade counterparties in a range of diversified sectors including energy, utilities and resources sectors.

Building on sound foundations The FY2016 results reflect the benefits of our investments and innovation from prior years. The Wallumbilla Gladstone Pipeline's first full year contribution has had a significant impact on our results as expected. There have also been strong and growing contributions from various investments and expansions from prior years, including the South West Queensland Pipeline and the Victoria Northern Interconnect.

During the year, a total of $673.6 million was spent on capital and investment expenditure. In Western Australia, we completed construction of the 293 kilometre Eastern Goldfields Pipeline and added another connection to it at Granny Smith in addition to AngloGold Ashanti's mines at Tropicana and Sunrise Dam. An enhancement project at the Mondarra Gas Storage Facility was completed, increasing injection/withdrawal capacity of the facility to better respond to gas market volatility. Projects to implement two-way flow on the Moomba Sydney Pipeline and Roma Brisbane Pipeline were also completed and the market benefited significantly from this added flexibility on the East Coast Grid during the year. In the south, capacity expansion works continued on the Victorian Northern Interconnect which when complete, will expand the interconnect to 200 TJ/day allowing more gas to flow north from southern supply sources.

We are always on the lookout for complementary midstream assets where we can leverage our skills and existing assets. During FY2016, APA acquired two such energy infrastructure assets that we had previously held an investment stake in - the Diamantina and Leichhardt Power Stations in Queensland and the Ethane Pipeline Income Fund that owns the Moomba to Sydney Ethane Pipeline. Both acquisitions were a perfect fit with APA's growth strategy: the assets were well known to APA; they are either connected or close to our existing infrastructure; we have had operational involvement with them for some time; and both have long term contracts with creditworthy customers. Importantly, each investment is operating cash flow per security accretive from the first full year of ownership.

Since closing the financial year, in August 2016, we acquired with our SEA Gas partner REST Industry Super, the onshore pipeline supplying gas from the offshore Otway Basin to the Origin-owned Mortlake Power Station. Again, this is an asset we already know well through our ownership with REST, of the Sea Gas Pipeline.

Invest and innovate for the future

APA has in fact, spent over $12 billion since its listing on acquiring and developing energy infrastructure assets, systems and technology. All of this investment has been undertaken for the purpose of working with our customers and assisting the growth and development of the gas and energy industries, connecting more energy supplies to energy markets and providing innovative services and solutions to encourage more gas to flow throughout Australia.

We are innovators and not simply point-to-point gas pipeline operators. We will, as we have always done, continue to evaluate new opportunities that diversify and extend our growth and footprint, as well as further develop and grow the energy industry. To this end we have been, without waiting for the final AEMC report or the COAG meeting, facilitating pipeline capacity trading enhanced by our new Integrated Operations Centre, during FY2016. At Wallumbilla and Moomba, we have commenced developing and providing hub services.

Strategically, we have been a growth oriented business since listing in 2000 and we believe in value creation which benefits not only our stakeholders, but the Australian economy as well.

The global economic consulting firm, The Brattle Group, recently estimated the direct quantifiable efficiency benefits to the market associated with formation of APA's East Coast Grid since 2012 to be $120 to $150 million to-date, and $15 to $32 million annually going forward. That is a significant contribution for a private company to be making to industry as a whole and I am very proud of this.

We believe that natural gas provides an energy solution that will enable the world to transition to a more carbon-efficient environment, whilst maintaining economic growth. Therefore, a strong and responsive infrastructure sector is essential in allowing gas to fuel our energy future whilst investigating and pursuing renewable opportunities such as wind and solar generation.

Health, Safety and Environment

This year, we are releasing our Sustainability Report at the same time as our annual results. Without wanting to repeat everything in that report, I do want to reiterate here that APA continues to be focused on delivering sustainability objectives and we remain mindful of the role we play within the community and the responsibility we have to all of our stakeholders - our customers, the environment, the community, our employees and investors. FY2016 is the first full year of using APA's new incident reporting platform which has provided improved access, analysis and rigour around the reporting of incidents and injuries across the organisation and its contractors.

Safety is a priority at APA because providing safe and reliable energy delivers value for our customers and investors. Most importantly, it also ensures we fulfil our obligations to our employees and the communities and environment within which we operate, in terms of health, safety and environmental outcomes.

Please refer to the Sustainability Report for my message and further details.

Brand refresh

You will have noticed that we have refreshed our brand and corporate logo during the year. Brands can help define a company's culture and to this end, we have come up with something new, but something that still represents what APA and its people want to deliver.

Importantly, whilst our brand and logo have changed, our core values have remained the same. The red dot represents our continued enthusiasm for, and focus on, delivering for our stakeholders, be they sustainable returns for our investors or reliable energy supply for our customers.

Looking ahead

APA will continue to invest and innovate. As an industry leader, APA will remain an active player in helping shape the best environment for the Australian gas market, continuing to promote what we believe is best for our industry.

It is in the interests of the pipeline sector to have as much gas flowing through pipelines as possible - indeed that has always been APA's mantra - more gas means more pipelines and midstream infrastructure and service solutions that we can offer our customers. The Australian, and indeed global, energy landscape will continue to evolve throughout the new financial year and I am confident that APA is in good shape to manage the dynamic environment ahead and that our best days continue to be in front of us.

We will maintain our focus on growing the APA business through organic expansion of our current portfolio of assets to meet our customers' specific needs and by looking to acquire assets that meet our strategic objectives. And, most importantly, we will continue to focus on growing the business to deliver more value to our Securityholders over the long term.

I would like to thank APA's 1,600 strong team of highly capable and dedicated employees for their enthusiasm and commitment to building our resilient and growing business

Mick McCormack Chief Executive Officer and Managing Director

  • Source: The Brattle Group Report "Benefits and Costs of Integration in Transmission/Transportation Networks" August 2016.