APA Corporation Price & Performance (APA)

And We're Making Good Progress With Our Projects In The Pilbara. We remain highly confident about the growth opportunities in this region. We also successfully navigated our way through the regulatory assessment of the Southwest Queensland pipeline. The favorable outcome has facilitated our confidence to make further incremental investments in the East Coast gas grid which we've announced today. Slide nine highlights the strength of our balance sheet. We have ample capacity to fund our existing $1,800,000,000 growth pipeline. FFO to net debt is 10.7%, comfortably above our target. At thirty one December, this translates into approximately $1,600,000,000 of funding capacity already available. When we add the capacity generated through our ongoing growth in operating The targeted cost reduction initiatives will provide additional funding headroom On top of that, Moving to Slide 10, This slide addresses the priorities our investors have been sharing with us. I won't go through each line, but I'll give you the key points. First is about having confidence in the long term future of gas. The answer is future Australian guest demand is robust. Up to and beyond 02/1950. And this is strengthened by the role gas power generation is expected to play to maintain security of supply.

Generation demand is being fueled by the growing introduction of renewables, by the growth in electrification and by the significant expected demand from new industries such as AI, and data centers. [indiscernible] These are not only our forecasts. This is what the ACCC APA, AIMO and other Australian experts are saying, and it should give you confidence that the earnings from our existing assets are sustainable beyond the 2050s. Second is the desire for sustainable growth. There's momentum in our growth strategy. We remain confident that delivering our organic growth pipeline will enable us to further grow our earnings and deliver accretive growth over the long term. And third is about funding the growth pipeline. As I said earlier, we can fund our organic growth and at the same time deliver sustainable ongoing distribution growth. Again, our $1,800,000,000 pipeline is already fully funded. The ongoing strength of our earnings and cash flow will provide additional ongoing funding capacity. And we have a number of funding sources available to us as we deliver projects beyond the $1,800,000,000 Having the foundations in place, we're now firmly focused on a range of initiatives that will create additional value for security holders. And these are outlined on Slide 11.

We're in advanced discussions with customers for a range of projects including our East Coast Gas Grid expansion, the ongoing development of the Beetaloo, developments in the Pilbara and Manresa, contracted gas power generation assets, and electricity transmission projects. They are all on strategy and demonstrate the momentum within the group is strong. Our strategy is compelling. And our focus on markets where we have a competitive advantage allows us to be disciplined. And target projects where we can generate returns above our hurdle rates. In addition to growth, we're focused on what we can control. Such as our cost base. We're confident we can deliver meaningful reductions in our cost base, across operations, our corporate functions foundational CapEx and our stay in business CapEx. Our discipline extends to our funding arrangements, We've already demonstrated our preparedness to work in partnerships including with EDF who are not only one of the most technically strong energy companies in the world, but they have a significant Finally, we continually review our portfolio to identify opportunities for asset recycling. This can provide an opportunity to recycle capital and deliver shareholder benefit where certain assets may be better off in the hands of others or in a partnership arrangement with APA. [indiscernible] In short, we're confident these initiatives will deliver value accretion and support our focus on delivering sustainable ongoing distribution growth. [indiscernible] With that, Garik will now take you through our financial performance and get deeper into the balance sheet.

Thanks, Adam, and good morning, everyone. I'd like to make three key points today on our half year results.

First, the business has delivered strong earnings growth in the first half.

With underlying EBITDA up 9.1% to just over $1,000,000,000 This is the first time that APA has delivered earnings of over $1,000,000,000 for a half year. Second, our balance sheet remains strong. And we are well positioned to fund growth along with growing distributions to security holders. [indiscernible] And finally, our inflation linked cash flows Strong customer demand, and disciplined focus on reducing costs means we are well positioned to create value with the organic growth opportunities in front of us. The underlying activity we are seeing across the business relation to customer discussions provides us with confidence around the outlook for the group. Moving to our headline financials on Slide 13. Underlying EBITDA is up 9.1%, reflecting inflation linked tariff escalation, strong customer contracting, a full six months earnings contribution from the Pilbara assets, and cost efficiencies across the business. Pleasingly, underlying EBITDA margin increased to 74.5%, supported by the stronger operating result and corporate cost growth below inflation. Free cash flow was up by approximately 4% to $552,000,000 This reflects higher underlying earnings partially offset by increased funding costs and unfavorable working capital movements in the half. Moving to Slide 14. I'll step through the drivers of our 9.1% uplift in underlying EBITDA compared with the corresponding period.

Inflation linked tariff escalation contributed approximately $31,000,000 of additional earnings. Recontracting has again been strong, further contributing to earnings growth. Digging a little deeper, On the East Coast, there was increased demand from customers for seasonal capacity Inflation linked tariff escalations and favorable customer recontracting. Additionally, we received $13,000,000 in insurance proceeds relating to the Moomba Sydney ethane pipeline. Compensating for lost revenue from Quinos' plant shutdown in February 2023. In FY 2027, following the asset conversion, we expect to recommence revenue from this asset. As such, we see the insurance proceeds delivering a largely normalized contribution for the asset. On the West Coast, higher ownership of the Goldfields Gas Pipeline and increased customer demand for storage at Mondara contributed to higher earnings. [indiscernible] Pilbara Energy assets drove strong growth in contracted power generation earnings. We have integrated these assets well and they are delivering in line with expectation. This was partially offset by lower availability in the North West Power system in Queensland which had benefited from high availability in prior periods. Finally, corporate costs increased by 2.5% Pleasingly, we continue to see moderation in our corporate cost growth. [indiscernible] With growth below inflation for the period and below the guidance provided at the F 'twenty four results.

And as Adam mentioned, we have progressed work to optimize APA's cost base with targeted reduction initiatives. Slide 15 summarizes the half on half movement in free cash flow which was up almost 4% to $552,000,000 The benefit from the uplift in underlying EBITDA was partially offset [indiscernible] some temporary working capital movements and increased interest paid. Looking forward to the full year result, free cash flow will incorporate a full year of the impact of increased debt funding costs and recommencement of cash tax payments which will offset underlying EBITDA growth. Slide 16 takes a look at statutory NPAT. Net profit after tax of $34,000,000 is lower than corresponding period as a result of one, higher depreciation and amortization due to the inclusion of the Pilbara Energy assets and two, increased net interest. [indiscernible] Net interest expense includes an $83,000,000 noncash recognition of FX losses. Reflecting the impact of the discontinuation of the WG hedge accounting relationship. This is described further in the supplementary financials in the presentation. We also saw higher interest costs through a $35,000,000 increase in the quantum and average cost of debt and a $30,000,000 increase due to the full six month contribution of interest on the hybrid securities.

Moving to Slide 17. I want to take the opportunity to remind you of AP capital allocation framework. This continues to be a key consideration for our decision making as we assess our growth opportunities. Framework is designed to ensure we allocate our free cash flow to those initiatives that can create the most value for our security holders. To that point, I'll outline our approach to funding growth on Slide 18. [indiscernible] Apart from the DRP, APA does not need to issue ordinary equity to fund the identified organic growth pipeline of $1,800,000,000 over FY 2025 to FY 2027. [indiscernible] $1,800,000,000 plus includes in flight and probable growth projects across contracted power generation, and gas transmission and storage. As discussed in the FY 2024 results investor presentation. Our balance sheet is strong [indiscernible] FFO to net debt at 10.7%, well above our target. This metric supports debt funding capacity at the half year of around $1,600,000,000 combined with active capital management, and the predictable capacity based inflation linked revenues we've highlighted today leaves us well positioned to deliver on our organic growth opportunities. By focusing on an efficient cost base and increasing free cash flow, our balance sheet capacity increases.

The inflation linkage on our tariffs participation in the DRP and the dividend payout ratio provide up to $700,000,000 of capital expenditure funding per annum. Which is above our estimated growth CapEx of circa $600,000,000 per annum. This is before taking into account any incremental funding benefits, cost optimizations and potential proceeds from asset recycling. The point is that we are very confident in relation to the funding flexibility we have in meeting the attractive growth opportunities available to us. This provides a good introduction to our CapEx on Slide 19. During the first half, we invested in growth capital expenditure through the completion of construction of both the Curricurri lateral pipeline and the Port Headland solar and battery projects. These projects are expected to deliver earnings at the back end of the second half. We also invested in early works for the East Coast Grid expansion, including the MSEP natural gas conversion and MSP summer capacity expansion. Foundational CapEx was lower than forecast, and focused on the grid solutions project emissions reduction programs and ongoing physical security of assets.

Stay in business capital was higher in the first half, due to timing of expenditures we are maintaining guidance at around $200,000,000 for the full year. Turning now to our capital management and debt metrics on Slide 20. We remain well positioned with a healthy spread of debt maturities and a significant amount of liquidity to support investment in growth. In the first half, we undertook a number of capital management initiatives, which have further strengthened our balance sheet position. These included our very successful return to The U. S. One which where we raised US1.25 billion dollars with ten and twenty year maturities. This enabled us to proactively repay early the outstanding US dollar note in September. We now have no existing drawn debt maturities until March 2027. As noted earlier, funds from operations net debt at December was 10.7% above our target of 9.5%. This metric remains consistent with our BBB flat Baa2 credit ratings is in line with the rating agency expectations. As we've said previously, we remain committed to our current investment grade credit ratings. On Slide 21, want to wrap up by reiterating three key points. First, the business has delivered strong earnings growth in the first half, with underlying EBITDA up 9.1% to just over $1,000,000,000 Second, our balance sheet is strong and well positioned to fund growth, along with growing distributions to security holders.

And finally, our inflation linked cash flows strong customer demand and focus on reducing costs means we are well positioned to create value with the growth opportunities in front of us.

And with that, I'll hand back to Adam.

Thanks, Garik. Taking you now to Slide 23. Remain confident about our strategy. It remains unchanged. Our priority market segments contain billions of dollars of opportunity for APA. And this allows APA to be selective in choosing the markets where we'll participate, focusing on markets where we have clear competitive advantages, and choosing projects that deliver the greatest value for security holders. Moving to Slide 24. Before we discuss our growth opportunities, we want to provide evidence of the strength of our existing business. I want to emphasize again that all of the most credible forecasters are in agreement that demand for gas is strong over the long term up to and beyond 02/1950, This slide provides AEMO's view of the stable long term demand [indiscernible] on the East Coast. And the significant investment required in gas power generation. This is what's driving the need to increase capacity on our East Coast APA grid and for new gas storage projects. The demand is being driven by two key dynamics. First, there's a need to increase capacity to move gas from the northern basins to the southern markets. And second, gas power generation needs to grow by at least 2.5 times to meet demand.

This GPG will need to be connected to the grid and in most cases command additional pipeline storage solutions. Turning to Slide 25. At APA, as it relates to our business, we're generally agnostic to whether it's domestic gas or imported LNG that supports the demand for gas in Australia. We would be storing and transporting both sources of gas in any event. However, as Australia's largest gas infrastructure company, we believe we need to ensure our market and policy settings translate into gas supply that's low cost low emissions and reliable. For our customers for industry, and for our communities. And that's why we advocate for unlocking the abundant domestic gas that's already available in our country. AMO's view on the price of gas from Northern Basins ranges from roughly $5.5 to $8.2 per gigajoule at the wellhead. By contrast, LNG global spot prices into Asia, range from $17 in an average Northern Hemisphere summer to about $21 in an average Hemisphere winter. And when you take Transport into consideration domestic gas is still considerably cheaper. As you all know, not only is domestic gas cheaper than LNG, but it's also more reliable, and lower emissions. The case for domestic gas is conclusive.

Moving to Slide 26, Our confidence in the demand for domestic gas supports today's announcement of a five year East Coast gas grid expansion plan. The plan will deliver a 25% increase in North to South gas transport [indiscernible] and new Southern Markets gas storage. We've structured the investments to incrementally meet market demand and help avoid annual gas shortfalls. Slide 27 is the detail behind our plan. It's designed to unlock Northern Australian gas to address IEMO's forecast gas supply shortages in the Southern markets, Our plan will support ongoing earnings growth from APA's core gas transmission business. It builds on the $700,000,000 investment APA has already made over the last four years in the East Coast gas grid. Including stages one and two, that have already added 25% more capacity to the grid. The new expansion plan includes an initial investment of 75,000,000 over the next two years. This includes $40,000,000 to immediately deliver two enhancements to the grid that have already reached FID. The remaining €35,000,000 will fund early works on stages three, four and five of the expansion plan. This includes both pipeline infrastructure expansions as well as storage projects. Reaching FID on stages three, four and five will require early customer support.

And the required regulatory approvals all of which will be progressed as we undertake our early works. Now this is a significant project for Australia's East Coast gas market, and we look forward to bringing it to life. In parallel to our East Coast expansion plans, we're also progressing opportunities in the Beetaloo, as outlined on Slide 28. It's becoming clearer that the Beetaloo Basin is likely to have the lowest cost lowest emissions gas to support Australia's domestic gas requirements. The first stage of our investment in the Beetaloo is already underway. And we'll connect the basin with the Northern Territory. This is a critical development for energy security in the NT, which approximately 80% of power generation comes from natural gas. But beyond the NT, is a significantly bigger opportunity. To supply Australia's East Coast gas market and the Beetaloo Basin looks set to achieve this. Slide 29 presents a summary where APA is focusing its growth This includes the gas transmission and storage opportunities we just stepped through as well as in contracted power generation and electricity transmission. We strongly believe in the attractive organic growth opportunities available to us. Which will deliver value accretion for APA security holders.

Our strategy is about partnering with our customers Pleasingly, well advanced in our discussions with customers across each of the four markets.

We're confident we can deliver high returns from these projects given our competitive advantages and the market requirements. And when coupled with a strong base business, that has strong demand fundamentals up to and beyond 02/1950, we're confident that these projects will support sustainable distribution growth over the long term. As well as deliver value accretion. Moving to Slide 31, I'll leave you with a reminder of the strong fundamentals of our business. We have long life assets with gas forecast to be required for decades to come. More than 90% of our revenues are inflation linked. We have high EBITDA margins with a focus on further improving margins through enterprise wide cost reduction initiatives. We have a $1,800,000,000 organic growth pipeline with ample funding capacity from our existing balance sheet and our operating cash flows. Beyond this, we're targeting growth opportunities that deliver strong returns and we will be disciplined. We have an attractive distribution yield of 8.5%, and we're focused on sustainable distribution growth for security holders over the long term. Thanks again for your time today. We'll now move to Q and A. First question today comes from Tom Allen at UBS APA.

Please go ahead.

Good morning, Adam, Garrick and the broader team.

Thanks for the update this morning. Lots of focus there on growth. Just in December 24, APA won the exclusive development ride to build two new corridors under the WA Pilbara Energy Transition Plan. So now there's a commitment to WA to build this infrastructure. Can you please confirm whether you currently have the capacity to fund that new electricity transmission network and associated works on balance sheet? And provide just a broad indication of the CapEx required And the second part for that is, are we right to assume that the returns targeted under your bid to the WA government for that work Similar to the real post tax returns under the regulated Tilbury transmission line that APA APA owns with Horizon. In the Pilbara currently?

Thanks Tom. Look firstly, you'll know that the $1,800,000,000 of organic growth that takes us out to 2027 which is fully funded, doesn't include the East Pilbara network. So the East Pilbara network, which as you rightly said, is two transmission corridors, one quite small. The other one quite large. But it is very early days there. There is a lot of work to be done to develop that, where obviously going to be working not only with the WA government, but also with our customers Our First Nation peoples in the region and the communities more broadly to bring this to life. But this is not something that we need any material level of funding for today. And I just keep coming back to our focus in the near term is on the $1,800,000,000 pipeline, which we're very confident about and which is fully funded. I could talk a lot about it Tom, but that's really the summary for And just the second part, Adam, about the framework to think of returns. I think when that deal was announced that the team had guided that at least a 2% spread over the cost of capital for that type of infrastructure.

But I thought can we guide perhaps the similar returns the real post tax returns under the regulated Bilbara network that Horizon and APA currently own?

Yes. What I can be really clear about and we've had it on numerous slides recently is what our hurdle rates are for the various assets in terms of a range. You'll recall those graphs, we haven't been specific about the exact numbers, but you can clearly see if you run your ruler across the slide, the sort of range that we're looking for. And quite obviously, Tom, we're not going to be chasing projects that we don't believe can deliver significant returns for our investors. So we won't even pick up the pen if we don't think that we're confident that we can deliver returns within our hurdle ranges.

Thanks, Adam. And then on your funding sources, I see you called out a continuation of the the DRP with a little discount and then also asset recycle initiatives. So the big Wallenbilly Gladstone pipeline obviously generates some of the strongest returns in the portfolio makes up about 35% of group EBITDA. So for that reason, it's perhaps the easiest asset to sell down. But I suspect that some might see that as selling the crown jewels just to provide near term funding support. So the question is, is that an asset you're considering selling down? And perhaps can you comment on the framework that you're using more broadly assess those asset recycling options?

Yes. Thanks, Tom. So a couple of things here. So firstly, is no need to sell any assets as we sit here today. So it's not like we're racing around trying to find homes for any of our existing assets. This is just about being disciplined and making sure that we're constantly looking at our portfolio and ensuring that we do the work to assess whether or not assets are better held by us or whether they're better held by others or a real option is also partnering with assets and APA APA had a track record of doing that in the past where it sold down stakes in existing assets. If we think that can generate more value in a different structure.

So having been through a couple of years of building the foundations of our business, things like our ERP and our investment in climate our investment in capability and security, we're now at that point where we can have a really good look at portfolio maximization. We're not going to obviously call out any particular asset, but suffice to say that what we will always do is do the numbers to work out whether or not we can create more value for those outside of our ownership. Obviously, you then look at the strategic value as well. So we wouldn't be selling an asset or divesting of an asset that provides us with a platform to continue to grow. So we need to look at all of that. And the key message here is that we're doing that and we'll announce things if and when they transpire. [indiscernible] Thank you. The next question is from Alastair Rankin from RBC Capital Markets.

Please go ahead. Good morning, Adam APA.

Derek and Tim, and congrats on the strong results. I might actually just start out on the corporate cost out initiatives. Pleased to see that you're targeting that. At the moment, Could you just run through exactly what you're targeting with those core cost outs going forward?

Yes. Thanks for the question, Alistair. Look, we've been obviously under that It goes back to the comment I just made before about having built the foundation. So having the business in a really good shape. And look, by the way, there will be continuing foundational investment in things such as our Grid Solutions business. So So it never stops. But really, we're really so but really we are now focused on making sure that we can optimize our cost base. As I said in my script, it's OpEx as in operational OpEx, it's corporate costs, it's stay in business, it's foundational. So it is enterprise wide, it is comprehensive. I think we'll probably be targeting three broad areas. So one is supply chain, a lot of external spend that we can go after there. Secondly, is just the efficiency post the investment in our systems and processes. Again, as an example, we've got contingent labor in our organization, and we need to look at how we best maximize the way that we deliver the outcomes post those investments. And the third one is around our operating model and being really internally organized around our customer base and ensuring that we're streamlined, that there's no duplication of effort.

So it is meaningful. We're not putting a out there. Yet, we'll work our way through that But again, we're confident that we can deliver meaningful returns. And you'll see in one of our slides there, but you can see the benefit not only from margin enhancement and driving a better outcome for our customers, But it also provides really tangible financial benefits, including providing us with additional headroom, which I think at times gets a little bit lost With the noise.

Excellent. Thanks, operative answer there. And might just shift over to the Pilbara as well. So just how does new port headwind assets performing? I know that only just been completed if you've got any update there? And then also second part of that question is just around you're thinking about growth asset, the overall growth asset pipeline now that those two assets are completed?

Yes. Thanks, Alastair. So the Port Hedland Solar and Battery Farm complete construction just pre Christmas and now we're working through the approval processes really it's to do with connections There's a group in WA called ISACO that is responsible to work with us to ensure that it's appropriately connected to the customer's operation and that just takes a bit of time. So the key message with that is that we're confident that the construction delivery has gone very well, and we'll be connecting that up through the appropriate channels over the coming weeks and months. So What we've advised is we're expecting that to come online [indiscernible] towards the back end of FY 2025.

And then same with Caricari, it's a very similar situation there. In terms of the Pilbara more broadly, in terms of again, really confident about the opportunities set there. We're working on a number of projects and they're projects that we outlined at the time that we acquired the business. So no surprises there. They're obviously customer led, so we're working with our customer and customers, I should say, to work through those processes. The demand and the need for these assets is real. The real strategy to recall on the business there is that we have acquired assets and we own assets that have really compelling sites that the customers land. So it's on our on our tenure. We're working our way through and for almost every aspect got the traditional owner support. And importantly, The sites are very close to the customer. So we think we APA best positioned to deliver the lowest cost outcome for our customers there. So we'll continue to work with the customer on that. We're confident and we'll bring them to life when we complete the negotiations with our customers.

Excellent. You very much. [indiscernible] Thank you. Your next question comes from Anthony Mulder at Jefferies.

Please go ahead. [indiscernible] I guess we were up there in May, it's eighteen months since you bought it. Is it surprising to you that you haven't had more developments being approved or going forward eighteen months since that acquisition?

Yes, Anthony, it's a good observation. And one of the things we've reflected on is maybe we should have been clearer at the time of the acquisition around the timing expectations to bring these projects to life. It was and it's not anyone else's miss, it's our miss that I think the market have sort of assumed that you announce these projects within the twelve months post acquisition. And again, we remind people, we've been really deliberate about our strategy and one of the things we have not wanted to do is to develop projects on the grid where we take risk and that build it and hope they come type strategy. We've worked on on a strategy which is very much customer led You develop the the projects in partnership with your customers. You try and bring the best solution for them and then you bring it to life when we're both ready. So ultimately, Anthony, we've got to work with our customers, You're not alone. We'd all like everything to move as quickly as possible, but the reality is that's not life, in particular working with your customers. [indiscernible] the point though, Anthony, is that we remain really confident I don't want to put a timeframe around it, but we're confident we can bring projects to life reasonably soon and equally in other regional parts of Australia, we think the strategy is sound.

If I can sort of agree. We don't like things earlier than I guess what people have delivered. I guess the second part to that is how important is the need for or the need of a steel grid transmission corridors to support that growth, to deliver that growth? And related was your interest in Zenithin Energy. Are we thinking of should we think about Pilgrim as needing all of these other components to deliver the growth that we previously thought as announced back in August? 2023? Anthony, the EPN wasn't It's obviously on the radar when we acquired the business, but we didn't incorporate any of that into our valuations or anything. It was that's really upside for us. And again, what we acquired was a number of projects, a number of sites, developments that had been at various stages of progression, including an existing business that generates a lot of cash and really good returns, mind you. And again, we are really confident about that pipeline of growth. We think that they're I'm not going to repeat. They're in the right sites. They're off our customers' tenure and we think they're really compelling. The point about the APN, which is for everyone's benefit, the East Pilbara Network, Which Is A Proposed Transmission Line For Us To Develop Effectively Connecting The Port It's Called Pit To Port Port Headland all the way down [indiscernible] in and around Newman is to be able to provide shared infrastructure for the various mining customers in the region.

And what that enables us to do is very importantly not only connect the along the transmission line, but very importantly, be able to enable the connection to the power generation sites There will be situations where you get much better load factors from, for example, wind farms if they're away from the coast, if they're more inland. And what this would enable is a build out across the region of more renewable power generation assets to be able to connect into that electricity line. So we think it's really exciting. But as I said on that earlier question, it's still early days and we'll continue to work through that. The zenith question is quite simple. It's a good business. We obviously know it well.

And it's very similar strategy to to our Alinta acquisition in the it's supporting largely off grid mining customers in and around Australia. So no issue with the strategy or the business per se. The key message to everyone on the call and we've been really clear about this is that we don't need to buy growth. We've got a really attractive organic growth pipeline already. And we've got significant growth opportunities beyond that $1.1800000000.0 dollars that we're very, very confident about. So don't need to buy growth. And obviously, when you look at something like Zenith, if it's complementary that ticks one box, but you then have to go to whether or not you can create value. And whether you can create value at the time. And quite frankly, current share price levels, it just didn't make sense for us. So we retracted from that very early. And and we'll continue to focus on the organic growth pipeline.

Very good. Thank you. And just quickly from Garrington also on Pilgrim 'twenty four EBITDA flat on first half 'twenty five? Was there anything specific in second half 24% earnings that made that higher, that made the growth sequentially flat.

No, I think good observation, Anthony. The run rate in second half of 'twenty four is consistent with the run rate we've seen out of the Pilbara earnings in first half twenty twenty five. Pilbara continues to deliver [indiscernible] the business case and our budget. So we're really pleased around the integration and performance of those assets and obviously look forward to the Port Head Headland solar and battery coming online late in second half to deliver more earnings from that portfolio.

Great. Thank you. Thank you. Your next question comes from Ian Miles Macquarie, Please go ahead.

Good morning, guys.

East Coast grid.

You've made comments that you've sort of sold a lot of your wick capacity into FY twenty FY27. Curious to understand, have you ever get a superior premium in the past given the shortages in the market? You've been able to capture some of that value.

Sorry, Ian. I got a bit confused by a question. Can you just repeat that again? [indiscernible] for winter. I was wondering whether you've been able to extract a premium out of that capacity the recontracting from what you've done in the past couple of years?

Look, when we've been working with our customers and again, recontracting has been strong. For the last three years. So this is not new and it's against gives us confidence about the long term role of our assets and long term confidence around things such as the East Coast Grid. And obviously, as we expand that out, particularly with the bigger projects like the Baloo pipeline and the Riverina storage facility, then that's got to be customer led. We've got to work with our customers to get confident to bring those to market. One of the things that we work really hard on and all credit to our team who works with our customers on this is making sure that we can work with them forecasting at their requirements over the next couple of years. But as you know, it's principally around the peak period, which is the area of concern generally for the market. And what we try and do is it's like any if [indiscernible] you're at capacity and then you're going to have periods where you've got shoulders where you don't. Have that capacity. So one of the things that we do with our customers is try to not only sell the book for those peak periods, but try and sell more of those shoulder periods and get more return out of that.

Now obviously the customer demand is there. Which is positive as well. So it works well for us and it works well for the customers. So I'd say Ian, it's less about [indiscernible] pricing or anything like that. We're obviously incredibly transparent around our pricing and it's all up on bulletin boards. It's more around how do we work with our customers to get longer term commitments in and around those shoulder periods as well as the peak.

So can I interpret that as you've actually sold more capacity in the normal winter periods, in the shorter periods as as this contract is increased?

Put it another way, Ian, the winter, which might have been three months in the past, might be four months or five months now. [indiscernible] Yes. That makes sense.

Okay.

Then it sort of extends into the announcements you've made and you talked about customer led What sort of contract life do you need And I appreciate you coming precise with a vague sort of amount. Need to see to progress these these initiatives to actually construction.

Yes, it's a really good question, Ian.

And we need to work through that with our customers now. And we've we've had good early engagement with our customers on the concepts. And one of the important things of bringing this to life publicly now is that [indiscernible] [indiscernible] more capacity to be able to work through the detail now with the customers as well as ensuring that we don't have any unnecessary regulatory hurdles or policy hurdles that get in the way. The customers, you know this, Ian, the customers have really transitioned generally, if I can generalize, over the last decade from ten, twenty years ago where it was a world of ten, fifteen year long term contracts to one where and it's really just LG GTA's are matching the GSAs, which have become a lot shorter just because of the way the gas the gas supply has become a lot more fluid. It is why we get quite confident about developments in the Surat and the Beta Lou because that will bring a lot more stability to the broader East Coast gas market knowing that there's significant volume low cost, low emissions gas flowing from Northern markets to Southern markets. And then ultimately, to answer your question, we just got to work through that with our customers over the next period.

Some customers will be out there looking for really long term contracts so that they can sure up there. Their own operations and others will be looking for shorter term contracts but understand that we're going to need a level of commitment from them to be able to make the investment. So long way of saying that there's a fair bit to go, but you've asked the right question and it's and it's what we will focus heavily on as well over the coming months. As well.

Okay. Maybe I just to take a different perspective. When do you need to [indiscernible] Commitments from customers to get these stage probably Stage three actually progressed.

So you can meet what, the twenty seven winter or twenty eight winter Yes. Look, and again, it's always a bit fluid. It's we're trying to, in one breath, be precise about a particular winter. But ultimately what we want to do is just keep incrementally building out capacity. It's about you've been around the industry long enough to weigh in that you always have the view that there's no gas supply and then all of a sudden, all there's supply this year. So it's not about trying to be perfect, but to answer your question, we want to try to hit FID with Baloo and Riverina in FY 2026.

To be able to support the winter capacity, really focusing on that sort of 2829 period. You know that we've done it before. We can build these things in stages as well. So you don't have to build all the compression and everything at the same time. You can build it out over time. Riverina would be likely to be a two stage project. But yes, it's it's just something we need to work through with our customers. And ultimately, they they want the going to want the supply there as well. They're not going to want to have to And then they understand the process that it takes time to build build these things. We do have good corridors available. We've been already working closely with the communities on this. On these projects. So we're feeling pretty good that we can deliver it We just need to work with the customer.

Okay. And one final question. I think you may have mentioned of gas plants. And like years ago, you used to have a Dandellong gas plant proposition, but sort of disappeared. Wondering, is that coming back or are there other sites that you're trying to develop for gas plants?

You mean gas fired power generation, Ian? Yes, gas fired power. Yes, absolutely. Look, that's our bread and butter, right? So we So we have a number of gas fired power generators around the country and obviously with the significant growth required about gas fired power generation to support the introduction of renewal renewables with coal coming out. The increasing demand from AI, data centers, all of that that is all well understood. There's a really strong demand for GPG Griffiths just came out with a really good report. I'd encourage you to have a read of that that hasn't a demand for gas fired power generation on the East Coast even higher than what EIMO's coming out with. But regardless of which one might be right, the reality is there's significant demand. For us, that presents two opportunities and it's also on the West Coast as well. That presents two opportunities. One is to build the GPG ourselves and again that's our bread and butter long term contracts with customers. So it's early days there, but we're obviously exploring that. And the second one is that what we've worked out we've seen it with CurryCurry and we've seen it with Brigalo in Queensland is that they need storage.

You can't fire up a gas fired power generator and just expect that the the gas is miraculously there in the existing pipeline. You need to have storage facilities to be able to to start the generators up and keep them running for the period of time that you need it. So we see that as an opportunity as well. And I guess that Ian just gives us confidence around growth beyond 2027, beyond the 1,800,000,000.0 yen and we can be disciplined and focused on business and create value.

Okay.

Look, I'm sorry, I asked too many questions. So I'm a little while ago. Thank you. Your next question comes from Rob Cowen, Morgan Stanley.

Please go ahead. Thank you. Good morning, everybody. Just following on the East Coast grid expansion plans. I maybe ask a couple of questions about some of the milestones there?

Are there any major planning approvals for Stage three, four and five that we should be thinking about. And then also, you've given us some indicative pipeline lengths and storage capacity there, which helps us kind of size that CapEx. You give us an indicative diameter of those new pipes? Just if possible? I was waiting for somebody to ask the question. And And I'll throw out a number for everyone that you'll anchor to, but I'll obviously heavily caveat that But look, just going to your first question. So yes, there will be planning approvals required. A lot of community engagement. Traditional engagement. So this is our bread and butter Rob, as you know. So we're working through that as we speak. We've got a lot of land already. We've got the corridors already And it works for us as well as the communities to use corridors that deliver deliver these outcomes most sensitively. So that's a massive focus for us, Rob, and we're well underway. We wouldn't have announced these if we didn't have confidence work our way through this already. I'm going to look at a piece of paper because I know you're going to quote me on these numbers. [indiscernible] again with the highly caveated number, but look, Belu, based on the size and length and the initial expected diameter of the pipeline, that is likely to be around an $800,000,000 mark.

I could put a big range around that, but it's just too early days. So that blue pipeline, which is effectively Stage three, could be in the order of $800,000,000 If you then go to the river in a storage bottle, you'd build that over a couple stages and that could be each stage around $450,000,000 So that's the Stage four. And then Stage five is just compression and so forth. You know that they're smaller kind of numbers. So yes, that gives you a rough range, Rob. But again, early days and a lot of work to be done [indiscernible] Okay. Thank you. You gave me more info than I was even asking for. Appreciate it.

Well, I know that I'd spend the next two weeks getting the same questions. I might as well give you a rough number now.

All right. No worries. Much appreciated. Okay. I guess my next question just More of a modeling question than anything else. Within your foundation CapEx, and I think you've basically reiterated your guidance there for foundation CapEx for this year. But you did have one particular emissions reduction activity, which probably wasn't looking as economic as everyone would have liked. You give us any update on that or yes, that one's out?

Yes, Robert, you're obviously talking about some of the electrification options that we're looking at on some of our gas facilities. So just for everyone's benefit, obviously, we've got an emissions reduction target with our gas transmission business. And we're looking at a range of options there. We've already done a lot of work around direct abatement. Valves and seals and those sorts of things. We think that there's more opportunity there and I think that's quite likely to be the most viable outcome for us to take direct emissions out. The other things that we've looked at is what can we do with some of our APA have and this is a challenge for companies like ours all around the world is that Our compressors run on gas for a reason and it's because they're out in the middle of nowhere and you don't have electricity. So it becomes a real economic challenge to make the electrification of some of our existing compressors viable. So Rob, we're just working through that literally as we speak and provide greater clarity to that in our climate report as part of our full year results.

Yes. Okay. Sounds good. Maybe one last question, going back to the Pilbara, where you've kind of highlighted your power as aspirations there are still underway. Could you comment and you called out working with traditional owners there, which has always been an important part of your I think you used the word bread and butter quite a lot. So I'd include that there. Can you talk about is there any opportunity with your new power developments in the Filra for co investment with First Nations groups?

Rob, we've been meeting and spending a lot of time as you can imagine with the traditional owners and ultimately we're looking at all sorts of partnerships with the traditional owners to to work with them and to be sensitive of their concerns. And remembering [indiscernible] the development of renewable power generation in remote regions such as the Pilbara, this is new. I think again a lot of people forget that the business has been going that we acquired for about eight to ten years. It hasn't actually been going for decades. So it is something that we need to be very sensitive to. And Rob, short answer to your question is we're looking at all sorts of opportunities in that regard to work with our First Nations people. So Yes, lots of options to consider there.

Okay.

Sounds good. All the best for the Thank you Thank you. Your next question comes from Dale Condors from Barren Jory.

Please go ahead.

Morning. I was just hoping that maybe you could high level pull the story together on the growth CapEx outlook. Is it right to assume that sort of the next three years, your $1,800,000,000 include some of the early East Coast pipeline augmentation and some minor sort of Pilbara growth projects And then after that point in time, it sounds like there's another $1,800,000,000 just on sort of CapEx in the pipeline network, And then how does that then overlay with I guess, Pilbara transmission lines and timing there and possible spend And then where is the trigger that you start to pull on third party capital that's required to come into that mix? I might just start with the longer term and I'll hand it over to Garik and Coe through the 1.8.

But just as we and you can imagine that we got models that map all this out as you do as well. And we go into an incredible amount of detail to understand its impacts on funding, on credit metrics, on distributions and trying to get that whole balance right. And it's I want to be really clear, we know we can get it right. So it requires You know, being disciplined, it means that you've got to generate strong returns on those projects. Which is why we're very focused on the markets that we are focused on.

We're not chasing growth for growth. We've got a very significant pipeline of opportunities. I want to be transparent with you on what they are and I believe we are.

And hence, that we believe the returns will be good. And as you get out to some of these bigger projects, absolutely, we will look at partnering. We have done it in the past and we'll do it again. We're partnering with EDF, as you know, on the electricity transmission projects. We've partnered in the past with other organizations like Marumbeni on different assets. And as we go into some of these bigger opportunities, obviously, when we speak to our investors, it's a great thing because we can deploy capital and generate strong returns. But we'll fund them in a way that is appropriate at the time to deliver the best return. And partnerships is one. Asset recycling is not something that we'll just do to react. But if we if we do see opportunities to recycle capital and then be able to deploy that, then that's something that we'll look at. So again, The message is that we absolutely understand that people will be making sure that we deliver those investments and fundamental why that can get the balance right between distributions and growth and we're acutely aware of that. And the key message is we've got many, many options at our disposal.

But, Garrett, do you want to go through the 1.8?

Yes. Thanks, Dale, for the question.

I think the way we frame the $1,800,000,000 in the past has been $1,800,000,000 plus of organic growth opportunities. And we look at it FY 2025 to FY 2027, what is in flight, what have we announced and committed to, but also what are the probable growth projects available to us. I would also say that if we spend the $1,800,000,000 over the next two point five years, then we will still have sufficient we still have a lot of headroom in that balance sheet over £500,000,000 on current estimates. And probably a third comment to make around the 1.8% is we've obviously already gone through £340,000,000 of that growth as you see on Page 19 of the pack and have a very healthy credit metric to support that or FFO to debt. In terms of the specific projects, in flight relate to the Port Hedland solar and battery project. Curi Curi lateral pipeline and a lot of the spend in the first half of twenty twenty five relates to to those projects. Other committed projects include the STIR plateau [indiscernible] and also the East Coast Grid early works that Adams talked to in some detail through the course of that.

When it comes to the probable projects, it likely focus and this reflects what we set out in the full year 2024 results presentation as well The focus on probable projects will come predominantly around remote generation across Pilbara, Mount Isa, and the Goldfields region.

Thanks for that extra color, particularly on the spare balance sheet capacity you see at the end. [indiscernible] maybe a final comment on what's your sort of idea outlook beyond FY 'twenty seven? Do you think growth CapEx continues at this level, accelerates and And is that the logical point where you could maybe accelerate your dividend growth?

Yes. Again, great question, Dale. And as we've said previously, a lot of our organic growth pipeline is going to be customer driven. When we acquired the assets in the Pilbara Back in August 2023, we talked about a $3,000,000,000 pipeline of growth opportunities there alone. And we continue to see those opportunities. We've talked about the East Coast grid expansion opportunity. So when we look forward and obviously this will be driven by customer timing, we see step ups in our earnings through the commitments we make in growth CapEx over the next two point five years and we will start to see those earnings come online. That will provide greater balance sheet capacity going forward as we've touched on in the presentation today. So I think from a business perspective, we certainly hope to see consistent growth organic growth capital aligned with what we've talked about in FY 2025 to 2027 and hopefully well beyond that as well.

Okay.

Thank you.

Thank you.

Your next question comes from Nathan Lidd at Morgan's.

Please go ahead. Good morning, Chans. Just my first question. I mean, share price has obviously been trending downwards. So my question, I suppose, is you think you can get better returns from investing in new projects than actually buying back your own stock?

Thanks, Nathan. Look, the key for us is that we know that we can generate strong returns. And again, we're very confident about the returns that we can generate over longer term. And it goes back to our strategy. It goes back to focusing on markets.

There are there's $100,000,000,000 worth of opportunity. We're not trying to chase $100,000,000,000 worth of projects. We're trying to niche markets where we've got strong, compelling competitive advantages where we can partner with customers and deliver long term growth. So for us, short answer is, yes, we're very confident about our ability to be able to deliver strong returns going forward.

I suppose those returns are sort of predicated against cost of capital. Cost of capital has gone up with lower share price. Okay. Look, second question, Baselink. So not much comment there in the presentation, but can you talk about what the potential range of earnings is on Baselink, if it does end up being operating on an unregulated basis? And I also noticed you spent some growth CapEx on the assets. So just wondering what that's for?

Yes, Nathan. I'll just take the first one and I'll let Garik talk about the growth CapEx. But looking in really simple terms and it's quite public, right? You can see read the submissions, but we've made a submission to the regulator to to put Baselink into a regulated arrangement. That's a commitment that we made with the Tasmanian government at the time that we acquired the business. And quite frankly, it makes a lot of sense for the consumer to have that asset as a regulated asset base. We I don't think people understand, but we already trade the business. So we already have the technical systems, mechanical trading of that asset in place. It's just that we've got it under a long term contract. [indiscernible] and we basically submit the bids in at a $0 So but we have the capacity to trade. We have people in the organization who have the capacity to trade. And if we are unable to get that as a regulated asset, then we've got the opportunity to trade that that business. Now I don't want anyone to get spooked by that. That doesn't mean that we're going to introduce earnings volatility into our business.

We're not going to be running a hedge book We're not going to be like an energy retailer. We can basically manage the downside and and then you get the earnings to the upside. And the best answer I can give you in terms of where that could land Nathan is that there's a report that was actually ironically commissioned by the by the regulator as part of their review group called Acelalan APA determined that over the life of the the asset that under a traded arrangement or a non regulated arrangement the cost to the consumer would be an extra $1,600,000,000 to $1,800,000,000 I think you can work out that means that we are not concerned about our ability to be able to generate returns from that asset. But again, we strongly believe that it's appropriate to regulate that asset and we'll continue to move down that path. And just to wrap it up, we have options around trading We may not be the one who actually physically undertakes the trading. We might enter into a long term contract or a short term contract. With a third party who can do that. And then we would take basically a stable return.

So there's a couple of options at our disposal there.

Did you answer? And just have the FX?

Yes. Nathan, I suppose high level The capital expenditure was planned expenditure that related to reliability of the asset including systems. I can get back to you with specifics around that, but that effectively is is expenditure we expected and see that under a regulated regime is rolling into the asset base as a non regulated asset, then clearly we'd look to get appropriate returns on that. [indiscernible] Yes.

Sorry, just a final one from me. Obviously, you've got a fair commitment of capital investment.

In the Manhiser region.

Just wondering what your thoughts are on the Queensland government proceeding with Copper String. Obviously, it's due for delivery later this decade, but just your thoughts in terms of what that could do to the value proposition in Meniza?

Well, what I'm reading at the moment is that a project that was Initially going to cost less than $2,000,000,000 is close to $10,000,000,000 potentially taking a transmission line to a region that already has sufficient renewable power generation on-site. So If I was the government, I would be struggling to understand how the economics could I don't think any consumer would want to pay for that. So So there may be a section where it goes to Townsville where it could make sense, but going from Townsville to Manhiser doesn't make a lot of sense. For us to come to pass, we'd be then selling energy anyway into that electricity transmission line to send it back to the East Coast Of Queensland. But yes, I think that's one of the More strange projects out there at the moment given the economics are just so horrendous.

Okay. Thank you. [indiscernible] comes from Gordon Ramsay at RBC Capital Markets.

Please go ahead.

Thank you very much.

Opportunity. [indiscernible] First of all, I wanted to congratulate you on the five year East Coast gas grid expansion plan. [indiscernible] gas is going to play an important role going forward in terms of the transition energy transition. I'm thinking a little bit longer term and obviously when the Wallumbiller Glasson pipeline there's some uncertainty about that asset in terms of its contract the [indiscernible] contract expires. I want to see if you can comment on how that might fit in with work that you're doing on the Beetaloo and obviously your commitment to the first stage of that project and if you see that potential opportunity to be a little something that could make a big difference long term and offset maybe what might happen at Willamble APA?

Yes. Thanks, Gordon. Look, the Beetaloo I think everyone's becoming more and more confident about the viability of that project. Well results are incredibly strong. It's a low cost opportunity, I think you've already seen the numbers and the around $5.6 $5.7 per gigajoule in terms of pricing. So even as you add the transportation costs, it becomes a very low cost product, incredibly low emissions as well. I don't think people appreciate how low the emissions are there. So it seems to be ticking every box. It's a very significant basin in terms of size. Obviously, first focus has been to deliver gas to the Northern Territory and I'm sure you're aware, but not only does the territory have a very deep dependency on gas, about 80% of its electricity comes from gas, but it's also had some supply issues with some existing wells up in and around the region. So this is a fantastic development for the territory and we've been working very closely with the government to bring that to life. Beyond that, there's clearly and given just the size of the of the basin, there is significant opportunity to obviously address [indiscernible] demand. And we think Beetaloo pipeline then connecting into the Southwest Queensland pipeline, the Baloo that we've announced today and various other developments, you can see how Beta Lou will provide a lot of security of supply to the East Coast gas market, which is terrific.

You know, you would all be able to work out very easily that there's going to be likely more gas available beyond domestic gas supply and that will be an interesting one and there's really two pathways that are being spoken about at the moment. One is an LNG export facility out of Darwin and then the other one which is clearly as equally obvious is that you would use the existing Gladstone LNG export facilities that are there and the timing of that is quite neat in terms of [indiscernible] Beta Lou would bring gas to market and when the timing of LNG exports starts to moderate. So the existing exports moderate. So yes, it's a an interesting one. That we are obviously all over Gordon and we will be with you monitoring it very closely moving forward. Thanks, Adam. Okay. I think that's let you go, but I was just going to say before I hand it over to you, but just to thank you to everyone for taking the time today and for all of your questions.