APA Group (APA) Earnings Call Transcript & Summary

Well, good morning, everyone. My name is Michael Fraser, and I'm the Chairman of Australian Pipeline Limited, the responsible entity for APA Group that comprises Australian Pipeline Trust and APT Investment Trust. On behalf of the Board, I'd like to welcome you all to this annual meeting of each of those trusts. Given it's now past 10:30 a.m., and a quorum is present, I declare open the 2021 Annual Meeting of APA Securityholders. In the spirit of reconciliation, I'd like to begin today by acknowledging the traditional custodians of country throughout Australia and their connections to land, sea and community. We pay our respect to their elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander people today. The meeting is being held virtually today due to the COVID-19 pandemic. We have securityholders, directors and executive leadership in a wide variety of locations. So let's hope the technology holds up for all of you, and you find the meeting both informative and engaging. Before we move to the formal aspects of the meeting, I'd like to assure securityholders that every effort has been made to provide you with the opportunity to fully participate in today's meeting by asking questions and voting on items of business. On a procedural note, I now declare voting for all items of business open on the webcast platform and via telephone. The method used to cast your votes today will depend on the technology you are using to participate in this meeting. Please be assured that both forms of technology offer ample opportunity to vote. Voting will remain open for the duration of the meeting and for an additional 5-minute window to facilitate voting by phone. You can vote online by clicking on the getting a vote card box at the bottom of the webcast. If you are participating by telephone, at the conclusion of the meeting, the telephone moderator will read out each resolution and provide instructions on how to vote during the allocated window. Please follow their instructions. [Operator Instructions] Questions can be submitted online at any time, and you don't need to wait for the relevant item of business to ask your question. In fact, we encourage you to start now. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. In addition, if we receive multiple questions on one topic, your questions may be amalgamated. We will endeavor to answer as many of your questions as possible today while trying to ensure that we keep the meeting's duration to a reasonable period of time. Joining me today in Sydney is Amanda Cheney, APA's General Counsel and Company Secretary, and she will read out the questions from securityholders. So that I may answer as many questions as possible in the time available today, I've asked securityholders to please ask no more than 2 questions and to keep your questions as short as possible. If you need assistance, please refer to the detailed instructions in the virtual meeting online guide that is available on the webcast platform and on APA's website. If you experience any difficulties, please call the meeting help line number, which appears at the top of your screen. The meeting help line number is 1 (800)992-312. Securityholders were also able to submit their questions in the lead-up to this meeting. We'll also incorporate those questions and answers into today's meeting as appropriate. A copy of the webcast of today's meeting will be posted on APA's website as soon as possible. So with those housekeeping matters now out of the way, let me make some introductions. Joining me in person today is our Managing Director and CEO, Rob Wheals; Steve Crane, Nonexecutive Director; and our Company Secretary and Group Executive of Governance and External Affairs, Nevenka Codevelle. Joining us online are the following Board members: Debbie Goodin, Chair of the Audit and Risk Management Committee; Shirley In't Veld, Chair of the Health, Safety, Environment and Heritage Committee; Peter Wasow, Chair of the People and Remuneration Committee; James Fazzino; and Rhoda Phillippo. Let me also introduce you to the rest of APA's executive leadership team who are joining us online. I have Ross Gersbach, President, North American Development; Kevin Lester, Group Executive Infrastructure Development; Hannah McCaughey, Group Executive, Transformation and Technology; Julian Peck, Group Executive Strategy and Commercial; Darren Rogers, Group Executive Operations; Jane Thomas, Group Executive, People, Safety and Culture; and Adam Watson, our Chief Financial Officer. We're also joined in person today by Jamie Gatt, who is APA's audit partner at Deloitte Touche Tohmatsu. The Notice of Meeting dated the 17th of September 2021 setting out the business for today's meeting has been sent to all securityholders. The items of business for consideration today are described in the Notice of Meeting, which I will take as read. The slide up on the screen sets out the agenda for today's meeting. Before we move to the business of the meeting, Rob Wheals and I will report on APA's performance for the 2021 financial year and our strategy and outlook for the current year. We'll then move to the items of business set out in the Notice of Meeting. We've also set aside time at the conclusion of the formal business to answer any other general questions you may have. Copies of my address and the Managing Director's address have been released to the ASX and will be posted on APA's website. So now turning to my formal address. When we gathered virtually for our annual meeting last year, I think few of us might have imagined that we'd be forced to do it again in 2021. And in that context, I want to acknowledge upfront the extraordinary efforts of our people in another extraordinary year for our business, our country and the rest of the world. While COVID-19 has continued to challenge us, thanks to the adaptability and resilience of our people and their commitment to delivering for our customers, APA was able to deliver another solid set of financial results in FY 2021. Revenues were marginally higher than the prior year. Underlying EBITDA was relatively stable at $1.633 billion, which was within our guidance range. And our balance sheet remains strong, and full year distributions to securityholders increased by 2% over the prior year. And I would note that this continues our long track record of growth in distributions to securityholders. Our reported net profit after tax was impacted by 2 significant items. Firstly, back in February, we incurred a $249 million impairment charge relating to the Orbost processing plant. That impairment reflected increased capital expenditure and reassessment of the plant's future cash flows following commissioning work during the first half of FY '21. Secondly, in March this year, we completed a liability management exercise, which, while it had a cost of $148 million attached to it, has strengthened our balance sheet, reduced our long-term debt costs and provided significant debt capacity to fund future growth. This year also marks 21 years since APA was formed and listed on the ASX. This is an exciting milestone for our business and has given us cause to both reflect on the drivers of success to date and the opportunities for the future. With that in mind, the Board and the executive team took the opportunity to refresh our strategy. While we maintain our focus on opportunities in natural gas infrastructure and renewable energy, we have also broadened our focus to the significant opportunities in electricity. We also continue to see the North American market as attractive as we explore energy infrastructure opportunities there. We believe our strategy will position APA to play a leading role in the development and deployment of the energy solutions of tomorrow as Australia and the world continues to decarbonize energy supply systems. Reflecting that broadened focus, I can advise securityholders that in early 2022, we will harmonize naming conventions across the APA Group. Australian Pipeline Limited will simply become APA Group Limited, Australian Pipeline Trust will become APA Infrastructure Trust and APT Investment Trust will become APA Investment Trust. The Board believes this is a sensible move that gives the APA name preeminence across our business structure, and it follows our brand refresh earlier this year through which we gave life to the APA acronym with the tagline, Always Powering Ahead. Consistent with our refreshed strategy and our commitment to powering ahead, securityholders would be aware of APA's recent proposal to acquire 100% of the shares in AusNet Services. AusNet is one of the largest electricity network operators in Australia. We think it's a highly attractive business with a largely regulated asset base, providing predictable earnings and cash flows. Our proposed acquisition of AusNet would enable us to leverage and significantly expand our presence in electricity transmission and distribution as well as gas distribution. If we are successful in acquiring AusNet, it would provide APA with exposure to fast-growing electricity infrastructure markets, an attractive organic growth pipeline, an experienced management and operating team and, importantly, additional skills and capabilities that will enable further growth. This would be a transformative acquisition for APA and for the future of energy infrastructure development in Australia. It is a unique opportunity to establish an Australian-owned national energy champion with the strategic intent and financial capability to accelerate the $20 billion growth in electricity transmission infrastructure, which is needed to support the decarbonization of Australia's economy. Importantly, it would deliver value for both groups of investors. We expect it will deliver strong returns over the long term, and we also expect it to be free cash flow accretive in the first financial year post acquisition. The combination of APA and AusNet would achieve revenue growth and cost synergies not currently available to AusNet shareholders. The energy transition is, of course, accelerating both here in Australia and around the world. As we head towards the upcoming COP26 meeting in Glasgow, there is growing momentum for a net zero future, and APA is pleased to be playing its part. Our refreshed strategy is underpinned by our ambition for net zero operations emissions by 2050, which we announced in February. This is an ambitious target, but one that sends a clear message to our investors, the market, our customers and the community about APA's commitment to playing its part towards decarbonization. We already have a climate management framework in place that sets our priority areas of focus for the business, together with our net zero and climate transformation program. We are currently in the process of establishing interim targets for 2030 on our net zero by 2050 journey, and these targets are intended to align with the Paris Agreement. We'll publish those targets and our net zero 2050 plan during 2022, and we intend to continue to consult with our securityholders over the next year on giving them a say as to the appropriateness of our plans and targets. I want to emphasize that your Board remains confident in the role of natural gas and gas infrastructure in the energy transition, supporting the integration of renewable energy into the energy system, empowering hard-to-abate and hard-to-electrify sectors. Existing gas infrastructure may also play a critical role in supporting the delivery of clean molecules to homes and businesses such as biogas and hydrogen, which are likely to be critical additions to our future energy mix. Turning now to the outlook. We'll continue to be disciplined in our proposed acquisition of AusNet and on the execution of our strategy, while our existing portfolio and organic growth pipeline gives us confidence about our capacity for growth. That organic growth pipeline now exceeds $1.3 billion, and we are in delivery mode on critical projects such as the Northern Goldfields Interconnect in Western Australia and the Kurri Kurri pipeline, which will deliver natural gas and have the ability to deliver blended hydrogen to the receipt station at Snowy Hydro's new electricity generator in the Hunter. Our balance sheet is strong, and lower interest costs and additional revenue from our Western Australian and our power assets in the first quarter has delivered a solid start to financial year '22. I'd also note that the recent increase in inflation rates will support future revenue growth as our long-term infrastructure contracts generally contain clauses that prospectively increase revenue based on either on Australian or United States inflation rates. We are determined to keep delivering for our securityholders with distributions expected to increase again in FY '22 to $0.53 per security, up 3.9% on last year. So to conclude, I again want to thank our people for their hard work, adaptability and resilience in another difficult year of COVID-19 restrictions. I particularly want to thank Rob Wheals and his executive team for the leadership they've provided to the business through this challenging time. And I'd also like to thank you, our securityholders, for your ongoing support of APA. I'll now invite our CEO and Managing Director, Rob Wheals, to say a few words. Rob?

Thank you, Michael, and good morning, everyone. I also acknowledge traditional owners, and I pay my respects to their elders, past, present and emerging. I also want to join with Michael in acknowledging the tremendous efforts of our people during 2021. Our people are our most important assets, and in the face of extraordinary challenges, including border closures, movement restrictions and work-from-home orders, they worked incredibly hard to deliver on our purpose, which is to strengthen communities through responsible energy. Their efforts again saw APA deliver a solid set of results, as Michael outlined, and high-reliability operational performance for the year with 99.9% of our customers' gas transmission nominations being delivered. And most importantly, they did so safely with APA reporting a 30% improvement in our total recordable injury frequency rate, or TRIFR, in financial year '21. Safety will always be our #1 priority. With COVID restrictions now starting to ease, I look forward to the opportunity to shortly get out again to sites right around Australia to thank nearly 2,000 people that make up the APA team for their commitment and hard work. As Michael has outlined, we meet at extraordinarily exciting and dynamic time in the history of our business. As the energy transition gathers pace, we are well placed to play a leading role, consistent with our vision to be world-class and leveraging our core skills and capabilities to deliver on our strategy for growth. In fact, in our chosen growth markets of Australia and the U.S. alone, we believe there are more than USD 2.8 trillion of opportunities that APA is well placed to play for across renewables, firming and storage, gas pipeline infrastructure and electrification, not to mention the opportunities for growth that will come from the energy solutions of tomorrow like hydrogen. And I'm pleased to say that we are firmly in execution mode. Our organic growth pipeline now exceeds $1.3 billion. We further expanded our new energy portfolio and capabilities through our Pathfinder Program, and I'll return to that shortly. We've made tangible steps to better support our customers and strengthen our stakeholder engagement. And we have continued to have a laser-like focus on creating value for our securityholders. Our industry-shaping proposal to acquire AusNet shows that strategy in action. It's a proposal that doesn't just come with a higher price than the one on offer by Canadian private equity firm, Brookfield Asset Management. It also brings greater certainty, not least because as an Australian business, APA does not require foreign investment review board approvals. Importantly, it would deliver value for both APA and AusNet investors. And as Michael said, it would see us create a national Australian flagship energy infrastructure business capable of playing a leading role in supporting Australia's energy transition. Both electricity and gas infrastructure will play a foundational role in Australia's pathway to decarbonization. And if we are successful in acquiring AusNet, APA would be uniquely placed to fast track that transition through a combined portfolio of integrated and complementary electricity and gas infrastructure. We would play a leading role in the creation of the vital transmission links that Australia will need to bring new renewable generation into the grid, delivering the critical infrastructure backbone that will support the significant investment in renewables and firming generation as Australia winds down its reliance on coal generation. And as that transition takes place, gas will continue to play a critical role. It already accounts for more than 1/4 of primary energy consumption and 1/5 of electricity generation. And over time, we know a combination of gas and renewables is the most economical and secure pathway to net zero. Indeed, Australia's transition to net zero, while keeping the lights on and energy affordable, means continuing to invest in the gas infrastructure necessary to support the transition. That's because gas is the perfect companion to renewable energy. So if we are successful in our proposal, we'd be well placed to benefit from the $20 billion of electricity infrastructure required in the NEM, lead in the delivery of the $8 billion in market opportunities in gas infrastructure over the next 2 decades while enabling $40 billion of market opportunities in renewables and firming. And perhaps, most importantly, we would keep these critical energy infrastructure assets in Australian hands, ensuring they deliver energy security for Australians and with a platform for Australian investors, from moms and dads through to large Australian superfunds to continue to own a stake. Another plank in our efforts to support the energy transition is our Pathfinder Program. Pathfinder will help us unlock the innovation, technology and new energy opportunities of tomorrow. And we already have a number of investments underway, including our first hydrogen project, which is targeted at enabling the conversion of a section of the Parmelia Gas Pipeline in Western Australia into Australia's first 100% hydrogen-ready transmission pipeline, and it's showing promising results. If successful, it would create a significant opportunity for the development of a hydrogen hub in the Kwinana Industrial Precinct near Perth. We know that our existing gas infrastructure will be vital to connecting Australia to the energy solutions of tomorrow like hydrogen and biogas, and APA's pipelines are adjacent to some of the best geographical areas for hydrogen production in Australia. With billions of dollars already invested in gas infrastructure across the country, it makes sense to look at ways to efficiently use our existing energy infrastructure to support Australia's transition to a low-carbon future. We have also joined a consortium of Australian and Japanese players in an effort to establish Queensland's largest green hydrogen project. This project could potentially underpin the future of hydrogen supply to Japan while, at the same time, create jobs for regional Queenslanders and pave the way for a domestic hydrogen supply chain for local and national customers. We are also strengthening our approach to other environmental, social and governance issues. Our sustainability road map is designed to create a further step change in the way we approach sustainability. And as part of this, we've enhanced our approach to social performance. We're dialing up our local content on projects, taking a more involved and inclusive approach to working with our stakeholders, strengthening our focus on engagement with First Nations communities, and we are investing to build the skills and capabilities of our people to deliver the energy solutions of today and tomorrow. And as the nation emerges from the worst phases of the COVID pandemic, we're taking our responsibilities to protect the health and safety of the communities in which we work seriously. That includes ensuring compliance with government-declared vaccine mandates such as those already announced in Western Australia and Victoria, and by taking a risk-based approach that will see us mandate vaccines for our people where we believe it is necessary to help protect our people and communities. Finally, I want to take the -- this opportunity to particularly thank my executive team for their hard work and support during this extremely busy year at APA. We have, of course, welcomed Adam Watson to APA as our CFO as well as Jane Thomas, who joined in May, as Group Executive for People, Safety and Culture. Shortly, we will farewell Hannah McCaughey. After a very busy time successfully establishing our new Pathfinder Program and leading our IT and cyber transformation programs, Hannah is leaving APA, and we thank her for her contribution and wish her all the very best. We will also soon say farewell to our Group Executive for Governance and External Affairs, Nevenka Codevelle. Now Nevenka began her career with APA about the same time as me, more than 13 years ago, and I have greatly valued our working relationship, her wise counsel and, of course, a friendship throughout our time working together. And I know Nevenka will be familiar to many securityholders in her role as company secretary. And on your behalf and that of the Board, I wish to publicly thank Nevenka and wish her all the very best for her next endeavor. Earlier this week, we welcomed Shirley Chowdhary to APA. After a short handover period with Nevenka, Shirley will capably assume the role of Group Executive for Governance and External Affairs on an interim basis, and I'm delighted to have her join the team. So to conclude, I am extremely excited about the opportunities ahead for APA as we position your business to play a leading role in Australia's energy transition with the strategy, the capability and expertise to deliver. Thank you again to our people, the Board and to you, our securityholders, for your ongoing support of APA. I'll now hand back to the Chairman.

Thanks very much, Rob. Thank you. I'd like to turn now to the formal business of the meeting. There are 4 items of ordinary business today. On the items of business where undirected proxies have been given in favor of the Chairman, it's my intention to vote in favor of all resolutions. An opportunity will be given to securityholders to ask questions specific to each resolution to be put to the meeting before voting on the resolution. As I said earlier, I'd encourage those who wish to ask a question via the webcast platform or the telephone to please do so now so they can be queued into the system to be asked at the appropriate time. I ask you to nominate clearly which resolution your question relates to, if it relates to a specific resolution so that it can be addressed. Alternatively, if the question relates to general business, please indicate this. [Operator Instructions] As we have asked you to participate virtually, all resolutions will be put to a poll. First item of business today is adoption of the remuneration report for the year ended 30th of June 2021. The remuneration report is included in the Directors' Report section of the annual report and details remuneration received by directors and APA's key management personnel for the year ended 30 June 2021. As you are aware, the APA Board has adopted a corporate governance framework, which is designed to be as consistent as far as practicable with the best practice procedures of publicly listed companies. Under that framework, securityholders have the opportunity to vote on the adoption of the remuneration report. Resolution 1 is an ordinary resolution and will be passed if more than 50% of the votes cast by securityholders entitled to vote are in favor of the resolution. While the vote is advisory and doesn't bind the directors or APA, in accordance with our corporate governance framework, if at least 25% of the votes cast are against the adoption of the remuneration report at the annual meeting in 2 consecutive years, then the 2 strikes mechanism will be triggered as per the Corporations Act. [Operator Instructions] Amanda, are there any questions or comments on this item of business?

Thank you, Chairman. We have received questions from 2 securityholders to the effect of, "Why are director fees so large? And why are there so many directors?"

Well, we only -- we have 7 nonexecutive directors. And of course, we've got our Managing Director, Rob Wheals. I have to say 7 is a relatively modest number of directors for a company of our size and complexity. And I think it really is necessary to have that number of directors to get the right skill set that we need around the Board table for the issues that we need to deal with. Again -- sorry, the second part of the question was directors' fees?

The second part of the question was why are there so many directors and why the fee is so large.

Again, with respect to the directors' fees themselves, we do benchmark those, and they are in line with market, if not, slightly below market, was the last data that we saw -- that I saw. And I might add that directors' fees haven't been increased since 1 January 2019. Next question.

Our next question is from Mr. [ Gerald McAdoo ]. "Why should highly paid executives get performance rights for doing the job they are paid to do? Maybe the sack would enhance their performance."

Well, we actually -- typically, we have our securityholders encouraging us to remunerate executives with more equity and less cash. And of course, the whole idea behind that is to get an alignment of interest between management and the interest of our securityholders because, obviously, if the share price goes up, both our securityholders benefit, and our executives benefit. And if it goes the other way, we'll -- both the executives and our securityholders are in the same boat. So it really is all about alignment of interest, and I note people like the proxy advisers, like the Australian Shareholders' Association, have actively encouraged us to put more into equity, into performance rights, and that's, in fact, what we have done over the last couple of years. Are there any other questions?

There are no further questions on the online platform currently for this item of business. I'll now ask the Link operator. Are there any questions from telephone participants today?

I can confirm there are no questions on item 1 of business via the telephone today.

Okay. Thank you. The details of the total valid proxies for this agenda item are displayed on the screen. I'd like to remind you that voting is open. You can use the webcast platform to cast your vote. Alternatively, telephone participants will have the opportunity to cast their vote during a 5-minute window at the end of the meeting. The next 2 items of business up on the screen relate to nominations for the 2 positions on the Board of the responsible entity, Australian Pipeline Limited, that become available on the retirement of myself and Debbie Goodin. For convenience, I'll refer to the responsible entity, Australian Pipeline Limited, as the company. Let me briefly explain the process that leads to the nominations. Under the company's constitution, at each annual meeting of the company, 1/3 of the directors and those who've held office for 3 years since election must retire from office. They are, however, eligible for reelection. On this basis, 2 directors are required to retire by rotation as directors this year, namely myself and Debbie Goodin. However, both myself and Debbie Goodin are eligible for reelection. Also, as required by its constituent documents, the company provided for securityholders to nominate candidates to fill the vacancies on the Board with the opening and closing dates for the nomination of candidates from securityholders included in the company's calendar of events for 2021 lodged with the ASX. Details on how candidates could be validly nominated were made available on APA Group's website during that time. No such nominations were received. The company's constituent documents require that APA securityholders approve the candidates for nomination as a director. Let's now consider their nominations one at a time. The second item of business is approval of the Board-endorsed nomination of myself for reelection as a director of Australian Pipeline Limited. I'll now hand over to Steve Crane, who will Chair the meeting while my nomination for reelection is considered. Steve?

Thanks, Michael. Michael was appointed a Director in September 2015 and Chairman in October 2017. He has been determined by the Board to be an independent director. The Notice of Meeting sets out some of the biographical details about Michael, which I'm sure you have read. I'll now ask Michael to address the meeting. Michael?

Thanks, Steve. As some of you would be aware, I've spent 37 years now heavily involved in the Australian energy industry through a variety of roles, including as a former Managing Director and CEO of AGL, and now, of course, my role as Chairman of APA. Amongst other roles, I've also been a past Chairman of the Clean Energy Council as well as a past Director of the Australian Gas Association and the Energy Retailers Association of Australia. The energy industry is something that I'm very passionate about, and I'm also very passionate about APA and its future, which I think is full of opportunity as Australia inevitably transitions to a low-carbon future. The experience I've gained across most aspects of Australia's energy markets is, I believe, very relevant to APA's business and the issues the Board needs to consider as we navigate our course through the very significant changes facing the industry. I believe my background and experience leaves me well placed to contribute to the Board, and I'd be honored to be reelected as a director by securityholders this morning. Thank you.

Are there any questions on this item of business?

Our next question is from Davis Superannuation Fund. "Please advise the meeting of the ages of the 2 candidates who are up for reelection. Thank you."

Well, we're not an ageist organization, but I think I'm able to say that Michael is in his early 60s, and Debbie is in her early mid-50s. Are there any other questions?

Operator, are there any questions from telephone participants on this item, please?

I can confirm there are no questions on item 2 from the telephones today.

Thank you. I can confirm there are no further questions currently on this item of business.

The details of the total valid proxies for this agenda item are displayed on the screen. And back to you, Michael.

Thanks very much, Steve. The third item of business is approval of the endorsed nomination of Debbie Goodin for reelection as a director of Australian Pipeline Limited. Debbie was appointed a Director with me in September 2015. She's been determined by the Board to be an independent director. We'll now hear a prerecorded address from Debbie.

Good morning, ladies and gentlemen. Today, I am pleased to join you from Boon Wurrung country on the Mornington Peninsula in Victoria. I joined the Board of APA Group 6 years ago and, since that time, was appointed the Chairman of the Audit and Risk Committee in 2017. I am also a member of the Nominations Committee and Health, Safety, Environment and Heritage Committee. I do not propose to go through my qualifications and experience this morning as this has been clearly set out in the Notice of Meeting, annual report and on our website. In addition to being a director of APA, I am the Chairman of Atlas Arteria Limited, and Director and Chairman of the Audit and Risk Committee of Australia Pacific Airports Corporation, the owner of Melbourne and Launceston Airports. I undertake to you that I have the knowledge and time available to continue to fulfill my commitments as a Director of APA Group. I am proud of APA's achievement since I joined the Board in 2015. I'm particularly pleased with how APA is responding to the rapidly changing world, the expectations of our customers, host communities and securityholders, particularly when it comes to environmental, social and governance commitments and performance. Our 2021 sustainability report is testament to how APA is responding with our first sustainability road map, our 3-year plan to how we deliver a step change and how we look at sustainability and support our refreshed corporate strategy. This reporting includes, amongst other things, our climate change management framework, environmental management plan, modern slavery statement, commitment and targets for diversity, inclusion, health and safety initiatives and performance and our approach to community and social performance. APA's commitments to sustainability are critical to ensuring that we are best placed as a successful Australian company to continue to deliver growth and strong returns to you, our securityholders. I look forward to continuing to represent you on our Board of Directors and appreciate your support in today's vote.

Thanks very much, Debbie. Are there any questions on this item of business, Amanda?

Operator, are there any questions from telephone participants, please?

I can confirm there are no questions on this item from telephone participants today.

Thank you. Chairman, I can confirm there are no further questions on this item on the online platform.

Thank you. The details of the total valid proxies for this agenda item are displayed on the screen. The fourth item of business is approval of the grant of performance rights to the Chief Executive Officer, Rob Wheals, under the APA Group long-term incentive plan. Australian Pipeline Limited is seeking securityholder approval for the grant of 270,362 performance rights to the CEO as part of his annual long-term incentive award for FY '22. Are there any questions on this item of business, Amanda?

Our next question is from Mr. [ Anthony Melvin ]. "Why is remuneration in the form of shares and share entitlements paid to directors and executive officers when it surreptitiously dilutes the relative value of the holdings of other shareholders through the redistribution of the value of APA over a greater number of shares?"

Well, let me clarify, first of all, that directors, nonexecutive directors, aren't paid in the form of APA scrip. In fact, we have a minimum securityholding requirement where directors are paid in cash and are obliged to, in fact, hold a certain number of APA securities, which they buy on their own account. APA securities are rewarded, subject to performance hurdles, to executives of the company. And as we talked about a little bit before, this is all about alignment of interest between securityholders and the executives of the company. And as I've said before, many of our securityholders actually encourage us to put more weighting on the equity component of remuneration packages rather than cash, and that's something that we've done over the last couple of years. So it's all about alignment of interest. Is there another question, Amanda?

Chairman, several securityholders have asked questions to the effect of, "When is performance of the company going to be in line with the CEO's remuneration?"

Well, I think APA delivered a very solid result over the last year in what were really quite extraordinary circumstances that we all know about. The Board was certainly very impressed with Rob's performance as CEO of the business. If you look at it, we've created, as we talked about in our addresses to the meeting, we now have created a $1.3 billion organic growth pipeline for the company. We increased dividends yet again last year, and we are giving guidance, forecasting a further increase in dividends for the year ahead. Where we have had a specific issue such as the Orbost gas plant impairment, you'll see in the remuneration report that we've made very specific reductions to the remuneration outcomes for those executives who were responsible for it. And just interestingly, in Rob's case, he wasn't involved in the original decision to invest in Orbost or through its construction, But we have, over the last 2 years since he's been the CEO because it comes with the territory, made a specific reduction to his incentive payments. So I think, certainly, when I go and talk to our securityholders, I think most of them are in agreement that pay is in alignment with performance.

Operator, are there any questions from telephone participants on this item, please?

I can confirm there are no questions on this item from telephone participants today.

So thank you. The details of the total valid proxies for this agenda item are displayed on the screen. A summary setting out the details of the total valid proxies for all agenda items is displayed on the screen for your reference. The poll results will be released to the market via an ASX announcement and will also be available on APA's website as soon as possible. A reminder to securityholders participating online to please vote now. Polls will automatically close 5 minutes after the conclusion of this meeting after those on the telephone have had the opportunity to vote. [Voting]

So that completes the formal business of the meeting. Now let me turn to matters of general business. We've already covered a number of the questions we received in advance of the meeting from our securityholders in the earlier addresses. I'll now open the meeting to questions in relation to APA business, including any questions which relate to the annual report for the 2021 financial year. That report is available to view on the webcast platform in the downloads section at the bottom of the screen. I mentioned earlier that our auditor is here today to answer any questions on the auditor's report or the conduct of the audit through me as Chairman of this meeting. I'll now take questions from participating securityholders. [Operator Instructions]. Amanda?

Chairman, several securityholders have asked questions to the effect of, "Conveying fossil fuels by pipelines is incompatible with waging war on global warming. What plans does APA have for stopping this and diversifying away from fossil fuels? What plans does APA have to foster truly clean energy solutions? Do you care about your grandchildren's future, let alone ours?"

Well, let me start by saying that APA totally accepts the signs of climate change, and we're very supportive of the transition of the world's energy supply systems to a net zero future. Obviously, we want that to happen with affordability and reliability of energy supply systems to be maintained. As we've already talked about today, we, earlier this year, committed to net zero operational emissions by 2050. As I've also talked about earlier today, we've committed across the course of the next 12 months to develop interim targets out to 2030, which are aligned with the Paris Accord. And we've also -- as I've said, we'll continue to consult with our securityholders about them having a say on those plans. We've also, in the last financial year, established our Pathfinder Program, which is looking at technologies of the future, and we're looking at a number of projects in the hydrogen space in regard to that. We're also the largest -- I think its eighth largest investor in renewables in the country. And of course, our proposed -- takeover proposal for AusNet is a diversification for the business, much more into the electricity side of the energy supply and in creating a whole new growth platform for the business. So I think it would be fair to say that we're committed and we're -- our actions are speaking as loud as our words. Amanda?

Our next question is from Two Hearts Pty Ltd. "Given that APA already has the backbone pipelines around Australia, which could or will be necessary for this essential industry, what strategy is in place to ensure that APA is the leading player and investor in the early research, planning and development of the green hydrogen era?"

Well, as I said in the last question, we've, in the last financial year, established our Pathfinder Program, which is really focused on the energy technologies of tomorrow, be they clean molecules, storage, microgrids, et cetera. And hydrogen is certainly a key part of that, and we have a number of projects that we've been quite public about that we're involved in. One of those is a hydrogen project in Western Australia, the Parmelia Gas Pipeline, which is a 43-kilometer pipeline, which we are looking to convert to be the first 100% hydrogen-ready natural gas pipeline in the country. And that's a repurposing of that pipeline, and obviously, that's a very important piece of research for where you think about the future might be in the future use of the very extensive gas transmission network that we have around the country. We're also involved in another project up in Gladstone with Stanwell Corporation and a number of Japanese partners, and that is looking at the production of green hydrogen in Gladstone for export to Japan. So they are just a couple of examples of what we're doing, and as I say, that's been the primary focus of the Pathfinder Program. Amanda?

Our next question is from Mr. Lewis Gomes as representative for the Australian Shareholders' Association. "The ASA notes with disappointment the impairments incurred during FY '21 that essentially wiped out the operating profit. Can the Chairman advise on the outlook for FY '22 with regard to the Orbost gas processing plant and any other likely impairments?"

Well, let me start by saying that the Orbost gas plant accounts for about 2% of our estimated revenue, so it's relatively small in the scheme of things. The Orbost plant was originally designed to operate at 68 terajoules a day, and it hasn't been doing that, disappointingly, obviously, and there are works underway to try and improve the performance of the plant. The Orbost plant basically got 2 parts to it: one, a traditional gas processing plant, which is actually working well; and the other part is a sulfur recovery unit, which isn't working so well due to foaming and fouling issues, and that's where the work is going on. We rebased the value of the plant during the last financial year down from 68 terajoules to base the value on 45 terajoules a day, which we believe is a long-term sustainable rate. And there is work, as I said, going on to try and improve the performance of the plant from that level, and we will review the value of the plant as we would normally do in the normal course of reviewing our carrying values when the accounts are signed off. Amanda?

Chairman, several securityholders have asked questions to the effect of, "The security price of APA has been generally falling over the last 3 years and has fallen further in recent months to below $9. Why should securityholders see value in APA? And what are the growth prospects within its core businesses?"

Well, let me start with, I guess, a couple of data points as to why securityholders should see value in APA securities. I mean we're currently trading -- we've been trading in the mid-$8 range. If you look at the consensus of broker valuations for the company, that's just north of $9.50 the last time I looked at it, so a significant gap there. And we're trading on a 6% yield. If you also look at it, we've got a very strong balance sheet, and we're forecasting to increase dividends again this year. So just on those fundamental things. That's why -- part of the reason why people should see value in the business. If you look to the future and the growth of the business, as we talked about, we've already got a -- today, a $1.3 billion growth pipeline that we're executing on with -- that will flow through to profits and cash flows in the future. And excuse the pun, but there are a number of other organic projects in the pipeline that, hopefully, we'll get to sign off on over the next little while. And I guess the other thing that I would say is obviously, if we're successful in our acquisition of AusNet, then that will create a whole other set of new growth pipelines for the business. When you look at our core business, as Rob said in his address, we very firmly believe in the decarbonization of the energy systems, but we also very firmly believe that there is a very long runway for natural gas. It has a very important role to play in assisting that transition and, in fact, accelerating that transition by supporting renewables and by supporting hard-to-abate and hard-to-electrify sectors of the economy. And when you look at it, and people who are in the energy industry do understand this, it is a massive task to get to net zero by 2050. And the world is going to need all the available technologies in its armory if it's going to achieve that objective. And so we believe gas is a very important technology, a very important part of that armory. We're heavily invested in it as we are heavily invested in renewables, which obviously has a very important role to play. So we see a very long-term future for gas and in supporting that transition. Amanda?

Our next question is from Mr. Lewis Gomes as representative for the Australian Shareholders' Association. "The offer for AusNet represents a credible opportunity to diversify APA operations within the Australian market. However, at a notional price of $2.60 per security, APA would be paying well above historic market value for AusNet. AusNet's revenue and EBIT have flatlined for the last 5 years, while CapEx consumes the equivalent of EBIT each year, as shown in APA's offer presentation. How does APA intend to extract value from this acquisition, particularly given that some 90% of AusNet's revenue comes from regulated assets?"

Well, let me just begin to answer that question by reiterating what Rob and I have already said today, and that is that we believe there is an enormous logic in putting the APA business and the AusNet business together to create a truly national Australian energy infrastructure business that Australians can invest in and Australians can own. It's a huge task ahead of us as a country. So we think there's compelling logic in that. And as we've also said to the market previously, we won't make that investment unless it meets our hurdle rates. And certainly, on the analysis that we've done to date, we believe it will be free cash flow accretive in the first year of operation and also in the long term -- strongly accretive in the long term. As to how we extract value from that business, look, there are a number of areas. First of all, the AusNet business as it is today, it's a Victorian-based business, and there have been constraints within AusNet as to its ability to grow that business both in Victoria and outside of Victoria to do with its constitution. Those constraints would be removed. When you look at the AusNet business historically, it's had a certain growth profile to it. But think about what we've been talking about, the decarbonization, the huge growth that has to happen in renewables if Australia and the rest of the world is to decarbonize. Both the Victorian and the New South Wales government have plans out there to build new, what they call, renewable energy zones. They require the backbone transmission systems to be built for all the new renewables to be built as coal comes out of the system. So that's a significant growth opportunity for the AusNet business. We also think there are significant opportunities to optimize their balance sheet and make it more efficient. There are obviously operating synergies between the 2 businesses given the nature of what we are involved in. Some of those synergies relate to the APA businesses. And obviously, some of them relate to the AusNet business, which I think the question said, they're regulated businesses. But that's not all of their business. But the regulated businesses do have mechanisms for those savings to be shared between shareholders and consumers. In addition to that, there are also tax benefits, which are associated with the acquisition. And look, Amanda, while I'm talking about AusNet, I just might add that as of this morning, we still weren't in the data room and still hadn't been granted due diligence despite the takeover panel finding last week that the exclusivity arrangements that AusNet had entered into with Brookfield were anti-competitive and those exclusivity arrangements coming to an end on Tuesday afternoon. So we still aren't in the data room, and we still have no clarity from AusNet or their advisers as to how they intend to run a competitive process for the sale of the AusNet business, which is something that the takeovers panel found that they had previously failed to do. So we look forward with interest to where that goes despite the statements that we've seen from AusNet about granting due diligence. Amanda?

Chairman, Mr. Lewis Gomes from the Australian Shareholders' Association has a further question as follows. "Based on preoffer financial accounts, both APA and AusNet carry significant borrowings of around $9 billion to $10 billion each. APA's current offer appears to require a significant further increase in debt of possibly up to $5 billion. Recent accounts for AusNet show earnings per security of only $0.09, which gives a yield on purchase price of about 3.5%, well below APA's cost of capital. How would the acquisition be funded? And what effect would this funding have on APA's free cash flow?"

Well, there are a couple of components to that. First of all, as we've said in our market presentations, we would look to raise funds from our existing shareholders, and we talked about a pro rata raising of circa $1.5 billion for that, also supported by a security purchase plan, which we would target $300 million from. So that's a component from our existing shareholders. We also -- our offer to AusNet shareholders is a -- one component of it is cash, and the other component of it is APA scrip. So the APA scrip component that goes to AusNet securityholders is another part of that, and the rest of it comes from a debt package, which we are highly confident of being able to put in place. As to the impacts on free cash flow, as I've said a couple of times now already, we expect it to be free cash flow accretive in year 1, first full year of ownership, and we expect it to be cash flow accretive over the longer term. Amanda?

Chairman, our next question is from Mr. [ Daniel Gocher ]. "At the last 3 AGMs, APA has told shareholders that it was working on emissions-reductions targets. Now you're saying we have to wait until next year for a climate plan. Isn't APA's commitment to net zero meaningless without short-term targets?"

Well, no, it's not -- no, it's not meaningless at all. And we committed to net zero 2050 earlier this year. So I say we've got a -- we've, in fact, recruited capability into the business. And I've been very clear that we will be putting in place those targets over the next year, and those targets will be aligned with the Paris Agreement. The 2030 targets we put in place will be aligned with the Paris Agreement. And as I've also said, we've already started the process of talking with our securityholders about giving them a say on those targets and on our plans. I don't think there's anything that we've got to be shy about with all of that.

Chairman, our next question is from Mr. [ Daniel Gocher ]. "Why do we need more gas infrastructure when the IEA Net Zero by 2050 Report concluded that we cannot afford any new or expanded fossil fuel projects if we are to limit global warming to well below 2 degrees?"

I think you only -- and when you look at the IEA forecast out there, there is still a significant requirement for natural gas. And I think you only have to look at what's been going on in Europe at the moment and other parts of the world to understand that we really need to make this a smooth transition. And my personal view is if it doesn't end up being a smooth transition, if we have unreliability of supply, and we have significantly increasing prices, then you're likely to lose public support for the transition along the way. So I think it's incredibly important that we listen to the people who understand. And in Australian context, people like Kerry Schott, Daniel Westerman, Energy Security Board, the AEMO, it's very important that we understand that, and we ensure the transition is as smooth as possible. And if that's a part of the objective then there is very clearly a very important role for gas to play. And in fact, you need to invest in gas supplies to ensure that we can transition more rapidly and get more renewables into the system quicker by helping maintain reliability of supply. Amanda?

Chairman, our next question is from Mr. [ Tony Greco ]. "With regard to the proposed acquisition of AusNet Services, since the share price of APA has fallen below $9.11, the value of the offer to AusNet shareholders has reduced below $2.60. Will APA be likely to increase the proportion of shares being offered, hence increasing dilution of APA securityholders' current holdings?"

Well, look, that question really goes to -- underlines one of the things I spoke about a moment ago, and that is the importance of doing due diligence. We've made -- obviously spent quite a bit of time looking at the AusNet business from the outside and making our best assessment of what the future prospects of that business are, what the future capital requirements of that business are, what the future cash flows are and how that all stacks up against our return requirements. So I really can't answer that question. I would be purely speculating, and it really does underline why it's so important that you get access to due diligence so you can then make a proper assessment of the value and decide whether you proceed or whether you pull back.

Chairman, our next question is from Mr. [ Russell Taylor ]. "Please outline the APA offer for AusNet. Are there limits to both cash and share components?"

Well, the overall mix is -- of the offer that we made at the moment is approximately 70% cash and 30% APA securities, and that is the default mix. But we are also giving AusNet securityholders the ability to try and optimize. If they want -- if somebody wanted 100% cash, they could nominate 100% cash. If somebody wanted 100% scrip, they could nominate 100% scrip. And to the extent that we can mix and match those differing requirements, we'll allocate as much cash as we can to the people who want cash and as much scrip to the people who want scrip, subject to that overall 70-30 cash-scrip mix. Amanda, do we have any other questions?

Chairman, our next question is from [ Kerry Bible ]. "Is there likely to be an entitlement offer to shareholders considering acquisition targets?"

Well, as I said before, certainly, with respect to our retail shareholders, we expect to make a share purchase plan or security purchase plan, in our case, available to our retail shareholders, and we also expect to make a pro rata entitlement for our larger shareholders.

Chairman, before proceeding to the further questions on the online platform, I'll now ask the operator. Are there any questions from telephone participants?

We do have a number of questions on the phone lines for general business today. Our first question is from securityholder, [ Cheryl Tonkin ]. Ms. [ Tonkin ], please ask your [Technical Difficulty]

We appear that we may have just lost that...

Hello?

Right. Hello.

Hello. Yes, you said, it's [indiscernible] net zero ambition is embedded in APA's target strategy and capital allocation decision-making, planning and valuation and growth. The International Energy Agency have made it very clear that being net zero by 2050 means there is enough room to develop new gas fields. So can you confirm that APA will not allocate [ at all ] to do any projects that facilitate development of new gas fields?

No. The short answer is no, I won't make that commitment because as I said before, gas has a very important role to play in ensuring that there is a smooth transition and that supplies remain reliable and that supply -- energy supplies remain affordable. That may mean that there are new supplies which are required. We've already seen a number of proposals in Australia for LNG import terminals, which is an expensive way to go for the country when we've got domestic supplies that could meet those needs.

Operator, are there further questions from telephone participants, please?

Our next question is from securityholder, [ Chun Kiat Tan ].

Yes. Yes, actually, I enjoy the whole session right up until now. And honestly, I'm telling you that I share the exciting vision. Unfortunately, we are also into some sort of twilight zone that there's a lot of misinformation as to how critical APA is in delivering that transition. I mean honestly, everybody wants a greener future. That is without a doubt. But getting to net zero is not just an issue for politicians, but it also has got implications for businesses. I mean Chairman has rightly pointed out that we look no further that the world right now is actually gripping with a very, very -- how can I put it? A very insane situation in my own words because out there, you have a gas prices shooting through the roof across the whole world. You have gas producers. Locally, we have some gas producers that has been beaten down, but suddenly, the share price is actually soaring through the roof. This morning, Woodside reported -- Santos reported fantastic results, okay? And there, you have your U.S. pipeline giant, Enbridge, share price going up, exciting about the future. And over here, you guys are trying to bolt-on acquisitions, deliver distribution. There is uninterrupted growth unlike other comparable infrastructure giants like Transurban, Sydney Airport that has got their distribution disrupted. And honestly, why I'm saying all this is because I'm concerned and I'm fearful because you guys are trying to get on with business as per usual, trying to go on with this transition. Unfortunately, the market does not like APA turning into a predator. I think the market prefers APA to be preyed upon, yes. And we just came off APA being preyed upon in 2018 by a previous suitor, but now because APA wants to raise the future by quoting on a credible acquisition. So my very big question here is this. Our share price is falling. Increasingly, it's going to make it very easy for APA at certain point in time to be preyed upon again but at a much lower price. And on the other hand, if we stay as a stand-alone entity going forward, going to be growing, immediately, we are looking at AusNet. But obviously, the cost of equity in financing the purchase of AusNet has actually risen because the market doesn't like APA turning into a predator. So we are in a very, very unreal situation whereby you guys are delivering growth in cash flow, which is very rare for businesses around, and I think you guys agree with me. So how do you actually navigate this? Because this is a big, burning question that I have.

Okay. Thank you for your question. And I think -- and it was a little -- sorry, it was a little hard to hear there, but I think you're saying that we would be turning ourselves into a producer by pursuing AusNet. If that is what you're saying, I'm not quite sure, we're absolutely not turning APA into a producer if you're thinking about it in the context of a natural gas producer. Look, as I said before, in looking at the AusNet business, we will be very disciplined about it. We've got our cost of capital that needs to be met and exceeded. And if -- when we do due diligence -- hopefully, we finally get in and do due diligence, if we find that we can't meet our investment criteria, then we won't proceed with it. But as I said, based on what we know from the analysis we've done so far from the outset, the proposal that we put forward is accretive to cash flow, as I've talked about a number of times, in the short term and in the long term for our securityholders. And we think it makes enormous sense. Yes, you will always get -- it's part of why, in an ideal world, you would have -- we would have done all of this confidentially with AusNet. That wasn't possible. It's a competitive -- well, it hasn't been a competitive process yet, but hopefully, it will be a competitive process. And so people know where they're looking to raise equity, and yes, that's had an impact on the share price. That's pretty normal in these circumstances. Amanda, do we have another question?

Thank you. Operator, are there any further questions from telephone participants, please?

We do have a question from securityholder, Dr. [ Catherine Elbry ].

It's actually [ Will Vanderbol ] here, a proxy holder for [ Catherine ]. My question is, I guess, in response to Mr. Wheals' introductory presentation and also some comments just made recently by Mr. Fraser as well. So Mr. Wheals spoke about leading the role in energy transition in support for net zero 2050 and also referred to $8 billion in market opportunities in gas infrastructure over the next 2 decades. And Mr. Fraser, you just mentioned that some new gas suppliers might be required within the energy transition. Just wondering if you've actually tested those claims against a credible net zero by 2050 pathway. I mean the $8 billion in gas infrastructure opportunities seems completely diametrically opposed to the conclusions of the IEA Net Zero by 2050 Report and many other climate science and modeling output. So isn't it misleading to present that sort of information and those claims to shareholders without testing them against the credible net zero by 2050 scenario?

I'll get Rob to take that question.

Yes. Thank you for your question. Last year, we conducted a climate change resilience report and exercise across our existing portfolio of assets, and we tested them against credible data sets and scenarios. That included a 1.5 degrees, 2 to 3 degrees and a 4-degree scenario on a look-forward basis. And importantly, what that exercise did is it demonstrated that our existing portfolio of assets would remain robust in all those scenarios. So that's comments made from myself in regards to our existing business. And certainly, when we look at the -- on a go-forward basis and as we consider investments in new infrastructure, as both Michael and I have said, gas remains a really critical part of that energy transition. When we think about 60% to 70% of electricity generation on the East Coast of Australia coming from coal, that's all forecast to come out of the system over the next decade or 1.5 decades, and more renewable energy will come in, which will need to be firmed up with different forms of firming, which will include gas firming, gas generation. So gas is going to be required, and therefore, gas infrastructure will be required to support that in the endeavor to get to -- an ambition to get to net zero by 2050.

I might also just add, the IEA in their net zero 2050 pathway, which they published a few months ago, they identified the fact that 50% of the emissions reductions that are needed to get to net zero by 2050 are from technologies that today are only still in the demonstration or prototype scheme -- prototype phase. As I said before, we are absolutely supportive of net zero by 2050. We're absolutely supportive of decarbonizing as rapidly as we can. And if people genuinely want that decarbonization to happen as rapidly as possible, then -- and they understand what needs to happen, they'll understand the important role that gas has to play in allowing that to happen. And certainly, we're interested in it happening. And as I said in -- a little while ago, the world will need its full armory of technologies if it's going to make that transition happen. And that includes natural gas, as it includes renewables, as it includes storage, as it includes a whole host of other technologies. Amanda?

Operator, are there any further questions from telephone participants, please?

Our next question is from Mr. [ David Chadwick ].

[indiscernible] in one of their recent updates comments that they are having ongoing discussions with APA re the Western Slopes Pipeline. You have been sent the 2017 Coonamble Declaration and understand the unanimous and vehement opposition by landholders along the proposed route, in particular, Motion 3, which states, "The APA Western Slopes Pipeline will be blocked at any cost." You also understand the same united and vehement opposition to Santos' Narrabri gas project due to the risk to 24% of Australia's only secure water supply. Considering the recent massive global shifts against fossil fuels, my question, is APA still considering lodging an EIS for the Western Slopes Pipeline against this massive local and global opposition? And in pursuing the project, how big a liability will it become on the balance sheet?

Rob, I might get you to take that question.

Thank you for your question. As we know, the Santos EIS was approved, and subsequent to that, it was challenged. The decision was challenged, and just more recently, the Land Environment Court has issued a decision to continue to support that -- the planning approval or the environment impact statement. As Michael has said, and I've said, gas is essential to the future. But in answer to your question specifically, we will wait to hear from Santos what their next steps will be. Clearly, they are in the driving seat of this project. And as I said, that's a decision for Santos as to whether they're going to progress the Narrabri gas project and, clearly, whether the Western Slopes Pipeline or the other alternative form of getting that gas to market will then be considered.

And I might just add for the benefit of our other securityholders so that they understand the full picture here. Yes, as you've just heard, there is local opposition to that project, but there is also an enormous amount of local support for the project. So it isn't a one-way street. We have another question.

Operator, are there any further questions from telephone participants, please?

We do have a further and final question from Mr. [ Chun Kiat Tan ].

Sorry, I think you misinterpreted one of the word because of the bad line here. Basically, what I'm saying is the bid for AusNet, based -- in that role, APA is actually a predator. Predator.

Sorry, predator. Yes.

I mean the thing is -- yes, predator. Sorry.

Sorry. Got you.

Yes. So -- yes, yes. So I mean the thing is, obviously, the market doesn't like companies to turn -- to be a predator, okay? They rather a company to be preyed upon, which is why our share price has actually gone down. And yes, that's, I think, one big concern is everybody is in this company as shareholders, as management as well. Okay. Then also, the other thing that I just want -- my final question is with regards to our search in U.S. I think we have been talking about looking into pipeline projects in the U.S. for a number of years. And obviously, I went through the transcript of the conversation with the analysts, the analyst briefing. I think the company is actually adhering to their financial discipline and looking, and the COVID disruption last year in U.S. doesn't really help. So have we got any further progress update from there? That's all for me.

Thank you. No, look, there is no further update other than what I said in our address, what Rob said in his address, perhaps, as well, and that is we continue to look. You mentioned gas pipelines. It is broader than that, but we continue to look at opportunities in the U.S. We have people on the ground over there, but we have nothing to report to securityholders. And if we do, we will advise securityholders at the appropriate time. Thank you. And sorry for not hearing your question properly before.

Chairman, our next question is from [ Hok Ku ]. "When are we going to see ethnically diverse Board members to reflect the current Australian population?"

Well, look, when we -- as per our corporate governance statement, we value diversity and when we look at the makeup of the Board, we look for people with different skills, experience and background. And perhaps, let me -- best way to answer that is just to talk about the process that we go through. The Board does sit down from time to time and look at where the organization is at, where are we at from a strategic point of view, where are we heading, what's our existing business, what are the skills that we need given the issues that we're facing. We then look at the skill set of our existing directors, and typically, this is a case where we've got a director stepping down, take that potential director coming out of the mix, where is the gap between the skill set of the Board and what we think we need. And it's that brief, which is actually fundamental to informing how we then go about selecting directors. We do overlay a filter. Obviously, we want people, as I said, from diverse backgrounds, diverse experience, et cetera. But most importantly, we want people with a background where they can add to the issues that we need to deal with as a Board. And I think the energy industry, quite frankly, is one of the most dynamic and interesting and complex spaces that you could be in for all the issues that we've talked about this morning. So that's the approach that we take to getting new directors onto the Board.

Chairman, our next question is from Mr. [ Michael Gonsworthy ]. "Can you please advise how APA is planning to reduce corporate costs and fees and increase dividends?"

Well, you'll be pleased to know that we've just carried out an operational efficiency review, which is in the throes of being implemented, and we were updated by our CFO yesterday in our Board meeting, and that's on track. So we're always looking for how we can do things more efficiently and more cost effectively. In terms of dividends growing, I mean, look, I'd just say we grew dividends last year. We're forecasting a dividend increase for the current year. We talked about the fact that we've got an organic pipeline of $1.3 billion worth of growth projects. We're looking to acquire the AusNet business. They are the things how you grow the business, grow the top line and grow the bottom line. Amanda?

Our next question is from Mr. [ Wayne Bradley ]. "As a securityholder, I request the option to obtain securities rather than receiving distribution when authorized, DRP."

Yes. Dividend reinvestment plan. We suspended our dividend reinvestment plan back in 2013, was the last time that it operated. We haven't had it in place then because when we've looked at the funding needs of the business, it hasn't been required. But I can assure all of our securityholders that, that is -- that isn't a set-and-forget policy. It's something that we continuously look at against what the capital requirements are for the business. And if we were successful in acquiring the AusNet business, there's a significant change in the business, obviously, that's something that we would come back to and look at again in terms of the future funding needs of the business. So we look at it. It's not turned off forever, and I hear you. Amanda?

Chairman, our next question is from Mr. [ Timothy Clifton ]. "What percentage of APA's income is generated by its Australian operations? And are franking credits allocated to investors for this income? What percentage of APA's income is generated by its overseas operations and are classified as foreign conduit earnings?"

Well, that's a fairly straightforward -- so 100% of our income is generated from our Australian operations, no revenue coming from the U.S. We've got a few costs over there. We do allocate franking credits whenever they're available to that income. So we don't generate any overseas operations, and so there are no foreign conduit earnings.

Chairman, our next question is from Mr. [ Douglas Hawk ], and we have received a similar question from Mr. [ Edmond Caru ]. "Has anyone taken into account the security of all assets, especially in the remote areas as if the assets come under deliberate sabotage or terrorist activity?"

Look, the short answer to that is yes, absolutely, both the -- from a physical security point of view and a cybersecurity point of view. And we -- cyber is there almost every other meeting that we're looking at it. But in terms of the physical security, this was an item that the Board considered only 3 or 4 months ago. So the answer is yes. And obviously, for obvious reasons, I won't go into the details. Amanda, do you have any other questions?

Chairman, I'll now ask the operator. Are there any questions from telephone participants, please?

We do have a final question from Mr. [ David Chadwick ].

I just wanted the opportunity to straighten now the record, Mr. Chairman. There is unanimous opposition, the pipeline route at 468-odd kilometers, it's 450 kilometers of the route where landholders have refused access agreements and, therefore, access. So perhaps you're not getting the feedback from the men on the ground or the staff on the ground, but certainly worth pursuing to -- so you can clarify my comments.

I'll stand by what I said before, and I thank you for your comment.

Chairman, our next question is from Mr. [ Robert Alonzo ]. "APA's largest shareholder, UniSuper, has a commitment to net zero emissions by 2030. The IEA's modeling shows achieving this goal [ leaves ] no room to develop new gas fields, yet APA's Western Slopes Pipeline would facilitate the development of Santos' Narrabri gas project. Does APA risk losing the support of its biggest shareholder by continuing with plans to facilitate new gas developments like Narrabri, which are out of line with a net zero by 2050 pathway?"

Look, we talk to UniSuper on a very regular basis, and they are very supportive of us, very supportive of our net zero by 2050 target and are supportive of our plans to set interim targets and, in fact, encouraging us to put that to a vote of securityholders, which would also include them. So we continue to talk to UniSuper. And at this point, we know they're -- certainly, in relation to the AusNet transaction, they are very supportive of us pursuing that transaction, and we'll be very supportive of any capital raising that we need to make.

Chairman, our next question is from Mr. [ Russell Taylor ]. "If the foreign holders of AusNet opt for the cash option, do you anticipate the need for a capital raising?"

Well, I think I've already answered that question a number of times when I've talked about how we would fund the business, and we said it in our ASX presentation a number of weeks ago. The short answer is yes, and it's circa 1.5 to our larger holders and a $300 million share purchase plan. Thank you. Next question.

Chairman, our next question is from Ms. [ Vivian Wiggs ]. The question is very detailed, and I will summarize it as follows. "Your voting is so corrupt, it is meaningless. You have 150,000-plus shareholders, and it only takes 3 to pass a resolution. We live in a democracy, and you people, the business leaders, do not believe in democratic voting. Each shareholder should be 1 vote only for democratic voting. You only have this because of the benefit you can get for yourselves."

Look, first of all, 1 share, 1 vote is a fundamental principle of corporate law right around the world, and we are no different. I think that what you may be referring to is, in the annual report, we're required, in a way, to put who our larger shareholders are. Unfortunately, the way that we're required to report that, people who are custodians, so in fact, manage the share portfolio for underlying shareholders, appear as the top 3 shareholders, I think, with just over 50%. I think that's what you're referring to. Be absolutely assured that sitting underneath those custodians, there are literally thousands of individual shareholders, be they retail shareholders or institutions, super funds, et cetera, and all of those securityholders get to vote on their own on the principle of 1 share, 1 vote, which is absolutely standard practice around the world. Amanda, do we have any other questions?

Chairman, several securityholders have asked questions to the effect of as follows. "Why does it take so long to produce the final statements and, moreover, the taxation statement for the FY '21? Other companies with units, not just shares, achieved it 3 weeks before APA. My husband is an ex partner of an international accounting firm and says it can be done, just more effort in the right direction."

Look, first of all, apologies for the time that it does take. It really comes back to when we sign off, when the auditors sign off on our accounts. As you can imagine, every company operates to a different schedule, and our schedule is typically around the third week of August that the auditors sign off on the accounts, and then we're able to get on with that. To assist securityholders, we have put in place an income tax estimator, which is available on our website for those people who want to try and calculate the amount of tax and lodge their tax return early. And that has proven to be extremely accurate over the last, I think, it's 3 years or so that it's been in place. Amanda?

Chairman, our next question is from Mr. Lewis Gomes as representative for the Australian Shareholders' Association. "Given the likely increase in financing costs as a result of the acquisition of AusNet, would there be any change to guidance on the distribution for FY '22?"

Look, let me say we have given guidance of $0.53 per security. We've reiterated that guidance today, and that remains the guidance. I think part of what Lewis' question highlights, though, is how important it is to get due diligence. So you can understand, in the case of AusNet, in particular, just exactly how large that growth pipeline is in the business and what that means for future cash flows, and of course, dividend policy out into the future is a part of that. Amanda?

Chairman, our next question is from Mr. and Mrs. [ Saunders ]. "The director's annual report does not comment on the $10 billion bid for AusNet. I noted that you identified investment opportunities within target markets of USD 2.8 trillion over the next 40 years. My question is, if successful, what will be the likely share price and dividend yield? And will this acquisition make APA a potential aggressive takeover target? And hopefully, the Chairman will keep shareholders updated regarding AusNet."

Look, there's a lot in that. So just to go to the first question. Yes, it wasn't in the director's report because the director's report was published in late August, and we made our bid very publicly for AusNet. I think it was the third week of September or thereabout. So that's why it wasn't there. Look, it's absolutely inappropriate. I mean, I made some comment about future dividends there and the importance of doing due diligence, and I certainly wouldn't speculate on the share price other than simply to reiterate is that if we proceed with that acquisition, we absolutely believe -- it will be because we absolutely believe it's in the best interest of our shareholders. Amanda?

Chairman, our next question is from Mr. [ Victor Robinson ]. "Congratulations on not only a sound business move, but perhaps, more importantly, from a great country perspective, on the move to acquire AusNet Services. We support you all the way. The Federal Court also need to step up their protection of Australian essential infrastructure, et cetera. Will APA need a contribution from its shareholder?"

Well, let me start, first of all, just by saying thank you, [ Victor ], for your support. And as I said before, we've had support from our largest shareholder. In fact, we've had support from many of our shareholders and many of AusNet shareholders for our proposal. So thank you for that. Look, I think I've answered the question in relation to equity raising earlier, so I won't go there again. Amanda, do we have any other questions?

I'll now ask the operator. Are there any final questions from telephone participants today?

I can confirm there are no further questions on telephones today.

Thank you, operator. Chairman, I can confirm there are no further questions on the online platform.

Thanks very much, Amanda, and thank you to all of our securityholders for those questions. That completes the business of the meeting. Before I conclude, and on a personal note, can I take this opportunity to add my thanks and acknowledgment of the extraordinary contribution of our Group Executive of Governance and External Affairs and Company Secretary, Nevenka Codevelle, who's sitting right here beside me, over the past 13.5 years, a long time, Nevenka. As Rob mentioned earlier, Nevenka will shortly be leaving APA to pursue other passions. And I know I speak for the entire Board when I say to you, Nevenka, that we will miss you, your professionalism, commitment and insight at the Board table and in our other discussions and forums. We look forward to seeing what comes next, and we wish you every success for the future. Now before I close the meeting, please note that voting will remain open until the conclusion of the 5-minute voting window for telephone participants. For those voting by phone, the telephone moderator will shortly read out the first resolution. You will be required to promptly vote on that resolution using your phone's keypad. Please follow the telephone moderators instructions on how to vote using your keypad. You'll have 10 seconds to cast your vote. The telephone poll for resolution 1 will then close. The moderator will then repeat this process for resolutions 2 through 4. All polls will then automatically close. Thank you for your attendance today. We sincerely appreciate your investor interest in APA, and I thank you for your patience and support with today's virtual meeting process. I wish you all good health until we meet again. I now declare this meeting closed, subject to finalization of the poll. Thank you.