APA Group (APA) Earnings Call Transcript & Summary

Well, good morning, everyone. My name is Michael Fraser. I'm the Chairman of APA Group Limited, the responsible entity for APA Group that comprises APA Infrastructure Trust and APA 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 2022 Annual Meeting of APA securityholders. In the spirit of reconciliation, I'd like to begin today by acknowledging the Gadigal people of Eora nation, as the Traditional Custodians of the land where this meeting is taking place. We pay our respect to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander People today. This meeting is being held as a hybrid, which means it's being held both virtually and in person. So we have securityholders joining us today in a wide variety of locations. And I must say it's great that after 2 years of just virtual meetings to be able to hold -- also hold this meeting in person and to see you all here today. 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 either from the floor, the webcast platform or on the phone and being able to vote on items of business. On a procedural note, I now declare voting for all items of business open on the webcast platform and for those attending in person. Voting will remain open for the duration of the meeting. Securityholders watching online will be able to ask questions during the meeting via the webcast platform by clicking on the Ask a Question box on your screen and typing your question. 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, and I'll address them at the relevant time. Joining me today in Sydney is Kynwynn Strong, APA's acting Chief Financial Officer, and she will read out the online questions from securityholders. We'll 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. I'd ask securityholders to please ask no more than two questions and to keep your questions as short as possible. It may be necessary for us to group similar questions or summarize long questions. [Operator Instructions] 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, which appears at the top of your screen. The meeting helpline number is 1 (800)990-363. A copy of the webcast of today's meeting will be posted on APA's website as soon as possible after the meeting. Now with those housekeeping matters out of the way, let me make some introductions. Joining me in person in Sydney today are our Board members: James Fazzino, who is the Chair of our Safety and Sustainability Committee; Debbie Goodin, who is the Chair of the Audit and Finance Committee; Rhoda Phillippo, who is Chair of the Risk Management Committee; and Peter Wasow, Chair of the People and Remuneration Committee, Peter on the end there; and Shirley In't Veld. I'd also like to acknowledge Steve Crane, who retired from the Board just last month. Steve was a director for nearly 12 years, and played a key role in helping APA be a successful as it has been over that time, and I'd like to thank Steve for his service to the Board. Let me also introduce you to some of APA's executive leadership team who is sitting on stage with me this morning. We have Adam Watson, our acting Chief Executive Officer; and Amanda Cheney, our Group General Counsel and Company Secretary, who you just heard from. Also sitting in the front row, we have members of our executive leadership team, and we're also joined in person today by Jamie Gatt, our audit partner at Deloitte Touche Tohmatsu. The slide on the screen sets up the agenda for today's meeting. The notice of meeting has been made available to all securityholders and I'll take it as read. Adam Watson and I will report on APA's performance for the 2022 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 that you may have. So now turning to my formal address. Against the backdrop of significant disruptions to Australia's energy markets over the last year, our FY 2022 financial performance has again demonstrated the strength and resilience of APA's business and our track record of delivering reliable and solid results. Compared to last year, revenue was up 4%. Our underlying EBITDA was also up 4%. And our free cash flow was strong, being up 20%. These results meant we were able to declare full year distributions of $0.53 per security, in line with our guidance and up 4% on the prior year. This represented a continuation of our history of growth in distributions to securityholders over the last 18 years, which says a lot about the robustness of our business. We can also reiterate our guidance of expected distributions of $0.55 per security for the financial year 2023. Our balance sheet remained strong and ensures we're well placed -- well positioned to pursue growth opportunities and ultimately create sustainable long-term value for you, our securityholders. With energy dominating the headlines over the past year, the need for an orderly and planned transition, where the lights stay on and energy remains affordable, has come into sharp focus. And with that, the critical role of our business in the energy transition has never been more apparent. Australia's transition to net zero means there is a continuing need to invest in gas infrastructure. Over time, we believe a combination of natural gas, renewables and other technologies will provide the most economical, secure and rapid pathway to reaching this goal. Through AEMO's Integrated System Plan, we know that to meet the growing demand for electrification by 2050, the National Electricity Market is forecast to need to double the amount of electricity it delivers now, and that is a massive task that we face as a nation. These circumstances, among other things, influenced our announcement in August to call time on pursuing a U.S. acquisition. Our focus is now solely on the Australian market, which is where we believe we can create the most value for our investors and communities. Our organic growth pipeline currently exceeds $1.4 billion, with many of these projects building momentum during the past year. We're committed to ensuring the investments we're making in gas infrastructure, renewables, hydrogen and electricity transmission will all contribute to a reliable, affordable and lower emissions future. Consistent with that strategy, we have agreed to acquire Basslink, the 370-kilometer subsea electricity interconnector between Victoria and Tasmania, representing a significant opportunity to grow our electricity transmission business. Our focus is to put Basslink on a sustainable footing and ensure that it plays a role in bringing new renewable generation onto the grid as Australia winds down its reliance on coal as well as providing energy security to Tasmania. Over the past 12 months, we've consulted with our investors and other stakeholders to produce our Climate Transition Plan, which updates APA's 2021 commitment of net zero emissions by 2050 with more tailored targets, goals and commitments for the next 3 decades. Most significantly, we have accelerated our net zero goal for power generation and electricity transmission from 2050 to 2040; set a 2030 target of a 30% reduction in emissions for our gas infrastructure business; and set a 2030 goal of a 35% reduction in emissions intensity for our power generation portfolio, which we believe is an ambitious commitment given the Diamantina Power Station at Mount Isa, which is the largest we have, is already one of the most efficient gas generators in Australia. In addition, we've undertaken detailed work on our gas infrastructure to understand the capital required to support structural abatement of our emissions, and we've committed to structural abatement in preference to acquiring carbon credits where it's reasonable to do so. We've also set a time line for establishing a Scope 3 emissions goal. And these commitments and the pathway to get there are defined in our Climate Transition Plan, which will be put to a non-binding advisory vote today. It's our intention as we move forward to report progress on the transition plan on an annual basis and to hold an advisory securityholder vote on a 3 yearly cycle. Before I finish, I want to recognize APA's previous CEO and Managing Director, Rob Wheals, for his contribution to the business over the last 14 years, including the last 3 years as CEO and Managing Director. As evidenced by our financial year 2022 financial results, Rob has left the business in good shape, and we wish him all the best for the future. As securityholders would be aware, we're now conducting a comprehensive search for a new CEO. But in the meantime, I'm confident that our acting CEO, Adam Watson, together with the other members of the executive leadership team, will continue to take the business from strength to strength. In closing, I want to thank all of our employees, our contractors and partners who have supported us and worked so hard over the past year to make it another successful one for APA. I also want to thank all our securityholders for your ongoing support. I'll now invite Adam Watson to address the meeting. Adam?

Thank you, Michael. And good morning, everyone. I would also like to acknowledge the Gadigal people of the Eora Nation, the Traditional Custodians of the land on which I'm speaking today. I pay my respects to their elders past, present and emerging. Well, it's an absolute privilege to be leading APA as the acting CEO during what is a very exciting time for our organization and the energy industry more broadly. There are three key topics I'd like to discuss with you today. And firstly, I'll talk about our strong operational and our strong financial performance we delivered in FY '22, and these results underscore the strength of our business to continue delivering benefits for our securityholders and for our customers and for our communities. And secondly, I'll talk to our strategy. And that's underpinned by the tens of billions of dollars, which will be delivered -- will be spent to deliver the Australian energy transition over the coming decades. And thirdly, I'll talk to our Climate Transition Plan, which supports our commitment to delivering better environmental, social and governance outcomes for our stakeholders. A great example of how our financial performance, our strategy and our Climate Transition Plan converge -- is yesterday's announcement confirming our agreement to acquire Basslink, the subsea electricity cable connecting Tasmania to the mainland. We've agreed to acquire a great business with great people, and we'll acquire a set of capabilities that will position us well to support Tasmania's renewable energy plans as well as the connections necessary to support the development of new energy solutions such as offshore wind farms, more broadly across Australia. I'll talk more about that in a moment. So let's start with our FY '22 results, and I want to first acknowledge that it's our fantastic people who deserve the credit for delivering such a solid result. Our operational performance was impressive, ensuring our customers were provided with their energy needs when they needed it. And we continue to make good progress with improving our safety and well-being of our people as reflected in our total recordable injury frequency rate, where there was a significant improvement achieved during the year. But there's always more we can do, and we continue to remain focused on continually making improvements. Our FY '22 financial performance highlights APA's solid foundations that continue to take the business from strength to strength. And they include our strong balance sheet, our inflation-linked revenues, our strong cash flow conversion and our diverse customer base. We remain focused on delivering value for our investors, our customers and our communities. And we know distributions are an important way to create value for our investors, and we're always looking at ways to ensure that we get the balance right between delivering growth from a distribution perspective, but also retaining an appropriate level of cash flow to internally fund our organic growth pipeline. And we do this through the strong balance sheet and our focus on capital management. Our financial performance year-to-date in this financial year, that is FY '23, is progressing well and remains on track to deliver our FY '23 distribution guidance of $0.55 per security. And we're pleased, as Michael said, that both FY '22 and FY '23 will deliver almost 2 decades of year-on-year distribution growth for you, our securityholders. Now to our strategy. As Michael also outlined, this is an exciting time for APA as we continue to grow and invest in support of Australia's energy transition. Key to an effective energy system and, importantly, a successful energy transition is ensuring they deliver four key outcomes: and that is energy that is safe, energy that is reliable, energy that's affordable and energy that's low emissions. I'm excited about the role that APA can play to deliver this for all of Australians given our experience and our exposure to renewables, electricity transmission, gas and gas firming and future fuels. Our strategy for growth and value creation is underpinned by the fact that Australia's entire energy system is undergoing enormous change. Right now, coal represents about 60% of our East Coast electricity market. And we all know the retirement of Australia's coal-fired power generators is accelerating. This will command significant investment in renewable power generation. And as the owner, operator and developer of renewable power generation, this is a space that APA knows well and we will continue to focus on. An example is the development of our Mica Creek solar farm in Mount Isa in Queensland. It will be Australia's largest solar farm outside the National and Western Australian electricity markets. And I visited the project just last week, and it's truly impressive. All of the new renewable power generators need to be connected via electricity transmission, and this is another area where we have experience and will continue to play a leading role. Again, our acquisition of Basslink will further enhance our electricity transmission capability and exposes hopefully to some new energy markets. We'll be the owner and operator of Australia's major subsea electricity transmission line. This acquisition will give us further skills and experience to help Tasmania achieve its growth ambition to be a major renewable energy producer. We can also potentially help Australia achieve its ambition of being a major producer of energy from offshore wind farms. We now have, as an Australian-owned business at APA, the expertise to connect these wind farms to the grid. We're looking forward to working with the state of Tasmania to put Basslink on a sustainable footing and safeguard its critical role in connecting Tasmania to the National Electricity Market. The investment opportunities in renewable power generation and electricity transmission are clearly attractive. And at the same time, we know gas is essential to fast track renewables and deliver the most secure, the most reliable, the most affordable and the most low emissions pathway to the decarbonization of Australia's energy system. As we see record levels of supply coming from wind and solar, the firming role of gas-fired power generation will be important -- increasingly important to ensure grid stability. And when the sun doesn't shine or the wind doesn't blow or where renewable power simply isn't intense enough to support major industrial users, gas will be required to step in. And this is a scenario that we've seen play out in Australia recently, and we're seeing it play out right now in other parts of the world such as Europe. The role of gas is to secure our energy system, and it's critical. The 2022 electricity crisis in the National Electricity Market has been challenging for many of our customers, and we're doing all we can to support them with a safe and reliable supply of energy solutions. That includes delivery of key projects like the expansion of our East Coast Grid, which we initiated ahead of market requirements to help avoid the then forecast gas supply shortfalls of winter 2023. As a nation, it will be crucial that governments, communities and the private sector work together. This way, we can develop solutions and pathways to ensure the energy transition is delivered in a structured and coordinated way. The energy market needs sensible policy, and it needs the right incentives and support in place. And we need to be sensible about our energy sources to ensure the energy system, again, is safe, reliable and affordable as well as low emissions. At APA, we're working hard to find ways to play our part in the developing of the infrastructure required to support the energy transition for the future. Our Pathfinder program, which is looking a long way into the future, is working in partnership with customers, with universities, governments and key industry participants. It's looking at the necessary transportation and storage infrastructure to support future fuels such as hydrogen and biogas. And some of this infrastructure will be new, and some of it will be from the conversion of APA's existing assets. While the viability of these future fuels is still a long way away, we recognize the importance of doing the hard work now to ensure we can support Australia in the future. And we also remain focused on delivering our existing $1.4 billion organic development pipeline that is supporting our energy needs of today. And right now, this includes projects like the Western Outer Ring Main in Victoria; the pipeline connection to the Hunter Power Project, right here in New South Wales; the Northern Goldfields Interconnect Project in Western Australia; and the Mica Creek Solar Farm in Queensland. Now to our Climate Transition Plan, and a team of representatives across all of the functions and operations of APA have worked very hard over the past 12 months to bring this plan to life. We've sought to align our targets and our goals to the objectives of the Paris Agreement. And we've taken a considered approach to assessing the tangible opportunities for emissions reduction, prioritizing structural abatement where we can. As Michael said, these opportunities are based on proven technologies. We believe our targets and goals are achievable, and we will continue to push ourselves to make further improvements in the future. But our plan is just one part of our sustainability road map that we've successfully progressed during FY '22. We've also invested in initiatives consistent with our road map to further improve outcomes for our communities; our First Nations' stakeholders; our customers; and you, our securityholders. At a community level, we commenced implementation of our new community and social performance strategy to further improve the way we support our host communities. Additionally, we're working to establish a responsible procurement strategy, which will involve developing APA's approach to sustainable, ethical and socially-responsible procurement. We've already signed up to Supply Nation and Social Traders to drive our supplier diversity and better incorporate First Nations' businesses into our supply chains. As an Australian business, we are proud of the important role we play in our economy and our communities. We're proud of the work we do with governments. We're proud of the partnerships we have formed with local communities, and we're proud of the jobs we create in regional areas. And just this year, we expect to create about 575 jobs to deliver our Northern Goldfields Interconnect Pipeline and around 160 jobs for the Mica Creek Solar Farm when they're at the peak of construction. In summary, APA is making good progress, and this is all achieved through the hard work of our 2,100 employees. To the APA team, I say thank you. You've once again displayed resilience, adaptability and flexibility during the COVID challenges of FY '22 -- in 2022 more broadly. We will continue to invest in our people, our systems and our processes to ensure we have the necessary capabilities to support our next generation of growth. I also want to take the opportunity to thank our executive team for their hard work, support and leadership. And I'm confident that the team will continue to deliver value for you, our securityholders, whilst improving the lives of our communities. And thank you to our Board and to you, our securityholders, for your ongoing support of APA. We're a strong business with strong foundations and a great future, and we're proud to be at the forefront of responsibly transitioning Australia's energy system. I'll now hand you back to the Chairman. Thanks, Michael.

Thanks very much, Adam, and well said. I'd like to turn now to the formal business of the meeting. Securityholders and proxies attending the meeting online can vote through the online platform by clicking on the Get a Voting Card Box at the bottom of the webcast. For those attending in person, when you arrived here today and registered your attendance, you were given a card that's either yellow, blue or red, and you must be holding a yellow card if you wish to vote at this meeting. Please mark your yellow card on each of the four resolutions to indicate whether you are voting for or against the resolution or are abstaining. If you hold securities jointly with another person, only the person holding the yellow card may vote. The returning officers for the polls of representatives of APA's registry, Link Market Services. They'll collect your yellow cards and count the votes at the end of the meeting. Only those holding yellow or blue cards are entitled to ask questions at this meeting. Visitors holding red cards are welcome but are not entitled to ask questions. And if anyone has not yet registered or has not been given a colored card, please identify yourself immediately to a representative of our registry, Link Market Services, who are up the back, so that we can register you and issue you with the appropriate card. Now there are four items of ordinary business today. Securityholders will be able to ask questions specific to each resolution to be put to the meeting before voting on the resolution. For those securityholders who are here in person and wish to ask a question or make a comment on a particular resolution, I'll invite you at the appropriate time to come up and ask your question at the standing microphone in front of me down here. For those securityholders who are unable to come to the microphone, please raise your card and we'll have an attendant come to you. Once I've taken some questions from the floor, I'll then also move to take questions from the webcast platform. And I was going to say from the telephone, but I understand that no one has registered, so we won't be having any calls into the meeting today on the phone. As I said earlier, I'd encourage those who wish to ask a question via the webcast platform 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. All resolutions will be put to a poll. The first item of business today is the adoption of the remuneration report for the year ended 30th of June 2022. The remuneration report is included in the Directors' section of the annual report and details remuneration received by directors and APA's key management personnel for the year ended 30th of June 2022. As you are aware, the APA Board has adopted a corporate governance framework, which is designed to be as consistent as practicable with the best practice procedures of publicly-listed companies. Now under that framework, securityholders can vote on the adoption of the remuneration report. The resolution -- 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 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. I'll start by taking questions from the floor. If anyone here in the room would like to ask a question or make a comment on Resolution 1, please make your way to the microphone here at the front of the room. Okay. It doesn't appear -- sorry, a gentleman here. Thank you.

Chairman, I would like to introduce Kevin, shareholder.

Good morning, Mr. Chairman. You said a lot of nice things about the Basslink connection between Victoria and Tasmania. So I assume the technical problems that had a few years back have thoroughly overcome. The question I want to ask though has to do with whether you will be tendering for the construction of the new pipeline, the Mariners pipeline, between Victoria and Tasmania and what sort of time scale you think that will be on?

Yes. Kevin, can I say at the moment, we're just dealing with the resolution in relation to the remuneration report, I'm very happy to come back and address that question if somebody can write it down for me when we get to general business. I'll make that the first cab off the rank if you want to jump up then.

I'm working from Habit.

There don't appear to be any questions in the room. Kynwynn, are there any questions or comments on this item of business from the platform?

Yes, Chairman. The first question is from Stephen Mayne. Because it is a trust, APA doesn't have to put its remuneration report to the vote. Thanks for voluntarily doing this since 2017. Although it was regrettable you didn't do it for the first 12 years of the regime, which was introduced in 2005. Is there anything stopping the board from dumping the remuneration report vote in future years? And will you commit to continue the current practice into the future?

Well, I think the answer to that, probably, and I'm looking across at our General Counsel, is probably technically, there's nothing that would prevent us from dumping that, as Stephen has put it in the future. But all I can say, Stephen, is that at this point in time, we have absolutely no intention of doing that. And I would expect that securityholders would let us know in no uncertain terms what they thought about it if that was something that we sought to do. They, for instance, do get to vote on who sits on the Board. It's a good way of showing your displeasure with that.

Chairman, there are no further questions at this point.

Thank you, Kynwynn. The details of the total valid proxies for this agenda item are displayed on the screen, as they are. I'd like to remind you that voting is open. You can use the webcast platform to cast your vote. [Voting]

Excuse me, Chairman, another question has just come through on Resolution 1 from Stephen Mayne. Has there been a material proxy protest vote against any of today's resolutions, including the remuneration report? Origin Energy is also holding its AGM today and has disclosed the proxy position to the ASX with the formal addresses ahead of the AGM commencing since 2008. Why doesn't APA do this? And will you at least disclose the proxies on the screen before the debate commences?

Look, the short answer is you've seen the vote. It's there for you. The proxy votes are up on the screen, so that's there. And no, the intention is not to disclose what the proxy votes are ahead of the discussion about the resolution, because I think that, that just takes away from the discussion that people might want to have if they see that something has already been carried, et cetera, by the proxy. So the intent is that we will not do that as a matter, I think, of good practice. No more?

There are no further questions at this point.

The second item of business today is approval of the Climate Transition Plan. The Climate Transition Plan was published on APA's website and released to the ASX on the 24th of August 2022. Resolution 2 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, the directors will consider the outcome of the vote and comments made by securityholders on the Climate Transition Plan. If anyone here in the room would like to ask a question or make a comment on Resolution 2, please make your way to the microphone here at the front of the room.

Chairman, introducing Antoinette, shareholder.

Welcome back, Antoinette.

Basically, I just want to say thank you for doing the Climate Plan because even if I get a few cents less of dividend, I am all for that. And I do recognize, of course, that some of what you say is very much cosmetic. But I think APA is genuinely in the forefront of actually doing things that they also realize is inevitable to do. And I think it's a good idea to have companies that are really doing the right thing even if they do it unwillingly because it is in the interest of just about everybody. And just otherwise, I just want to thank you because I'm quite a happy shareholder, and I'm a bit shocked that it's been 18 years that I've been a shareholder. I was not aware of that. So -- but thank you to the Board, and I'm very interested in what you're going to do about climate change. Thank you very much.

I'll take that as a comment rather than a question. Thanks very much, Antoinette.

Chairman, introducing [ Marger ] as a proxy holder.

I just wanted to ask you about the Climate Transition Plan. Repeatedly states that there's potential for existing gas infrastructure to lower -- to transport lower emissions fuels, including hydrogen and that APA is actively pursuing this through the Pathfinder program. Is it possible for APA's existing gas pipeline infrastructure to transport 100% hydrogen? If not and if replacement or significant upgrades are required, wouldn't widespread electrification be a far cheaper decarbonization option than replacing gas with hydrogen?

Well, in answer to your question, that's part of the work that we've been doing at the moment, is understanding whether any of our pipelines can carry 100% hydrogen. We've been doing test results, which are, I'll say, encouraging so far with respect to the Parmelia pipeline in Western Australia, and that has been a primary focus for us. We're -- so that's kind of on track, but we've still got work to do with respect to it. I think in reality, the answer is that, that will vary from pipeline to pipeline around the country. They were built at different times to different specifications. And I think one of the other things that I would say as well about pipelines is that it will also obviously depend on where you end up with your distribution networks and whether they can carry 100% hydrogen, and that will ultimately determine where hydrogen may or may not flow around the country. The other issue, of course, is being able to produce it economically, and there's a lot of enthusiasm for hydrogen. There's a lot of money that's going into it, but it's got a long way to go in terms of it being economic as well as being -- of it being economic. The other question you raised about hydrogen versus electricity, I think there's commentary this morning about that. And I think the reality is when you look at what the future energy demands are for the Australian economy, and this is the same all around the world, we're basically going to need every tool that we've got in our kit bag to be able to deliver reliable and affordable energy. And if hydrogen can get down the cost curve as those who are very enthusiastic about it seem to think it will, then it will be one of those things are available to us in our kit bag. But as I say, it's got a fair way to go to get down the cost curve.

Chairman, reintroducing Kevin as shareholder.

Kevin back again.

Hopefully, on the right issue this time. I noticed you've got the estimate of the price involved to 2030 is between $150 million and $170 million. Now I guess that some of that is going to be spent on regulated assets, and so here we do it in regulated asset base and produce income set by that route. But that amount of spend on the unregulated assets, any increase in income will have to come from you charging your users more. So I'm just wondering, to what extent you'll be able to gain income from the unregulated assets?

Well, it's a very informed question that you've got there, Kevin. Well put. So most of the money is primarily targeted at this point at nonregulated assets and looking at electrification of compressors and other things. It really is an open question as to customers' desire to pay. They will all no doubt. Because most of our customers are the -- obviously, the large players in the energy industry, either as retailers or as large users of energy, they'll all be looking to develop their own plans, and anything that we can do will obviously help them in the longer term. So they are typically the contracted assets. It's an open discussion that we'll have with our customers as to what future pricing might look like and what might be included out of what cost we may incur. So we haven't yet had that discussion.

Chairman, introducing Ray as a shareholder.

Ray? Thank you.

Thank you, Chairman, for taking my question in regards to the other shareholder and a question about blending. There is currently a company in Wisconsin in America that is doing tests on this right at this moment. So it looks like globally, it's blending of hydrogen and natural gas is happening.

Yes. In South Australia, they've been doing some tests over there as well, blending it into the network.

Let's hope it goes well. Now more -- from listening to your speeches this morning, are you planning on offsetting your carbon emissions by -- gas transmission by using renewable energy from Basslink? Is that going to offset?

Yes. No, not really. I mean Basslink is a transmission link, so we're not buying generators with that. Think about it pretty much in the same way as a gas pipeline where you've got a producer. In this case, generators in Tasmania will export to Victoria. And likewise, if they need -- if they're short of power in Tasmania, it will export there. So no, it doesn't work that way.

Chairman, introducing Hir as a shareholder.

UniSuper has long been APA's largest shareholder, but has been significantly reducing its stake in this company lately. This sell down has coincided with increasing commentary and commitments from UniSuper on climate change, including a commitment that the fund's actions will be consistent with the ultimate goals with Paris agreement, in particular, targeting net zero emissions at a whole of fund and portfolio level by 2050. So my question is this. How can APA shareholders view this sell down by our biggest shareholder as anything but the ultimate rejection of the company's inadequate kind of plan, irrespective of the outcome on this resolution?

Well, yes -- I mean, I think when you see where the properties are and you understand that UniSuper hold circa 12%, 13%, so there's still far and away our largest shareholder. I think it's pretty clear to see which way that they have voted. So I think they may disagree with you with respect to that. What I would say is that -- and the approach that UniSuper has taken, and there are many people who call for institutions out there to simply sell down your stock in companies like APA or oil and gas companies, and then there are people who, I think, take a far more proactive and educated approach, and like UniSuper, who think that they're much better to be inside the tent and proactively engage with us on our plan. And I have to say we've had very active engagement with UniSuper with respect to our plan. They certainly think that we've got more work to do with respect to it. But I think net-net, they're supportive of where we've got to so far. But no doubt, they want to see us do better as we move forward.

Indeed, I'm sure they do. In response to your remarks about active engagement, I take your point in principle. But we're here now today in a climate crisis 30, 50, 150 years depending on which date you pick from the earliest warnings, and we're still emissions realizing. So it's a bit difficult to accept that has any credibility at all. And I guess the other remark I'd make in connection with that is that the position that UniSuper might be adopting presently is not necessarily supported by their stakeholders, and I'm sure you're aware of the pressure in that respect and that, that may change in the future.

Sure. Look, what I would say, and I think I've said it already, you look at any of the modeling out. There is a critical role for natural gas to play not only in Australia but right around the world in getting to net zero by 2050. And I have said it before at previous AGMs, I think if people are genuinely interested in reducing emissions rather than just being ideologically opposed to natural gas, then we would have enough gas to make sure that we can get to net zero a lot quicker than we otherwise would. At the end of the day, if we don't keep energy reliable and we don't keep it affordable, then the community will respond to that. If we end up with blackouts and we end up or we're already seeing prices going through the roof on the electricity side of things, then my concern is that, that mandate, that community support for getting to net zero will be lost. So I come back to -- we firmly believe, and you look at whether it's the IEA's modeling, you look at the AEMO modeling, which are all -- one of the pathways to net zero by 2050, yes, there is a reduction in their forecast in the use of natural gas, but it plays an absolutely fundamental role to getting there. And I think sophisticated shareholders and the debate generally is around the planet, quite frankly, is starting to recognize how important natural gas is.

I accept. I think most people would accept that gas today and in the short term has a role to play, but your Climate Plan is predicated on continued near-term investment in new gas supplies being essential out towards 2040. Your stranded asset risk analysis for your member to Sydney and Southwest Queensland pipelines are considered resilient to climate risk. But in practice, this may require new basin development out until 2040. And on Page 25 of the plan, it says you're aligned with the objectives of the Paris Agreement. Now, that's clearly not only the objectives of the Paris Agreement. IEA and the UN have clearly said that there can be no new fossil fuel developments really from now in developing countries in order to do along with the Paris agreement.

I would say, well, we don't necessarily agree with everything that they have said. As I say, just to go back to you, you talk about today versus the future. I'd just repeat what I said. If you go and look at the International Energy Agency's transitions to net zero, there is still a very substantive role for natural gas come 2050. Go and look at the AEMO pathway to net zero by 2050 and their scenario analysis, and again, there is a very significant role for natural gas out to 2015. At the end of the day, look, if -- from our perspective, we absolutely believe that's where we need to go, and we absolutely intend to be part of the solution, not part of the problem. And being part of the solution means making sure that people have got reliable and affordable energy in the transition. You can't -- and it comes back to, and I'm sure you would advocate, just shut the coal-fired power stations. Well, I'm sorry. But whilst that might -- that's an ideal scenario. At the end of the day, the lights go out, and we lose the mandate. On the other hand, if you -- which is, again, what AEMO's modeling shows, as I forget the exact number, but say another 10,000 megawatts or so of gas-fired generation, which is required to back the system up, you need that to be built. So the question to me isn't so much how quickly can you take coal out of the system, it's how quickly can you replace it with low emissions energy being wind farms, solar farms or gas to firm it all up.

Okay. So given the nature of your business, I guess that's not unexpected, but it's very clear that renewable electricity is by far the most reliable and by far the most affordable electricity going to the future. And your plans predication on new gas development, it's clearly not aligned with the Paris Agreement objectives that you claim to be aligned with.

Okay. I'll take that as a comment.

Chairman, introducing Arthur as a shareholder.

Mr. Michael Fraser, I think I remember you for some time ago, probably years ago. You were COO of AGL. Is that right?

That's correct.

That's good. So my question come back, you say you are looking for not as a CEO for APA. Can you not perform both case because you have experience already? I believe it, too. I'm not sure APA was part AGL. Is that correct?

That's correct.

Also why you need a CEO, you got all the experience to do that. Okay. So that's my point of view.

Well, I'll take that as a vote of support. Thank you for that. But no, that's -- I'm at a point in my life that's not something that I'm contemplating.

So just a question. The other thing, I don't believe in climate change. I don't believe that role. I've been followed there for years. I got information from -- by Internet about Nobel Prize in Norwegian was over 50 years in science in wet and things like that, you see CO2 doesn't make any difference in change in the climate. Actually it says we are really going down the CO2 and the weather is going down. As we can see now, we have more rains. I live in Queensland, we have more rain now than ever before. We -- the way there's been a cooler there. If we are going now in spring, years ago, it used to be very hot. And the government make a propaganda and therefore was brainwashed everybody, climate change. I don't believe that at all. It's like coronavirus. Coronavirus are not. I am 80 years of age. I didn't have the vaccine. Even though they send to my house to have a vaccine, make me stay at home because I'll be fine if I'll do that, and I did. Now it's all bullish in America, actually. The over court case against Pfizer the company produces coronavirus, it proved it's all false, is all conned that they do it to everyone. We follow everything because in America, they do they will accept whatever they say here. And the same thing happens with the climate.

I think this meeting is about APA business.

But the climate we're talking about now. Approve the climate transition. I don't agree with that, and I don't believe we shouldn't because we do improve anything. Actually, we try mess up with the environment, eventually going to pay very hard with that. Actually, they don't say how many things we've been doing for the environment, we suck almost everything. Now we have solar in all their house. They have electric cars, but they don't talk about. They just talk we have to eliminate everything. We should come back to candle lights, and I don't agree with that because there's too much hysteria on that. That's my point of view.

Okay. Well, thank you. Thank you for your opinion. Just for the record, the Board's position is that the science of climate change as assessed by the IPCC is unequivocal. So that's our view. Do we have any other questions from the floor? No? So Kynwynn, are there any questions or comments on the platform on this item of business that we haven't already aired?

Yes, Chairman, there's a few questions. The first one is from Gregory John Decker. What is the APA Group's Climate Transition Plan?

Well, look, as we outlined in the -- in both my formal presentation and Adam, we published a plan back with the results in August. And really, what it is, it's a plan that sets out a series of commitments by APA of the role that we're going to play in Australia's transition to net zero by 2050, and there are commitments that we believe are consistent with the objectives of the Paris Agreement. And given the discussion that we've already had on this and the fact that I've gone through some of the detail, I won't go into any more detail about it. But that's the essence of what it is. It sets out a series of commitments that we've made to targets, goals, objectives between now and 2050.

The next question is from [ Kerrie Osmond ]. The Climate Transition Plan is nothing more than a transfer of the company's wealth and ability to control funds directly from the good of the company and shareholders to outside forces. When does the Board intend to stop pandering to those questionable, illegitimate and false influencers, which will enable the company to grow, expand and work to the betterment of the country?

Well, again, I respectfully disagree with the premise of the question. The Board's position, as I just stated, is that we believe the signs of climate change as assessed by the IPCC is unequivocal. We've committed, as I've said, to net zero by 2050. But very importantly, and I think the point that I was trying to make to the gentleman before, is we also absolutely believe that natural gas and natural gas infrastructure has a critical role to play in that transition to net zero. And we fundamentally believe that the steps that we're taking that we've outlined in our Climate Transition Plan are absolutely in the best interest of securityholders. And as I said before, our intention is to be part of the solution, not part of the problem as we transition.

The next question is from [ David Brice ]. Are there any ESG investors on APA's share register that are requiring APA to improve APA's carbon footprint on the environment and become carbon neutral faster than is reasonable?

Well, I think the real answer to that is that many, many institutions would regard themselves as being ESG-conscious. And as I've talked about before, we've had active engagement not only with UniSuper, who are our largest shareholder, but we've also had significant engagement with many of our securityholders, including the Australian Shareholders' Association representing retail shareholders. So the climate plan really is the result of proactive engagement that we've undertaken as a company. As we've progressed the development of the plan, we engaged -- so we've engaged with shareholders right along that journey.

Chairman, the next question is from Stephen Mayne. When disclosing the outcome of voting on all resolutions today, but particularly this Climate Transition Plan, could you please advise the ASX how many shareholders voted for and against each item, similar to what happens with the scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions and with the disclosure initiative adopted by the likes of Metcash, Altium and Dexus after their 2021 AGMs.

Look, the short answer is no, Stephen. I think you've gone to the heart of it. That's an issue that you would see with a scheme of arrangement where you need to know both by not only the number of votes, but the number of shareholders; in this case, corporations or, as you disclosed, the number of votes, and that's what we will do.

Chairman, the next question is from Stephen Mayne. What prompted the Board's decision to put the Climate Transition Plan up for a vote? And will you commit to doing this every year into the future, like what occurs with the nonbinding remuneration report vote, which is also a voluntary initiative?

The short answer is, at this point, we're committing to putting it up. As I said in my formal address, we're putting it -- we intend to put it up for a securityholder vote every 3 years. At the end of the day, these are -- and if people read the plan, these are longer-term targets that you're setting you take. We certainly will be reporting progress back to securityholders on an annual basis. But we don't intend to put it up until 3 years' time and then on a 3-yearly cycle, so that we actually have time to get some real traction on what -- on a number of significant projects. So that's where we are with respect to that. So the other part of the question, Kynwynn, was...

The nonbinding remuneration report is similar...

Yes, sorry, what prompted us -- the question Stephen asked was, what prompted us to put up? Look, I'd just come back fundamentally to -- I think I said we intend to be part of the solution, not part of the problem. We don't want to be a laggard. We clearly recognize that the space that we're in, in the energy industry, we clearly have a significant role to play in the transition, and we want to be on the front foot all the time. It's as simple as that. We could have sat back and waited to see, and it is early days for many companies in terms of putting these resolutions up, but we want to be on the front foot.

There are no further questions on the platform.

Thank you. All right. The details of the total valid proxies for this agenda item are displayed on the screen, and I'd like to remind you that voting is open. You can use the webcast platform to cast your vote. [Voting]

All right. The next 2 items of business up on the screen relate to nominations for the 2 Board positions -- for the 2 positions on the Board of the responsible entity, APA Group Limited, that become available on the retirement of James Fazzino and Rhoda Phillippo. For convenience, I'll refer to the responsible entity, APA Group 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 James Fazzino and Rhoda Phillippo. Both are eligible for reelection. 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 third item of business is approval of the Board-endorsed nomination of James Fazzino for reelection as a director of APA Group Limited. James was appointed a director in February 2019. He's been determined by the Board to be an independent director, and I'll now hand over to James to address the meeting.

Thank you, Chairman. It's a privilege to stand before securityholders seeking reelection to the APA Board. We're in currently in what is arguably the largest transformation ever in the Australian energy system. I believe that APA will play a key role in ensuring that the transformation is successful with respect to emissions, reliability and cost. The specific expertise that I bring to the Board during this time includes: firstly, an understanding of customer needs through my roles outside APA in working with energy-intensive manufacturers and in my previous role as CEO of Incitec, which was and remains one of Australia's largest energy consumers; second, a deep understanding of federal government policy and thinking on transition; and finally, hands-on experience in successfully executing world-scale projects, including hydrogen production and the hydrogen economy. I also chaired the Safety and Sustainability Committee of the Board. My relevant experience here is: firstly, an unwavering belief that you can work without incident and that all incidents are preventable; second, hands-on experience in safely running high-hazard, high-potential-consequence facilities, importantly, most of those in remote locations; third, expertise in diversity and inclusion, including psychological safety; and finally, experience in sustainably operating facilities in a way that protects the environment, generates jobs in local communities and create shareholder value. Thank you.

Thank you, James. Are there any questions on this item of business?

Chairman, introducing Sue from the Australian Shareholders' Association.

Welcome, Sue.