A shareholder raised why remuneration such as that proposed to the MD as 'performance rights' surreptitiously dilutes other holders' interests.
The Chairman repeated what was above re alignment of interest.
Several shareholders asked questions re 'when is performance of the company going to be in line with the CEO's remuneration?' The Chairman said that there's a $1.3 billion organic growth pipeline, and increased dividends have been paid and will occur in the future. The problems with Orbost's gas processing plant have been reflected in reduced payments to some executives involved in that.
'Woke' activists raised a question about APA 'diversifying away from fossil fuels'. The Chairman said 'APA totally accepts the science of climate change' (many non-woke individuals may disagree, including thousands of scientists) He talked of APA's 'commitment to net-zero by 2050, and alignment with the Paris Accord. (Oh dear!)
The APA Pathfinder Program is examining future technologies, and it's the eighth largest renewables investor in the nation. (Hmmm: not sticking to its knitting).
Re green hydrogen, the PP above is focused on micro-grids, clean molecules storage and the Western Australian Parmelia gas pipeline (43km long), looking to be converted to the first hydrogen-ready pipeline in Oz. There's another project in Gladstone Qld looking at green hydrogen for export to Japan.
The Australian Shareholders Association asked re impairments incurred in FY 21, specifically Orbost. The Chairman said it's only two per cent of APA's revenue: it was originally designed to operate at 68Tj/day but it has not done this. The sulphur recovery unit is not operating well due to fouling and foaming issues. The value is now based on 45 Tj/day: work is continuing. It will review the value of the plant in due course.
Several holders asked re the falling share price over the last three years. The Chairman said that brokers' consensus was 'north of A$9.50'. The Chairman noted the six per cent yield, the forecast of increased dividends plus the A$1.3 billion growth pipeline. There are others that may get to signoff in the next little while. If APA is successful in AST acquisition, it will create more growth opportunities.
APA very firmly believes that there is a very long runway for natural gas as it'll support hard to abate/hard to electrify sectors. The world will need all available technologies to achieve 'net zero by 2050'.
The ASA also asked re the AST offer of APA's, suggesting that a price of A$2.60 was well above value. Some 90 per cent of AST's revenue comes from regulated assets. The Chairman said this was an opportunity for Australians to own the merged business. APA won't make the investment unless it clears APA's hurdles. It says it'll be cashflow accretive in the first year. To date, in Victoria and outside Vic, there have been constraints in AST's constitution as to how it can grow the business: APA's takeover would remove such constraints.
State Governments that have plans for renewables give a growth opportunity for the AST business, plus the chance to have operating synergies, and optimisation of AST's balance sheet under APA control.
Savings of the regulated businesses could be shared between consumers and shareholders.
As of this morning, APA is still not in the AST data room. (Incredible!) There is still no clarity from AST as to how the latter intends to run a competitive process, essentially ignoring the Takeovers Panel's decision.
The ASA further asked re borrowings: APA/AST each have A$9 billion of debt. Funding the acquisition may require up to $5 billion. The Chairman said that there'd be a pro-rata raising of A$1.5 billion plus an SPP of A$300 million. One component of the offer is APA scrip, the rest is cash. APA is confident it can put in place the required debt package.
APA Price at posting:
$8.43 Sentiment: Hold Disclosure: Held
(20min delay)