ASX RELEASE 20 November 2014 The Manager ASX Market Announcements Australian Securities Exchange 4 th Floor, 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Dear Sir or Madam Company Announcement I attach the following announcement for release to the market: • Investor meeting presentation Yours sincerely Mark Knapman Company Secretary APA Ethane Limited
Investor Presentation 20 November 2014
Introductions and Agenda Introductions – Board of APA Ethane Limited, the Responsible Entity for EPX Robert Wright – Non-Executive Director, Chairman • Rick Coles – Non-Executive Independent Director • Nancy Fox – Non-Executive Independent Director • – Management Sam Pearce – Fund Manager • Mark Knapman – Company Secretary • Agenda 1. Brief Overview – Robert Wright 2. Distributions in FY15 (year to date) – Robert Wright 3. FY14 Results – Sam Pearce 4. Balance Sheet Summary – Sam Pearce 5. Product Transportation Agreement changes – Sam Pearce 6. Key Issues – Sam Pearce 7. FY15 Distribution Guidance – Robert Wright 8. Question & Answer Session Investor Presentation 2
Brief Overview Principal Activity - Investment in the Moomba to Sydney Ethane Gas Pipeline, through wholly owned subsidiary, Gorodok Pty Limited. - Pipeline – 1375km in length, running through regional NSW as well as the urban areas from Wilton into Botany. Commercial Arrangements - Pursuant to a long term Product Transportation Agreement (to 2030) with its sole customer, Qenos, provides capacity on the pipeline for the transportation of ethane from the gas processing plant in South Australia’s Cooper Basin to a petrochemical plant near Botany Bay, Sydney owned by Qenos. - Effective 1 January 2015, charges under the Product Transportation Agreement will change from a mixture of reservation and transportation charges, to a fixed minimum charge thereby removing the risk to revenue associated with volume until 2018. Operations - EPX has no employees - Operational roles are undertaken by East Australian Pipeline Pty Limited under long term operations and maintenance contract. Investor Presentation 3
Distributions in FY15 (year to date) On 25 August 2014, EPX announced the Sept Dec Distribution distribution for the quarter ending September (paid (payable (cps) 2014 of 3.20 cents per security and franking 15 Oct 14) 15 Jan 15) credits of 1.05 cents per security. The cash Cash 3.20 3.25 distribution consisted of fully franked dividends from EPIT and interest income trust distributions Franking 1.05 1.07 from EPIFT. Total 4.25 4.32 Today, EPX has announced the distribution for the period ending December 2014 of 3.25 cents per security and franking credits of 1.07 cents per security. The cash distribution consists of fully franked dividends from EPIT and interest income trust distributions from EPIFT. Investor Presentation 4
FY 14 Results Statutory Results FY14 Distributions $’000 % Period Date Cash Franking Change Paid per credits security per 16.2 ▼ Revenue from PTA 22,217 (cents) security 35.7 ▼ (cents) Net Profit After Tax 5,135 July 13 - Sept 13 15 Oct 13 3.29 1.09 14.6 ▼ Operating Cash Flow 10,549 Oct 13 - Dec 13 15 Jan 14 3.29 1.09 14.6 ▼ Operating Cash Flow 15.2cents per Security Jan 14 - Mar 14 15 Apr 14 3.04 0.99 Apr 14 - Jun 14 15 Jul 14 3.04 0.99 NPAT primarily impacted by: Total 12.66 2.18 $4.3 million reduction in revenue ($3.0 million after tax) as a result of lower volumes of ethane transported and a change in the tariff structure under Distributions primarily impacted by: the PTA from 1 October 2013 Fund continuing to be in a tax payable position Operating cash flow primarily impacted by: Quarantined funds held for major OpEx and CapEx Payment of the balance of prior year tax liability ($2.3 projects million) Reduction in cash receipts due to change in PTA pricing structure Offset somewhat by the receipt of the June 2013 Qenos debtor amount in July 2013 Investor Presentation 5
Balance Sheet Summary FY15 Expectations Actual FY14 ($000) Cash and cash equivalents Current 6,442 Full year of Pay-As-You-Go tax Non-current 2,169 instalments for FY15 of $2.9 million Total cash and cash equivalents 8,611 Property, plant and equipment 33,640 Intangible assets 41,158 Other Commence utilising the mine-subsidence Current 800 provision from late FY15, which is Non-current - delayed from prior expectation Total Assets 84,209 Trade and other payables 2,928 Income tax payable 726 Other Current 150 Non-current 6,070 Total Liabilities 9,874 Net Assets 74,335 Issued capital 88,765 Accumulated Losses (14,430) Total Equity 74,335 Investor Presentation 6
Product Transportation Agreement changes Background • Qenos approached EPX seeking some relief under the PTA to match their volume expectations under their proposed new ethane supply arrangements. • After detailed negotiations, terms acceptable to EPX were agreed in November, with effect from 1 January 2015. Summary of changes ** 1 Jan 2015 – 31 Dec 2018 Fixed reservation charge of $20 million p.a.*, nil transportation charge unless agreed annual thresholds met. If thresholds met, current tariff structure (reservation and transportation charges*) Impact of changes will apply. Increased certainty under PTA From 1 Jan 2019 onwards No volume risk in period 2015-2018 The tariff reverts to current tariff structure (reservation No termination before 1 Jan 2019 and transportation charges*) Mechanism to allow EPX to recover the amount of Reduction in revenue compared to FY14 revenue it would otherwise have been entitled to in FY14 total revenue was $22.2 million 2015-2018 if the tariff structure was not changed, subject to meeting agreed monthly volume thresholds. Stability in cash available for distributions Termination Certainty of revenue allows for detailed planning Termination cannot occur before 1 Jan 2019. Qenos’ must provide 12 months notice. If given prior to 1 Jan 2018, the tariff for 2018 will be based on the current tariff structure (reservation and transportation charges*). Otherwise, the tariff in 2018 will be as set out in the first point above. * Adjusted annually by 50% of CPI ** Further details set out in the EPX ASX release dated 13 November 2014 (attached) Investor Presentation 7
Key Issues Product Transportation Agreement Distribution guidance reflects the impacts PTA changes with effect 2015 to 2018 on revenues Increased revenue certainty Removal of termination risk prior to 1 Jan 2019 Non Routine Operating Costs Mine Subsidence Monitoring Due to underground coal mining activities in the Appin Required to maintain pipeline integrity region Quarantined funds available Expected to incur ~$150k in FY15 Magnetic flux leakage inspection pigging Required to maintain pipeline integrity “Intelligent” or “smart” pigging, inclusive of required cleaning pigging into Botany Quarantined funds available, additional Expected to cost ~$2.5m in FY17 and ~$0.8m in FY18 funds to be quarantined Capital Management Quarantining of Funds Required to manage known material items Quarantined funds for future material known items in upcoming years ($3.4 million as at June 14) Nil from FY14 cash flows ~$0.5m from FY15 cash flows Investor Presentation 8
FY15 Distribution Guidance Distribution Sept Dec Mar June (cps) (actual) (announced) (forecast) (forecast) Cash 3.20 3.25 3.0 – 3.25 3.0 – 3.25 Franking 1.05 1.07 ~1.0 ~1.0 Total 4.25 4.32 4.0 – 4.25 4.0 – 4.25 Based on the above guidance distributions will be paid: – around 80% from EPIT fully franked – around 20% from EPIFT unfranked (no tax deferred component expected) FY15 impacted by PTA amendment – distributions impacted accordingly Investor Presentation 9
Ethane Pipeline – Wilton to Port Botany Investor Presentation 10
Ethane Pipeline – mine subsidence Investor Presentation 11
Ethane Pipeline – through Sydney Investor Presentation 12
Ethane Pipeline Scraper Station Ethane Pipeline 200 mm diameter Investor Presentation 13
Bulla Park Pump Station Ethane Pump Station From Moomba To Sydney Investor Presentation 14
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