APA Group points to $1.4bn pipeline after CEO Rob Wheals’ sudden exit

Outgoing chief Rob Wheals described it as a solid result but investors are likely to focus on its decision to exit North America and search for a new leader.

Departing APA Group boss Rob Wheals has batted back suggestions the gas pipeline giant had been forced to rip up its old strategy, arguing the board’s decision to abandon a $4bn foray into North America did not mark a major U-turn for the company.

Mr Wheals unexpectedly quit on Monday after several large shareholders approached the board, demanding the shutdown of its stalled North American expansion and calling for a broader strategy reset to tap into net-zero investment opportunities.

While UBS analyst Tom Allen said it looked like a significant shift in strategy and lowering of risk appetite since its investor day in May, the APA chief said the overall vision remained the same.

“There’s really no major shift aside from the fact we’ve made that decision that the US is not one of those building blocks for us,” Mr Wheals said after delivering its annual results on Wednesday.

“We just think the risks and challenges associated with the US needed to be weighed up against the opportunities in front of us to participate in effectively what‘s going to be a rebuilding of the national electricity market in Australia.”

APA pointed to a $1.4bn growth pipeline tapping into net zero investment projects and expects gas to play a critical role into the next decade — despite climate concerns — with Russia’s invasion of Ukraine underscoring a global energy security rush to secure supplies.

The company said the current “disorderly” retirement of coal and renewables investment will lift volatility and costs in the power grid, calling for more investment in gas to smooth out a rocky transition in the electricity system.

It laid out a new climate plan with a scheme to cut emissions by 30 per cent by 2030 in gas transmission and net zero operational emissions by 2040 for power generation and electricity transmission infrastructure.

APA also evaluated the resilience of four APA assets to climate transition risk under different Paris-aligned scenarios, including a 1.5 degree scenario, and found the Moomba-Sydney pipeline and South West Queensland pipeline were “relatively resilient to 2040” providing northern gas supplies are sufficient to meet demand.

“I don‘t think anybody can sit here today and predict what the world’s gonna look like in three decades time. But what you can do is so a number of different scenarios and how might that trend translate which is exactly what we’ve done,” Mr Wheals said.

APA said it was targeting gas transmission, electricity transmission and renewables deals with an organic growth pipeline in excess of $1.4bn covering the period from 2023 through 2025.

Projects include the Northern Goldfields interconnect, East Coast gas expansion, Kurri Kurri pipeline, Mica Creek solar farm and Western Outer Ring. It’s also bidding for the Tasmanian undersea power cable Basslink.

APA Group has pointed to a $1.4bn growth pipeline tapping into net zero investment projects as it works to re-boot its strategy after the shock departure of its chief.

As disclosed on Monday, the Sydney-based company’s underlying earnings rose 3.9 per cent to $1.69bn, free cash flow up 19.8 per cent to $1.08bn and a dividend of 53c a security, up 3.9 per cent on the last year. APA expects to lift its 2023 dividend by 3.8 per cent to 55c per security.

Energy infrastructure earnings rose by 5.4 per cent to $1.71bn led by its east coast and Wallumbilla Gladstone pipeline, where it called out favourable US inflation with its annual reset in January 2022 lifting 7.5 per cent. Revenue grew from stronger demand within the Victorian transmission system and a full year of Orbost gas processing plant income.

Mr Wheals will be replaced on an interim basis by chief financial officer Adam Watson, a former Transurban executive who is expected to be in the frame for the top job on a permanent basis.

The future of its North American boss, Ross Gersbach, will be discussed with the board in the next few weeks.

APA owns 15,000km of gas pipelines worth $21bn across Australia and delivers half the nation’s gas along with stakes in storage facilities, power stations and wind and solar farms. Its shares fell 2.1 per cent or 24c to $11.30.

Originally published as APA Group points to $1.4bn pipeline after CEO Rob Wheals’ sudden exit