APA in raising drive for $1.2bn in pipeline, renewable energy and gas processing projects

APA Group has embarked on a $500m rights issue to help fund its $1.2bn capital growth program.

APA Group CEO Mick McCormack. Picture: Hollie Adams

Pipeline operator APA Group has embarked on a $500 million rights issue to help fund its $1.2 billion capital growth program of pipeline, renewable energy and gas processing projects.

The capital raising was announced yesterday with the company’s first-half earnings report, where APA logged an 11 per cent fall in profit for the half to $124m, on the back of increased finance costs and higher depreciation and amortisation. “The half-year results are in line with the expectations that we signalled in August 2017,” APA group managing director Mick McCormack said. “APA’s unprecedented capex spend over the next couple of years will start delivering additional revenue from 2018-2019, with a significant further kick-up in 2019-20.” The raising will come as a one-for-17 fully underwritten renounceable entitlement offer at $7.70 per share — a 6.4 per cent discount to the theoretical ex-rights price.

The company said the offer would position APA to take advantage of growth opportunities and maintain its current debt headroom. “What we’re investing in now is in direct response to our customers’ needs to better enable them to run their operations over the coming years,” Mr McCormack said.

“Australia’s energy market is a dynamic one and APA will continue delivering infrastructure to assist the market to evolve for the benefit of our customers.”

Ratings agency Moody’s said the results were in line with expectations and that the capital raising would maintain APA’s position at the stronger end of its Baa2 credit rating. “Moody’s regards the maintenance of a degree of headroom within the rating as important in providing a buffer for the incremental capital expenditure and execution risk associated with the company’s sizeable $1.2bn capital program, and the likelihood of tempered future tariff increases as the regulatory environment evolves,” the ratings agency said. “Moody’s expects APA Group’s earnings to increase as various capital projects are commissioned and commence generating revenue.”

APA declared an interim distribution of 21c per security, up 0.5c on a year earlier. “APA is in the midst of its largest organic capital growth expansion spend to date, with current committed projects of over $1.2bn and growing,” chairman Michael Fraser said. APA said it had appointed former Alumina chief executive and Santos chief financial officer Peter Wasow and former Verve Energy managing director Shirley In’t Veld to its board.