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APA Group (ASX:APA) plots a steady path to low emissions future

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APA Group (ASX: APA) held its annual general meeting (AGM) today, which focused on the resilience of the company’s revenue streams and the drive to a lower emissions future. In fact, much of the company’s future plans revolved around reaction to the economy’s transition to lower emissions. APA Group owns and manages a network of natural gas pipelines.

Financial performance

Revenue was up 4.8% on the previous year, while earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 5.1% year on year. Consequently, the company was able to declare full year distributions of 50 cents per security. This is an increase of 6.4% on FY19. For long-term investors, total securityholder returns since APA’s listing 20 years ago in June are now 2,203%. 

The transition to low emissions economy is a significant area of focus for the company. While natural gas will undoubtedly remain critical , there are also significant opportunities in new energy sources, as well as opportunities to continue growing the company’s renewable portfolio. In addition, the company is now Australia’s 6th largest owner of renewable power generation assets, with just over half of its power generation coming from wind and solar.

For example, the Australian Renewable Energy Agency (ARENA) announced $1.1 million of funding for a renewable methane pilot project. The project seeks to determine whether it’s possible to create methane using solar powered electricity, water and CO2 from the atmosphere on an industrial scale. 

A pathway to low emissions growth

In April, the company published its Climate Change Position Statement. In further commitment to low emissions, it has also delivered its first Climate Change Resilience Report. This is a comprehensive analysis of the resilience of APA’s current asset portfolio under three divergent climate scenarios to 2050. Moreover, the company continues to play its critical role in addressing the urgent energy challenges of today. For instance, the government has specifically highlighted the gas sector in supporting Australia’s recovery from COVID-19.

With a forecast 2023 winter gas supply shortfall, the company is working to ensure capacity is not a constraint. To this end, it advised it will invest up to $700 million to increase capacity by up to 50% from its Wallumbilla Gas Hub in Queensland to southern markets.

Company Managing Director and CEO, Rob Wheals, commented: “As we’ve said before, we see over $4 billion of domestic growth opportunities over the next five to 10 years. Of these as much as $1 billion of projects are in active discussion with customers for decisions and/or delivery over the next two to three years.”

APA share price performance

The APA share price is down by around 3% since the start of the year. It currently trades at a price-to-earnings ratio of 39.6, and has a trailing 12-month dividend yield of 4.6%.

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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of APA Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Daryl Mather