APA Group (ASX: APA) shares have gone into a trading halt as the energy infrastructure business announced its FY23 result and revealed a large Pilbara-focused acquisition.
The result is for the full financial year to 30 June 2023.
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FY23 result released, APA shares enter trading halt
- Revenue rose 7.4% to $2.4 billion
- Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew 2% to $1.725 billion
- Statutory net profit after tax (NPAT) increased 10.4% to $287 million
- Free cash flow fell 1% to $1.07 billion
- Distribution per security increased 3.8% to 55 cents
APA said that the revenue growth was driven by a "solid" energy infrastructure performance and inflation.
The underlying EBITDA didn't grow as quickly because it has been investing in its capabilities to "support growth ambitions and business resilience." Free cash flow declined slightly due to higher 'stay-in-business' capital expenditure.
What else happened during the year?
APA noted that one of its highlights was its capital investment of around $1.2 billion, which included $845 million invested in critical infrastructure projects, such as stage one of the East Coast grid expansion, the Northern Goldfields Interconnect project and the Dugald River solar farm.
The East Coast grid expansion will facilitate increased gas supply to meet projected shortfalls at times of peak demand in southern markets.
APA also completed the acquisition of Basslink, which is a large electricity cable that can supply energy in both directions between Tasmania and the mainland. It enables Tasmania to export some of its renewable hydropower.
Pilbara acquisition
APA announced today that it has entered into a share sale agreement to buy 100% of Alinta Energy Pilbara. This is an energy infrastructure business that has contracted operational assets across gas and solar power generation, gas transmission, battery energy storage systems (BESS) and electricity transmission.
It also has an extensive development pipeline of projects across those areas. This pipeline includes 82MW of solar and BESS projects, with at least 1GW of renewables-focused developments.
The enterprise value of this acquisition is $1.7 billion, with stamp duty and other transaction costs currently estimated at $86 million. The implied enterprise value multiple is 12.9 times forecast of FY24 EBITDA.
It's going to raise $675 million with a fully underwritten pro-rata institutional placement to partly fund the acquisition, with the balance to be funded by new debt. There will also be a non-underwritten security purchase plan (SPP) for eligible investors to raise $75 million.
This is expected to add to free cash flow per security in the first full year of ownership, and add value.
What did APA management say?
The APA CEO and managing director Adam Watson said:
The need to bring new gas supply to market is growing as we transition away from diesel and coal-fired power generation to renewables firmed by gas. And gas is critical to power Australian industry, manufacturing and minerals processing. With a unique ability to bundle energy solutions, APA is well placed to support our customers to meet their decarbonisation targets in the fastest and most efficient way possible.
We are confident the energy transition will present attractive opportunities across our four strategic growth asset classes of renewable power generation and firming, gas transmission, electricity transmission and future fuels, and we are well placed to build further momentum over the year ahead.
What's next for APA?
The business has guided that its FY24 distribution is expected to grow by 1.8% to 56 cents per security.
It said it's going to keep investing to ensure it has strong foundations, with a focus on corporate capability, its sustainability initiatives and its growth markets. Management is excited by the growth opportunities created by the energy transition.
The Pilbara acquisition and integrating it will also be a focus of the business.
APA share price snapshot
Before shares were halted, the APA share price had fallen by 12% in 2023 to date, while the S&P/ASX 200 Index (ASX: XJO) has risen by 2.5%.
