APA Group Remains Optimistic on Pilbara Green Energy Rollout Amid Setbacks
APA Group's chief executive, Adam Watson, has reaffirmed his confidence in the potential for a significant green energy rollout in the Pilbara region, even as customers experience delays in their transition timelines. The company, which acquired Alinta Energy's Pilbara power and storage portfolio in 2023, is actively pursuing development projects, including new transmission lines, to bolster renewable energy infrastructure.
Strong Financial Performance and Growth Prospects
Mr Watson highlighted the robust financial performance of the acquired assets, noting they generated approximately $140 million in earnings last year, representing a yield of around 10 per cent. "These assets are generating a lot of cash, about $140 million of earnings last year, representing a yield of around 10 per cent, which is obviously very strong," he stated. Despite slower-than-anticipated demand for new power generation developments from customers in the Pilbara, the development pipeline has expanded, positioning APA for future opportunities.
APA remains focused on remote regions beyond the Pilbara, such as Kalgoorlie and Mt Isa, where similar green energy initiatives are being explored. The company's commitment is underscored by recent strategic moves, including a land-use agreement with a local Indigenous corporation in December to consider establishing a renewable energy hub at Newman, near BHP's major iron ore mining operations.
Progress on Key Transmission Projects
In 2024, APA secured priority status from the State Government for two critical transmission projects: the Hamersley Range Corridor, which will connect Port Hedland to Newman, and a link for the Burrup Peninsula. Mr Watson reported "reasonably good progress" on the Burrup Peninsula project, with planning approvals advancing and ongoing collaboration with customers and government authorities.
These initiatives are part of APA's broader strategy to enhance energy transmission and support the transition to renewable sources in resource-rich areas.
Financial Results and Market Reaction
On the financial front, APA Group, based in Sydney, posted a substantial 180 per cent increase in profit for the first half of the financial year, reaching $95 million. However, despite this positive outcome, shares declined by 2.4 per cent to $9.01 at the market close, reflecting investor caution amid broader market conditions.
Expansion of East Coast Gas Network
Concurrently, APA has initiated a major expansion of its east coast gas network, aimed at increasing capacity by 30 per cent. The company plans to invest about $480 million in two projects designed to improve gas flows between northern and southern states. This move comes in response to warnings of a potential gas shortage in Victoria by the end of the decade.
Mr Watson emphasized the necessity of this expansion, stating, "The demand for stage 3 (of the expansion) is clear and domestic gas is not a constraint. This expansion plan is a timely and cost-competitive solution to our predicted southern market supply shortfalls."
Overall, APA Group is navigating a complex energy landscape with a dual focus on advancing green energy projects in the Pilbara and strengthening gas infrastructure on the east coast, all while maintaining financial resilience and strategic growth.
