Organisational Structure
	Principal Activities
	Strategy

Organisational Structure

At the annual meeting of APA in October 2004, securityholders approved changes to the Australian Pipeline Trust (APT) constitution to enable APA to staple securities of another entity to APT units.

Historically APT was a taxpaying public trading trust, with securityholders generally receiving after-tax distributions of income together with periodic returns of capital.

In December 2006, APT Investment Trust (APTIT) was stapled to APT to act as a passthrough trust for tax purposes. A passthrough trust is not required to pay tax on its income and as a result distributions are made pre-tax. Distributions in excess of taxable income resulting from tax timing differences can also be passed through to securityholders as tax deferred income. APTIT is therefore generally able to make higher cash distributions out of the income it receives and also return capital on which tax is deferred until units are sold.

APA believes that the stapled structure allows maximum distribution flexibility to securityholders allowing them to obtain higher cash distributions than would otherwise be the case.

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Principal Activities

APA’s portfolio comprises a mix of established pipeline assets, assets under development and complementary energy infrastructure assets. It derives its reliable and predictable revenue stream through a mix of regulated returns and negotiated revenue contracts. APA has assets in each mainland state and territory.

Gas Transmission

APA is the leading owner, manager and operator of natural gas pipelines in Australia. APA owns, or has an interest in more than 10,000 km of gas transmission pipelines in all mainland states and territories of Australia. APA transports approximately 50% of the natural gas consumed in Australia.

Gas Distribution

In 2006, APA purchased Allgas, one of the two major gas distribution businesses in Queensland. Allgas services some of the high population growth centres in south east Queensland and northern NSW. The Allgas distribution network supplies 65,000 customers and includes over 2,300 km of distribution mains located in Brisbane, the Gold Coast, northern NSW, Toowoomba and Oakey. A significant expansion program has been approved by the regulator to satisfy rapid growth in gas demand in the region.

Electricity Transmission

APA owns and operates both Murraylink and Directlink, which are underground direct current electricity cable interconnectors. Murraylink connects the South Australian and Victorian electricity grids and Directlink the Queensland and New South Wales electricity grids.

Gas Processing

APA owns and operates two gas processing facilities, Kogan North and Tipton West. Both are located west of Brisbane. Kogan North processes coal seam gas from the Kogan North gas field for transportation through the Roma to Brisbane Pipeline to Swanbank E Power Station. Tipton West processes coal seam gas for supply to the Braemar Power Station.

Gas Storage

The Mondarra gas storage facility is located near Dongara, Western Australia, and adjacent to the two pipelines servicing Perth, including APA’s Parmelia Gas Pipeline. It is currently the only commercial underground gas storage facility in Western Australia. APA is expanding the facility in response to the need for peak gas demand to service customers in Perth.

APA owns a liquid natural gas storage facility in Victoria which provides peak shaving and security of supply services for the Victorian gas transmission system.

Electricity Generation

APA has constructed one gas-fired power station (“Daandine”) and is constructing a second (“X41”). Daandine is located adjacent to the Kogan North gas processing facility and will produce 27.4 MW of electricity in base load operation.

X41 is a 30 MW power station which will be fuelled by gas transported in APA’s Carpentaria Gas Pipeline and will be connected into the grid servicing the mineral rich province in the Mt Isa area.

APA believes that gas-fired power generation will increasingly be viewed as a viable and greener alternative to coal-fired power generation, particularly as both the major Federal political parties committed to the introduction of a national carbon trading scheme in the coming years.

Greenfield Developments

In June 2006, APA announced that it would develop the Bonaparte Gas Pipeline in the Northern Territory, which will transport gas from Wadeye on the Bonaparte coast to Darwin to meet the Northern Territory’s Power and Water Corporation power generation requirements.

APA is also pursuing a gas transmission grid on the eastern coast that will offer a seamless tariff for gas delivered into Queensland, New South Wales, the Australian Capital Territory and Victoria.

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Strategy

Our vision is to continue to grow as Australia’s leading energy transmission and distribution Business. The strategy is simple. We are committed to growing the Business and maximising value for securityholders in the short, medium and long-term.

APA has a three phase approach to growth, by: growing the Business organically; investing in brownfields and greenfields projects, and acquisition. Organic growth occurs via the expansion of existing assets and, in particular, our core pipeline assets. Our success in increasing throughput and developing innovative arrangements on the Roma to Brisbane Pipeline and Goldfields Gas Transmission Pipeline are good examples of this.

Brownfields projects, which involve the development of, for example, compressor stations, provide immediate returns by building upon an already established income stream. Greenfields opportunities provide sustained longer-term returns arising from the benefit of investment in the initial stages of the projects. The Bonaparte Gas Pipeline is an
excellent example of a greenfields project which will take several years to build, but will then provide strong, sustainable returns.

Finally, the acquisition of core and complementary assets completes the three phase approach, ensuring that APA’s philosophy of being a stable, strong and long-term investment for securityholders is achievable.

Underscoring our investment strategy is the goal of increasing distributions by at least CPI annually. In looking at our achievements for the 2007 financial year, APA has exceeded that target by providing an annual increase of 16.7% over the previous year, demonstrating the value of our acquisition strategy.

APA has a vision of developing a gas transmission grid on the eastern seaboard that will offer a seamless tariff for gas delivered into Queensland, New South Wales, the Australian Capital Territory and Victoria. This will greatly assist the expansion of a competitive gas market in Australia, by providing greater access to multiple supply sources and enhancing producer on producer competition.

APA’s business model is a low cost, transparent and competitive one. Our approach distinguishes us from many other businesses that operate a fee based model.