Driven by the strong performance and growth of our gas transportation and distribution business, and a full year's positive impact from internalising our operational and asset management activities, I am pleased to report that APA Group delivered a record underlying financial result for the 12 months to 30 June 2009. This represents our ninth successive year of record performance.

In the midst of a period of global uncertainty, we adhered to our strategy of growing the business sustainably and profitably, and strengthening our balance sheet.

We declared a final distribution for the financial year of 16.0 cents per security ('cps') taking the total distribution for the year to 31.0 cps - a 5.1% increase on the previous year, achieving the guidance provided at the interim results of increasing distributions by at least 5% for the year.

Financial performance

APA achieved a 7% increase in underlying revenue to $959 million and a 7% increase in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $459 million.

APA is a strong cash-generating business and the increase in operating cash flow provides the basis for increasing distributions to securityholders. During the year APA reported a 22% increase in underlying operating cash flow to $234 million, and a 13% increase in operating cash flow per security to 48.2 cps.

True to strategy, distributions continued to be well covered by operating cash flow. Cash remaining after distribution payouts was used to fund business growth, as was the $79 million capital raised through the Distribution Reinvestment Plan and the Security Purchase Plan which operated during the year.

Key achievements

Our strategic focus for the year has been to continue to enhance APA's portfolio of gas assets and strengthen our balance sheet. We delivered on this strategy, with several key achievements.

We established an unlisted investment vehicle, Energy Infrastructure Investments (EII), in December 2008, selling a number of APA's annuity-style assets to EII and attracting international industry experts, Marubeni Corporation and Osaka Gas Company, as co-investors. APA continues to benefit from the assets through retention of a 19.9% minority equity interest in EII, and assuming responsibility for managing Ell's assets under a long term agreement. The $647 million in funds received from the EII transaction were predominantly used to pay down debt.

In a tight credit market we have now successfully refinanced the $1 billion of debt due in the 2010 calendar year, receiving strong support from local and foreign banks, as well as the US private placement market. The Standard & Poor's initial credit rating of BBB assigned to us in May 2009 was additional confirmation of APA's investment grade status.

Our market-leading portfolio of gas transmission and distribution assets was further enhanced by a number of expansion developments and acquisitions during the year.

APA completed the Bonaparte Gas Pipeline and Wickham Point Pipeline in the Northern Territory ahead of schedule and on budget, creating Australia's newest gas pipeline. These assets were included in the EII transaction.

Expansion of the Victorian Transmission System continued, with the commissioning of the Brooklyn Lara Pipeline in the south, and commencement of capacity expansion in the northern section of the system.

We increased the capacity of the Goldfields Gas Pipeline in Western Australia and the Carpentaria Gas Pipeline in Queensland through the addition of three new compressor stations to those pipelines. We also completed the first stage of expansion work on the Moomba Sydney Pipeline, geared towards increasing its capacity for delivering and storing larger volumes of gas.

During the year we undertook a small but strategic acquisition. APA acquired the Central Ranges Pipeline for $23.5 million. The pipeline is connected to APA's Moomba Sydney Pipeline system and provides additional storage capacity as well as delivery of gas to the Central Ranges region. We also increased our interest in Envestra Limited during the year from 18.3% to 30.4% through participation in, and partial underwriting of Envestra's rights issue and participation in Envestra's Distribution Reinvestment Plan.

Securityholders

In December 2008 APA established a security sale facility for securityholders who held APA securities worth less than $1,000. Through the operation of this facility the number of APA securityholders decreased by 26,565, or 26%, and consequently reduced our register administration costs.

Management team

In June 2009 we appointed Peter Fredricson as the Group's Chief Financial Officer. Since his arrival, Peter has been actively involved in APA's capital management activities as well as overseeing the year end financial reporting process. His strong track record and experience will be of great benefit to APA. The Board thanks Ross Gersbach for standing in as Chief Financial Officer for five months this year, and ensuring APA achieved its refinancing objectives.

Outlook

The Board remains focused on ensuring APA delivers secure and growing operating cash flow from all parts of our business. We expect to see continued and increasing demand for our natural gas transportation, distribution and storage services. The general move to cleaner energy alternatives such as natural gas is supported by government policies and the positive choices of businesses and households.

In the coming year, APA will benefit from the pipeline expansion activities completed this year. APA will continue to enhance capacity and services on our regulated and contracted assets, supported is by a strengthened balance sheet.

Barring unforeseen circumstances, APA directors again affirm their intention to increase distributions in the 2010 financial year by at least 5%, with distributions fully covered by operating cash flow.

In conclusion, I would like to thank my fellow directors, Managing Director Mick McCormack and the 1,100 talented and energetic APA employees for their contributions to our record performance this year. Thank you also to our valued and loyal securityholders, for your continued support.

Len Bleasel AM
Chairman APA Group