APA Group (ASX: APA) Lifts EBITDA 8.3% and Guides Higher

APA Group reported stronger underlying earnings and free cash flow for the year ended June 30, 2026. Cost reductions, inflation-linked tariffs and new assets outweighed softer earnings from Victoria’s transmission system.

Underlying EBITDA rose 8.3% to $2.18 billion, exceeding the midpoint of APA’s guidance. The underlying EBITDA margin expanded 370 basis points to 77.9%.

APA operates more than 15,000 kilometres of gas pipelines and delivers around half of Australia’s domestic gas. Its portfolio also includes electricity transmission, gas-fired generation, renewables and battery storage. Much of its revenue comes from capacity charges, regulated arrangements or fixed contracts.

Earnings Drivers Come Through

New assets contributed $70 million to underlying EBITDA. These included the Kurri Kurri lateral pipeline, Port Hedland Solar and Battery Energy System, and Atlas to Reedy Creek pipeline.

Inflation-linked tariff escalation added $66 million. Meanwhile, enterprise-wide cost reductions contributed $80 million, beating APA’s $50 million target. Corporate costs fell 20.6% during the year.

Statutory net profit after tax increased 81.4% to $234 million. However, total revenue declined 6.3% to $3 billion, mainly reflecting lower pass-through revenue. Segment revenue excluding pass-through items rose 3.2% to $2.8 billion.

Free cash flow increased 3.2% to $1.12 billion. Higher underlying earnings offset increased interest and tax payments. Operating cash flow declined 2.5% to $1.25 billion.

Distribution Growth Continues

APA declared distributions of 58 cents per security, up one cent from FY25. This represented its 22nd consecutive year of distribution growth.

For FY27, APA expects a distribution of 59 cents per security. It also expects free cash flow to grow broadly in line with inflation.

The distribution guidance remains subject to asset performance, macroeconomic factors and regulatory changes. It excludes the effects of any future acquisitions or divestments.

FY27 Guidance Points Higher

APA forecast FY27 underlying EBITDA between $2.26 billion and $2.34 billion. The $2.3 billion midpoint represents growth of 5.4% from FY26.

Expected drivers include inflation-linked tariffs, new asset contributions and the regulated conversion of Basslink. APA also expects another $20 million of cost reductions, taking the annualised run-rate to $100 million.

These benefits will be partly offset by earnings lost through the Networks and GDI divestments. APA received combined proceeds of $101 million from those sales during FY26.

Growth Pipeline Expands

APA increased its FY27-to-FY29 organic growth pipeline to about $3.5 billion from roughly $3 billion. Planned spending covers gas transmission, storage and contracted power generation.

Major projects include the East Coast Gas Grid expansion and the South West Pipeline expansion. The pipeline also includes Sybella Creek Solar and Battery Energy Storage System.

Construction of the Sturt Plateau Pipeline is complete. It will transport up to 40 terajoules of Beetaloo gas daily to Northern Territory power generation assets.

APA is also progressing the proposed 400-megawatt Brigalow Peaking Power Plant in Queensland. Operations are targeted from 2028, although development remains conditional on approvals and final documentation.

Net debt remained at $12.6 billion, while liquidity increased to $3.1 billion. Funds from operations to net debt improved to 11.2%, above APA’s stated 8.5% threshold.