Well, good morning, everyone. My name is Michael Fraser. I'm the chairman of APA Group Limited, the responsible entity for the APA Group that comprises APA Infrastructure Trust and APA Investment Trust. On behalf of the board, I'd like to welcome you all to this annual meeting of each of those trusts. Given it is now past 10:30 A.M. and a quorum is present, I declare the 2023 annual meeting of APA security holders open. In the spirit of reconciliation, I'd like to begin today by acknowledging the Gadigal people of the Eora Nation as the traditional custodians of the land where this meeting is taking place. We pay our respect to their elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander people here or online with us today.
Today's annual meeting is a hybrid meeting, which means it is being held both virtually and in person. Before we move to the formal aspects of the meeting, I'd like to assure security holders that every effort has been made to provide you with the opportunity to fully participate in today's meeting. You can ask questions directly from the floor, via the webcast platform, or on the phone. You'll also be able to vote on items of business, and on a procedural note, I now declare voting for all items of business open on the webcast platform and for those attending in person. Voting will remain open for the duration of the meeting. Security holders watching online will be able to ask questions during the meeting via the webcast platform by clicking on the Ask a Question box on your screen and typing your question.
Questions can be submitted online at any time. You don't need to wait for the relevant item of business to ask your question. In fact, we encourage you to start submitting your questions now, and then I will address them at the relevant time in the meeting. Joining me today in Sydney is Nicole Lyons, APA's General Manager, Corporate Brand and Reputation. She's up the back there somewhere. Wave, Nicole. There she is, in purple. She'll read out the questions from security holders who are joining us virtually. We'll aim to answer as many of your questions as possible today while ensuring we keep the meeting to a reasonable length, and to that end, I'd ask security holders to please ask no more than two questions and to keep your questions as short as possible.
It may be necessary for us to group similar questions or summarize longer questions. To ask a question by phone, you'll need to press star one on your keypad. If you wish to ask a subsequent question, please press star one again to rejoin the queue. If you need assistance, please refer to the detailed instructions in the virtual meeting online guide that is available on the webcast platform. The webcast of today's meeting will be recorded and posted on APA's website as soon as possible after the meeting. Now, with those housekeeping matters out of the way, let me now make some introductions. Joining me in person today are our board members, James Fazzino, Chair of the Safety and Sustainability Committee; Nino Ficca over here; Peter Wasow, Chair of the People and Remuneration Committee; and Shirley In’t Veld.
Now, two of our board members have been unable to join us today in person. The first is Rhoda Phillippo, Chair of the Risk Management Committee, who is joining us online. Rhoda is unable to join us in person today as she is overseas for her wedding. Rhoda, on behalf of all of us at APA, and I'm sure all of our security holders, let me say congratulations and best wishes. On a far less romantic note, unfortunately, Debbie Goodin, who's Chair of our Audit and Finance Committee, is unwell and has been unable to be with us in person today, but she is also joining us online, and, Debbie, we wish you a speedy recovery.
Let me also introduce to you Adam Watson, our Chief Executive Officer and Managing Director, and for those of you online people in the room just met her. For those of you online, we also have Amanda Cheney here on the stage, our Group Executive, Legal and Governance, which includes responsibility for Company Secretariat. Also sitting in the front row, all these good-looking people down here, is the rest of our executive leadership team. We're also joined in person today by Jamie Gatt, who is APA's Audit Partner at Deloitte. Thanks, Jamie. The slide up on the screen sets out the agenda for today's meeting. Now, the notice of meeting has been made available to all security holders, and I'll take it as read. Adam Watson and I will report on APA's performance for the 2023 financial year and our strategy outlook for the current year.
We'll then move to the items of business set out in the notice of meeting. We've also set aside time at the conclusion of the formal business to answer any other general questions you may have. So now, turning to my formal address. FY 2023 was another solid year of delivery for APA. Over the last 12 months, we've delivered both earnings and distribution growth, invested to expand our asset base and refreshed our strategy to be the partner of choice in delivering infrastructure solutions for Australia's energy transition. Our financial performance in FY 2023 was underpinned by the reliability of our infrastructure and the capability of our people. Our CEO and Managing Director, Adam Watson, will provide further details on this shortly.
This performance enabled the board to declare a final distribution of AUD 0.29, taking the FY 2023 distribution to AUD 0.55 per security, which was in line with our guidance. This represents an increase of 3.8% on FY 2022. Notably, it's been delivered in parallel with our ongoing investment in the business to build capability and capitalize on growth opportunities in our target markets of contracted renewables and gas firming power generation, electricity transmission, gas pipelines, and future energy technologies. During a time of great change and transformation across our industry, we've remained focused on growing our business for the benefit of our customers, communities, and investors.
Over the last three years, we've not only continued to grow distributions, but we've also maintained our investment-grade credit rating and funded the acquisition of Basslink, as well as a further AUD 1.6 billion in organic growth opportunities, all from existing cash flow and debt. Today, we reconfirm our FY 2024 distribution guidance of AUD 0.56 per security, forecast to be up 1.8% on FY 2023. Our FY 2024 distribution guidance reflects our desire to ensure our distribution growth is appropriately balanced to accommodate ongoing investment in the business and to ensure we can deliver long-term value accretive growth for you, our security holders. Over the last year, we have continued to take steps to further build the capability we need to deliver on our strategy and capitalize on the opportunities ahead.
We appointed Adam Watson as Chief Executive Officer and Managing Director in December 2022, and completed the final appointments to our refreshed executive leadership team just recently. We also recently announced the appointment of Nino Ficca as Non-Executive Director, who will bring significant electricity transmission and energy market experience to APA, and you'll be hearing from Nino in a little while. It was also pleasing to recently announce the acquisition of Alinta Energy's assets in the Pilbara, and in parallel, an equity raising. The equity raise was structured in a way that allowed our retail investors to not only participate in the raising, but also at a discount to the institutional placement.
The capital raise was well supported by both our institutional and retail investors, and I'd like to thank all of our security holders for their strong endorsement of the growth strategy we are pursuing with this acquisition. Our commitment to ensuring our security holders can continue to participate in the growth of the business is also reflected in our decision to reactivate our distribution reinvestment plan, which we announced yesterday. We know that DRPs are attractive to our investors, especially our retail investors, and we will use the proceeds from the DRP to help fund the ongoing growth opportunities we see before us. I'd now like to make some comments on the current dynamics in Australia's energy sector. Let me start by saying that, in my view, the science of climate change is unequivocal.
As stated in our climate transition plan and restated in our recent climate report, APA is committed to achieving net zero operational emissions in our power generation and electricity transmission infrastructure by 2040, and for our gas infrastructure by 2050. But as we and the rest of the country drive towards our net zero targets, we need to remain aware of the significant challenges in achieving this lower emissions future, while at the same time maintaining a reliable and affordable energy system. It seems abundantly clear that even with the industry's best endeavors and most optimistic view of the road ahead, there are several factors at play that will inevitably delay the achievement of Australia's renewable energy targets and hence emission reduction targets.
These factors include the competition for skilled labor, critical minerals, and equipment supply right around the world, with many other countries competing for the same resources as Australia. They also include inflationary pressures that are significantly impacting project costs and the glacial pace of project approval processes. Not to mention, that increasingly interventionist energy policies across Australia have also, in a number of instances, rattled investment confidence, and there is also significant ongoing local community opposition to new electricity transmission and renewable projects. Now, action targets. The reality is policy settings also need to ensure that the lights stay on and energy remains affordable. If they don't, and there are rolling blackouts and further substantial increases in the cost of energy caused by a lack of reliable generation and a lack of natural gas supplies, it will cause political and economic upheaval.
Public support for the transition will evaporate overnight, making the transition even harder to deliver, and that's not what any of us at APA or others across our industry want. We cannot, as a country, allow perfection to be the enemy of the good. In Victoria and New South Wales, governments have either done or are in the process of negotiating deals to extend the operating life of coal-fired generators out of necessity. Now, you can do that at relatively short notice when you're dealing with existing assets. You can't do that at short notice when the assets, like essential gas firming generation or new natural gas resources, need to be developed. At APA, we want to be part of the solution.
That's why we're not only investing in renewable and electricity transmission assets, as well as hydrogen opportunities, but we've also taken the initiative, at our own risk, to invest in expanding the capacity of our East Coast Gas Grid. We've done this because it's obvious to us that given the dwindling natural gas supplies in the southern states, that more gas will need to flow from north to south in the years ahead. Without the ability to move larger amounts of gas from the north to the south, southern states will experience energy supply shortfalls, including potential blackouts and higher prices. This isn't scaremongering. It's there in black and white, as advised by the Australian Energy Market Operator and the ACCC in recent reports on the supply and demand outlook in our key energy markets.
But our East Coast Gas Grid expansion is only part of the solution. Government policies need to ensure there are both adequate new gas supplies and new reliable gas firming generation capacity before it's too late. There are several long-standing and emerging gas projects that need to be progressed quickly. The timeframes to bring this type of new investment to market are long. You can't just wake up one day and click your fingers to solve the problem. In this context, it's important to remember that 90% of the gas consumed in Australia is used to power our most critical industries. Gas is essential for generating industrial heat, used in the manufacture of basic building products like bricks, steel, and cement. It's also essential to the production of ammonia-based fertilizers for the agricultural sector and explosives used extensively in the mining industry.
Gas is also critical to powering our mining and resources projects that are so critical to jobs, our economy, and the energy transition itself. So if we don't take action and alleviate gas supply pressures, not only are governments putting energy reliability at risk, they are also adding to the cost of gas and, in turn, further stoking cost of living pressures and the housing crisis. Now is the time for all levels of government to take out insurance in the form of policies that ensure the energy transition is as rapid as possible without causing major disruptions, socially and economically, to the country. If they don't, no one will forgive them when the lights go out, when higher energy bills need to be paid, and when future governments need to pay yet again to extend the life of whichever emissions-intensive coal-fired generators are left standing at the time.
That said, before I hand over to Adam, to address the meeting, I want to acknowledge that some of our security holders have raised concerns in relation to certain aspects of our remuneration arrangements, this year. And while the board continues to support the FY 2023 remuneration outcomes and a vote in favor of our remuneration report, those concerns have been heard, and we will continue to engage with security holders in relation to them. I will go into further detail when we come to Resolution 1, which deals with the remuneration report. So to conclude, I'd like to thank our people for their ongoing hard work to execute on our strategy, and I also want to thank Adam, and his leadership team and my fellow directors for their contribution over the last year.
I'll now invite our CEO and Managing Director, Adam Watson, to address the meeting. Thank you.
Thank you, Michael, and good morning, everyone. I also want to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land on which I'm speaking today. With our operational footprint spanning all states and territories across Australia, APA has an important role to play in advancing reconciliation and improving outcomes for our First Nations people. I was pleased to recently launch APA's first Reconciliation Action Plan, which outlines the meaningful action we will take to deliver this over the years ahead. There are three topics I'll cover today. First, I'll take you through our FY 2023 operational and financial performance. I'll then update on progress with our strategy. And third and finally, I'll talk to our sustainability achievements, including the progress we've made towards our 2030 climate transition plan targets and goals. So let's start with an overview of our FY 2023 financial performance.
Revenue of AUD 2.35 billion was up 5.1%. Underlying EBITDA of AUD 1.7 billion represented a 2% increase on the previous year, and statutory profit after tax was up over 10% to AUD 287 million, and distributions were up 3.8% to AUD 0.55 per security. The key message is that we successfully delivered growth in revenue, earnings, and distributions, while, as Michael said, at the same time, making the necessary investments in our systems, processes, and people to ensure we're positioned to deliver long-term sustainable growth for you, our security holders. Our financial performance reflects the solid foundations of our business, and one of those foundations is our people, who are critical to our ongoing success, and their engagement and safety remain one of our key priorities.
I'm pleased to report that we had zero fatalities and zero serious injuries in FY 2023. We achieved a 42% reduction in our potential serious harm rate compared to FY 2022, and our overall total recordable injury frequency rate, our TRIFR, was stable. We remain committed to further improving our safety outcomes in FY 2024. I'm very proud to report that we've made strong progress in gender diversity and engagement, having now for the first time, achieved over 30% representation of women across our workforce. Representation of women in senior leadership positions has also increased, including within our executive leadership team. Other highlights include implementing significant enhancements to our parental leave entitlements, and we also completed a review where we rectified gender pay equity in like-for-like roles. Now to our strategy.
This is an exciting time for APA as we continue to grow and invest in support of our customers, communities, and Australia's energy transition. The infrastructure required to decarbonize Australia's energy system will be in the hundreds of billions of dollars. So for APA, it's not an issue of whether the opportunity exists, it's about where we focus, and that's why in FY 2023, we brought clarity to our growth strategy. Our strategy is to be the partner of choice in delivering infrastructure solutions for the energy transition. It's a customer-driven strategy focused on selected asset classes, including contracted renewables and firming, electricity transmission, gas transportation, and future energy, including hydrogen and solutions like carbon capture and storage.
We already have strong momentum with the execution of this customer-led strategy, and highlights over the last year include delivering the largest remote grid solar farm in Australia in Mount Isa, along with the recent acquisition of the Alinta Pilbara business, which is now very close to completion. The Alinta Pilbara business is underpinned by high-quality assets and a stable base of blue chip customers operating in one of the world's leading mining geographies. The acquisition will create value for our security holders and complements our existing assets in Western Australia. The acquisition gives our business a significant growth platform to expand our footprint in remote generation regions, leveraging the existing skills and experience we have in regions such as Mount Isa and Gruyere. It's a AUD 25 billion market opportunity, and we're well placed to be the leading player in this space.
In addition to the Alinta Energy Pilbara acquisition, we've made other significant investments and completed several major projects in the last year. This included the acquisition of the Basslink interconnector, which further expands our electricity transmission business, and the delivery of the first stage of the East Coast Gas Grid Expansion, which, as the chairman has noted, will play an important role in the transportation of gas from Australia's northern gas fields to the southern demand centers. We also completed the Northern Goldfields Interconnect Pipeline, providing our customers with greater energy security, supporting growth, and enabling the energy transition to renewables in Western Australia's resources sector. Now to our sustainability achievements. Incorporating sustainability into everything we do is central to how we operate. Over the past year, we made further progress against our sustainability roadmap.
This included, as I mentioned before, the release of our first Climate Transition Plan, which details our commitment and pathway to net zero , and the recent launch of our inaugural Reconciliation Plan. Our FY 2023 climate report highlights that we successfully delivered a 6.7% net reduction in gas infrastructure emissions and a 5.3% reduction in power generation infrastructure in emissions intensity, compared to our FY 2021 base year. This represents good progress towards our 2023 interim targets and goals. During the year, we also established a new target to reduce operational methane emissions by at least 30% by 2030, compared to 2021. In summary, we delivered solid financial and operational outcomes during FY 2023. We refined our strategy, and we're in execution mode, supporting our customers as they decarbonize their operations. And we've made good progress with our own sustainability ambitions.
To close, I'd like to thank our dedicated employees for their significant contribution to what has been another successful year. I'd like to thank our customers for trusting us with the development and delivery of their energy infrastructure solutions. I'd also like to thank you, our security holders, for your ongoing support of our business. I'll leave you with three key messages. One, we are a strong business. We have strong foundations and a great future. A solid FY 2023 operational and financial performance demonstrates this. Two, we are executing our strategy to be the partner of choice in delivering energy infrastructure for the energy transition. And our acquisition of the Alinta Pilbara business leverages our existing skills in operating large-scale renewables, gas firming, electricity transmission, and battery storage, and is an example of how we are delivering.
Three, we are committed to doing our part to accelerate the energy transition by decarbonizing our business and being at the forefront of responsibly transitioning Australia's energy system. Thank you, and I'll now hand you back to our chairman.
Thanks very much, Adam, and well said. I'd like to turn now to the formal business of the meeting. Security holders and proxies attending the meeting online can vote through the online platform by clicking the Get a Voting Card box at the bottom of the webcast. For those attending here in person, when you arrived here today and registered your attendance, you were given a card that's either yellow, blue, or red. You must be holding a yellow card if you wish to vote at this meeting. Please mark your yellow card on each of the five resolutions to indicate whether you are voting for or against the resolution or are abstaining. If you hold securities jointly with another person, only the person holding the yellow card may vote. The returning officers for the poll are representatives of APA's registry Link Market Services.
They will collect your yellow cards and count the votes at the end of the meeting. Only those holding yellow or blue cards are entitled to ask questions at the meeting. Visitors holding red cards are very welcome, but you're not entitled to ask questions. If anyone has not yet registered or has not been given a colored card, please identify yourself now to a representative of our registry, Link Market Services, so that we can register you and issue you with the appropriate card. Doesn't appear that we have anyone in that position. There are five items of ordinary business today. Security holders will be able to ask questions specific to each resolution to be put to the meeting before voting on the resolution. Questions in relation to general business will be taken at the end of the meeting.
For those security holders who are here in person and wish to ask a question or make a comment on a particular resolution, I will invite you at the appropriate time to come up and ask your question at the standing microphones located in each of the aisles. For those security holders who are unable to come to the microphone, please raise your card, and we will have an attendant come to you. Once I've taken some questions from the floor, I will then move to take questions from the webcast platform and from the telephone. As I said earlier, I'd encourage those who wish to ask a question via the webcast platform or the phone to please do so now, so they can be queued in the system to be asked at the appropriate time. All resolutions will be put to a poll.
The first item of business today is adoption of the remuneration report for the year ended 30th of June, 2023. The remuneration report is included in the directors' report section of the annual report, and details remuneration received by directors and APA's key management personnel for the year ended 30th of June, 2023. Under APA's corporate governance framework, security holders can vote on the adoption of the remuneration report. Resolution 1 is an ordinary resolution and will be passed if more than 50% of the votes cast by security holders entitled to vote are in favor of the resolution.
Now, while the vote is advisory and doesn't bind the directors of APA, if at least 25% of the votes cast are against the adoption of the remuneration report at the annual meeting, then a first strike is received, and the two strikes mechanism, as per the Corporations Act, is triggered. As mentioned in my opening address, I'd like to make some comments on the feedback received from investors and proxy advisors in relation to our short-term incentive outcomes for FY 2023 and our long-term incentive plan. The board recognizes the important role remuneration plays in supporting the delivery of our growth strategy over both the short and the long term. We also acknowledge the need to ensure that our remuneration approach aligns with the interests of our security holders, and that there are different views about how we can best achieve that.
Our short-term incentive is an important means to reward management for financial and non-financial outcomes delivered across the financial year. This year, some security holders have raised concerns that the FY 2023 short-term targets weren't high enough. In relation to our long-term incentive plan, a concern has also been raised that the FY 2024 grant of performance rights, which will be performance tested in three years' time, should have a different starting point in relation to the relative TSR measure. These concerns have resulted in a number of investors voting against our remuneration report. Now, while the board continues to support the FY 2023's feedback from investors, and we will take it into consideration in the future as we seek to ensure our remuneration arrangements are supported by security holders.
I'd now like to invite questions or comments on Resolution 1, and I'll start with any questions from the floor. If you have a question or comment, please make your way to one of the microphones.
Mr. Chairman, we have a question from Dr. Gomes from the Australian Shareholders Association.
Good morning, Chairman, and fellow directors. I represent the Australian Shareholders Association. We have close to 300 members who are invested in APA, holding just under 3 million shares, which, if they were aggregated, would put us at number 16 on your top 20 list. Perhaps in contrast to some of your proxy advisors, we're generally supportive of the remuneration report, subject to a couple of comments which we've made in the past. We'd like to see a four-year testing period for the LTI. You're aware of that. And we've also raised questions around the use of return on capital as an LTI metric.
We'd like to see something that has more transparency, so we can understand what, what the numbers really mean and, and perhaps something akin to free cash flow or earnings per share growth that has greater, greater transparency. But, otherwise, we're supportive of the REM report. We have no further questions on it.
Great. Thank you very much, and I just want to acknowledge it is an ongoing debate as to you know what are the appropriate measures, whether it's short term or whether it's long term, and the one you've raised about Return on Capital and whether that's appropriate, is something that we will look at again over the next 12 months. Are there any other questions from the floor? If not, thank you. Are there any... Nicole, are there any questions or comments from the platform?
We'll now go to the phones.
Thank you. There are no phone questions.
Okay. Thank you. The details of the total valid proxies for this agenda item are displayed on the screen. You can see the numbers up there. The next three items of business relate to the election and re-election of directors on the board of the responsible entity, APA Group Limited, those directors being Nino Ficca, Peter Wasow, and Shirley In't Veld. Let me briefly explain the process that leads to the nominations. Under the company's constitution, at each annual meeting of the company, 1/3 of the directors and those who've held office for three years since election must retire from office. They are, however, eligible for re-election. On this basis, two directors are required to retire by rotation as directors this year, namely Peter Wasow and Shirley In't Veld. Both are eligible for re-election.
The nomination of Nino Ficca for election is to fill a casual vacancy on the board. The company's constituent documents require that APA security holders approve the candidates for nomination as a director. Resolution 2 is the approval of the board-endorsed nomination of Nino Ficca for election as a director of APA Group. Nino was appointed on the first of September 2023. He's been determined by the board to be an independent director, and I'll now ask Nino to address the meeting. Nino?
Good morning. Thank you, Michael. Good morning, everyone. My name is Nino Ficca. Today I seek your support as I stand for election to the APA Group board as a non-executive independent director. In support of my nomination, I'd like to outline my background and some of the key achievements that I believe will demonstrate my ability as a director to the ongoing success of your company. I'm an electrical engineer by profession and have been involved in the energy sector for over 40 years. I served 14 years as the CEO and Managing Director of AusNet Services, from listing in 2005 until my retirement in 2019. I've also been a director on the Singapore Power Grid assets in Singapore.
Taking AusNet to its listing on the ASX in 2005 was a significant milestone and something of which I'm immensely proud. This experience as a CEO of a public company gave me a strong understanding of debt and equity capital markets, the need to maintain a strong balance sheet and investment-grade credit ratings, and to ensure long-term success. My time at AusNet also allowed me to gain significant executive experience in sectors which are closely aligned to APA's current operations and areas of growth. AusNet Services and its predecessors was integrated electricity transmission, electricity distribution, and gas distribution company with an asset base of in excess of AUD 8 billion.
During my time as CEO, I managed the company through a period of industry reform, including the privatization of assets and successful proposals for the company to develop and operate new electricity transmission infrastructure in a contestable environment. In delivering major capital works, I navigated similar challenges that APA faces today as we look to build new capabilities and deliver new energy infrastructure safely and in support of the energy transition. AusNet had a direct or contracted workforce of around 3,000 people, and as such, my passion and commitment has always been, and will all continue to be, the health and safety of our people, our contractors and partners, and the communities that we serve.
Expanding my learning from other industries, such as mining and petrochemicals, I've always sought to drive strong health and safety culture and urgency, with urgency and passion, with the objective of everyone going home safely every night. Thank you.
Thanks very much, Nino. I have to say, I was delighted when Nino finally agreed to join the board. We had to be patient and wait for him to free himself up from other obligations that he had. Is there anyone here in the room who'd like to ask a question or make a comment in relation to Resolution 2 ? If you would, please make your way to the microphone. Dr. Gomes.
Chairman, thank you again. We don't have any questions, but we'd just like to say we're very supportive of the election of Mr. Ficca. Perhaps I'm a little biased as an engineer myself, we really welcome the inclusion of some engineering capability on this board, and particularly electrical engineering. Obviously, that's critical to the future of APA, not just Mr. Ficca's, if you like, general management experience, but I think his technical experience will be greatly valued. And I assume he will be supportive of the growth that you're looking for within your technical resources within APA. And for example, I note that Mr. Vassallo is here today on your executive team with, again, strong electrical engineering background.
Look, no questions, but we're very supportive and welcome Mr. Ficca to the country, to the company.
Thanks very much for the comment. Any other questions in the room? Doesn't look like that. Nicole, are there any questions or comments from the platform or the phone lines?
Yes, Chairman, we have a question from Steven Mayne regarding Resolution 2, and this question has multiple parts. Could you please put up an amendment to the constitution at next year's AGM, removing the constitutional barriers for an external party to nominate for the board? No other ASX 50 company requires 5% of shares or 100 shareholders to support a candidate to simply get on the ballot. It's normally just self-nomination or the support of one shareholder to run for a board. Why do you continue to support this undemocratic barrier to entry, and when will you regularize your constitution to bring it into line with standard market practice? Could newest director and candidate today, Nino Ficca, comment on this? How would he have felt chasing 100 shareholder signatures from at least 5% of the total stock on issue just to be nominated?
The long and the short of it, Steven, is that in our deed poll, we have a process whereby people can nominate for election as a director of the APA Group. They just have to have that nomination in by the 28th of August. It's in our annual calendar of events. So I think the short answer to the question is, we're already doing what you've asked for. Do we have any other questions?
No other questions from the platform. We'll now go to the phones.
There are no phone questions.
Okay, thank you. The details of the total valid proxies for this agenda item are displayed on the screen. Resolution 3 is the approval of the board-endorsed nomination of Peter Wasow for re-election as a director of APA Group Limited. Peter was appointed a director in March 2018. He's been determined by the board to be an independent director, and I'll now hand over to Peter to address the meeting. Peter?
Thanks, Michael, and good morning. Thank you for considering my nomination to serve as a director. I'll just see what's happened here. Okay. Yeah, I've only been here for five years and can't even manage the clicker. My professional qualifications and work experience are detailed in both the annual report and the notice of meeting, and I don't want to repeat what you may have already read. However, if I can, I'd like to add a little color to what you'll find there and explain how my background might be of value to the company. Most of my working life has been spent trying to either capture opportunities or overcome challenges across the gas industry value chain.
Over the years, I've served as a senior executive, a chief executive, or as a director of companies which at the time were variously Australia's largest domestic gas producer, or at another company, at another time, Australia's largest domestic gas consumer. So I've witnessed firsthand the business on both sides of the ledger. And having now served for more than five years as a director of APA, I also have a full appreciation of the importance and value added by what connects gas producers on the one hand with gas consumers on the other, which of course, is our pipeline network. And while we believe that electrification is the way of the future, as you can see by the investments we've recently made, gas still is, and will remain for some time, the mainstay of the business.
And this is because gas has a critical role to play in the energy transformation Australia is undergoing. I hope that the broad perspective I have on this industry, from a molecule of methane trapped in the ground, all the way to the burner tip powering industry, homes, and electricity generation, will continue to be of some use to the company as it pursues its goals. I thank you again for your consideration and look forward to your support. Good morning.
Thank you very much, Peter, and Peter makes a very valuable contribution to the board. Is there anyone in the room who'd like to ask a question or make a comment on resolution three? If you do, please make your way to the microphones. Doesn't appear to be. Nicole, are there any questions or comments from the platform or on the phone?
Yes, Chairman, we have a question from Steven Mayne regarding Resolution 3. At last year's AGM, there was a 20% protest vote against both the election of James Fazzino and the board's climate transition plan, despite the chairman claiming that no proxy advisor recommended a vote against any of the four resolutions. As a candidate up for re-election today, could Peter Wasow comment on how he and the board responded to last year's unexpected and unusual protest votes? Have there been any similar protest votes against any of the directors today?
Look, look, I'll just answer that question, Peter. How we responded to that, Steven, is that we very actively engaged with those security holders who had raised concerns in the way that they voted last year. I have no doubt, Steven, that you would have seen our recent climate report and the way really upfront in that climate report, part of what we did was to say, "Here were the concerns that were expressed to us about the climate transition plan, and here's what we've done to address those concerns." And I'd encourage any of our security holders that have an interest in that matter or a concern to look at it because that approach has been, I would say, very well received by those security holders.
We've obviously gone back not only to the security holders who voted against the climate transition plan last year, we've gone back to a large number of our institutional shareholders and indeed to the Australian Shareholders Association, representing retail shareholders, and I have to say that's been a very positive and constructive engagement. So that's how we've dealt with it. Are there any other questions online, Nicole?
No, Chairman, there are no further questions online. We'll now go to the phones.
There are no phone questions.
Okay. The details of the total valid proxies for this agenda item are displayed on the screen. And I might say, I think Stephen Riney asked about seeing the votes. Here they are, and the protocol is that I'll put them up after we've had the questions. All right. Resolution 4 is the approval of the board-endorsed nomination of Shirley In't Veld for re-election as a director of APA Group. Shirley was also appointed a director in March 2018. She's been determined by the board to be an independent director, and I'll now hand over to Shirley to address the meeting. Thank you, Shirley.
Good morning, everyone. I am today seeking your support to continue to serve as a member of the APA Group Board of Directors. By way of background, I've spent the last 30+ years pursuing my corporate career based in Perth, and in that time, I've acquired senior executive experience across various different sectors, including energy, mining, minerals processing, banking, and manufacturing. I should add, I've also held two CEO roles, one being in the private sector with Alcoa Rolled Products, and the other in the public sector with Verve Energy, which was the government-owned, Western Australian Government-owned electricity generator, and both, I might add, are big gas users. As a result, I've gained a sound perspective on operations, strategy, and risk management, and a deep understanding of what drives a successful business.
I'm currently also a non-executive director of Alumina Limited, Develop Global, and Karora Resources. I've also sat on the boards of various other organizations, including Northern Star Resources, the NBN, CSIRO, Duet Group, and Asciano. I can assure security holders that I do have the capacity to carry out my role as a director of APA to the standard that you would expect, and of course, being based in Perth, I do bring some geographical diversity to the board. I enjoy my work on the APA board and value my board colleagues and the approach that they, together with the executive team, take at all times to act in the best interests of security holders and secure APA's future. I would like to continue to serve on the APA board, and to that end, request your support. Thank you.
Thanks very much, Shirley. Again, if anyone here in the room would like to ask a question or make a comment on Resolution 4, please make your way to one of the microphones now. Again, doesn't look like we have anyone. So, Nicole, are there any comments or questions from the platform or from the phones?
Yes, there is a question, Chairman, from Steven Mayne regarding Resolution 4 . "The AFR reported on August eleventh that Morgan Stanley's infrastructure investing arm had emerged as a competing bidder to APA for Alinta Energy's power assets in the Pilbara. The same paper later reported that that APA bid against itself and rival bidders were a fiction. Given that Morgan Stanley was one of our advisors on the deal, could Shirley comment on whether the board investigated its role in the bid and these AFR reports, which seemingly drove up the price we paid in a very small field, citing a Morgan Stanley vehicle as a rival bidder?
Well, again, look, I'll take that question, Shirley, since it was myself and Adam who ran things to ground there. Steven, you'd be very pleased to know, and we were pleased to know, that our intelligence and on who the competing bidders may or may not be, ended up being entirely accurate. Yes, following that story, you can imagine there was some discussion with our advisors, it being Morgan Stanley. What I'm very confident about is that we didn't pay any more for the asset than we needed to pay to acquire it, and I am very confident that this is an excellent acquisition for APA. As we have said in our market releases around it, it will be free cash flow per security accreted in its first full year of operation.
It will be value accretive based on all of the modeling we've done. It will give us returns above our cost of capital, and it creates a significant growth platform for the business. Nicole, are there any other questions?
No further questions on the platform. We'll now go to the phones.
There are no phone questions.
Okay. The details of the total valid proxies for this agenda item are displayed on the screen. Very good. All right. Resolution 5 is the approval for the grant of performance rights to the Chief Executive Officer and Managing Director, Adam Watson, under the APA Group Long-Term Incentive Plan. APA Group is seeking security holder approval for the grant of 269,626 performance rights to the CEO as part of his long-term, his annual long-term incentive award for FY 2024. Again, if anyone here in the room would like to ask a question or make a comment on Resolution 4, could you please make your way to the microphone now?
Mr. Chairperson, we have a question from Ms. Carpenter regarding the Resolution 5.
Thank you, Mr. Chairman, and, to you, Mr. Watson. In APA Group's 2023 annual report, the group says: "Our strategic ambition is to be the partner of choice in delivering infrastructure solutions for Australia's energy transition." In June, financial year 2023, APA signed an agreement with Tamboran Resources to progress the connection of Tamboran's climate-wrecking bomb, the Beetaloo Basin, to APA's existing transmission assets. In August, APA signed an agreement with Empire Energy to begin works on connecting Empire's share of the Beetaloo Basin to APA's Amadeus Gas Pipeline. The longer-term arrangement would see APA connecting Empire's share of Beetaloo to the East Coast gas market. These developments clearly demonstrate that APA is intent on providing the critical pipeline infrastructure that is required to unlock the Beetaloo carbon bomb.
Yet, Beetaloo is not mentioned once in APA's financial year 2023 climate report, despite the fact that over its lifetime, analysts have estimated that Beetaloo could result in as much as 1.4 billion tons of CO2 equivalent, equal to more than 3x Australia's entire emissions in 2021. Given this obvious materiality of emissions involved in the Beetaloo project, why weren't the developments APA progressed with Beetaloo and its developers made apparent to shareholders in the climate report you speak of?
Look, I'll just leave that question for the moment. At the resolution before the meeting is in relation to the long-term incentive grant. I will deal with the issue you've raised, when we get to general business, if that's okay? Does anybody else have a question in relation to the resolution before the meeting, which is in relation to the grant of performance rights under the long-term incentive?
Mr. Chairperson, I have a question from, Ms. Grant.
Hello. I am usually more informed about APA's business. I have had other problems this year. But I have always supported APA, and I bought an extra lot of shares. My comment is that for the last 10 or 15 years, or whatever, I have always voted against the remuneration report, as a matter of principle, and some of you know all my intentions because of it. The only other general comment I want to make is between Mr. Fraser's and Mr. Watson's speeches. I very much prefer Mr. Watson's speech in terms of doing the utmost things for climate change requirements. I find Mr. Fraser's speech, normally I am quite supportive of Mr. Fraser, but I think he was doing the bit, the generic, general sort of against case about governments, et cetera.
Governments are us and companies. Governments are not just in a vacuum, and we all have a responsibility to act on things like climate change. I am on the side of Mr. Watson. If he is pursuing what he says APA is pursuing, then I'm very happy. Unfortunately, I have no other comments against my usual fashion, because I had a personal problem of looking after six kitten litters of a wild cat that I had to look after, have weaned and rehomed. But the fact that I bought extra shares means I'm quite happy with APA and always have been. Thank you very much.
Thank you. I'll take that as a comment, not a question, and I can absolutely assure you I am extremely supportive of the energy transition. My comments were directed at saying we need to be realistic and make sure that the lights don't go out and energy becomes unaffordable. All right, Nicole, are there any questions or comments from the platform or the telephone in relation to this resolution?
Yes, Chairman, we have a question from the McMahon Family Investments. In relation to the approval of grant of performance rights to the CEO, Mr. Watson, under the APA Group long-term incentive plan, what is the effect and/or impact of this vote given? If security holder approval is not obtained, the board will consider alternative arrangements to appropriately remunerate and incentivize Mr. Watson.
Well, look, let me just say, first of all, I'm very confident that the resolution will be passed, so I don't think this issue would arise. But look, if it wasn't, the board obviously hasn't made any decision, and it is a board decision. But we'd certainly consider any security holder feedback in that regard, along with our intent to retain Adam's services and appropriately incentivize him in the long-term interests of security holders. Are there any other questions, Nicole?
No further questions on the platform. We'll now go to the phones.
There are no phone questions.
Okay. The details of the total valid proxies for this agenda item are displayed on the screen. A summary setting out the details of the total valid proxies for all agenda items is displayed on the screen for your reference. Voting will close shortly, so please complete your yellow voting cards now, if you've not done so already. A reminder to security holders participating online to please vote now as well. All right. If everyone has finished voting, if you're finished, the representatives of Link Market Services will collect your yellow voting cards. All right. I think that's it. All the voting cards have been collected. Polls will automatically close five minutes after the conclusion of this meeting. That completes the formal business of the meeting.
The poll results will be released to the market by an ASX announcement and will also be available on APA's website as soon as possible. So now let me turn to matters of general business. We've already covered a number of the questions we received in advance of the meeting from our security holders in the earlier addresses, earlier addresses and the Q&A that we've already had. I'll now open the meeting to questions in relation to the APA business, including any questions which relate to the annual report for the 2023 financial year. That report is available to view on the webcast platform in the Download section at the bottom of the screen.
I mentioned earlier that our auditor is here today to answer any questions on the auditor's report or the conduct of the audit through me as the Chairman of the meeting. Now, before I go to any further questions from the floor, I said I would come back to the question that the lady raised in relation to the Beetaloo project. Let me make a few comments on that. First of all, we're at a very early stage, and the proponents of developing the Beetaloo are at a very early stage of considering that. For the benefit of all of our security holders, there was an extensive inquiry, which I think went over around five years by Justice Pepper.
And it was an inquiry that concluded, based on the best available scientific data, that the challenges and risks associated with any onshore shale gas industry in the Northern Territory can be appropriately managed. And in that report, Justice Pepper went on to make a whole series of recommendations about any development that may go ahead, and those recommendations were accepted in full by the Northern Territory government, including a recommendation that there be no net increase in lifecycle greenhouse gas emissions in Australia from any onshore shale gas development in Australia. Obviously, this was specifically about the Beetaloo. So that's the story in relation to Beetaloo. It is also a very low carbon gas in terms of its emissions up there.
And, as I said before, in my earlier address, you know, we really need to make sure that we maintain energy security, reliability, and affordability, and if Beetaloo ends up being part of that solution, then it should be developed. All right. If anyone here in the room would like to ask a question or make a comment regarding general business, then please make your way to the microphone, and I remind you to please state your name before asking a question.
Mr. Chair, we have a question from Mr. Trevor Gibb about various matters.
Thanks, Chairman. I'd like to thank APA, having Surf Life Saving involved with the first aid to start with. I'm involved with Surf Life Saving. Congratulations in regards to the progress in renewables. I live 600 Ks North of Perth, so I know where Shirley's coming from. In regards to, I live in between two renewable projects, namely the Murchison renewable project, North of where I live in Kalbarri, and the Oakajee project. Are you guys involved or going to be involved with either one of those two?
I'm looking at Adam there because he's involved a lot more in the day-to-day, and I'm getting a shake of the head.
No, they're largely on grid, and we're focused on the off-grid space, so that's not our wheelhouse.
Just to update everyone, they are purely hydrogen and ammonia projects, and you mentioned somewhere in your speech that hydrogen, hydrogen was- Looking at the situation. Thank you.
All right. Do we have any other questions in the room?
What was your name? We've got a question, Mr. Chairman- from, Mr. Don Esplin.
Don.
Hello, board. I've just got a, it's just a general question, I guess. Where the share price of APA has been battered like many others on the share market at the moment, and you'd no doubt be disappointed that, the price has sort of moved down way below you probably expect it to be. But I guess my question relates just to your, the financial situation, level of gearing, amount of debt, how you're managing that debt. Obviously, at the moment, it's, increasing interest rates and bond prices are having some impact. Could you just make some general comment about, your hedging arrangements or how you're dealing with the, with this matter?
Certainly. And look, you need to look at that, I guess first of all, in the context of just having made the acquisition of the Alinta assets, which involve the equity raising, and there is associated debt, which goes to fund the balance of that acquisition on top of the equity raise. Our general approach, so if I step back from that for just a moment, we have a long-term debt book with the debt profile. If you look at it out over a number of years, it's quite staggered as to when we need to refinance it, and most, if not all of that, has been hedged in terms of the interest rates in relation to it.
You've then got the debt which is associated with the acquisition, and we are like right in the middle of finalizing what will be, I'll describe as the more permanent arrangements associated with that debt. So we are actively looking at it, and we will make announcements when appropriate.
Mr. Chairperson, we have a follow-up question from Tracy Carpenter.
Hi. Thanks, Mr. Chairman. My question was specifically asking about the climate report and why it doesn't reflect the amounts of emissions-
Sorry, my apologies. Yeah, why it's not reflected in the climate report is, and I meant to add that to the first part of the answer, is it's very early stage. We have a memorandum of understanding, I think is the right status of the agreement that we've got. So there is no data, no emissions for us to add to the announcements that we've made via the ASX, that we have that MoU in place, and we, you know, are the pipeline partner of choice, to use my words, about the development of that. Look, we don't have any data around the emissions to report on that because it's a future project, which is uncertain as to whether it will go ahead or not go ahead.
But you can imagine, in due course, there will be appropriate disclosures, if we get to that point, which is uncertain.
Another question from Dr.- Gomez. Louis Gomez.
Mr. Chairman, just a comment and a question. They're related. Firstly, we welcome the greater allocation of securities to retail investors during the recent SPP for the Alinta assets. I think we went collectively for retail investors from AUD 75 million to AUD 200 million. Even then, it was oversubscribed, as I understand, but we do acknowledge and thank you for that attention to retail investors. We know you're very retail-focused with your distributions, et cetera. The question is you've acquired Basslink and the Pilbara assets, and you talked in relation to Pilbara about being cash flow positive and various other positive metrics. Will you be able to give more visibility in future reporting on the performance of both Basslink and the Pilbara assets? Those sort of metrics.
We know what we've paid for those assets. What we'd like to see is what are the returns or financial benefits that we're getting from them?
I'll respond, Lewis, by saying we'll take, we'll take that on board when we look at whether it's in our results presentations or strategy presentations. We'll, we'll look at that and see whether it's appropriate or not, but I hear you. All right. Don't think there are any other questions in the room, so Nicole, do we have any questions from the platform or online?
Yes, we do, Chairman. The first question is from David Timothy Bryce: Does APA have an opinion on the Victorian State Government's policy to ban natural gas connections to new housing starts in Victoria? Does APA believe this will affect APA's earnings in any way once this natural gas ban into new housing starts inside the state of Victoria is fully implemented?
Look, I think the answer to that is, over time, we would expect it to have a very modest impact on our earnings. As currently, around 90% of the gas that we transport actually goes to industry. As to an opinion on the ban, I'd make this point, and it's kind of, it's a bit like what I was saying earlier in my formal address, that the quickest way to reduce emissions is to remove the highest source of emissions as soon as possible. Now, in Victoria, that means removing brown coal generation as soon as possible should be the priority, because we all want to reduce emissions as soon as possible.
Now, this policy, if you think it through, will actually divert new renewable generation away from doing that, because some of it will have to go to what would otherwise be gas appliances in the home. And so, I would say that it is a misguided policy until you've gotten rid of brown coal generation in Victoria.
Next question is from Pelican Super Investments: Could you please explain why the APA share price has tanked? Does this downturn in price have anything to do with the issue of new shares to purchase Alinta Energy?
Look, as the previous gentleman just said, the whole market is down. There are a range of factors here, and it's obviously difficult to be exactly certain, exactly which components drive how much of the downturn. But the whole market is down. We're down further, depending on, you know, exactly what time you look at that over. But I'd also note that our infrastructure peers in Australia are down similar sorts of levels to our security price. There's a couple of obvious things. The whole market's down because there is general concern on both the Australian and the global economic outlook.
But in relation to a company like APA and others in the infrastructure space, we are interest rate sensitive, and we've seen over many years, with the decline in interest rates, that has been a real positive for the APA security price. And the opposite has been true over the last little while. With interest rates going up, the APA security price, along with other infrastructure stocks, our prices have come off. So that's a very obvious correlation with interest rates that explains part of the, of the answer. In relation to the Alinta acquisition itself.
A couple of comments I would make is that it has been very well received by most of our investors that we've engaged with, but clearly, people want to see the runs on the board from that acquisition, which we haven't yet completed. So I would think that over the next 12-18 months, as people start to see the results flow through in the way that we expect them to, that we may see some positive response to that. The final thing that I'd say about our share price is that we're going through a period where we need to invest in our business, not only in, like, the acquisition of the Alinta assets or other new projects, but ensuring that we've got the systems, processes, skills, and capabilities within the business to take the business forward.
That has impacted, to some extent, our results, and it's reflected in part by our distribution guidance for the FY 2024 year, which was probably a little lower than what some people were expecting. But as I said earlier, that's a balance to accommodate investment in the business that I've just talked about, that we need to make, and ensuring long-term value-accretive growth. So there are some of the reasons that we think the price is where it is today. Any other questions?
The next question is from Mr. Peter John Armit: The availability of the APA annual tax statement for the annual period ending 30 June in mid-September delays the preparation of my tax return. What can/will be done by APA to remedy that?
The annual tax statement, for all of you who are regular visitors here, will know, is an annual question at the annual general meeting. The answer, unfortunately, remains the same. The tax statement, look, technically, it can't be completed until our accounts are finalized, our year-end accounts. That typically doesn't happen till around the third week or thereabout in August. What I can say, which I do say each year, is that we have available on our website an annual tax estimator, which is available prior to that, and the ATO hasn't had any concerns that I'm aware of with people using that to complete their tax returns ahead of getting the actual tax statement from us.
The next question is from Amanda Claire. Just one second. Sorry. How has the acquisition of Alinta Energy Pilbara added value for shareholders in light of the current share price, post capital raising of circa AUD 8.50?
Okay, so in relation to Alinta, as I said before, well, we don't even have the keys to the business right now. But all of our analysis and due diligence on this indicates to us that it will be free cashflow per security accretive in the first full year of ownership. And as I said earlier, it will be value accretive if it performs as expected, exceeding our cost of capital. So that's how we see it being value accretive.
There's a second part to this question. Also, structure of the capital raising as a placement and share purchase plan has resulted in economic loss to investors who were unable to proportionately participate, given the deep discount to the pre-issue price. How is this fair for shareholders not able to participate in the institutional placement?
Look, what Amanda is referring to there applies to a very small number of our security holders. In fact, the structure of our share purchase plan, this is for retail shareholders, allowed 99% of our retail holders to participate at a minimum on a pro rata basis to their existing holdings. So addressing the exact question that's been asked. Also, the structure meant that retail security holders ended up receiving a discount to institutional holders. And from the board's perspective, there are a number of ways that you can structure these things, but given the size of the raising, we thought this was the most appropriate structure with the offsetting benefits that most of our shareholders, 99% of them, got their, at least their pro rata entitlement, got them at a discount.
That offset the benefits of something like a PAITREO structure, which we've used in the past. That was the decision that we made and why we made it.
The next question from the McMahon Family Investments has multiple parts: Please articulate how else the proceeds raised from the recent placement and SPP will be used other than to partly fund APA's proposed acquisition of Alinta Energy Pilbara Holdings and Alinta Energy Newman Storage. Further, explain, A, the strategic business case, B, how this will benefit security holders, C, what is the actual and forecast impact on both ROE and EPS? D, what other M&A strategic plans are you able to foreshadow? And E, how APA plans to navigate decarbonization and the changing future energy landscape. The second part of the question is, in relation to the approval of granted performance rights to the CEO, Mr. Watson, under the APA Group long-term-
Nicole, can I just deal with the-
Absolutely.
Thanks. There's a lot in that. That's a way to get in a bit more than your 2 questions. Look, I think the first part of the question was about the use of funds from the capital raise. They will, all of the capital raise funds will be used, will go towards the acquisition of the Alinta assets. The balance will come from, will be debt-funded. As to the strategic rationale, I think was the next part around the acquisition and how it will create security holder value. Look, I've already covered some of this off in what we've said earlier, but just to go over it quickly, the acquisition is 100% consistent with our strategy.
The assets that we've acquired include contracted renewables and firming generation and batteries, electricity transmission, and gas pipelines. The business is absolutely in our wheelhouse, and it provides a significant growth platform for us as the miners in the Pilbara region all look to decarbonize their operations. Typically, I think on average, the assets are contracted for around seven years, and as I said before, free cash flow accretive in the first full year, and value accretive based on all of our analysis. I think we then got to other M&A strategic plans. Look, the primary focus for us at APA from here is to focus on developing our business organically and through greenfield projects. We're focused, as Adam said, on contracted renewables and firming, electricity transmission, and future energy projects.
Anything that we would do in an M&A sense, the only thing I would say is that we will remain very, very disciplined. And, I think there was a last part there about decarbonization and changing energy landscape, and look, I think I've covered that off already in comments that I've made.
The next question is from Andrew Fitzsimons: What more can be done to respond to the climate change crisis?
There's a recent report out from the Boston Consulting Group, and part of that report concluded that there were three actions that will contribute the most to decarbonization here in Australia. One was retiring coal-fired generation and building out renewables. And as I have said before on occasions, it's building out renewables first is what needs to happen, being able to firm that up, so when the wind doesn't blow and the sun doesn't shine, you get that done, and coal will come out of the system. So that's how you get the question isn't how quickly coal can come out of the system. The question is actually how quickly you can build out renewables and have that firmed up. Once you've done that, coal will simply disappear out of the system.
So retiring coal, build out renewables, electrifying light vehicles, and developing renewable gases were the three priority areas, according to that piece of Boston Consulting work. And as we've said before this morning, at APA, we want to be part of the solution, not part of the problem. We see that there are two components to that. One is decarbonizing our own operations. The other component is to deliver energy infrastructure, as we've said, infrastructure solutions that help our customers and the economy more broadly to decarbonize. We're making good progress at APA on our own emissions, in our own business, as per our climate report. But more broadly, as I have already said in my address, there are real challenges to meeting the target and keeping the lights on and energy affordable.
I think in terms of other things that we can do, I think we should all remain, technology agnostic, as we're going to need all of the available technologies if we're going to hit net zero by 2050. And as I also said, earlier, we can't, let perfection be the enemy of the good in this transition.
Next question is from Steven Mayne. APA has a market capitalization of AUD 10.3 billion and is the largest listed company, which remains a trust rather than a regular company. Does the chairman agree it's time to just pay the extra tax and regularize our corporate structure to replicate what every other ASX 50 company does?
I have a wry smile because it seems that every time I interact with Steven, and Steven and I know each other reasonably well, we engage. It seems on a fairly, well, at least an annual basis, Steven asks this question. Look, the long and the short of it is that we have looked at this on a very regular basis. There are substantial costs, first of all, in us doing away with the trust structure, and there are significant disadvantages, we believe, to our security holders. So until any of that changes, our view remains that this is the appropriate structure, and we shouldn't incur unnecessary costs for all of you, our security holders. So that's where we're at, Steven.
The next question is from Kevin Joseph Troy: Is your schedule of tariffs yielding an adequate commercial return? To see APA pump up its annual distribution by way of substantial capital repayments put me in mind of a Ponzi scheme. If you drop back to paying distributions solely out of income, the inadequacy of your tariff schedule will become apparent.
I think if you look in our remuneration report, I believe it is under the long-term incentive measures, you'll see that the return on capital we've achieved over the last three years is 12.1%. So in answer to the concern about our tariffs not yielding an appropriate return, I think that's actually a very appropriate return that we're earning. We'd always like it to be higher, of course, and our plans and strategies hopefully will see that increase further, again, but it is, I think, a very appropriate return. The question around distributions of capital, look, they arise due to the large non-cash items we have in terms of depreciation and amortization.
But we have very strong free cash flow per security, which is what we consider when we're determining distributions.
The next question is from Ian Mellor, and it has two parts. Please comment on how Basslink will benefit APA, and what percentage approximately is APA gas transportation volume related to domestic usage?
Let me answer the last part of the question first. When we say domestic usage, this is including industry, et cetera, because some goes offshore, it's around 60%. In relation to Basslink, we're in the process of trying to convert that into a regulated asset. We have an application before the AER, which hopefully is being well received there. So the long-term objective is that we will earn a regulated rate of return on that asset, which will obviously be above our cost of capital and in line with our required returns for that kind of asset.
If I think more broadly about it, it obviously brings another skill set and capability set within our business, and that is the operation of a subsea cable. I think I'm right in saying that would make us the only subsea cable operator in the country. There is obviously a lot of discussion and proposals around the development of offshore wind farms, and so I think as a starting point, they will all obviously need subsea cables to connect them back into the mainland grid. So being the only operator with that skill set in the country, I think that gives us a bit of a competitive advantage, but obviously that's got a long way to go.
There are no more questions from the platform. We'll now go to the phones.
There are no phone questions.
Okay. Well, thank you for those, for those questions, and that completes the business of the meeting. Now, before I close the meeting, please note that voting will remain open until the conclusion of the five-minute voting window for webcast online participants. All polls will then, automatically close. For those of you here in the room, please hand your voting card to a Link Market Services team member so it, that it can be counted. Thank you for your attendance today. Just as my voice is giving out, we appreciate your ongoing support of APA, and I wish you all good health until we meet again. I now declare this meeting closed, subject to finalization of the poll. Thank you very much.