Further thoughts on the APA SPP, please?

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Question asked 02/09/2023

Further thoughts on the APA SPP, please?

Hi James and team I appreciate that you have recently written much about APA and their SPP but I would value your review and synopsis of the offer. On 16/08 MM was neutral APA and reconsidering the holding because of investment changes (eg. the Vic ban on gas connections, etc.). APA is heavily leveraged and the capital raising will just quickly more to their debt load. Recently MM was more positive the company and indicating that MM would participate in the SPP. I look forward to your updated thoughts and comments on the APA_SPP Regards, JanP

Answer

Hi Jan,

The variable here is price. APA was trading $9.50 when we turned to a more neutral stance (here) sighting the potential for APA to go after the Alinta assets in the Pilbara. At the time we suggested a capital raise would likely ensue. That has now played out and the stock is being offered through the SPP at $8.50, a 10.5% discount, hence the change to a more positive bias. You are right insofar as the deal increases their debt load, however they are very stable and contracted cashflows that come from these assets. It’s important when thinking about the level of debt, to always anchor it to the type of earnings that service it.

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LAST UPDATED 31/08/2023 17:04

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