PRODUCT DISCLOSURE STATEMENT RENOUNCEABLE RIGHTS ISSUE 2 New Units for every 7 Existing Units at $3.75 per New Unit to raise approximately $356 million The Rights Issue closes at 5.00 pm (Sydney time) on Monday, 11 December 2006 Lead Manager and Underwriter i PRODUCT DISCLOSURE STATEMENT IMPORTANT INFORMATION PRODUCT DISCLOSURE STATEMENT Issue or the Stapling Issue which is not contained in this PDS AVAILABILITY PDS. Any information or representation that is not in this This document is a product disclosure statement within A free paper copy of this PDS is available during PDS may not be relied on as having been authorised by the meaning of section 761A of the Corporations Act for the Issue Period by calling the APA Information APL in connection with the Rights Issue or Stapling Issue. the purposes of Chapter 7 of the Corporations Act. Line on (02) 8280 7132 from within Australia or NO COOLING-OFF RIGHTS APPLY TO THE RIGHTS ISSUE +61 2 8280 7132 from outside Australia. An electronic This Product Disclosure Statement (PDS) contains an version of this PDS is available on APA’s website at offer to subscribe for new units in Australian Pipeline Cooling-off rights do not apply to an investment www.pipelinetrust.com.au. The electronic version of Trust ARSN 091 678 778 (APA) under a renounceable pursuant to the Rights Issue. This means that in most this PDS is only available online to persons resident in rights issue (Rights Issue). Each New Unit will be issued circumstances, you cannot withdraw your Entitlement Australia and New Zealand. Persons who access the by Australian Pipeline Limited ABN 99 091 344 704 and Acceptance Form once it has been lodged. No electronic version of this PDS must ensure that they AFSL 239 927 (APL) in its capacity as responsible entity cooling-off rights apply to the Stapling Issue. download and read the entire PDS. of APA. OFFERING RESTRICTIONS FUTURE PERFORMANCE This PDS also relates to the issue of units (APTIT Units) This PDS has been prepared to comply with the in the APT Investment Trust ARSN 115 585 441 (APTIT) Except as required by law and only then to the extent requirements of the laws of Australia. The Rights Issue by APL in its capacity as responsible entity of APTIT and so required, neither APL nor any other person warrants is not being extended to any person whose registered sets out details of the rights and liabilities attaching to future performance of APA or any return on any address is outside of Australia or New Zealand. No offer such APTIT Units. investment made pursuant to this PDS. is being made in relation to the Stapling Issue and APTIT This PDS does not constitute an offer or invitation to Units will be issued to all Unitholders on the APA register ENQUIRIES subscribe for APTIT Units. It has been prepared in at 5.00 pm (Sydney time) on the Stapling Record Date. If you have any questions in relation to the Rights Issue accordance with Part 7.9 of the Corporations Act so The distribution of this PDS in jurisdictions outside or Stapling Issue, please contact your fi nancial or other as to enable APL to issue APTIT Units and to staple of Australia or New Zealand may be restricted by law professional advisers. If you have questions in relation to those APTIT Units to APA Units on issue at the time of and persons who come into possession of this PDS how to complete the Entitlement and Acceptance Form, issue of the APTIT Units (including APA Units issued should seek their own advice on and observe any such please call the APA Information Line on (02) 8280 7132 under the Rights Issue or the DRP) as approved by the restrictions. Any failure to comply with such restrictions from within Australia or +61 2 8280 7132 from outside general meeting of Unitholders of 20 October 2004 may constitute a violation of applicable securities laws. Australia. (Stapling Issue). This PDS does not constitute an offer or invitation in PHOTOGRAPHS AND DIAGRAMS An application for APTIT Units will be made by APL any place in which, or to any person to whom, it would as agent and attorney for each Unitholder. No other not be lawful to make such an offer or invitation. In Some of the assets depicted in photographs and applications for APTIT Units will be accepted by APL particular, the New Units have not been and will not diagrams in this PDS may not be assets of APA or under or in connection with this PDS. be registered under the United States Securities Act of products or services sold by APA. Diagrams in this PDS 1933, as amended (US Securities Act) or the securities are illustrative only and may not be drawn to scale. INVESTMENT DECISIONS laws of any state of the United States of America (United The information provided in this PDS is not investment States) and may not be offered or sold in the United DEFINITION OF TERMS advice and has been prepared without taking into States or to or for the account or benefi t of US Persons Defi nitions of certain terms used in this PDS appear in account your individual investment objectives, fi nancial except in transactions exempt from the registration the Glossary. circumstances or particular needs. You should read the requirements of the US Securities Act. whole PDS and seek independent fi nancial and taxation UPDATED INFORMATION APPLYING FOR NEW UNITS advice from your fi nancial or other professional advisers Information about the Rights Issue or Stapling Issue may before deciding whether to apply for New Units under Eligible Unitholders will only be entitled to exercise need to be updated by APL. Any updated information the Rights Issue. their Rights and apply for New Units to which they are about the Rights Issue or Stapling Issue which is not entitled by completing and lodging their Entitlement and DATE OF THIS PDS materially adverse to investors will be made available at Acceptance Form together with payment of Application www.pipelinetrust.com.au. APL will provide a copy of This PDS is dated 16 November 2006. A copy of this PDS Monies. The number of New Units to which you are the updated information free of charge to any person was lodged with the Australian Securities and Investments entitled is shown on the Entitlement and Acceptance Form. who requests a copy during the Issue Period, by calling Commission (ASIC) on that date. Neither ASIC nor Applications for New Units by Eligible Unitholders the APA Information Line on (02) 8280 7132 from within Australian Stock Exchange Limited (ASX) nor any of their under this PDS must be lodged by no later than 5.00 pm Australia or +61 2 8280 7132 from outside Australia. respective offi cers or employees takes any responsibility (Sydney time) on 11 December 2006 (subject to change). Where updated information about the Rights Issue or for the contents of this PDS. A reference in this PDS to Stapling Issue is materially adverse to investors, APL time is a reference to Sydney time. You do not need to apply for APTIT Units. These will be will issue a supplementary PDS in accordance with its issued and stapled to APA Units as described in this PDS. obligations under the Corporations Act. NO REPRESENTATIONS OTHER THAN AS SET OUT IN THIS PDS No person is authorised to give any information or to make any representation in connection with the Rights i ONE OF TABLE OF CONTENTS AUSTRALIA’S IMPORTANT INFORMATION i TABLE OF CONTENTS 1 LEADING ENERGY KEY DETAILS AND DATES 2 TRANSPORTERS WHAT DO I NEED TO DO? 3 LETTER FROM THE CHAIRMAN 4 APA HIGHLIGHTS AND KEY RISKS 5 SECTION 1 DETAILS OF THE RIGHTS ISSUE 9 SECTION 2 ANSWERS TO KEY QUESTIONS 12 SECTION 3 ACTIONS REQUIRED FOR THE RIGHTS ISSUE 17 SECTION 4 OVERVIEW OF APA 20 SECTION 5 ESTABLISHMENT OF APTIT AND STAPLING PROCEDURES 29 SECTION 6 FINANCIAL INFORMATION 32 SECTION 7 INVESTIGATING ACCOUNTANTS’ REPORT 38 SECTION 8 RISK FACTORS 43 SECTION 9 FEES AND OTHER COSTS 49 SECTION 10 TAXATION IMPLICATIONS 54 SECTION 11 ADDITIONAL INFORMATION 59 GLOSSARY 69 CORPORATE DIRECTORY 73 KEY DETAILS AND DATES KEY RIGHTS ISSUE STATISTICS Existing Units on issue Approximately 332.1 million Rights Issue ratio 2 for 7 New Units available under Rights Issue Approximately 94.9 million Issue Price $3.75 per New Unit Rights Issue proceeds Approximately $356 million APA Units on issue following Rights Issue (excluding APA Units issued under the DRP) Approximately 427.0 million KEY RIGHTS ISSUE DATES Lodgement of PDS with ASIC 16 November 2006 Existing Units quoted ex-Rights and Rights trading commences 20 November 2006 Rights Issue Record Date for entitlements under Rights Issue 5.00 pm (Sydney time), 24 November 2006 Rights Issue opens 27 November 2006 Rights trading ends 4.00 pm (Sydney time), 4 December 2006 Deferred settlement trading of New Units commences 5 December 2006 Closing time and date for renunciations, acceptances 5.00 pm (Sydney time), 11 December 2006 and payment in full Allotment of New Units 18 December 2006 Despatch of Unitholder statements for New Units 19 December 2006 Deferred settlement trading of New Units ends 19 December 2006 Normal trading commences for New Units 20 December 2006 KEY STAPLING DATES Last day for trading in APA Units 22 December 2006 Commencement of trading in Stapled Securities on a deferred settlement basis 27 December 2006 Stapling Record Date 3 January 2007 Issue of APTIT Units and Stapling 4 January 2007 Despatch of Stapled Security holding statements 5 January 2007 Deferred settlement trading of Stapled Securities ends 5 January 2007 Normal trading commences for Stapled Units 8 January 2007 Note: These dates are indicative only and subject to change. APL, in consultation with the Underwriter and subject to the Corporations Act, the ASX Listing Rules and other applicable laws, has the right to vary the dates of the Rights Issue, including to extend the Rights Issue or accept early or late Entitlement and Acceptance Forms, either generally or in particular cases, without notifying you. APL, subject to the Corporations Act, the ASX Listing Rules and other applicable laws, also has the right to vary the dates associated with Stapling, either generally or in particular cases, without notifying you. You are encouraged to submit your Entitlement and Acceptance Form as soon as possible. The commencement of quotation of New Units and Stapled Securities is subject to confi rmation from ASX. 2 PRODUCT DISCLOSURE STATEMENT RENOUNCEABLE RIGHTS ISSUE WHAT DO I NEED TO DO? READ Read this PDS in full, including: ■ Important Information (located on the inside of the front cover); ■ Section 1: Details of the Rights Issue; ■ Section 2: Answers to Key Questions; ■ Section 5: Establishment of APTIT and Stapling Procedures; and ■ Section 8: Risk Factors. RIGHTS ISSUE STAPLING Consider and Consult Do Nothing Consider all risks and other information contained in this PDS in You do not need to do anything to be issued APTIT Units. light of your particular investment objectives and circumstances. All Unitholders on the register at 5.00 pm (Sydney time) on Consult with your fi nancial or other professional advisers if you the Stapling Record Date will be issued one APTIT Unit for each are uncertain. APA Unit (including any New Units issued pursuant to the Rights Issue and any APA Units issued under the DRP) they own on that date. An application for APTIT Units will be made by APL as Decide and Complete attorney and agent for each Unitholder. All APTIT Units issued to If you have decided to exercise all or some your Rights and Unitholders will be stapled to APA Units on a one for one basis to acquire New Units, complete the Entitlement and Acceptance form Stapled Securities. Form and lodge the form together with your Application Monies Your unitholding details will be updated automatically in with the Registry by 5.00 pm (Sydney time) on Monday, a Stapled Security register upon issue of the APTIT Units. 11 December 2006. If you have decided to transfer all or some of your Rights, you should contact your stockbroker. Closing of Rights trading on ASX occurs on Monday, 4 December 2006. If you do nothing, your Rights will lapse. Further information on how to exercise or transfer your Rights is set out in Section 3. For answers to any further questions you may have, please call the APA Information Line on (02) 8280 7132 from within Australia or +61 2 8280 7132 from outside Australia. 3 LETTER FROM THE CHAIRMAN 16 November 2006 Dear Unitholders, On behalf of the directors of Australian Pipeline Limited (APL) acquire some or all of these New Units, the Directors recommend (in its capacity as responsible entity of Australian Pipeline that you consider transferring some or all of your Rights prior to Trust (APA)), I am pleased to invite you to participate in a 4.00 pm (Sydney time) on 4 December 2006, rather than allowing renounceable Rights Issue to raise approximately $356 million them to lapse. for APA. The proceeds of the Rights Issue will be used to For an outline of the procedure that you should follow to exercise reduce gearing and provide APA with additional fl exibility and your Rights and acquire New Units or to transfer your Rights, fi nancial capacity to fund future acquisitions and development please read Section 3 “Actions Required for the Rights Issue”. opportunities and to pay the expenses of the Rights Issue. If you decide to apply for New Units, the closing time and date APL is focused on growing Unitholder distributions by at least for acceptances and payment is 5.00 pm (Sydney time) CPI annually, using a combination of skilful asset management on 11 December 2006. and appropriate asset acquisitions. To this end, APA has recently acquired the Allgas gas distribution network in Petronas Australia Pty Limited, which owns approximately Queensland and has now almost completed the acquisition 13.2% of the issued capital of APA, intends to exercise of all stapled securities in GasNet. its Rights and acquire all New Units to which it is entitled under the Rights Issue. The balance of the Rights Issue is GasNet’s Victorian gas transmission business complements underwritten by ABN AMRO Rothschild. APA’s New South Wales gas transmission businesses and the Board considers it will augment APA’s competitive position on To complement APL’s ongoing investment strategy, APL the eastern seaboard. Together with our recently announced has created APT Investment Trust (APTIT) to act as a “pass participation in the FEED study for a new pipeline linking through” trust for tax purposes and increase fl exibility in the gas fi elds in Queensland to the Moomba gas hub, APL paying distributions. APL intends to issue APTIT Units to all believes the acquisition of GasNet will enhance our ability to Unitholders on the APA register on 3 January 2007 and to provide seamless transportation services for the delivery of gas staple those APTIT Units to APA Units. The resulting Stapled across Queensland, NSW, Victoria and the ACT. APL expects Securities will be quoted on ASX. a number of benefi ts from its acquisition of Allgas, which Section 5 sets out how we propose to give effect to the currently services one of the highest economic and population stapling process that was considered and approved at the growth regions in Australia (from Brisbane to northern NSW general meeting of Unitholders held on 20 October 2004. No including the south coast region of Queensland). Similarly, APL action is required by you in relation to the issue of APTIT Units believes GasNet’s Telfer Pipeline in Western Australia further or the Stapling. enhances our already strong business in Western Australia. The Directors urge you to carefully read this PDS including On 16 November 2006, the Board announced an unfranked the risks associated with investing in New Units set out in fi rst interim distribution of 7.0 cents per APA Unit payable on Section 8 and the description of the Stapling in Section 5, 18 December 2006. Based on current expectations for the full in conjunction with publicly available information relating to year results for FY2007, APL expects to declare a 28.0 cent APA, before deciding whether to apply for New Units. distribution per Stapled Security for FY2007 on the expanded issued capital base. This represents an increase of 16.7% on the If you have any questions in respect of the Rights Issue 24.0 cent distribution per APA Unit for FY2006 and signifi cantly or Stapling, please call the APA Information Line on exceeds APA’s objective to grow Unitholder distributions (02) 8280 7132 from within Australia or +61 2 8280 7132 annually by at least CPI. The New Units will not participate in from outside Australia. this distribution. On behalf of the Directors, I commend the Rights Issue to you. Unitholders at 5.00 pm (Sydney time) on 24 November 2006 with Yours faithfully, an address in Australia or New Zealand (Eligible Unitholders), will have the right to acquire 2 New Units for every 7 Existing Units, at an Issue Price of $3.75 per New Unit, which is a 18.1% discount to the last trading price on ASX on 15 November 2006. Your entitlement to New Units is set out in the Entitlement and George Bennett Acceptance Form. If you do not wish to exercise your Rights to Chairman 4 PRODUCT DISCLOSURE STATEMENT RENOUNCEABLE RIGHTS ISSUE APA HIGHLIGHTS AND KEY RISKS PERFORMANCE HIGHLIGHTS FOR THE PAST FIVE FINANCIAL YEARS Over the last fi ve Financial Years, APA has had strong organic growth in revenue that has been complemented by strategic acquisitions and development of gas pipelines and complementary assets. APA’s solid operating cash fl ow has supported increased distributions to Unitholders. This is illustrated in the following charts. Total Revenue – Before Significant Items* Total Assets 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 A$m 0 50 100 150 200 250 300 350 A$m 0 500 1000 1500 2000 2500 Net Profit After Tax – Before Significant Items* Cash Flow – Operating Cash flow per APA Unit (cents) Cash flow operating (A$m) 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 A$m 0 10 20 30 40 50 60 70 0 20 40 60 80 100 120 Total Equity Distributions per APA Unit Income Capital 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 A$m 0 100 200 300 400 500 600 700 cpu 0 5 10 15 20 25 * Signifi cant items relate to items that are non-recurring or are not refl ective of normal business operations of APA APA – Total Unitholder Returns since IPO (base = 100) 400 350 300 250 200 150 100 Jul-00 Nov-00 Mar-01 Jul-01 Nov-01 Mar-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Note: T otal Unitholder Returns includes returns to Unitholders from both changes in APA’s unit price and distributions paid (excluding franking credits) which are assumed to be reinvested in APA Units at the unit price at the time. Investors should be aware that past performance is not necessarily a guide to future performance and that the above data should not be treated as a forecast of future performance or expected returns of APA. 5 APA HIGHLIGHTS AND KEY RISKS FY2005 ABOUT APA DISTRIBUTION PER APA APA is one of Australia’s largest gas transmission businesses and also owns complementary assets including gas distribution and UNIT OF 22.5 CENTS electricity transmission assets. KEY OPERATING HIGHLIGHTS FOR FY2006 FY2006 ■ APA achieved a 4.4% increase in pipeline transportation DISTRIBUTION PER APA revenue and a 12% increase in EBITDA on the previous UNIT OF 24.0 CENTS Financial Year ■ These results included a three month revenue contribution from Murraylink and the Kogan North gas processing facility ■ APA reduced operating costs as a percentage of revenue, primarily through the integration of APA’s Western Australian FY2007 gas business and a reduction in charges payable to service providers DISTRIBUTION PER APA ■ APA committed to build the Bonaparte Gas Pipeline in the Northern Territory, which is scheduled to operate from STAPLED SECURITY January 2009 EXPECTED TO GROW 16.7% ■ APA executed an agreement to build, own and operate the Daandine power station, using coal seam gas from fi elds TO 28.0 CENTS adjacent to APA’s Roma to Brisbane Pipeline GAS TRANSMISSION GAS DISTRIBUTION APA has interests in over APA acquired the Allgas 10,000 km of gas transmission gas distribution network in pipelines in all mainland states and November 2006 territories of Australia, including This network comprises over the recently acquired GasNet 2,300 km of gas distribution mains pipelines and serves over 64,000 customers These pipelines transport in south east Queensland and approximately 40% of the natural northern New South Wales gas consumed in Australia ELECTRICITY COMPLEMENTARY TRANSMISSION ASSETS APA acquired Murraylink in Other assets of APA include: March 2006 ■ Kogan North gas processing facility in Queensland; and Murraylink is a 180 km high voltage electricity transmission ■ Mondarra gas storage facility interconnector between South in Western Australia Australia and Victoria 6 PRODUCT DISCLOSURE STATEMENT RENOUNCEABLE RIGHTS ISSUE APA HIGHLIGHTS AND KEY RISKS KEY RISK FACTORS There are risks inherent in all forms of investment. In addition to Gas Transportation Deed Risk is that a revenue reduction the risks associated with any stock market investment which are under an agreement with AGL Energy will not be replaced. detailed in Section 8.1, there are risks which are specifi c to an Details are contained in Section 8.2.7. investment in APA, which arise out of the businesses carried on Operational Risk includes equipment failures or breakdowns, by APA and the sectors in which it operates. information technology systems failures or breakdowns, The following is a list of the principal APA specifi c risks. This list contractor default, unplanned interruptions, damage by third is not exhaustive and is not a substitute for a careful reading of parties and unforeseen accidents. These are dealt with more Section 8 which describes both these risks and the more general fully in Section 8.2.8. risks of investing in APA in more detail. Regulatory Risk is the risk inherent in operating in a regulated Asset Integrity Risk is physical risk faced by gas transmission environment including pricing. Details of this risk are in pipelines and gas distribution systems. This risk is addressed in Section 8.2.9. more detail in Section 8.2.1. Risks associated with Alinta’s investment in APA are Bypass Risk arises when competitors replicate portions varied. Sections 4.9 and 8.3 more fully explain these risks. of pipelines or electricity transmission systems rather than purchasing transportation services on an existing transmission asset. This risk is faced by all transmission assets. It is most relevant to APA in regard to gas transmission pipelines and is described in more detail in Section 8.2.2. Competition Risk arises because some of APA’s assets are affected by the existence of competing assets owned and operated by other parties. APA’s assets may be affected in the future by the development of new competing assets or by the expansion of existing competing assets. This risk is addressed in more detail in Section 8.2.3. Construction Risk arises in the construction phase of projects and includes the failure to obtain necessary approvals, higher than budgeted construction costs and project delays. For more information, see Section 8.2.4. Gas Demand Risk is a function of end user demand which in turn is dependent on a number of variables including weather and population growth. This risk is dealt with in more detail in Section 8.2.5. Gas Supply Risk is the adverse effect a shortage in the availability of competitively priced gas could have on APA’s revenue. For more information, see Section 8.2.6. 7 This page has been left blank intentionally. 8 PRODUCT DISCLOSURE STATEMENT RENOUNCEABLE RIGHTS ISSUE