Australian Gas Networks Ltd

This security is available for Retail and Wholesale Clients

Issuer Outline

Australian Gas Networks Limited (AGN) owns gas distribution networks in Victoria, South Australia, Queensland, New South Wales and the Northern Territory. The networks transport gas to domestic, commercial and industrial consumers via retailers, with Australia’s three largest energy retailers taking over 90% of the gas volumes.

AGN’s network consists of over 22,000 kilometres of mains pipeline and 1,120 kilometres of transmission pipeline servicing over one million customers across five states and territories.

AGN currently outsources maintenance operations to the APA group under a long term operating agreement. AGN is wholly owned by a consortium led by Cheung Kong Infrastructure, a listed infrastructure group based in Hong Kong.

Key terms

Key Dates

Strengths

• By their nature, AGN's distribution networks are monopoly assets with little chance of substitution or competition in the
  medium term. Growth in its gas networks should continue to improve as greener energy solutions remain a focus of
  governments
• The vast majority of AGN's revenues come from its regulated networks business which includes annual CPI adjustments.
  This high level of regulated revenue underpins AGN's ability to meet its debt obligations. AGN's network businesses
  maintain a low business risk profile due to their essential service nature and diversified geographic footprint
• AGN has significantly improved its financial position as a result of a number of equity based initiatives undertaken in recent
  years which have the effect of both improving the balance sheet of the company and increasing the level of protection to
  bond holders
• AGN has continued to manage its refinancing exposure well and in advance of maturities. Recent bond issues have removed
  immediate refinance risk and lengthened the average duration of AGN's debt to around nine years
• The inflation linked bonds have the benefit of a guarantee of scheduled payments of principal and interest by Assured
  Guaranty, which provides the credit rating uplift to AA over the Issuer's underlying credit rating
• AGN is now majority owned by the large Hong Kong conglomerate CKI, which in itself has an investment grade rating from
  S&P with a stable outlook. Both S&P and Moody’s upgraded the rating of AGN following the takeover, as it believes CKI will
  adopt a more conservative stance on AGN's capital structure than AGN did operating as a stand-alone entity. CKI has a
  history of maintaining investment grade ratings on its investments in Australian regulated assets. In addition, CKI has ample
  sources of capital of its own which provides an additional funding source for AGN if needed

Risks

• As primarily a gas distribution network, AGN faces some volume risk if actual volumes fall short of forecasts. This largely
  results from milder than expected winters in Victoria and South Australia. We note that volume demand for AGN's networks
  has historically been resilient to changing economic conditions, but susceptible to warmer winters. This resilience reflects
  its predominantly residential customer base and the essential nature of its service to gas users
  
• As with any regulated asset, AGN has exposure to regulatory risk. While the completion of the recent regulatory decisions
  has removed this in the medium term, regulatory risk will reappear at the time of the next round of regulatory reviews in the
  medium to longer term. The diversification of AGN's assets across several regulatory jurisdictions helps provide comfort that
  they will minimise the regulatory risk in the longer term

Other risks

• Call risk: n/a
• Duration risk: n/a
• Interest deferral/cancellation: n/a
• Non-viability trigger: n/a

Summary

The AGN Limited 3.04% 20 August 2025 inflation linked bond offers inflation protection and exposure to a mature, highly rated infrastructure asset. Being an inflation linked bond with a relatively long duration, the bond suits investors with a longer term investment horizon