APA Group gains $1bn extra funding capacity after S&P credit rating change

The APA Group (ASX: APA) share price is in focus today after S&P Global Ratings reaffirmed its BBB credit rating and improved APA’s debt threshold, enabling over $1 billion in extra growth funding.

What did APA Group report?

• S&P affirmed APA’s BBB (stable) long-term credit rating
• S&P lowered APA’s downside FFO to Debt threshold from 9.5% to 8.5%
• The modification increases debt capacity by more than $1 billion
• APA maintains stable and predictable cash flows
• The change strengthens APA’s ability to fund future growth projects

What else do investors need to know?

The adjustment from S&P recognises APA’s consistent cash generation and solid financial management. By lowering the downside threshold, APA can now take on additional debt to pursue expansion across its $27 billion portfolio of infrastructure assets.

APA supplies about half of Australia’s domestic gas through its 15,000 kilometres of pipelines and operates a mix of gas, electricity, wind, and solar assets nationally. This strengthened balance sheet supports the company’s strategy of securing Australia’s energy future.

What did APA Group management say?

CEO and Managing Director Adam Watson said:

It is pleasing to see S&P acknowledge the high-quality of our ongoing cashflows. S&P’s modification of our FFO to debt downside threshold is significant, providing more than $1 billion in additional funding capacity from our existing balance sheet.

We have strong momentum in the delivery of our growth strategy and remain focussed on efficient and prudent capital allocation to capture value from the most attractive long-term opportunities for APA securityholders. This ratings modification will provide further funding support for our attractive growth projects.

What’s next for APA Group?

APA is expected to use this enhanced debt capacity to fund new projects across its key energy infrastructure networks. The company remains focused on efficient investment and pursuing growth opportunities that can deliver value for securityholders.

As the transition to renewable energy accelerates and demand for reliable energy infrastructure grows, APA aims to maintain its strong financial position to support the nation’s evolving energy needs.

APA Group share price snapshot

APA Group shares have risen 27% over the past 12 months, outperforming the S&P/ASX 200 Index (ASX: XJO) which has increased 2% over the same period. 

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The post APA Group gains $1bn extra funding capacity after S&P credit rating change appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Apa Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.