APA Group (ASX:APA) Announces Joint Development for 400MW Brigalow Power Plant

In a recent ASX announcement, APA Group (ASX:APA) has executed a Joint Development Agreement with state-owned CS Energy to develop the APA Brigalow Power Plant, positioning itself for an 80% ownership interest in the Queensland project. The 400MW gas power station, located adjacent to CS Energy’s existing Kogan Creek Power Station, targets a 2028 operational date to provide firming capacity for peak electricity demand periods as renewable energy penetration increases across the National Electricity Market.

The partnership represents APA’s first major collaboration with a state-owned entity in gas-powered generation and expands the company’s footprint beyond transmission infrastructure into power generation. CS Energy will retain 20% ownership and handle plant operations and maintenance post-commissioning.

Revenue Protection Through Long-Term Hedge Agreement

APA will limit exposure to wholesale electricity price volatility through a proposed 25-year hedge offtake agreement with CS Energy. The arrangement provides inflation-linked returns with a small variable revenue component offering potential for enhanced returns during favourable market conditions.

This revenue structure provides predictable, long-duration cash flows that investors typically value in infrastructure assets. The inflation linkage offers natural protection against rising costs over the project’s operational life, whilst the variable component allows participation in upside market opportunities.

This investor update confirms the investment forms part of APA’s existing $2.1 billion organic growth pipeline and will be funded from existing balance sheet capacity. Management expects returns consistent with APA’s required return hurdles, demonstrating capital allocation discipline.

CEO Commentary on Strategic Value

“This project builds on APA’s existing capabilities and assets in Queensland, driving momentum in our GPG growth strategy and complementing our separate agreement with CS Energy to deliver the project’s lateral pipeline,” said Adam Watson, Chief Executive Officer and Managing Director.

This development represents a strategic deepening of the company’s presence in Queensland, where it already maintains significant pipeline and transmission infrastructure. This clustering of assets creates operational synergies and strengthens APA’s position as a critical energy infrastructure provider.

What Is the Ownership Structure of the Brigalow Power Plant?

Following the execution of full form documentation, APA will lead project delivery under a construction management agreement. On satisfaction of conditions precedent, APA will acquire its 80% ownership stake, with CS Energy retaining 20% and providing operational expertise.

The ownership structure balances risk and reward effectively. APA provides capital and development capability whilst CS Energy contributes operational expertise and benefits from existing infrastructure adjacency at Kogan Creek Power Station.

A reimbursement mechanism protects APA’s early funding if full form documentation is not executed, reducing exposure during the conditional development phase. This structured approach demonstrates prudent risk management throughout the development timeline.

How Will APA Fund the Brigalow Power Plant?

APA will fund the project from existing balance sheet capacity without requiring equity raising or material debt increases. This approach avoids dilution to existing securityholders whilst demonstrating financial strength and disciplined capital management.

As part of the Joint Development Agreement, APA will provide early funding up to the date of acquiring its 80% interest. This staged investment approach reduces upfront capital exposure until the project is de-risked through full documentation and regulatory approvals.

Final capital expenditure will be determined following detailed engineering design, expected to be completed in the first half of calendar year 2026. GE Vernova has been appointed to deliver the gas turbines for the project, bringing global technology leadership and proven reliability to the development.

Why Is Gas-Powered Generation Critical for Queensland’s Energy Future?

The project addresses critical infrastructure needs identified in the Australian Energy Market Operator’s 2024 Integrated System Plan. According to AEMO, 13 gigawatts of new gas-powered generation capacity will be needed in the National Electricity Market under its Step Change scenario.

Gas-powered generation provides firming capacity for variable renewable energy sources such as solar and wind. As renewable energy penetration increases across Queensland’s grid, peaking power plants become essential for maintaining system reliability during periods when renewable generation is insufficient to meet demand.

The 2028 operational target positions the APA Brigalow Power Plant to capture early capacity shortage periods ahead of many competing projects. This timing advantage could strengthen APA’s market position in Queensland’s evolving energy landscape.

Strategic Vision for Energy Transition

“We know significant investment in GPG capacity is needed to firm the integration of renewables in Australia’s energy system. CS Energy and the Queensland Government continue to show leadership in the energy transition, with the delivery of new renewable power generation and supporting GPG infrastructure,” said Adam Watson.

The partnership with Queensland’s state-owned CS Energy represents strategic validation of APA’s capabilities in large-scale infrastructure development. It positions the company as a preferred partner for government-backed energy transition projects.

Infrastructure Integration and Gas Supply Connection

The new gas-fired power plant will connect to APA’s Roma Brisbane Pipeline via a new lateral transport and storage pipeline being developed separately. APA finalised a Project Development and Gas Transportation and Storage Agreement for this lateral pipeline with CS Energy in July 2025.

This parallel development ensures gas supply infrastructure aligns with the plant’s 2028 commissioning timeline. Co-location with CS Energy’s Kogan Creek Power Station provides access to existing grid connection infrastructure, reducing development complexity and capital requirements.

What Conditions Must Be Satisfied Before Project Completion?

Development remains conditional and subject to necessary external and government approvals, finalisation of several development matters, and entry into full form documentation. The long form agreements are likely to be executed in the middle of calendar year 2026.

These conditions precedent are standard for major infrastructure projects and allow both parties to progress engineering work whilst managing regulatory and commercial risks. The conditional structure provides flexibility to address unforeseen challenges during the development phase.

Portfolio Context and Growth Strategy Alignment

The APA Brigalow Power Plant expands APA’s footprint in gas-powered generation alongside its existing portfolio of $27 billion in gas, electricity, solar and wind assets. The company owns and operates power generation assets including gas-powered, wind and solar facilities across Australia.

Watson noted the company “continues to see strong momentum across a range of growth opportunities in gas transmission and storage, GPG and remote power generation.” The focus remains on “efficient and prudent capital allocation to ensure we prioritise the most attractive opportunities for APA securityholders.”

The partnership with Queensland’s state-owned CS Energy represents both strategic expansion into generation and geographical deepening in Queensland. This clustering of assets creates operational synergies and strengthens APA’s position as a critical energy infrastructure provider in the state.

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