AGL Energy Limited Locked Bag 1837 Level 24, 200 George St T: +61 2 9921 2999 ABN: 74 115 061 375 St Leonards NSW 2065 Sydney, NSW, 2000 F: +61 2 9921 2552 AUSTRALIA AUSTRALIA www.agl.com.au
ASX & Media Release
AGL Investor Day
14 November 2016
AGL Energy Limited (AGL) will today host its 2016 Investor Day featuring presentations from members of AGL’s Executive Team and other members of senior management. Copies of the presentations are attached to this release and are available on AGL’s website. The Investor Day will be webcast live from approximately 12.15pm to 3:15pm and approximately 4:10pm to 5pm. You can register to view the webcast via AGL’s website at the following link: http://www.webcasts.com.au/agl141116/. A replay of the webcast will be archived on AGL’s website with the presentation materials and a transcript of the event.
Further inquiries:
Investors Media Nicole Rizgalla, Investor Relations Manager Kathryn Lamond, Media Manager Direct: +61 2 9921 2691 Direct: +61 2 9921 2170 Mobile: +61 400 488 836 Mobile: +61 424 465 464 email: [email protected] e-mail: [email protected]
About AGL AGL is one of Australia’s leading integrated energy companies. It is taking action to responsibly reduce its greenhouse gas emissions while providing secure and affordable energy to its customers. Drawing on over 175 years of experience, AGL serves its customers throughout eastern Australia with meeting their energy requirements, including gas, electricity, solar PV and related products and services. AGL has a diverse power generation portfolio including base, peaking and intermediate generation plants, spread across traditional thermal generation as well as renewable sources including hydro, wind, For personal use only use personal For solar, landfill gas and biomass.
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14/11/2016
AGL Investor Day 2016
Disclaimer and important information
The information in this presentation: - Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held; - Does not take into account the potential and current individual investment objectives or the financial situation of investors; and - Was prepared with due care and attention and is current at the date of the presentation. Actual results may materially vary from any forecasts (where applicable) in this presentation. Before making or varying any investment in securities in AGL Energy Limited, all investors should consider the appropriateness of that investment in light of their individual investment objectives and financial situation and should seek their own independent professional advice. Major expenditure remains subject to standard Board approval processes. Statutory profit and Underlying Profit Statutory profit is prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards, which comply with International Financial Reporting Standards. Underlying Profit is statutory profit adjusted for significant items and changes in the fair value of financial instruments. Underlying Profit has been presented with reference to the Australian Securities & Investments Commission’s Regulatory Guide 230 “Disclosing non-IFRS financial information” issued in December 2011. AGL’s policy for reporting Underlying Profit is consistent with this guidance. The Directors have had the consistency of the application of the policy reviewed by the external auditor of AGL.
For personal use only use personal For Amounts presented as statutory profit/(loss) and Underlying Profit are those amounts attributable to owners of AGL Energy Limited.
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Agenda
Market & Operations Update 1230
Richard Wrightson, General Manager, Wholesale Markets Wholesale Electricity: Managing Volatility
Doug Jackson, Executive General Manager, Group Operations Group Operations: Driving Value
Strategy & Growth Update 1345 Andy Vesey, Managing Director & CEO Growth in Transition: Our Strategic Imperative
Alistair Preston, Exec. General Manager, Organisational Transformation Power Shift: AGL Scenario Planning
Brett Redman, CFO Agile Capital: a Growth Story
Stephen Mikkelsen, Executive General Manager, Energy Markets Growth Initiatives: Break-Out Session
Elisabeth Brinton, Executive General Manager, New Energy New Energy: Building the Innovation Accelerator
Tim Nelson, Head of Economic Policy & Sustainability Perspectives on Policy Reform 1730
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Wholesale Group Electricity: Operations: Managing Driving Value
Volatility For personal use only use personal For
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Wholesale Electricity: Managing Volatility
Richard Wrightson General Manager, Wholesale Markets
Rising wholesale electricity market
Six-month rolling average spot price ($/MWh) Forward curve prices for FY18 flat swap ($/MWh) 70 70 65 65 60 60 55 55 50 50 Macquarie 45 acquisition 45 40 40 35 35 30 30 25 25 20 20 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 15 Jul 15 Jan 16 Jul 16
New South Wales Victoria For personal use only use personal For Source: AEMO, GFI Group
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Renewable build tracking thermal withdrawal
NEM renewable generation by state (GWh) NEM retirement/mothball of thermal generation (GWh) 30,000 30,000
25,000 25,000
20,000 20,000
15,000 15,000
10,000 10,000
5,000 5,000
0 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 Pre 2013 2013 2014 2015 2016 2017
NSW SA VIC QLD Coal retired Gas mothballed Coal mothballed then retired Coal pending closure Source: REC Registry, SunWiz, AEMO Gas potential closure
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Increasing thermal fuel costs driving the market
3-month rolling avg. gas cost (AUD/MWh sent out) Black coal cost (AUD/MWh sent out) 120 120 110 110 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 15 Jul 15 Jan 16 Jul 16
ADL BRI SYD VIC For personal use only use personal For Source: AEMO, ICE Futures Europe
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Demand outlook appears to be improving
250,000 Electricity demand (GWh)
200,000
150,000
100,000
50,000
0 2010 2011 2012 2013 2014 2015 *2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual Forecast NSW VIC QLD SA
Source: AEMO * Data is for partially complete year
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AGL portfolio well-aligned to manage market risk
4% 2% 5% 5% 6% 10%
25% 32%
55% 55%
NEM AGL
Black Coal Brown Coal Gas Wind Hydro For personal use only use personal For Note: Other sources comprise 1% of NEM generation mix Source: AEMO
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AGL coal supply position remains well-hedged
Performance reflects capacity to flex incremental generation to meet market demand
Black coal position (Mt)
14 12 Additional generation supported by stockpile drawdown 10 8 Stockpile drawdown 6 Contracted Coal Committed load supported by contracted coal position AGL Macquarie Generation 4 2 0 12345678910111213141516FY15 FY16 FY17F FY18F FY19F
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AGL well-positioned in event of LGC shortfall
… while lack of capital investment reflects policy uncertainty
LGC market model – new LRET target
60,000 6,000 50,000 5,000 40,000 4,000 30,000 3,000 MW
LGCs (000s) 20,000 2,000 10,000 1,000 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
LGCs supply Opening bank LGC shortfall LRET compliance and voluntary LGCs Installed capacity required (RHS) For personal use only use personal For
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SA pricing driven by thermal withdrawals
South Australia electricity forward curve flat swap ($/MWh) May 16: Jun 16: AGL 110 Closure of defers Torrens A 2012: Northern only operates Northern and mothballing Playford 100 Oct-Mar. Playford not intended to operate at all Jun 15: Jul 15: Announcement Northern, Playford and 90 Jun 14: Dec 14: AGL that Northern, Leigh Creek Northern to announces Playford and Leigh closure brought operate mothball of Creek won’t 80 forward to Mar 17 through Torrens A operate beyond winter by 2017 Mar 18 Jul 16: Pelican Point 70 following increases to full operational capacity on SA 60 turnaround government request Oct 15: Announcement of 50 closure of Playford and Northern in Mar 13: Pelican Mar 16 40 Point reduced to half capacity 30 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16
Source: GFI Group
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Wholesale Electricity: Managing Volatility
Richard Wrightson
General Manager, Wholesale Markets For personal use only use personal For
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Wholesale Group Electricity: Operations: Managing Driving Value Volatility
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Group Operations: Driving Value
Doug Jackson
Executive General Manager, Group Operations For personal use only use personal For
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Focusing on improving our safety performance
Total Injury Frequency Rate (TIFR) per million man hours
12 Macquarie contractors 11.0 10 included from FY16
8 6.2
6 4.7 4 4.3 2.7 2 1.9 0 FEB 2015 FEB FEB 2016 FEB JUL 2015JUL SEP 2015 JUL 2014JUL SEP 2014 OCT 2015 DEC 2015 OCT 2014 DEC 2014 APR 2016 APR 2015 JUN 2016JUN JUN 2015JUN NOV 2015 2016 JAN AUG 2015 AUG JAN 2015 JAN NOV 2014 AUG 2014 AUG MAR 2016 MAR 2015 MAY 2016 MAY 2015 FY17 YTD OCT YTD FY17
AGL TIFR Combined TIFR Employee TIFR Contractor
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AGL Macquarie: beating expectations
two years since For personal use only use personal For acquisition 18
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Key operating statistics illustrate performance
Lost generation due to mills (GWh) Duration of Liddell forced outages (days) 300 6.2 $45M gross 5.7 250 AGL margin acquisition improvement 4.8 in FY16 200
150
100
50
0 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Baseline Waterwall Reheater
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Improved generation output at AGL Macquarie
Bayswater net actual generation (GWh) Liddell net actual generation (GWh) 1,800 1,000
1,600 800 1,400
1,200 600 1,000
800 400 600
400 200 200
- -
For personal use only use personal For Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15 Mar 16 Sep 16
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Optimising an ageing plant
Finding the sweet spot at Liddell
Year-to-date commercial availability comparison 100%
80%
60% Incremental generation can be priced to reflect associated operating impact 40%
20%
0% Time FY17 commercial availability FY16 commercial availability
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Loy Yang mine: doing it differently
Overburden and interseam volume 10
9 As the mine advances, more dirt 8 must be moved to mine the coal 50% increase 7
6
5 4 Securing coal supply Cubic metres (M) 3 > In-pit stockpile 2 > Long-range planning 1 > Machine productivity
0 For personal use only use personal For Overburden Interseam
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AGL Torrens outlook in a volatile market > Torrens A: operation reflects South Australian markets; annual assessment of ongoing operation > Torrens B: fuel optionality > Development permit provides flexibility to construct open-cycle gas turbine up to 800 MW
Group Operations: Driving Value
Doug Jackson
Executive General Manager, Group Operations For personal use only use personal For
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AGL Investor Day 2016
Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation
Imperative Planning Accelerator For personal use only use personal For
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Growth in Transition: Our Strategic Imperative
Andy Vesey Managing Director & Chief Executive Officer
Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation
Imperative Planning Accelerator For personal use only use personal For
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Power Shift: AGL Scenario Planning
Alistair Preston Executive General Manager, Organisational Transformation
Scenario planning applies a rigorous process to strategy
Identify key trends Order uncertainty territories Define drivers and outcomes
Test investments Monitor evolving events Write scenario narratives For personal use only use personal For
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Internal and external experts mapped the } trends shaping the Australian energy market
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Distributed energy resources penetration rate
Consumer behaviour We ordered the Competitive intensity uncertainty territories, Network role } considering C02 profile their influence on one another Industrial electricity demand
Government intervention For personal use only use personal For
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Drivers and outcomes were identified
Driver matrix for
High (80%) distributed energy resources penetration } suggests emergence of
Ability to control disruptive business models Low (20%)
High (20%) Low (80%) 33 Costs
We developed scenarios to illustrate four possible futures
#2 #3 #4 For personal use only use personal For
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High uptake of smart Government has distributed energy proactively engaged in an resources (DER) orderly transition from stimulates new business thermal to large-scale models. renewable plant… This results in increased Consumers have higher competition from expectations and many traditional and non- have transitioned from traditional players. passive consumers to active market participants.
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Anticipated values in 2025 Uncertainty Monitored by territories triggers #1 #2 #3 #4 Distributed Trigger 1 Top quartile Middle quartiles Middle quartiles Bottom quartile energy penetration Trigger 2 High Medium Low Low Consumer behaviour Trigger 3 High: Medium: Low: Low: >0% -20% <-20% <-20% Today’s Competitive Trigger 4 Medium High Medium Low intensity trends Trigger 5 Strong, low Weak, high Strong, low Strong, low Role of network support Trigger 6 High Medium Low Very low } Trigger 7 Tracking Tracking Tracking Not on track scenario #1 CO reduction 2 towards low towards low towards profile medium Industrial Trigger 8 Medium High Low Very high electricity Trigger 9 High High Medium Low demand Government Trigger 10 Few Few Many Several
For personal use only use personal For intervention
Sources: Bloomberg New Energy Finance, Amr Reputation Institute Reptrak Report, AER, Westpac, European Patent Office 36
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Anticipated values in 2025
Uncertainty Monitored Last data territories by triggers (Sep 16) #1 #2 #3 #4 Distributed Global lithium 97 GWh 500 GWh 400 GWh 200 GWh 125 GWh energy ion battery penetration manufacturi Today’s ng capacity trends (GWh) } support scenario #1
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Weighted robustness Illustrative acid test for a business solution reflects how the conditions of the scenario 1. Robustness test uncertainty territory Outcome Relevance amplify or diminish the value of the investment Distributed energy Emergence of disruptive business models Yes 4 3 2 1 resources penetration across the value chain Consumer behavior Changing customer expectations and trust Yes 4 1 3 1 Low variance of Major shifts in retail market shares and Competitive intensity Yes 4 3 2 1 range of products robustness indicates Reformed tariffs and behind the meter similar benefit in all Role of network Yes 2 3 2 1 competition scenarios
CO2 profile Proliferation of carbon reduction Yes 4 2 2 1 Industrial electricity Reshaped supply-demand load curves Yes 2 2 4 1 demand Strategy fit shows Government Change in the number and variety of whether or not the Yes 4 2 2 1 intervention government interventions opportunity complies
64 24 16 17 7 with AGL’s Greenhouse Gas Policy and with AGL’s Weighted robustness score 57% 86% 57% 61% 25% ambition to enrich the Variance 6.21 customer experience 2. Strategy fit Yes
AGL’s greenhouse gas policy compliance Yes High optionality means Customer experience Yes AGL’s net exposure to loss from a potential future exit
3. Optionality 10 4 3 2 1 would be low For personal use only use personal For
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Weighted Variance Strategy fit Optionality robustness
No-regrets business Digital decision; high Transformation robustness across all 81% 4.69 Yes 11 scenarios; high Program optionality provided by Agile framework
The results of the Acid Test allow us to compareRisk mitigation and capital-light; robust in PARFdifferent business73% solution 6.92 Yes 16 all except “lilac” scenario; provides for considerable optionality
Early-mover advantage; high robustness under Sunverge 57% 7.45 Yes 10 “green” scenario; Virtual Power Plant demo provides optionality
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The scenarios, watch-tower and acid test form the basis of an ongoing strategic conversation Identify key trends Order uncertainty territories Define drivers and outcomes
Test investments Monitor evolving events Write scenario narratives For personal use only use personal For
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Power Shift: AGL Scenario Planning
Alistair Preston Executive General Manager, Organisational Transformation
Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation
Imperative Planning Accelerator For personal use only use personal For
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Agile Capital: a Growth Story
Brett Redman Chief Financial Officer
Recent actions underpin strong performance
Total shareholder return 50% +46%
40%
30%
20% +14%
10%
0%
-10% Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16 AGL S&P/ASX200 Accumulation Index
For personal use only use personal For Source: Orient Capital
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We are targeting increased returns
Return on Equity
8.3% 8.0% 7.5% 7.5% 7.2%
Targeting improvements in FY17 and onwards
FY12 FY13 FY14 FY15 FY16
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Unchanged outlook reflects strategy delivery
FY17 Underlying Profit expected to be $720-800M1 Primary drivers expected to be: > Wholesale electricity margin (phasing of benefit to reflect competitive environment, timing of retail price changes and AGL hedging profile) > Customer value strategy > Delivery of operational transformation targets Year-on-year improvement expected to be weighted towards second half Outlook reflects strength of AGL business despite previously disclosed challenges: > Unseasonably mild July/August weather > Anticipated reduction in gas portfolio EBIT of at least $100M vs. FY16 > Continued negotiations over AGL Loy Yang enterprise bargaining agreement
For personal use only use personal For 1. Subject to normal trading conditions for the remainder of FY17; Underlying Profit is after interest and tax
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Asset sales reflect discipline and focus $948M of $1B divestment objective for FY17 already achieved Macarthur Wind Farm and Diamantina Power Station divestments completed in FY16 Sales to Powering Australian Renewables Fund (PARF) > Nyngan and Broken Hill solar projects sold for $257M > Sale of Silverton Wind Farm likely before third-quarter FY17
Strong cash flows position AGL to fund growth Generation and use of cash: FY15 onwards FY15 FY16 FY17 onwards Operating expenditure $(1,352)M $(1,380)M FY17 base of $1,381M reflects targeted $170M inflation-adjusted reduction vs. FY15 EBITDA $1,505M $1,689M To continue to grow broadly in line with Underlying Profit EBITDA/cash conversion 101% 94% Expected to remain above 90% Cash flow from operations $1,527M $1,588M To continue to grow broadly in line with Underlying Profit Interest paid $(194)M $(172)M FY17 increase to reflect emphasis on securing long-term tenor Tax paid $(147)M $(166)M Cash tax rate expected to remain ~30% Sustaining capital expenditure $(368)M $(390)M FY17 base of $315M reflects targeted $100M inflation-adjusted reduction vs . FY15 Dividends paid $(344)M $(446)M Dividend Policy for ~75% of Underlying Profit (where 80% franking can be maintained) Cash available $474M $414M To continue to generate at least $400M per year Disposals - $691M Asset sales likely to continue beyond achievement of ~$1,000M by end FY17 Acquisitions/investments $(1,585)M $(30)M Commitment to Energy Impact Partners fund in the region of ~$65M Growth capital expenditure $(426)M $(139)M To increase beyond FY17 forecast base of ~$200M in support of growth programs Share issuance/buy-back $1,210M - On-market buy-back of up to 5% of issues share capital worth ~$600M at announcement
Total headroom @ Baa2 N/A ~$2,000M Ample to support growth and announced capital management initiatives For personal use only use personal For
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The way we use capital is evolving
2006-2015 2015-2016 2017 onwards
“Building the Base” “Optimisation” “Agile Capital”
Asset acquisition and Asset sales, efficiency Targeted investment consolidation of programs and capital where management competitive advantage management review premium can be earned
49
Agile capital to enable an expanded core
Leverage growing orchestration capability to explore complementary data-driven retail offerings in the connected home Strengthening existing business AGL (e.g. Digital Transformation Program, core PARF, LNG import)
Deploy capital to transitioning Clear view of what we won’t do (e.g. developed geographies where AGL offshore power development, high- has relevant expertise, for example risk geographies, emerging markets)
Western Australia For personal use only use personal For
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A strong range of growth opportunities Acid test RobustnessStrategy fit Optionality
Reflects AGL’s commitment to 20% equity stake in the Fund More PARF equity investments developed $200M from FY16 onwards, starting with NSW solar projects today ~$300M investment through FY19 underway Digital transformation program Potential ~$50-100M enterprise resource planning upgrade
~$65M commitment to Energy Impact Partners fund Technology-led New Energy investments Sunverge investment has led to Virtual Power Plant demo $700M+ underway Targeting ~100,000 customers within 24 months Western Australia market entry Potential ~$50-100M expenditure in FY17-FY19
Investment of $17M to ready for final investment decision LNG import facility Potential ~$200-300M development pending decision in 2018-19
Develop additional gas-fired or battery plant peaking capability Large-scale peaking plant development Highly contingent on market conditions and policy settings
Growing orchestration and technology/data capability provides Expand data-driven retail offering opportunities to expand range of customer services Less developed Opportunity to expand core where risk profile and market type today Developed offshore retail markets in transition are consistent with existing business
51 Any investment must meet minimum 12% internal rate of return hurdle (post-tax, nominal) and higher depending on level of assessed risk
Summary of growth and return expectations
> FY17 Underlying Profit guidance of $720-800M equates to 8% growth at mid-point > New Dividend Policy targets payout ratio of 75% of Underlying Profit > Anticipated 90% or higher EBITDA/cash conversion > At least $400M a year of cash being generated to support growth funding > Balance sheet headroom of ~$2B available > On-market buy-back of up to 5% of issued share capital:~$600M at announcement > Growth investment projects worth $700M-plus underway
> For personal use only use personal For Targeted post-tax nominal internal rate of return >12% on all growth investment
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Agile Capital: a Growth Story
Brett Redman Chief Financial Officer
Growth Project Break-Out Presentations Stephen Mikkelsen, Executive General Manager, Energy Markets
Phaedra Deckart Maree Mamo Head of Wholesale Gas General Manager, Customer, Capability & Insights
Scott Thomas Simon Moorfield
General Manager, Projects Chief Information Officer For personal use only use personal For
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Western Australia: Market Entry
Scott Thomas General Manager, Projects
WA is attractive in size and accessibility
Population Contestable gas market Gas market competitors
2.6M people ~700,000 gas sites ~90% Alinta share
1.0M households ~10,000 business sites 2013 Kleenheat entered
92% live in south-west corner $711 per annum average bill ~10% Kleenheat share
For personal use only use personal For Source: Government of Western Australia Department of State Development
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Changing dynamics to drive customer value focus
Gas market primed for Wholesale market is Increased focus on Electricity market competition responsive value and cost contestable in future
Limited competition in gas AGL has investigated gas Mining has led economy, ~1M residential and before Kleenheat entry supply, transport and contributing 30% of GSP ~100,000 business sites storage options in WA, Competition relatively new including services that Falling demand has halved Only ~5% contestable today for customers enable loads to ramp up growth from 5.0% to 2.5% (mainly in remote areas)
Kleenheat has acquired 10% Market has been responsive, Tougher and tighter of market in three years with offers received economic environment
Source: Government of Western Australia Department of State Development
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Time to act with differentiated value proposition
AGL intent How Build brand Build brand Drive shopping Drive switching Defend share awareness acceptance behaviour behaviour strongly Leverage competitive, macro Strong brand launch Build intimacy and Profile and segment Develop unique and Exceptional customer and wholesale above line (TV, radio, relevance through market using insight valuable offers for experience press, billboards etc) local area and cause- from other states and different segments throughout life-cycle environment to and online based marketing data augmentation that drive high appeal acquire ~100,000 to switch Ongoing value gas customers in 24 Constant and high Partnerships and Develop and deliver through loyalty and presence (reach) and alliances with local targeted, relevant and Simple process to engagement to build months, prior to pressure (frequency) gas sales and service personalised look for, choose and high regret for churn future electricity providers propositions to get gas from AGL market deregulation Local and relevant specific segments at Augmented by strong sponsorship Relationships with the right time Mix of price and value and responsive save properties and networks and based on deep and intervention activation government Effective use of digital segment insight and programs channels needs
Leverage growing personalised retailing capability enabled by Digital Transformation Program For personal use only use personal For
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Strategic Options in East Coast Wholesale Gas
Phaedra Deckart Head of Wholesale Gas
LNG demand continues to lead market transition
By 2018, 70% of gas demand will be Queensland LNG 6000
5000
4000
3000
2000
1000 East Coast gas demand (TJ/d) 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Residential and commercial Industrial Power LNG
For personal use only use personal For Source: AEMO, Poten & Partners
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Market moving to shorter-term contracts
Re-contracting needed to meet future demand
3000
2500
2000
1500
1000
East Coast gas (TJ/d) East Coast gas 500
0 2015 2020 2025 2030 2035
Contracted domestic supply Contracted gas to LNG Domestic demand (base case)
Source: AGL, Poten & Partners
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Winter 2016 illustrates changing dynamic
Spike in spot gas prices likely to recur 35 30 25 20 15 10
Daily spot pricespot ($/GJ) Daily 5 0 12 Jun 19 Jun 26 Jun 3 Jul 10 Jul
Sydney Adelaide Victoria
For personal use only use personal For Source: AEMO
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Supply tightness to continue
Shortfalls could occur in absence of further development
Source: AEMO, Poten & Partners
63
Disruption driving need for market reform
> ACCC East Coast Gas Inquiry focus areas: transportation, transparency, liquidity
> AGL supports increasing liquidity and transparency of trading hubs
> Market structure should allow gas to flow to demand
> Focus on alleviating system constraints to allow supply to meet demand is essential For personal use only use personal For
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Existing options for security of supply
Three key areas:
Strategic options Commentary Status quo foundation supply Continue to negotiate with Cooper Basin and Gippsland Basin for long-term competitive supply
Expand domestic supply Binding heads of agreement executed with Cooper Energy to support final investment decision of Sole development Final investment decision expected early 2017
Storage Significant storage position in Iona Peak storage at Newcastle and Silver Springs positions AGL portfolio for seasonal demand
65
LNG import facility a fourth option of interest
> AGL investing $17M to ready project for final investment decision in 2018-19 > Potential development cost of $200-300M PRELUDE DARWIN Asia ICHTYS > A number of sites identified GORGON APLNG NWS WHEATSTONE QCLNG > PLUTO Terminal could be available by 2021 GLADSTONE > Regulatory and community engagement to commence in early 2017
USA For personal use only use personal For Europe, Middle East and Africa 66
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Digital Transformation Program
Maree Mamo General Manager, Customer, Capability & Insights Simon Moorfield Chief Information Officer
Digital Transformation
Shift the way Foundational Adoption Future state we work • People • Customer chooses digital • • Customer experience led Process channels • Customer advocacy and loyalty • • • Design digital first Technology More digital less analogue • Frictionless customer • Business agility (phone calls) experience • Lean principles • New ways of engaging in energy • Continuous value delivery experiences • Data informed design • Data-insight led Signature moments - differentiating the experience
Customer-centricCustomer-centric value value streams- streams-organisingorganising AGL around AGL customer around momentsthe customer experience Distributed energy and connected home Business enablement Move and join Bill and usage Pay and assist Stay and grow Technology
Investment : $24M to date, $300M over the life of the three-year program For personal use only use personal For
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Growth in Power Shift: Agile Capital: New Energy: Transition: AGL a Growth Building the our Strategic Scenario Story Innovation Imperative Planning Accelerator
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New Energy: Building the Innovation Accelerator
Elisabeth Brinton
Executive General Manager, New Energy For personal use only use personal For
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Applying new technologies to deliver our business definition
Products and solutions Commercial Business definition partnerships Harness insights to enrich the customer’s energy experience Technology investments
71
Develop and prove Transition to Products and new business the appropriate solutions Commercial partnerships models and AGL business unit market solutions
Technology
investments For personal use only use personal For
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Focus on three value pools, aligned with scenario planning outcomes
Deploying Creating energy Inventing the low-carbon orchestration personalised consumer and “grid edge” retailer solutions solutions at scale
Data-driven market research and analysis
External data Internal customer data
73
Solar Analytics and Solar Command Maximising customers’ solar value $2.5M investment in Solar Analytics (from Dec 14) represents path of investment in innovation, then scaling up Solar Command: technology solution adds new value for solar customers while opening up growth opportunity Provides portal to test new product propositions such as smart appliance orchestration Now using digital meters for scalability Currently ~4,000 customers; expect to turn on another
~6000 by end of 2017 For personal use only use personal For
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World’s largest residential PV/battery virtual power plant $20M demonstration project leverages strategic investment in Sunverge and is supported by Federal Government 1,000 connected customer batteries storing 7MWh of energy (equivalent to 5MW peaker) in South Australia Enables AGL to provide orchestration services that benefit network operators including: peak shaving, voltage optimization and enhanced grid stability services World-leading IoT solution being developed that includes scalable software and consumer experience interface
Electric car plan and concierge service Australian-first service offering Bundled offer combining distributed energy product with tailored energy plan Unlimited charging for $1 a day, fully carbon offset via Future Forests program Leverages initial Ninja Blocks investment in orchestration/IoT capabilities ActiveStream digital meter captures charging load and provides demand management capability Concierge service includes online and call-centre guidance plus
premium installation service For personal use only use personal For Positions AGL as clear market leader as EV take-up increases
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Energy Impact Partners investment Investment in global Energy Impact Fund Managed by private-equity firm in New York AGL to join EIP Nexus Council alongside Southern Company, National Grid and Xcel Energy Inc Access to leading-edge products, technologies, partnerships, business models and market intelligence globally Channel to global markets for our innovative Australian technology partners Creates optionality in technology and partner selection
New Energy: Building the Innovation Accelerator
Elisabeth Brinton
Executive General Manager, New Energy For personal use only use personal For
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AGL Investor Day 2016
Supplementary
Information For personal use only use personal For
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History of AGL 2013 2016 AGL invests in demand Macarthur Wind Farm response management 1837 2006 opens and is the largest company Sunverge and Australian Gas Light AGL Energy Limited founded wind farm in the Southern offers customers EV Company is created from merger/demerger with Hemisphere charging Alinta Limited 1873 2015 2016 AGL launches world’s AGL imports and installs 2015 AGL launches the first largest solar Virtual first gas-cooking stove First gas arrives at residential battery Power Plant in South at its Darling Harbour 2009 AGL’s Newcastle storage device into Australia store AGL's hydroelectric Bogong Power Station Gas Storage Facility the Australian market opens in Victoria
2015 2005 AGL releases its Greenhouse Gas 2016 2012 Policy, providing a pathway for the AGL acquires AGL launches the AGL acquires the Loy decarbonisation of AGL’s coal- Southern Hydro Powering Australian Yang A power station fired generation portfolio Renewables Fund. 1841 2008 and adjacent coal mine Australian Gas Light Company AGL develops the lights the first gas lamp in Hallet wind farm Australia (within two years project in South 2015 there are 165 gas lamps) Australia 2014 AGL's Nyngan and Broken 2007 comprising four AGL acquires Macquarie Hill solar plants achieve wind farms 2013 Generation including full generation of 155 MW AGL acquires AGL acquires Bayswater and Liddell power 81 Powerdirect Australian Power & Gas stations
Executive Team
Andy Vesey Managing Director & Chief Executive Officer
Brett Redman Dan Cram Alistair Preston Doug Jackson Stephen Mikkelsen Elisabeth Brinton John Fitzgerald Chief Financial Officer Executive General Executive General Executive General Executive General Executive General General Counsel & Manager, People & Manager, Organisational Manager, Group Manager, Energy Manager, New Energy Company Secretary Culture; acting Executive Transformation Operations Markets General Manager,
Stakeholder Relations For personal use only use personal For
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AGL operations and key generation capacity
OPERATIONAL OVERVIEW VIC SA QLD NSW Total customer accounts Customer accounts Customer accounts Customer Customer accounts 1 . 3.7 million accounts . 533,000 gas . 132,000 gas accounts . 674,000 gas ˗ 2.2 million electricity . 636,000 electricity . 408,000 electricity . 79,000 gas . 808,000 electricity ˗ 1.4 million gas . 395,000 ˗ 2.0 million dual fuel accounts Key generation capacity Key generation capacity Key generation capacity electricity Key generation capacity² . Loy Yang A – 2,210 MW . Hallett Wind Farms – . Bayswater – 2,640 MW . 10,409 MW total owned / operated . Somerton – OCGT–150 MW 351 MW . Liddell–Coal – 2,000 MW . Energy sales (FY16) . Macarthur Wind – 420 MW Torrens Island Power . NSW Hydro – 53 MW . Electricity ~ 37,839 GWh Station–Gas –1,280 MW . Oaklands Hill Wind – 63 MW . Broken Hill Solar – 53 MW . Gas ~ 234 PJ . Wattle Point Wind Farm – 91 . VIC Hydro – 743 MW MW . Nyngan Solar – 102 MW
ACT QLD ActewAGL SA . Partnership between AGL and Icon Water Limited where AGL holds 50% of ActewAGL’s retail business NSW Customer accounts VIC ACT . 134,000 gas
TAS . 195,000 electricity
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Thermal generation portfolio
AGL Macquarie AGL Loy Yang AGL Torrens
. Capacity: 4,960 MW . Capacity: 2,210 MW . Capacity: of 1,280 MW ˗ Bayswater power station - 2,640 MW ˗ ~30% of Victoria’s electricity supply ˗ ~30% of South Australia’s electricity supply ˗ Liddell power station - 2,000 MW . Fuel: brown coal . Fuel: natural gas ˗ Hunter Valley gas turbines - 50 MW . Comprises Loy Yang A power station and adjacent Loy . Location: 18km from Adelaide ˗ ~13% of eastern Australia’s electricity supply Yang coal mine . Age: ‘A’ station – 1967, ‘B’ station - 1976 . Fuel: black coal . Annual mine output of ~30 million tonnes of coal . Location: ~240km from Sydney, between Singleton & . Location: 165km south east of Melbourne near Traralgon in Muswellbrook in NSW’s Hunter Valley Victoria’s Latrobe Valley . Age: Bayswater –1985, Liddell –1971 . Age: Completed between 1984 -1988
. Committed closure dates under AGL Greenhouse Gas Policy: . Committed closure date under AGL Greenhouse Gas Policy For personal use only use personal For ˗ Bayswater – 2035 -2048 ˗ Liddell - 2022
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Coal supply position
AGL Macquarie AGL Loy Yang . Coal sourced from Peabody’s Wilpinjong mine, BHP Billiton’s Mt . Coal sourced from AGL Loy Yang mine, largest brown coal mine in Arthur mine and Glencore’s Mangoola mine Australia . Significant strategic coal advantage . Significant strategic benefits of ownership ˗ Strong contractual position with coal suppliers ˗ Control of fuel source ˗ Access to multiple low-cost coal mines ˗ No haulage requirement; only cost is cash cost to mine ˗ Ability to burn low-cost non-export quality coal ˗ Full flexibility on managing generation levels ˗ Upper Hunter Valley location provides strategic rail access and ˗ Full control and visibility over mine capex program state of the art unloading infrastructure ˗ No re-contracting risk ˗ Low rail haulage cost and significant existing delivery infrastructure provides competitive advantage in coal procurement
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Renewables portfolio and funding
Wind Solar Hydro Powering Australian Renewables . Seven wind farms in . Nyngan and Broken . Hydroelectric power Fund (PARF) South Australia and Hill solar plants in stations in Victoria and . $2-3B fund devised to own ~1,000 MW of Victoria with installed NSW with installed NSW, with three large-scale renewable projects capacity of 925 MW capacity of 155 MW primary schemes ˗ Nyngan and Broken Hill solar plants as located in the Kiewa, seed assets Dartmouth and Eildon catchments with total ˗ AGL Silverton and Coopers Gap wind installed capacity of projects progressed as priority projects 796 MW ˗ Leveraging AGL’s development pipeline and project management . AGL to contribute equity of ~$200M . July 2016 announcement confirmed QIC committed $800M of equity on behalf of its
clients including Future Fund For personal use only use personal For
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Largest privately-owned generator in the NEM
12,000
10,000
8,000
6,000
4,000 Generation capacity(MW) Generation
2,000
0 AGL Origin Energy Snowy Hydro Energy Stanwell CS Hydro Engie Australia Tasmania
Source: Australian Energy Regulator 2015/2016 financial and company presentations
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Generation portfolio
Carbon intensity FY16 Sent out Asset State Type Status Net Capacity (MW) (tCO2e/MWh) Generation (GWh) Bayswater NSW Coal Owned 2,640 0.95 16,849 Liddell NSW Coal Owned 2,000 1.01 7,640 Loy Yang VIC Coal Owned 2,210 1.28 14,395 Total Coal 6,850 38,884 Torrens Island SA Gas Steam Turbine Owned 1,280 0.62 2,447 Diamantina1 QLD Combined Cycle Gas Turbine Sold N/A N/A 643 Yabulu QLD Combined Cycle Gas Turbine Control Dispatch 121 0.51 75 Somerton VIC Combined Cycle Gas Turbine Owned 150 1.00 12 Other2 Various Gas/Diesel Various 88 0.54 244 Total Oil and Gas 1,639 3,421 Macarthur VIC Wind Control Dispatch 420 0.00 989 Hallett Wind Farms SA Wind Control Dispatch 351 0.00 1,147 Wattle Point SA Wind Control Dispatch 91 0.00 259 Oaklands Hill VIC Wind Control Dispatch 63 0.00 163 VIC Hydro VIC Hydro Owned 743 0.01 1,134 NSW Hydro NSW Hydro Owned 53 0.00 30 NSW Solar NSW Solar Owned 155 0.01 316 Other3 Various Landfill & Biogas Various 44 0.09 133 Total Renewable 1,920 4,171 Generation Portfolio as at 30 June, 2016 10,409 0.95 46,476 For personal use only use personal For NEW Industry Average 0.90 1 Sold in March 2016 2 Includes Hunter Valley Gas Turbines, Moranbah power station, the Qenos and Coopers cogeneration plants and Wilpena diesel generator 3 Includes six landfill generators, Werribee biogas power station, Wilpena solar plant and the ISIS Bagasse biomass generation rights 88
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Lowest cost thermal generation portfolio
Cost position in the National Electricity Market 160 Short run marginal cost at $9.0/GJ gas price 140 Short run marginal cost at $7.5/GJ gas price
120 Short run marginal cost of $3.9/GJ gas price
100 Short run marginal cost of coal $MW/h 80
60
40
20
- Hallet Roma Kogan Tarong Eraring Mintaro Yarwun * Liddell Mt Piper Callide C Callide B Osborne BBThree * Yabulu Stanwell OakeyPS Newport Mortlake Colongra Ladbroke Gladstone Smithfield Moranbah Dry Creek Talawarra Bairnsdale Barcaldine Vales Point Vales Loy Yang B Yang Loy Millmerran Quarantine Uranquinty Hazelwood SwanbankE * Somerton * Torrens B * Torrens * Torrens A * Torrens Jeeralang B AngastonPS Jeeralang A Yallourn W2 Braemar1-3 TamarValley Pelican Point Braemar4-6 TarongNorth * Loy Yang A * Loy Yang * Bayswater Valley Power Valley Condamine GT Laverton North Laverton * Hunter Valley Darling Downs GT TamarValleyPeaker * Denotes AGL asset 89
Key wholesale operating statistics
Generation vs sold volumes (MWh) Gas sales (TJ)
50,000 250
40,000 200
30,000 150
20,000 100
10,000 50
0 0 FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16
For personal use only use personal For Generation volumes Sold volumes Consumer gas sales Total gas sales
Note: FY12-FY15 restated to reflect recognition of volumes associated with feed-in tariffs from solar customers 90
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Strong customer and generation position
Residential customers by state Generation capacity by state (MW) 164 474,000 1,726
540,000 1,482,000 4,901
3,617 1,169,000
NSW VIC SA QLD NSW VIC SA Other
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Customer numbers and customer churn
Total customer numbers vs. EBIT per customer Customer churn rate
6,000 108 120 30% 99 102 5,000 89 100 86 25% 4,000 3,800 3,735 3,681 80 3,474 3,517
3,000 60 20%
2,000 40 EBIT per customer ($) customer per EBIT
Customer numbers('000) 15% 1,000 20
0 0 10% Jul Jul Jul Oct Oct Oct Feb Feb Feb Sep Jan Apr Jun Sep Jan Apr Jun Sep Jan Apr Jun Dec Dec Dec Aug Aug Aug Nov Nov Nov Mar Mar Mar May May FY12 FY13 FY14 FY15 FY16 May FY14 FY15 FY16 Customer numbers (LHS) EBIT per customer (RHS) For personal use only use personal For AGL Rest of Market
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Retail energy markets across the NEM
NSW VIC SA QLD Overall
5 4 7 8 8 5 22 28 31 8 13 34 36 15 54 20 20 65 23 22 44 25
4 5 15 4 14 24 20 24 19 24 6 33 7 50 31 7 16 10 21 36 18 29 Electricity Gas 37 19 19 5
AGL Origin EnergyAustralia Snowy Hydro Ergon Simply Other
Source: AGL estimate, Australian Energy Regulator 2015/2016 financial and company presentations
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Five-year profit and cash performance
Key post-interest and tax income measures EBITDA/cash conversion
1,400 1,800 105% 1,600 1,200 100% 1,000 1,400 95% 800 1,200 600 1,000 90% 400 800 85% 200 600 0 80% (200) 400 conversion EBITDA/cash
Cash Flow from Operations ($M) Operations from Flow Cash 75% (400) 200 (600) 0 70% FY12 FY13 FY14 FY15 FY16 FY11 FY12 FY13 FY14 FY15 FY16
Underlying Profit after interest and tax Underlying Operating Cash Flow Cash conversion Statutory Profit after interest and tax
For personal use only use personal For Statutory Cash Flow after interest and tax
*FY12-FY15 restated to reflect recognition of volumes associated with feed-in tariffs from solar customers 94
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Debt maturity and debt mix post USPP issue
Debt maturity profile ($M) Borrowings mix 700
600
500
400 Bond Bank Debt 300 Debt 41% 43% 200 Sub 100 Notes 16% 0 FY17 FY31 FY21 FY18 FY19 FY27 FY32 FY23 FY29 FY22 FY25 FY26 FY28 FY30 FY24 FY20 Drawn Bank Debt Bond Debt Undrawn Bank Debt Bond Debt Sub Notes Bank Debt
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Contact information
James Hall General Manager, Capital Markets phone: +61 2 9921 2789 mobile: +61 401 524 645 e-mail: [email protected]
agl.com.au Nicole Rizgalla Download the app Investor Relations Manager 131 245 phone: +61 2 9921 2691 mobile: +61 400 488 836 e-mail: [email protected]
Blathnaid Byrne Group Treasurer phone: +61 2 9921 2255 mobile: +61 424 644 947 agl.com.au/community facebook.com/aglenergy twitter.com/@aglenergy youtube.com/aglenergy
For personal use only use personal For e-mail: [email protected]
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AGL Investor
Day 2016 For personal use only use personal For
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