Annual Report 2020 Contents About this Report Letter from the Chairman 2 AGL recognises that transparent reporting about our strategy, our performance and our challenges Managing Director & CEO’s Report 4 is an essential part of our responsibility to our shareholders and other stakeholders, and to Five-Year Summary 6 maintaining our licence to operate. COVID-19 Response 7 Report structure Purpose, Values & Strategy 8 This report is designed to be read in its entirety. The required elements of the Directors’ Report, including the Operating and Operating Environment 10 Financial Review (OFR) as required by ASIC Regulatory Guide 247, are covered on pages 4 to 93. Commentary on AGL’s financial performance specifically is contained on pages 32 to 56, and How We Create Value 12 references information reported in the Financial Report (pages 94 to 169). Note, the declaration forms part of the Financial Business Value Drivers 14 Report under the Corporations Act. Integrated Reporting Financial Review 32 This report has been prepared with reference to the International Integrated Reporting Council’s (IIRC) International Integrated Governance Summary 57 Reporting Framework, as we believe it provides a useful basis for disclosing how we create sustainable value for our shareholders Board of Directors 61 and other stakeholders over time. We have used the framework to demonstrate how consideration of risks and opportunities (both those arising from our business and those that exist in a Remuneration Report 67 broader operational context), our purpose and our values drive our strategy. We have also considered how the execution of Other Required Disclosures 92 our strategy creates value, applying a lens that is broader than financial performance alone. Financial Report 94 AGL follows the guidance provided by the Financial Stability Board's Task Force on Climate-Related Financial Disclosures Shareholding Information 179 voluntary disclosure framework (TCFD Framework). 'Pathways to 2050', our FY20 TCFD report which accompanies the Annual Report, details how we consider governance, risk management, Investor Information 181 strategy, and metrics and targets in relation to climate change. A summary of the TCFD disclosures is also included as part of the Glossary for the Business Environment Business Value Driver scorecard on page 21. Value Drivers 182 This is the first year that AGL has aligned our disclosures to the Sustainability Accounting Standards Board (SASB) standards for Electrical Utilities and Power Generators and Gas Utilities. A SASB Further information index is included in the ESG data centre on our website which This report is available on our website at identifies the extent to which each SASB disclosure requirement 2020annualreport.agl.com.au A printed copy of the has been applied. In addition, AGL has continued to prepare our report is available free of charge upon request. disclosures in accordance with the GRI Standards: Core option. The ESG data centre includes a GRI index that outlines which AGL’s 2020 Corporate Governance Statement is available topic-specific GRI standards have been used in the preparation of at agl.com.au/corporategovernance. this report. AGL's TCFD report, 'Pathways to 2050' is available at agl.com.au/specialreports. Assurance The Remuneration Report (page 67 to 90) and the Financial A comprehensive ESG data centre in which additional Report (page 94 to 171) have been audited by Deloitte. Deloitte performance data is available to view and download can was also engaged to undertake limited assurance of the Key be found at 2020datacentre.agl.com.au. Performance Indicators included in each Business Value Driver The boy and girl on the front cover are a Sydney brother scorecard (page 14 to 31) in accordance with the Australian and sister. At the time of the 2019 photoshoot, they were Standard on Assurance Engagements ASAE 3000 Assurance customers of AGL. The image depicts family life in the home, Engagements other than Audits or Reviews of Historical Financial where we have all spent significant periods during the Information issued by the Australian Auditing and Assurance COVID-19 pandemic in 2020. The family are benefiting from Standards Board (ASAE 3000). The Key Performance Indicators the dual benefit of energy and telecommunication services, are to be read in conjunction with the definitions in the Glossary. enabling the way they live. It illustrates AGL's purpose – Full details of the assurance process and outcome are included in Progress for life. the Assurance statement. Business Value Drivers The International Integrated Reporting Framework describes six forms of capital (financial, manufactured, intellectual, human, social and relationship and natural) but encourages organisations to adopt a categorisation and terminology appropriate to their business. In this report, AGL has grouped and defined these capitals into the seven distinct Business Value Drivers outlined below. Icons are used throughout this report to demonstrate how each Business Value Driver links to strategy, risk management and remuneration, and to demonstrate key relationships and trade-offs between Business Value Drivers. CUSTOMERS COMMUNITIES & PEOPLE ENVIRONMENT Social and relationship capital RELATIONSHIPS Human capital Natural capital Social and relationship capital Effective and trusted The competencies, Access to and stewardship and relationships with The strength of working experience, behaviours, use of scarce natural resources, residential, business and relationships and trust with engagement and and AGL’s impact on the natural wholesale customers. key stakeholders; brand wellbeing of AGL’s people. environment, both directly and and reputation. as a result of the products and services provided. Information about performance and INFRASTRUCTURE SYSTEMS & PROCESSES FINANCE outlook in respect of Manufactured capital Intellectual capital Financial capital each Business Value Effective and efficient use of Availability and development Access to and management Driver is included assets throughout the value of processes, knowledge, of financial capital to support chain that AGL uses, owns insights, systems and data, execution of strategy and on pages 14 to 31 of or has control of, to enable including energy portfolio investment in growth this report. delivery of energy to the management and customer opportunities through market and to customers. analytics, to support and retaining financial market enhance business activities. support. Forward-looking statements SDG Business Value Driver This report includes information about AGL’s performance for the period 1 July 2019 to 30 June 2020. Any forward-looking statements are based on AGL's current expectations, best estimates and assumptions as at the date of preparation, many of which are beyond AGL’s control. These forward-looking statements are not Page 20 guarantees or predictions of future performance, and involve known and unknown risks, which may cause actual results to differ materially from those expressed in the report. Sustainable Development Goals Page 24 Page 20 Page 14 Page 16 The United Nations Sustainable Development Goals (SDGs) are a set of 17 interconnected goals that form a global benchmark for achieving a sustainable future for all. While many of the SDGs intersect with AGL's operations, the three SDGs we assess as most material to our strategy and operations comprise SDG 13 – Climate Action; SDG 7 – Affordable and Clean Energy; and SDG 9 – Industry, Page 24 Page 28 Page 30 Innovation and Infrastructure. AGL Energy Limited Annual Report 2020 | 1 During the bushfire season, we acted swiftly to provide support to our customers, our people and the affected communities by providing targeted debt waivers and billing pauses for affected customers and bill credits for AGL customers who were front line volunteers. I am particularly proud of the way AGL and its people are responding during the COVID-19 pandemic, including by adopting new ways of working with a large proportion of the workforce pivoting to remote working while a number of AGL's people at generation sites continue to work with additional health and safety measures in place so that there is no disruption to customer experience and AGL's operations. Letter from We continue to support our community partners as well as our affected customers the Chairman through our hardship programs. As the world continues its response to the COVID-19 pandemic, the full extent of the impact on Australia and its economy remains unclear "I am pleased to present AGL’s annual and energy markets in Australia continue to experience uncertainty report for the financial year ended and volatility. The impacts on the energy markets to which AGL is exposed, not least wholesale electricity and gas prices have been 30 June 2020 (FY20)." profound, while many customers are facing levels of hardship that directly impact their ability to pay their bills. In recognition of the financial stress that our customers are facing as a result of the pandemic, in March 2020 AGL launched its COVID-19 Customer Support Program. The program included access to deferred payments until 31 July 2020 and waiving disconnection and reconnection fees for small businesses forced to temporarily close. AGL continues to provide ongoing payment support options to customers who cannot pay their bills because they have lost their job or business, or because their health has been impacted by the pandemic. Graeme Hunt Strategy Amid this environment, I am pleased to say