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 2017 Annual Report 25 August 2017 AGL Energy Limited (AGL) has today commenced dispatch of its 2017 Annual Report. A copy is attached. AGL also issued its 2017 AGL Sustainability Report today. Online versions of the Annual Report and Sustainability Report are available at www.agl.com.au/2017ReportingSuite. Investor enquiries Media enquiries James Hall Chris Kotsaris Kathryn Lamond General Manager, Capital Markets Senior Manager, Investor Relations Senior Manager, Media T: +61 2 9921 2789 T: +61 2 9921 2256 T: +61 2 9921 2170 M: +61 401 524 645 M: +61 402 060 508 M: +61 424 465 464 E: [email protected] E: [email protected] E: [email protected] About AGL AGL is committed to helping shape a sustainable energy future for Australia. We operate the country’s largest electricity generation portfolio, we’re its largest ASX-listed investor in renewable energy, and we have more than 3.6 million customer accounts. Proudly Australian, with more than 180 years of experience, we have a responsibility to provide sustainable, secure and affordable energy for our customers. Our aim is to prosper in a carbon-constrained world and build customer advocacy as our industry transforms. That’s why we have committed to exiting our coal-fired generation by 2050 and why we will continue to develop innovative solutions for our customers. 1 AGL 2017 AnnualAGL Report 2017 Annual Report 2017 You with us? Shaping a sustainable energy future At AGL, we’re embracing innovation and technology to foster new and sustainable energy solutions for our customers. Today, we invite you to read our 2017 Annual Report, which provides comprehensive analysis of our performance over the year. Nyngan Solar Plant About this Report Contents This report is intended to provide AGL shareholders with information on your Chairman’s Letter 2 company, for the financial year ended 30 June 2017. Our 2017 Annual Report Managing Director & CEO’s Report 4 includes the concise Financial Report of AGL and its consolidated entities for Five Year Summary 7 the year. This year, AGL has also produced an online Annual Report which is available on our website agl.com.au/2017AnnualReport Executive Team 8 Corporate Governance Summary 10 A printed copy of our Full Financial Annual Report is also available free of charge upon request. Directors’ Report 12 Concise Financial Report 59 Shareholding Information 74 Investor Information 76 Directory and Financial Calendar 77 AGL also publishes an annual Sustainability Report which provides an account of our performance in relation to the social, environmental and economic challenges facing AGL and the energy industry. This report is available on our website agl.com.au/2017SustainabilityReport AGL’s Corporate Governance Statement discloses the extent to which AGL has complied with the ASX Corporate Governance Council’s ‘Corporate Governance Principles & Recommendations – 3rd edition’. This statement is available at agl.com.au/CorporateGovernance Included in this year’s report is a Corporate Governance Summary which outlines key aspects of AGL’s corporate governance arrangements. Annual General Meeting Details AGL’s Annual General Meeting will be held at the Melbourne Recital Centre, commencing at 10:30am on Wednesday 27 September 2017. Full details are available in the Notice of Meeting or on AGL’s website agl.com.au/agm AGL Energy Limited ABN 74 115 061 375 Chairman’s Letter It gives me great pleasure to present AGL’s annual report for the financial year ended 30 June 2017. It has been a significant year for AGL – represented by the refresh of the AGL brand. Our new look and the “You with us?” Despite the challenging policy environment, Our Managing Director & CEO, Andy Vesey, campaign we launched in April – as featured AGL, with its partners, is now developing provides a detailed update on our progress on the front cover of this year’s annual report more than 850 MW of lower emissions against these objectives in his report, overleaf. – reflect the transformation journey we electricity generation capacity in Australia, I am pleased to say that, to date, AGL’s began in 2015. as well as assessing options to increase transformation journey has been delivering supply to the wholesale gas market through Our message reflects our support for strong returns for shareholders. importing liquified natural gas and expanding the Paris climate accord to reduce our storage capability. In the 2017 financial year, total shareholder carbon emissions – and emphasises our return was considerably higher than for commitment to close our coal-fired assets at We’re also investing in our customers, the broader Australian share-market, at the end of their lives. through our $300 million Customer 42 percent, compared with 15 percent Experience Transformation program and This is a major responsibility for AGL given on the S&P/ASX100 Index. in accelerating innovation through strategic our position as the largest generator in the investments in our New Energy business. Over five years, AGL’s total shareholder National Electricity Market. return is 117 percent compared with It is essential that all our stakeholders can A priority for the Board is ensuring AGL, 77 percent for the Index. recognise that AGL is operating responsibly as a major emitter of carbon through its and sustainably – and is ready and willing to In FY17, Statutory Profit after tax was coal-fired electricity assets, is managing invest in long-term solutions that make long- $539 million, compared with a Statutory its economic, environmental and social term economic sense. Loss after tax of $(408) million in FY16. responsibilities and risks. We began investment programs valued at The improvement represented an increase That’s why the relaunch of our brand this more than $1 billion during FY17 and the in underlying earnings as well as the absence year was so important. total value of new energy supply projects AGL of asset impairments that affected the FY16 Amid concerns about energy stability, and its partners are developing or proposing result, which we treated as Significant Items. sustainability and affordability, the level of is more than $2 billion. Underlying Profit after tax in FY17 was scrutiny of our industry is greater than at In addition, we have returned $1.1 billion $802 million, up 14 percent, the third any time during my 11-year tenure as an directly to shareholders through FY17 via our consecutive year of growth in this metric AGL director. on-market share buy-back and new policy to of more than 10 percent. This follows the South Australian blackout of target a higher dividend payout ratio. AGL continues to use Underlying Profit as the September 2016, rising prices for gas and As we look to the 2018 financial year and reference point for the company’s earnings coal, the abrupt closure of several non- beyond, we have a strong financial position as it removes the impact on Statutory Profit AGL coal-fired power stations (including with more than $2 billion of funding associated with non-cash changes in the Hazelwood in Victoria in March 2017 just headroom on our balance sheet and an value of certain financial hedging contracts five months after its owner announced its investment grade credit rating. used to manage risk associated with intention to do so) and continued uncertainty wholesale electricity costs. in relation to government policy. The AGL Board continues to assess how and where to deploy shareholders’ capital Underlying Profit also removes Significant Against this backdrop, there are no responsibly in this changing world, while Items – although AGL did not record any simple answers. balancing our broader responsibilities to our such items in FY17. Nonetheless, the recent energy system customers and the community. The strong FY17 financial performance was review by Chief Scientist Alan Finkel offers a enabled by AGL’s development or acquisition powerful blueprint to deliver an affordable, Strategic imperatives driving over many years of a first-class generation orderly and reliable transition. performance electricity portfolio – combining coal-fired, It’s too important to cherry-pick and if it is The transformation of AGL is in response gas, hydro-electric, wind and solar energy. fully implemented, AGL believes it will unleash to two strategic imperatives: prospering in This portfolio is performing strongly amid an the wave of investment our market needs. a carbon constrained future, and building customer advocacy. environment of rising wholesale electricity prices, augmented by the discipline with Those two imperatives are driving our which we have been running the business. agenda, informing our strategic objectives and the way we deploy capital as the company evolves. 2 AGL Energy Limited Consistent with our strategic framework In summary, we have enhanced disclosure The Board will continue to review its collective of embracing transformation, driving in relation to how we set and benchmark skills and experience on an ongoing basis to productivity and unlocking growth, over FY16 the Managing Director & CEO’s fixed provide AGL with strong governance and the and FY17, AGL has reduced business as usual remuneration; reduced the size of his target oversight necessary to deal with the challenges operating expenditure and sustaining capital short-term incentive (STI); increased disclosure of today and the future. expenditure while divesting non-core assets. in relation to STI metrics and outcomes for all A copy of the Board’s current skills matrix Key Management Personnel; provided more Our continued strong performance enabled is included in the Corporate Governance detail about the workings of the transitional a change to our dividend policy during FY17, Summary section of this annual report.