AGL Energy Limited Level 22, 101 Miller St Locked Bag 1837 T: 02 9921 2999 ABN: 74 115 061 375 North Sydney NSW 2060 St Leonards NSW 2065 F: 02 9921 2552 www.agl.com.au ASX statement 17 September 2010 AGL Energy Limited is about to commence dispatch of its Annual Report 2010 and the Notice of Meeting in respect of the Annual General Meeting to be held on 21 October 2010. A copy of each of these documents has been lodged with the ASX today. Paul McWilliams Company Secretary 1 outside back cover outside front cover AGL Annual Report 2010 Energy Annual ® Report in action. 2010 inside front cover inside back cover Contents Introductory pages 1 Divisional highlights 2 Group highlights 3 Our integrated strategy 4 Achievements toward strategies and objectives 5 Chairman’s Report 6 Managing Director’s Report 8 Leadership in sustainable business 10 Our customers 11 Major power generation and upstream gas assets 12 Retail Energy 14 Merchant Energy 16 Investments 19 Upstream Gas 20 Leadership team 22 Corporate Governance 24 Reporting contents 33 AGL Financial Calendar AGL Energy Limited ABN 74 115 061 375 26 August 2010 2010 full year result and final dividend announced Annual General Meeting 10 September 2010 Record date for 2010 final dividend AGL’s Annual General Meeting will be held 30 September 2010 Final dividend payable at the City Recital Hall, 21 October 2010 Annual General Meeting Angel Place, Sydney 17 February 20111 2011 interim result and commencing at interim dividend announced 10.30am on Thursday 10 March 20111 Record date for 2011 interim dividend 21 October 2010. 31 March 20111 Interim dividend payable Front cover AGL employee Matthew 1 Indicative dates only, subject to change/Board confirmation. Arnott at AGL’s 140 MW Bogong Power Station in Victoria. AGL has major investments in the supply of gas and electricity, and is currently servicing more than 3.2 million customer accounts across New South Wales, Victoria, Queensland and South Australia. AGL Energy Limited (AGL) is Australia’s leading integrated renewable energy company and is Australia’s largest private owner, operator and developer of renewable generation assets. AGL is taking action towards creating a sustainable energy future for our customers, our investors and the communities in which we operate. The Australian Gas Light Company (old AGL) was formed in Sydney in 1837. It supplied gas for the first public lighting of a street lamp in Sydney in 1841 and was the second company to be listed on the then Sydney Stock Exchange. On 6 October 2006, old AGL and Alinta Limited shareholders approved the merger of old AGL’s infrastructure assets with Alinta and the subsequent separation of AGL. This was subsequently approved by the Federal Court of Australia on 9 October 2006. AGL began trading on the Australian Securities Exchange on 12 October 2006. AGL is one of Australia’s top 50 listed companies. Divisional highlights AGL’s Retail Energy business delivered strong growth in operating EBIT while the Merchant Energy business performed well in mild market conditions. Retail Energy Merchant Energy Upstream Gas – Gross margin up $71.0 million – Mild winter conditions – Focus for the year was driven by improved regulatory reduced volumes and on exploration activities and contract outcomes and wholesale gross margin to increase gas reserves. from the acquisition of higher and milder summer – Proved plus probable (2P) value customers. conditions in South Australia gas reserves at 30 June – Operating efficiency continued and Victoria reduced the 2010 up to 1,578 PJ. benefit from AGL’s generation to improve, with net operating – Gas sales volumes from and hedge portfolio. costs as a percentage of ongoing operations increased gross margin falling from – Fees from AGL’s wind farm 34 percent to 13.7 PJ. 52.4 percent to 49.5 percent. developments continued to – Decrease in operating EBIT provide strong returns with – Customer accounts increased was due mainly to the sale a contribution of $57.0 million. by 45,000 and dual fuel of the Papua New Guinea customer accounts increased business in the previous year. to 1.36 million. $318.7m $386.1m $5.5m Operating EBIT Operating EBIT Operating EBIT ($million) ($million) ($million) 402.8402.8 402.8 318.7318.7 318.7 386.1386.1 386.1 102.1102.1 102.1 271.7271.7266.8271.7266.8 266.8 331.4331.4 331.4 5.5 5.5 5.5 29.9 29.9 29.9 20102010 2010 20082020080920200820091020200910 2010 20082020080920200820091020200910 2010 20082020080920200809 2009 2 Group highlights AGL’s Underlying Profit increased by 13.2%. 30 June 30 June 30 June 2010 2009 2008 $m $m $m Profit after tax from continuing operations 356.1 718.2 316.3 Profit/(loss) after tax from discontinued operations – 877.9 (87.3) Profit after tax attributable to shareholders 356.1 1,596.1 229.0 Adjust for the following after tax items: Significant items (49.9) (1,441.3) (62.6) Changes in fair value of financial instruments 122.7 251.0 184.6 Pro-forma adjustment – (27.0) (10.0) Underlying Profit 428.9 378.8 341.0 Increase in Underlying Profit 13.2% 11.1% 4.7% $428.9m Underlying Profit +13.2% from 2009 $789.6m $428.9m 95.6 cents 1.0 LTIFR Operating EBITDA Underlying Profit EPS – underlying Our Lost Time Injury ($million) ($million) (cents) Frequency Rate (LTIFR) fell again this year, Divested reflecting the ongoing EBITDA importance we attach Continuing EBITDA to employee safety 63.4 209.0 63.4209.0 209.0 63.4 428.9 428.9 3.6 428.9 95.6 95.6 3.6 95.6 3.6 789.6 789.6 789.6 729.7 729.7 729.7 378.8 378.8 378.8 85.0 85.0 85.0 341.0 341.0 341.0 78.3 78.3 78.3 662.8 662.8 662.8 2.5 2.5 2.5 1.0 1.0 1.0 2008 2009200820102009200820102009 20102008 2009200820102009200820102020090820201009200820102009200820102009200820102020090820201009 2010 2008 2009 2010 3 Our integrated strategy AGL’s integrated strategy provides access to multiple profit pools and balances risk between upstream supply of energy and our customers’ demand for energy. Upstream supply (core) Gas Production Renewable Generation Thermal Generation Transmission (non-core) Gas Electricity Distribution (non-core) Gas Electricity Retail markets (core) Gas Renewables Electricity Upstream supply Customer energy demand – Maintain our position as – Focus on managing and Australia’s largest private growing margins. owner and operator of – Use our customer base to renewable energy assets by leverage our upstream continuing to develop our supply strategy to achieve existing pipeline of projects. economies of scale. – Increase direct ownership – Use the benefits from our of gas to 2,000 PJ (2P) over Project Phoenix to provide the medium term. our customers with improved – Increase ownership or control service and more options for of electricity generation managing their energy needs. capacity to 6,000 MW. 4 Achievements toward strategies and objectives We said we would deliver Our actual Underlying Profit for the year was $428.9 million, an increase Underlying Profit of between of 13.2 percent on last year. $390 million and $420 million We said we would increase Our ownership of 2P gas reserves has increased during the year from 1,107 PJ our direct ownership of to 1,578 PJ – an increase of 43 percent. gas reserves We said we would increase Our ownership or control of electricity generation assets increased from 3,517.7 MW to 3,756.5 MW, our ownership or control of with the commissioning during the year of the electricity generation assets new 140 MW Bogong Power Station, the and maintain our position as 71 MW Hallett 2 Wind Farm and other generation assets. We also commenced construction of the Australia’s leading integrated 132 MW Hallett 4 Wind Farm and announced renewable energy company our commitment to construct a 67 MW wind farm at Oakland Hills in western Victoria. New long-term contracts to supply renewable energy to the Victorian Desalination Plant, the Adelaide Desalination Plant, and Melbourne Water Corporation have made AGL Australia’s largest seller of renewable energy. We said we would profitably Our customer accounts increased by 45,000 with our operating costs as a proportion of grow our customer base EBIT falling from 52.4 percent to 49.5 percent. and improve our level of Complaints to State Ombudsmans’ offices customer service fell from 76 per 10,000 customers to 48 per 10,000 customers. We said we would continue Our Lost Time Injury Frequency Rate to improve the safety of fell from 2.5 to 1.0. our employees 5 Chairman’s Report We are confident that we have the people and the processes in place to provide the service our customers expect, and to deliver the returns our shareholders expect. Mark Johnson Chairman AGL’s strategy is founded on providing reliable, low emission energy The financial results also include, as a significant item, an supplies and high levels of service, to all our customers. Pursuing entitlement to a refund of income tax of approximately $89 million. this strategy involves improving every aspect of our service Amendments to the income tax law in June 2010 allow AGL to and expanding our portfolio of energy sources within a carbon correct an anomaly in the application of the tax consolidation rules constrained world. to the merger/demerger transaction with Alinta Limited in October 2006, and we expect to receive the cash refund during FY11. The We continue to maintain a strong financial position which allows us tax refund will be sufficient, for example, to fund AGL’s acquisition to participate in national energy markets.