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 11 September 2008 AGL Energy Limited is about to commence dispatch of its Annual Report 2008 and the Notice of Meeting in respect of the Annual General Meeting to be held on 15 October 2008. A copy of each of these documents has been lodged with the ASX today. Paul McWilliams Company Secretary 1 AGL Annual Report 2008 Important dates 29 August 2008: Shares began trading ex-dividend. 04 September 2008: Record date for final dividend. 26 September 2008: Final dividend payable. 15 October 2008: Annual General Meeting. The Annual General Meeting of AGL will be held in the City Recital Hall commencing at 10.30am. An Australian Government Initiative About this report The inside pages of this report are printed on Envi, Australia’s first carbon-neutral paper. Envi is also the first paper stock in Australia to carry the Federal Government’s Greenhouse Friendly certification, and is the stock of choice for all AGL customer communications. All inks and varnishes used to print it have a vegetable oil base (such as linseed ® oil and soya oil) obtained from non-genetically modified plants and trees. Energy in action. It was designed by Cobé Design and printed by Lilyfield Printing. All individuals who kindly appear in this report are staff, family and friends of AGL. AGL Annual Report 2008 AGL10256_2008_AR_Cover_0309FA.indd 1 3/9/08 3:52:52 PM AGL Energy Limited AGL Annual Report 2008 ABN 74 115 061 375 Directory of Offices Head Office, Gas and Power Development Level 22, 101 Miller Street Look beyond the surface and North Sydney NSW 2060 you’ll see the whole picture. Tel: 02 9921 2999 Tackling climate change at Fax: 02 9921 2552 an industry level requires a Retail Energy and cohesive strategy for the Merchant Energy crucial times ahead. Level 22, 120 Spencer Street Melbourne VIC 3001 In our first full year as AGL Energy, we’ve taken action on Tel: 03 8633 6000 multiple fronts. We’ve continued Fax: 03 8633 6002 to assemble Australia’s largest privately owned and operated Retail Energy portfolio of renewable assets 226 Greenhill Road and strengthened our retail and Eastwood SA 5063 generation assets. We’ve cleared Tel: 08 8299 5666 the way for all of our people Fax: 08 8299 5001 – our customers, employees and shareholders – to be well placed in the new carbon constrained economy. Change calls for more than words; it calls for action. We want to show what energy in action was able to achieve this year. AGL10256_2008_AR_Cover_0309FA.indd 2 3/9/08 3:52:59 PM PB/11 AGL Annual Report 2008 Contents Integrated strategy page 2 Key numbers page 3 Chairman’s Report page 4 Managing Director’s Report page 7 Part 1: Building a better business page 9 Part 2: Reporting page 33 AGL employees Adam Mackett and Justin Parker at Hallett Stage 1 wind farm 2/3 AGL Annual Report 2008 Integrated Strategy & Key Numbers Capturing value and growth opportunities upstream $ UPSTREAM Gas Renewable Thermal 271.7m Retail Energy operating EBIT production generation generation $ +41.1% on 2007 300.8m This year’s result includes a full-year contribution Merchant Energy operating EBIT from the Powerdirect and SunGas businesses. TRAnSMISSION / DISTRIBUTION +7.4% on 2007 Gas Electricity The result includes a contribution from the Torrens Island Power Station in its first year of AGL ownership. RETAIL MARKETS Gas Renewables Electricity $ $155.1m 355.5m Gas and Power Development operating EBIT Underlying net profit after tax* IncreasinG services To customers +18.8% on 2007 +7.6% on 2007 The result includes a full-year contribution from Capturing value and growth opportunities in retail markets Underlying net profit after tax was at the upper end of AGL’s revised the investment in Queensland Gas Company earnings guidance of $330–$360 million for 2008. Limited. *See page 36 for a reconciliation of underlying net profit after tax. Our integrated strategy Key numbers 3.22m Upstream gas Generation Market leadership Customer accounts increased during the year by almost 34,000. We have 1.41 million gas > Equity gas > Thermal generation > Economies of scale customer accounts and 1.81 million electricity > Contract gas > Renewable generation > Customer service accounts. > Transmission and > Carbon solutions > Sales and marketing capability haulage contracts > Hedge products and trading > Regulatory and risk management > Gas storage 4/5 AGL Annual Report 2008 Chairman’s Report Power Station’s value in supporting our integrated energy AGL aspires to be Australia’s leading integrated energy company, Our strategy is clear. It has been in place for several years strategy was demonstrated when power demand in South efficiently supplying gas and electricity customers in national now, but the manner in which we seek to implement it Australia reached historically high levels during extreme heat markets. It manages the associated risks of these activities obviously needs to adapt to changing conditions – and conditions in February and March this year. through appropriate control over the sources of its products – conditions really are changing. The past year has been most in electricity, these include physical generation assets, despatch eventful for Australian energy markets. Important new energy We continued to develop our market-leading renewable rights and a flexible portfolio of hedge contracts, and, in gas, sources have emerged, prospects of a more efficient national energy portfolio. The successful completion of the Hallett secure and diversified long-term supply arrangements. energy market may be closer, and carbon constraints based Stage 1 wind farm, which was opened in June this year, and on international obligations are likely to radically affect energy the hydro generation plant at Bogong, which is on track to be In electricity, our portfolio of generation assets and hedge supplies and costs for as far ahead as can be foreseen. completed in October 2009, will maintain AGL’s leadership contracts is well matched against our current customer load. position in developing renewable energy sources in Australia. Future investment in electricity generation is likely to be The level of proven coal seam gas reserves, particularly in The outlook is for these assets to continue to grow in value. mainly from developing our own assets including assets Queensland, has increased dramatically and corporate activity that use renewable energy. has followed. As noted earlier, AGL has material and increasing It is important for AGL to maintain an investment grade credit interests in coal seam gas in Queensland and New South Wales rating and a strong balance sheet if it is to operate efficiently in In gas, we are Australia’s leading retailer. Some commentators and we intend to spread our interests further. national energy markets and optimise shareholder returns. This have suggested that our market-leading position may be means that we need to manage the amount of debt we can eroded because we do not have large direct holdings in proven AGL fully supports the New South Wales Government’s For AGL, the focus for much of the year has been on incur, and we need to invest in the assets that are really gas reserves. Our portfolio of long-term contracts with plans to privatise its electricity retail assets. We also believe restoring market confidence in the Company, following the important to long-term performance and balance sheet strength. established and reliable major gas producers provides us with it should privatise its electricity generation assets as an earnings downgrade in October last year. To earn market ample access to gas to meet the needs of the market and our essential element of encouraging the substantial investment confidence again and to restore support for AGL required During the year, AGL sold its Chilean gas distribution business customers for a number of years. However, we are increasing in new generation assets required to maintain security of management stability, improved operating performance, (GasValpo) and its 33% interest in AlintaAGL, realising the emphasis on developing the interests we already have in electricity supply for New South Wales. In turn, sensible new restoration of balance sheet strength and progress toward approximately $600 million. The GasValpo business had been gas projects at Moranbah and the Galilee Basin in Queensland, investment will contribute to a more efficient national energy AGL’s strategic objectives. owned by AGL for 10 years, was well managed and produced at Camden and the Hunter Valley in New South Wales, and by market – a matter of concern to every Australian. solid earnings every year, but a variety of local issues in Chile investing in emerging gas producers. I believe our efforts so far have been successful. They reflect meant the business was unlikely to grow appreciably. AGL’s In supporting the New South Wales Government’s plans, we real credit on Managing Director Michael Fraser, his executive interest in AlintaAGL was acquired as part of the transaction believe it is imperative that the sale process establishes a team, and all of AGL’s people. Financial results for the full year with Alinta Limited in October 2006. AlintaAGL is a good AGL has lifted its abilities to better serve clear and transparent operating framework for the privatised are in line with the revised guidance we gave shareholders in business selling gas to residential and business customers in its customers with our Phoenix program. businesses. Buyers of the retail businesses must have October 2007 and dividend payments have been maintained Perth, but Western Australia is not connected to the national Phoenix provides improved customer confidence in the mechanism for setting regulated tariffs and in at forecast levels.