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 18 September 2013 Annual Report 2013 AGL Energy Limited is about to commence dispatch of its Annual Report 2013. A copy is attached. Paul McWilliams Company Secretary 1 2013 Annual Report AGL Energy Limited ABN 74 115 061 375 Contents 2 Divisional Financial Highlights 3 Group Financial Highlights 4 About AGL 5 Our Approach 6 Our Assets 8 Chairman’s Report 10 Managing Director’s Report 12 Our Operations 12 Retail Energy 15 Merchant Energy 19 Upstream Gas 22 Sustainable Business Strategy 25 Economic 28 Customers 31 Community 34 People and Safety 37 Sustainable Energy 40 Environment 43 Executive Team 44 Corporate Governance Statement 52 Directors’ Report 79 Concise Financial Report 92 Shareholding Information 93 Subordinated Note Holding Information 94 Investor Information AGL Financial Calendar 28 August 2013 full year result 2013 and final dividend announced 2 September Ex-dividend trading 2013 commences 6 September Record date for 2013 2013 final dividend 27 September Final dividend 2013 payable 23 October Annual General 2013 Meeting February 2014 interim result 2014 and interim dividend Cover photo: Sisters This report is intended to provide AGL shareholders announced Indi and Gabriella enjoy with information on the environmental, social, August 2014 full year result riding their ponies on the governance and risk matters that affect your company, 2014 and final dividend family’s farming property alongside the financial performance for the year, in announced at Macarthur in Victoria. one easy-to-read document. Wind turbines on the Our 2013 Annual Report includes the concise Financial property are part of the AGL’s Annual General Meeting will be held Report of AGL and its consolidated entities for the Macarthur Wind Farm. at the Grand Hyatt, 123 Collins Street, financial year ending 30 June 2013. Copies of our Melbourne commencing at 10.30am on full Financial Report for the year can be downloaded Wednesday, 23 October 2013. from AGL’s online Investor Centre at agl.com.au or shareholders can contact AGL’s Share Registry to request a copy. See page 94 for contact details. Engaging our stakeholders Engaging our stakeholders has always been at the heart of what AGL does. Our success is measured by our financial performance and by the social and environmental effects our decisions and actions have on the wider community. We have a responsibility to engage with local communities which are, or could be, affected by our business. We will continue endeavours to improve the way we consult with local communities. This is vital to the success of our new developments, the expansion of existing infrastructure and our ongoing operations. 420 MW With 140 turbines capable of generating 420 MW, the Macarthur Wind Farm in south west Victoria is currently the largest wind farm in the Southern Hemisphere. The wind farm is located on three private properties that are also used for cattle and sheep grazing. Divisional Financial Highlights AGL’s Retail Energy and Merchant Energy divisions both performed strongly against a backdrop of continued soft demand for energy and strong competition in our key markets. Retail Energy Merchant Energy Upstream Gas >>>Operating>EBIT>up>by>6.8>percent> >>>Operating>EBIT>up>58.1>percent> >>>Proposed>changes>to>NSW>coal> to>$355.5>million. to>$869.3>million. seam>gas>regulations>give>rise>to> $343.7>million>(pre-tax)>provision> for>impairment. >>>Gross>margin>per>customer> >>>First>full>year>contribution>from> increased>3.3>percent. wholly-owned>Loy>Yang>A>power> station>in>Victoria.>Performance>in> >>>Government>approval>received>for> line>with>acquisition>expectations. Stage>1>of>Gloucester>Gas>Project> >>>Customer>accounts>up>by>43,460,> in>NSW. including>97,000>new>electricity> customers>in>New>South>Wales. >>>Construction>of>Macarthur> Wind>Farm>in>Victoria>completed> >>>Construction>continued>on>Newcastle> in>January>2013,>on>time>and> Gas>Storage>Facility>in>NSW. >>>Dual>fuel>customer>accounts>up> on>budget. to>1.7>million. 355.5 869.3 0.0 Operating EBIT ($ million) Operating EBIT ($ million) Operating EBIT ($ million) 305.1 322.8 355.5 453.2 549.7 869.3 14.3 0.6 0.0 2011 2012 2013 2011 2012 2013 2011 2012 2013 AGL Energy Limited 2013 Annual Report 2 Group Financial Highlights AGL’s statutory net profit after tax for the year rose by 238.3 percent due to a full year contribution from AGL Loy Yang, changes in the fair value of certain financial derivatives and a strong performance by the core Merchant and Retail businesses. On an underlying basis, profit increased by 24.1 percent to $598.3 million. Underlying earnings per share increased by 8.8 percent to 108.8 cents. A fully franked final dividend of 33.0 cents per share was declared, bringing the dividend for the year to 63.0 cents per share. 30>June 30>June 30>June 2013 2012 2011 $m $m $m Profit>after>tax>attributable>to>shareholders 388.7 114.9 558.7 Adjust>for>the>following>after>tax>items: Significant>items 289.6 155.1 27.3 Changes>in>fair>value>of>financial>instruments (80.0) 212.0 (154.9) Underlying>profit 598.3 482.0 431.1 Increase>in>underlying>profit 24.1% 11.8% 0.5% Operating EBIT Underlying profit EPS – underlying Dividends per share 1,049.3 598.3 108.8 63.0 Operating EBIT ($ million) Underlying profit ($ million) EPS – underlying (cents) Dividends per share (cents) 656.5 730.4 1049.3 431.1 482.0 598.3 91.41 100.0 108.8 60.0 61.0 63.0 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 1 EPS restated for the bonus entitlement of AGL Energy Limited 2013 Annual Report the one-for-six share rights issue completed 3 in June 2012. About AGL Looking to the future AGL is one of Australia’s leading integrated renewable energy companies. Drawing on more than 175 years of experience, we operate retail and merchant energy businesses, power generation assets and an upstream gas portfolio. AGL>has>one>of>Australia’s>largest>retail>energy>and> dual>fuel>customer>bases>providing>gas>and>electricity> to>more>than>3.5>million>customers>in>Queensland,> New>South>Wales,>Victoria>and>South>Australia. We>have>a>diverse>power>generation>portfolio>–> including>base,>peaking>and>intermediate>generation> plants>–>spread>across>traditional>thermal>generation> as>well>as>renewable>sources>including>hydro>and>wind.> AGL>is>Australia’s>largest>private>owner>and> operator>of>renewable>energy>assets>and>is>seeking> to>further>expand>this>position>by>exploring>and> developing>a>suite>of>low>emission>and>renewable> energy>generation>development>opportunities.> AGL’s>heritage>began>in>1837>as>The>Australian>Gas> Light>Company,>supplying>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. Sally, Civil Engineer at AGL Loy Yang. AGL has 2,750 employees an objective to increase female appointments AGL has 2,750 employees and is one to its Senior Leadership of Australia’s Top 50 ASX-listed Pipeline to 50 percent companies with a market capitalisation by 2016. of $8.025 billion as at 30 June 2013. AGL Energy Limited 2013 Annual Report 4 Our Approach Our Vision Creating energy solutions for the communities of today and tomorrow Our Values > One Team > Authentic > Delivery > Safe and Sustainable > Vitality Our integrated Energy Production Upstream supply Strategic Objectives strategy >>>Increase>direct>ownership>of>gas>to>meet>a>substantial>proportion>of>AGL’s>> long-term>domestic>demand>for>gas. AGL retails gas and electricity to residential, >>>Invest>in>gas>storage>to>provide>security>of>gas>supply>for>our>customers>> small business, commercial and industrial during>periods>of>peak>demand. customers. >>>Increase>control>of>peaking>and>renewable>electricity>generation>to>be>more> self-sufficient>in>meeting>customer>needs>and>the>mandatory>Renewable>> AGL’s integrated business strategy balances Energy>Target. the risk between upstream supply of energy and our customers’ demand for energy. Vertical>integration>gives>AGL>a>natural>hedge>against> Gas Renewable theRmal energy>price>movements,>while>providing>access>to> PRoduction GeneRation GeneRation multiple>profit>pools.> There>are>two>core>elements>to>AGL’s>integrated>strategy. Transmission* The>first>concerns>the>‘demand’>side>of>the>business.> This>relates>to>the>energy>products>and>services>we> provide>to>our>customers.>If>AGL>is>to>continue>to> Distribution* grow>over>the>long>term,>it>is>crucial>that>we>continue> to>expand>this>side>of>the>business>as>it>is>this>which> underpins>investment>in>our>upstream>supply>assets.> The>other>core>element>of>our>strategy>concerns>the> ‘supply’>side>of>the>business.>Over>the>last>few>years,> Gas Renewables electRicity we>have>been>investing>substantial>amounts>of>capital> to>increase>our>ownership>of>the>gas>and>electricity> we>need>to>meet>our>customers’>needs.>This>will>allow> Downstream demand us>to>better>manage>the>wholesale>costs>of>gas>and> Strategic Objectives electricity>in>the>years>ahead>so>that>we>can>remain> >>>Grow>our>electricity>customer>base>in>New>South>Wales. a>competitive>supplier>of>energy>to>our>customers. In>pursuing>our>strategic>objectives>of>growing>both> >>>Expand>the>range>of>energy>efficiency>service>offering>to>help>our>customers> the>demand>side>and>supply>side>of>the>business,>it> manage>their>energy>costs. is>also>important>that>the>investments>we>make>earn> a>satisfactory>return>for>our>shareholders.>This>means> >>>Provide>an>excellent>experience>for>our>customers.