Agl Energy Limited · ASX:AGL
Agl Energy — Investor Day (2016)
97 slides from Agl Energy's investor day presentation, 2016
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Slide 2: Disclaimer and important information
Disclaimer and important information The information in this presentation: - Isnotan offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held; - Doesnot take into account the potential and current individual investment objective
Slide 3: Agenda
Agenda Market & Operations Update s. | Richard Wrightson, General Manager, Wholesale Markets ms Doug Jackson, Executive General Manager, Group Operations Strategy & Growth Update Andy Vesey, Managing Director & CEO Alistair Preston, Exec. General Manager, Organisational Transformation Brett Redman,
Slide 4: Wholesale Electricity: Managing Volatility; Group Operations: Driving Value
Wholesale Electricity: Managing Volatility Group Operations: Driving Value SIAGL| . Energy in action?
Slide 5: Wholesale Electricity: Managing Volatility
a Wholesale | ey Electricity: = Managing = Volatility : Richard Wrightson B General Manager, Wholesale Markets
Slide 6: Rising wholesale electricity market
Rising wholesale electricity market Six-month rolling average spot price ($/MWh) Forward curve prices for FY18 flat swap ($/MWh) 70 70 65 65 60 60 55 55 50 50 Macquarie 45 acquisition 45 40 40 36 36 30 30 25 25 20 20 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 15 Jul 15 Jan 16 Jul 16 New South Wales == V
Slide 7: Renewable build tracking thermal withdrawal
Renewable build tracking thermal withdrawal NEM renewable generation by state (GWh) NEM retirement/mothball of thermal generation (GWh) 30,000 30,000 25,000 25,000 20,000 20,000 16,000 16,000 | | oo oo ne 5,000 5,000 L 0 ~_———ii = <= 2001 2003 2005 2007 2009 2011 2013 2015 2017 Pre 2013 2013 2014 20
Slide 8: Increasing thermal fuel costs driving the market
Increasing thermal fuel costs driving the market 3-month rolling avg. gas cost (AUD/MWh sent out) Black coal cost (AUD/MWh sent out) 120 120 n0 110 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 15 Jul 15 Ja
Slide 9: Demand outlook appears to be improving
Demand outlook appears to be improving Electricity demand (GWh) aE: 2 So a = So i Forecast Actual = NSW em VIC mQLD mSA Source: AEMO * Data is for partially complete year SAGL] . Energy in action?
Slide 10: AGL portfolio well-aligned to manage market risk
AGL portfolio well-aligned to manage market risk 2% 5% NEM AGL mBlack Coal m Brown Coal = Gas = Wind Hydro Note: Other sources comprise 1% oF NEM generation mix Source: AEMO 10 SAGL| . Energy in action? 10
Slide 11: AGL coal supply position remains well-hedged
AGL coal supply position remains well-hedged Performance reflects capacity to flex incremental generation to meet market demand Black coal position (Mt) 14 12 , le ee 10 a 8 4 Stockpile drawdown 6 = Contracted Coal 4 m AGL Macquarie Generation : BE 0 FY16 FY16 | FY18F FY19F SAGL] . 1 Energy in actio
Slide 12: AGL well-positioned in event of LGC shortfall
AGL well-positioned in event of LGC shortfall ... While lack of capital investment reflects policy uncertainty LGC market model - new LRET target 60,000 50,000 LGCs (000s) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 sees LGCs supply === Opening bank «~~ LGC shortfall —®—LRET compliance an
Slide 13: SA pricing driven by thermal withdrawals
SA pricing driven by thermal withdrawals 110 2012: Northern only operates 109 | Sear: Playferdnot intended to operate tall 90 80 70 60 ne iit oes sO N Mar 13 Pelican 40 | Point reduced tohalfcapacity 30 Mar 13 Sep 13 Source: GFI Group 13 South Australia electricity forward curve flat swap ($/MWh) Ma
Slide 14: Wholesale Electricity: Managing Volatility
ey Electricity: = Managing = Volatility 14
Slide 15: Agenda divider
Wholesale Group Electricity: Operations: Managing Driving Value Volatility NSAGL| . Energy in action?
Slide 16: Group Operations: Driving Value
Group Operations: Driving Value Doug Jackson Executive General Manager, Group Operations 16
Slide 17: Focusing on improving our safety performance
Focusing on improving our safety performance Total Injury Frequency Rate (TIFR) per million man hours JUL 2014 sep 2014 ocr 2014 DEC 2014 JAN 2015, Mag 2015 MAY 2015 JUN 2018 JUL 2015 OCT 2015 Nov 2015 DEC 2016 JAN 2016 FEB 2016 MAR 2016 APR 2016 MAY 2016 FYI7 YTD OCT ——"AGLTIFA Combined =——meTIFREm
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Slide 19: Key operating statistics illustrate performance
Key operating statistics illustrate performance Lost generation due to mills (GWh) Duration of Liddell forced outages (days) 6.2 57 4.8 Jul? Jant2 Jult2 Jant3) Juli3 Jant4 Jult4. Jant5 JultS Jan16 Juli6 Baseline ‘Waterwall Reheater SAGL| | 19 Energy in action? 19
Slide 20: Improved generation output at AGL Macquarie
Improved generation output at AGL Macquarie Bayswater net actual generation (GWh) Liddell net actual generation (GWh) 1,800 1,000 1,600 1,400 800 1,200 600 1,000 800 400 600 400 200 200 Sep13 Mar14 Sep14 Mar15 Sep15 Mar16 Sep 1é Sep13. Mar14 Sep14.—s Mar15 = Sep15. Ss Mar16—s Sep 16 SAGL| | 20 Energ
Slide 21: Optimising an ageing plant
Optimising an ageing plant Finding the sweet spot at Liddell Year-to-date commercial availability comparison os YU) 40% 20% O% Time #.FY17 commercial availability m= FY16 commercial availability SAGL| | a Energy in action? 21
Slide 22: Loy Yang mine: doing it differently
Loy Yang mine: doing it differently Overburden and interseam volume As the mine advances, more dirt must be moved to mine the coal 50% increase Cubic metres (M) Securing coal supply > In-pitstockpile > Long-range planning > Machine productivity Overburden = Interseam SIAGL| . 2” Energy in action’ 22
Slide 23: AGL Torrens outlook in a volatile market
AGL Torrens outlook in a volatile market > Torrens A: operation reflects South Australian markets; annual assessment of ongoing operation > Torrens B: fuel optionality > Development permit provides flexibility to construct open-cycle gas turbine up to 800 MW sii tl 23
Slide 24: Group Operations: Driving Value
Group Operations: Driving Value Doug Jackson Executive General Manager, Group Operations 24
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Slide 26: Growth in Transition; Power Shift; Agile Capital
Growth in Power Shift: Agile Capital: Transition: AGL a Growth our Strategic Scenario Story Imperative Planning SAGL] . 6 Energy in action?
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Slide 28: Growth in Transition; Power Shift; Agile Capital
Growth in Power Shift: Agile Capital: Transition: AGL a Growth our Strategic Scenario Story Imperative Planning SAGL] . 28 Energy in action?
Slide 29: Power Shift: AGL Scenario Planning
Power Shift: AGL Scenario Planning ‘ ) Alistair Preston Executive General Manager, Organisational Transformation _ > ‘ae Fb » aa! 29
Slide 30: Scenario planning applies a rigorous process to strategy
Scenario planning applies a rigorous process to strategy SAGL] . pe Energy in action? 30
Slide 31: Subsidy levels / trends shaping the energy market
Subsidy levels Consumer abit forcontrol Gio carbon Global amar Innovative petite arin Eerie Snartateigs Dstrtted every etwor Fossil Fuel resources costs ‘tariff design prices CO,reduction profile CORE Oe) consumer eeatenent Subsidised low Value of exporting Innovative grid back togrid Grid energy an
Slide 32: Distributed energy resources penetration rate
32 Distributed energy resources penetration rate Consumer behaviour Competitive intensity Network role CO, profile Industrial electricity demand Government intervention We ordered the uncertainty territories, considering their influence on one another SAGL| | pe Energy in action? 32
Slide 33: Drivers and outcomes were identified
Drivers and outcomes were identified 33 Ability to control High (80%) Low (20%) Driver matrix for distributed energy resources penetration suggests emergence of disruptive business models High (20%) Low (80%) Costs Energy in action? 33
Slide 34: We developed scenarios to illustrate four possible futures
We developed scenarios to illustrate four possible futures LZ Ea EE NSAGL| . 34 Energy in action 34
Slide 35: High uptake of smart distributed energy resources
35 High uptake of smart distributed energy resources (DER) stimulates new business models. This results in increased competition from traditional and non- traditional players. Government has proactively engaged in an orderly transition from thermal to large-scale renewable plant... Consumers have hi
Slide 36: Uncertainty territories monitored by triggers
Uncertainty territories Distributed energy penetration Consumer behaviour Competitive intensity Role of network CO, reduction profile Industrial electricity demand Government intervention Monitored by triggers Trigger 1 Trigger 2 Trigger 3 Trigger 4 Trigger 5 Trigger 6 Trigger 7 Trigger 8 Trigger 9
Slide 37: Uncertainty territories monitored by triggers
Uncertainty Monitored territories _ by triggers Last data (Sep 16) Distributed — Global lithium energy ion battery penetration manufacturi ng capacity (GWh) 97 GWh 500 GWh Anticipated values in 2025 #3 #4 400 GWh 200 GWh 125 GWh Today’s trends support scenario #1 SAGL| | pe Energy in action? 37
Slide 38: Illustrative acid test for a business solution
Illustrative acid test for a business solution 1. Robustness test uncertainty territory Distributed energy Competitive intensity Role of network AGL’s greenhol Customer experia Optionality Outcome Emergence of disruptive business models 0s the value chain i ctations and t Major shifts inretal market
Slide 39: Results of the Acid Test compare business solutions
The results of the Acid Test allow us to compare different business solution 39
Slide 40: Scenarios, watch-tower and acid test form the basis of ongoing conversation
The scenarios, watch-tower and acid test form the basis of an ongoing strategic conversation SAGL| | pe Energy in action? 40
Slide 41: Power Shift: AGL Scenario Planning
Power Shift: AGL Scenario Planning ‘ ) Alistair Preston Executive General Manager, Organisational Transformation _ > ‘ae Fb » aa! 41
Slide 42: Growth in Transition; Power Shift; Agile Capital
Growth in Power Shift: Agile Capital: Transition: AGL a Growth our Strategic Scenario Story Imperative Planning SAGL] . 42 Energy in one action’
Slide 43: Agile Capital: a Growth Story
m Agile Capital: a ¢ Growth Story 43
Slide 44: Recent actions underpin strong performance
Recent actions underpin strong performance Total shareholder return 50% 4 40% 5 30% 4 20% 4 10% 4 0% -10% Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16 —AGL ——S&P/ASX200 Accumulation Index Source: Orient Capital SAGL| . a Energy in action’
Slide 45: We are targeting increased returns
We are targeting increased returns Return on Equity 9) 8.0% 9) FY12 FY13 FY14 FY15 FY16 45 Energy in action? 45
Slide 46: Unchanged outlook reflects strategy delivery
Unchanged outlook reflects strategy delivery FY17 Underlying Profit expected to be $720-800M! Primary drivers expected to be: > Wholesale electricity margin (phasing of benefit to reflect competitive environment, timing of retail price changes and AGL hedging profile) > Customer value strategy > Del
Slide 47: Asset sales reflect portfolio focus
Wii TT ri LLL Y If | Asset sales reflect ee and focus $948M of $1B divestment objective for FY17 already achieved Macarthur Wind Farm and Diamantina Power Station divestments completed in FY16 Sales to Powering Australian Renewables Fund (PARF) > Nyngan and Broken Hill solar projects sold for $257M
Slide 48: Strong cash flows position AGL to fund growth
Strong cash flows position AGL to Fund growth Generation and use of cash: FY15 onwards FY17 onwards FY17 base of $1,381M reflects targeted $170M inflation-adjusted reduction vs. FY15 To continue to grow broadly in line with Underlying Profit Expected to remain above 90% To continue to grow broadly i
Slide 49: The way we use capital is evolving
The way we use capital is evolving 49 2006-2015 “Building the Base” Asset acquisition and consolidation of competitive advantage 2015-2016 “Optimisation” Asset sales, efficiency programs and capital management review 4 Energy in action? 49
Slide 50: Agile capital to enable an expanded core
Agile capital to enable an expanded core Leverage growing orchestration capability to explore complementary data-driven retail offerings in the connected home Strengthening existing business (e.g. Digital Transformation Program, PARF, LNG import) Deploy capital to transitioning developed geographies
Slide 51: A strong range of growth opportunities
A strong range of growth opportunities co Acidtest -—— Robustness Strategy fit Optionality More developed today Digital transformation program PARF equity investments Technology-led New Energy investments Western Australia market entry Expand data-driven retail offering Less developed . . a “olay, D
Slide 52: Summary of growth and return expectations
Summary of growth and return expectations > FY17 Underlying Profit guidance of $720-800M equates to 8% GrOWh at mid-point > New Dividend Policy targets PAYOUL ratio OF 75% of Underlying Profit > Anticipated 90% or higher EBITDA/cash conversion > Atleast $400M a year of cash being generated to suppor
Slide 53: Agile Capital: a Growth Story
m Agile Capital: a ¢ Growth Story 53
Slide 54: Growth Project Break-Out Presentations
Growth Project Break-Out Presentations Stephen Mikkelsen, Executive General Manager, Energy Markets Phaedra Deckart Maree Mamo Head of Wholesale Gas Capability & Insights Scott Thomas Simon Moorfield General Manager, Projects Chief Information Officer General Manager, Customer, 54
Slide 55: Western Australia: Market Entry
Western ; a &, Australia: == Market Entry eae | > Scott Thomas General Manager, Projects 55
Slide 56: WA is attractive in size and accessibility
WA is attractive in size and accessibility Population Contestable gas market 2. ¢) Gas market competitors aie rfir 2.6M people ~700,000 gas sites ~90% Alinta share 1.0M households ~10,000 business sites 2013 Kleenheat entered 92% live in south-west corner $711 per annum average bill ~10% Kleenheat s
Slide 57: Changing dynamics to drive customer value focus
Changing dynamics to drive customer value focus Wholesale market is responsive Gas market primed for competition Q & Limited competition in gas AGL has investigated gas before Kleenheat entry supply, transport and storage options in WA, including services that enable loads to rampup Competition rela
Slide 58: Time to act with differentiated value proposition
Time to act with differentiated value proposition AGL intent Build brand awareness Leverage competitive, macro brand launch and wholesale ine (Re rea environment to acquire ~ 100,000 gas customers in 24 months, prior to future electricity market deregulation Leverage growing personalised retailing c
Slide 59: Strategic Options in East Coast Wholesale Gas
Strategic Options i in East Coast = Wholesale Gas Phaedra Deckart Head of Wholesale Gas 59
Slide 60: East Coast gas demand (TJ/d)
East Coast gas demand (TJ/d) 60
Slide 61: Market moving to shorter-term contracts
Market moving to shorter-term contracts Re-contracting needed to meet future demand 3000 = 2500 Ss $ ©= 2000 a i=) i= East Coast gas 500 2016 2020 2025 2030 2035 = Contracted domestic supply mm Contracted gastoLNG ©#=——Domestic demand (base case) Source: AGL, Poten& Partners. SAGL| . 61 Energy in ac
Slide 62: Winter 2016 illustrates changing dynamic
Winter 2016 illustrates changing dynamic Spike in spot gas prices likely to recur 35 Daily spot price ($/GJ ) 12 Jun 19 Jun 26 Jun 3 Jul 10 Jul Sydney ====Adelaide e=—Victoria Source: AEMO NIAGL 62 Energy in action? 62
Slide 63: Supply tightness to continue
Supply tightness to continue Shortfalls could occur in absence of further development 1800 - — Li 2016 2019 2022 2025 2028 2031 2034 ‘mmm Conventional Firm © sm SuratBowen Contracted — +.r4 Conventional Contingent = +». Surat-Bowen Contingent === AEMO Domgas Demand Source: AEMO, Poten & Partners SAG
Slide 64: Disruption driving need for market reform
Disruption driving need for market reform Vv Vv Vv 64 ACCC East Coast Gas Inquiry focus areas: transportation, transparency, liquidity AGL supports increasing liquidity and transparency of trading hubs Market structure should allow gas to flow to demand Focus on alleviating system constraints to all
Slide 65: Existing options for security of supply
Existing options for security of supply Three key areas: Strategic options Commentary Status quo foundation supply Continue to negotiate with Cooper Basin and Gippsland Basin for long-term competitive supply Expand domestic supply Binding heads of agreement executed with Cooper Energy to support fin
Slide 66: LNG import facility a fourth option of interest
LNG import facility a Fourth option of interest veeball PRELUDE DARWIN GORGON ae de fmicrrys WHEATSTONE gh, NWS fa-PLUTO Aa wills lew Pi “ Europe, Middle East and Africa 66 vVvvv Asia APLNG OCLNG pe SE welt AGL investing $17M to ready project for final investment decision in 2018-19 Potential develo
Slide 67: Digital Transformation Program
Digital Transformation Program bh - Maree Mamo = General Manager, Customer, Capability & Insights Zz Simon Moorfield Chief Information Officer 67
Slide 68: Digital Transformation
Digital Transformation Customer-centric value streams- organising AGL around the customer experience 68 Energy in action? 68
Slide 69: Growth in Transition; Power Shift; Agile Capital
Growth in Power Shift: Agile Capital: Transition: AGL a Growth our Strategic Scenario Story Imperative Planning SAGL] . 69 Energy in action?
Slide 70: New Energy: Building the Innovation Accelerator
New Energy: ~ Building the ‘Innovation = SS i \ \ \ a % wy ; ae al ds mK Flisabeth Brinton ~} vy Executive General ne
Slide 71: Applying new technologies to deliver our business definition
Applying new technologies to deliver our business definition SAGL] . n Energy in action?
Slide 72: Transition to the appropriate AGL business unit
Transition to the appropriate AGL business unit Commercial partnerships Technology investments SAGL| | pe Energy in action? 72 72
Slide 73: Focus on three value pools, aligned with scenario planning outcomes
Focus on three value pools, aligned with scenario planning outcomes SAGL . B Energy in action” 73
Slide 74: Solar Analytics and Solar Command
_ Solar Analytics and Solar Command Maximising customers’ solar value $2.5M investment in Solar Analytics (from Dec 14) represents path of investmentin innovation, then scaling up Solar Command: technology solution adds new value for solar customers while opening up growth opportunity Provides porta
Slide 75: Investment in Sunverge supported by Federal Government
Wi, Sf investment in Sunverge and is supported by Federal Government , 1,000 connected customer batteries storing 7MWh of energy (equivalent to 5MW peaker) in South Australia , Enables AGL to provide orchestration services that benefit network operators including: peak shaving, voltage optimization
Slide 76: Electric car plan and concierge service
Electric car plan and concierge service Australian-first service offering Bundled offer combining distributed energy product with tailored energy plan Unlimited charging for $1 a day, fully carbon offset via Future Cat aly Forests program m Leverages initial Ninja Blocks investment in orchestration/
Slide 77: Energy Impact Partners investment
Energy Impact Partners investment Investment in global Energy Impact Fund Managed by private-equity firm in New York AGL to join EIP Nexus Council alongside Southern Company, National Grid and Xcel Energy Inc Access to leading-edge products, technologies, partnerships, business models and market int
Slide 78: Building the Innovation Accelerator
* Building the _ Innovation pra Accelerator 7 iS Elisabeth Brinton Executive General Manager, New Energy nn iS 78
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Slide 81: History of AGL
History of AGL 1837 Australian Gas Light Company iscreated 1873 AGL imports and installs first gas-cooking stove atits Darling Harbour store f t e 2005 AGL acquires SouthernHydro 1841 Australian Gas Light Company lights the first gas lamp in Australia (within two years there are 165 gas lamps) 2006
Slide 82: Executive Team
Executive Team Andy Vesey ing Director cutive Offic Brett Redman Dan Cram Chief Financial Officer ve General People & ting Executive M Alistair Preston ve General anisational Doug Jackson Stephen Mik Exec G a Execul Manager, Group Operation: Elisabeth Brinton Execul Manager, New John Fitzgerald SAGL
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