Slide 1: AGL reports 11% increase in Underlying Profit
AGL Energy Limited Locked Bag 1837 Level 22, 101 Miller St T: +61 2 9921 2999 ABN: 74 115 061 375 St Leonards NSW 2065 North Sydney NSW 2060 F: +61 2 9921 2552 AUSTRALIA AUSTRALIA www.agl.com.au ASX & Media Release AGL reports 11% increase in Underlying Profit 10 August 2016 AGL Energy Limited (AGL)
Slide 2: Outlook
Outlook AGL continues to expect to deliver earnings growth in FY17 noting: A challenging start to the year, reflecting unseasonably mild July weather on Australia’s east coast; The impact of a reduction in its gas portfolio margin of at least $100 million compared with FY16 (as stated on 7 July
Slide 3: FY16 Full-Year Results
FY16 Full-Year Results 12 months ended 30 June 2016 Andy Vesey Managing Director and CEO Brett Redman Chief Financial Officer Date 10 August 2016
Slide 4: Agenda
FY16 Full-Year Results | 10 August 2016 2 Agenda 1 2 3 4 Results Group Operational Supplementary highlights financials update/outlook information Andy Vesey Brett Redman Andy Vesey IMPORTANT NOTE: This presentation should be read in conjunction with the AGL Energy Limited Financial Results ASX Relea
Slide 5: Results highlights
FY16 Full-Year Results | 10 August 2016 3 Results highlights Andy Vesey Managing Director and CEO 1
Slide 6: Results announcement highlights
FY16 Full-Year Results | 10 August 2016 4 Results announcement highlights Effective strategy delivery amid evolving markets 1 Statutory loss of $408m; statutory operating cash flow after tax of $1,186m up 14% 2 Underlying Profit up 11% to $701m reflects margin and cost discipline 3 Underlying cash f
Slide 7: Delivering our strategic framework
FY16 Full-Year Results | 10 August 2016 5 Delivering our strategic framework Focused approach driving priorities and performance FY16 Achievements FY17 Focus Areas Embrace transformation › Confirmed exit of Natural Gas › Embed scenario planning › Align structure with strategy › Scenario planning rol
Slide 8: Key operations driving shareholder value
FY16 Full-Year Results | 10 August 2016 6 Key operations driving shareholder value Reflects core operational execution capability › Two additional months of AGL Total generation up 14% to 45 TWh Macquarie › Commissioning of solar sites › Re-organisation driving results Operating costs down $122m › C
Slide 9: Transforming the customer’s digital experience
FY16 Full-Year Results | 10 August 2016 7 Transforming the customer’s digital experience Three-year, indicative $300m program to drive customer value Three key components Expected outcomes Foundational Capability › Improved customer acquisition and retention Significant investment in core technologi
Slide 10: World’s largest virtual solar power plant
FY16 Full-Year Results | 10 August 2016 8 World’s largest virtual solar power plant AGL committed to ~$20m project in South Australia Scope › 1,000 connected batteries › Equivalent of 5 MW solar peaking plant › Utilises Sunverge platform › Heavy discounts on batteries for homes/small businesses with
Slide 11: Powering Australian Renewables Fund progress
FY16 Full-Year Results | 10 August 2016 9 Powering Australian Renewables Fund progress QIC, Future Fund demonstrate support for large-scale clean energy investment › $2-3 billion fund devised to own ~1,000 MW of large-scale renewable projects › July 2016 announcement confirmed QIC, on behalf of its
Slide 12: AGL’s position on policy and market reform
FY16 Full-Year Results | 10 August 2016 10 AGL’s position on policy and market reform Three focus areas for long-term integrated approach to energy and climate policy 1 Reform National Electricity Market to incorporate high penetration of renewables › “Energy only” market produces volatility unaccep
Slide 13: Appointment of EGM, New Energy
FY16 Full-Year Results | 10 August 2016 11 Appointment of EGM, New Energy Elisabeth Brinton to join AGL effective mid-September 2016 › Most recently Corporate Strategy Officer at NYSE-listed Pacific Gas & Electric Company › 25 years’ experience of innovation, execution and value creation in multiple
Slide 14: Group financials
FY16 Full-Year Results | 10 August 2016 12 Group financials Brett Redman Chief Financial Officer 2
Slide 15: Key financial metrics
FY16 Full-Year Results | 10 August 2016 13 Key financial metrics Strong underlying performance Financial results and key metrics FY16 FY15 Change Statutory (loss)/profit ($m) (408) 218 287% Underlying Profit ($m) 701 630 11% Statutory EPS (cents) (60.5) 33.3 282% Underlying EPS (cents) 103.9 9
Slide 16: Statutory to Underlying Profit reconciliation
FY16 Full-Year Results | 10 August 2016 14 Statutory to Underlying Profit reconciliation Statutory loss impact of significant items and changes in fair value $m FY16 FY15 Change Statutory (loss)/profit (408) 218 626 Adjust for the following after tax items: Significant items Restructuring costs 60
Slide 17: Underlying Profit summary
FY16 Full-Year Results | 10 August 2016 15 Underlying Profit summary Increase of 11% $m FY16 FY15 Change Revenue 11,150 10,678 4.4% Operating EBITDA 1,689 1,505 12.2% Operating EBIT Energy Markets 2,286 2,063 10.8% Group Operations (854) (729) 17.1% New Energy (21) 2 - Investments 25 26 (3.8%) Centr
Slide 18: Underlying Profit drivers
FY16 Full-Year Results | 10 August 2016 16 Underlying Profit drivers Higher generation, disciplined price management and transformation 900 Energy Markets Group Operations 42 (3) 23 800 83 (43) (21) 78 (55) (6) 701 700 (23) (4) $ million 630 600 500 400 1 FY15 Consumer Wholesale Wholesale Eco Mark
Slide 19: Consumer Market – key metrics
FY16 Full-Year Results | 10 August 2016 17 Consumer Market – key metrics Customer value strategy driving growth in EBIT per customer account $m FY16 FY15 Change Average customer accounts (‘000) 3,692 3,727 (0.9%) Cost to serve per customer account $69 $72 (4.2%) Cost to grow per account acquired / r
Slide 20: On track for targeted $170m opex reduction by FY17
FY16 Full-Year Results | 10 August 2016 18 On track for targeted $170m opex reduction by FY17 $122m delivered in FY16 compared with $102m target 1,600 36 10 1,500 1,460 (4) 34 15 - 1,400 1,380 1,381 (122) (48) $ million 1,300 1,200 1,100 1,000 FY15 CPI M&A Reclass. Reduction FY16 CPI M&A Reclass. Re
Slide 21: Breakdown of opex saving objectives
FY16 Full-Year Results | 10 August 2016 19 Breakdown of opex saving objectives Transformation opex targets ahead of schedule FY16 FY16 FY17 $m Target Actual Target Group Operations 49 46 77 Maintenance optimisation 21 20 29 Procurement 22 17 29 Labour and contractor 11 12 13 Other 4 3 6 Additional g
Slide 22: Capex reductions and asset sales on track
FY16 Full-Year Results | 10 August 2016 20 Capex reductions and asset sales on track $100m (real) sustaining capex reductions and $1b asset sales by FY17 Sustaining capital expenditure Capital expenditure 500 $100m reduction less CPI › Sustaining capex in FY16 included a number 395 390 400 of major
Slide 23: Working capital: progress on $200m target reduction
FY16 Full-Year Results | 10 August 2016 21 Working capital: progress on $200m target reduction $72m reduction delivered in FY16 against $64m objective FY16 FY16 FY17 $m Target Actual Target Optimise coal stockpile at AGL Macquarie 2 21 21 Excess gas bank to be naturally consumed (20) (17) 38 Reduce
Slide 24: Underlying operating cash flow
FY16 Full-Year Results | 10 August 2016 22 Underlying operating cash flow Cash conversion rate of 94% $m FY16 . FY15 Operating EBITDA 1,689 1,505 Equity accounted income (8) 4 Onerous contracts (42) (14) Receivables 138 77 Creditors (109) 74 Inventories (10) (62) Carbon liability - (139) Net derivat
Slide 25: Balance sheet strength
FY16 Full-Year Results | 10 August 2016 23 Balance sheet strength Headroom provides considerable flexibility to deploy capital for growth › Moody’s initiation: Baa2 credit rating, stable outlook › More than $800m of cash and undrawn debt facilities › Net debt $2,731m, down $811m during FY16 › FY16 c
Slide 26: Operational update / outlook
FY16 Full-Year Results | 10 August 2016 24 Operational update / outlook 3 Andy Vesey Managing Director and CEO
Slide 27: People and safety
FY16 Full-Year Results | 10 August 2016 25 People and safety Improvements in safety performance a key focus for year ahead Total injury frequency rate (rolling 12 months) Employee engagement score 100% 6 5.2 5 80% 77% 77% 76% 4.3 70% 4.1 4 60% 3 2.7 40% 2 20% 1 0 0% Jun-13 Jun-14 Jun-15 Jun-16 2013
Slide 28: Commitment to community and sustainability
FY16 Full-Year Results | 10 August 2016 26 Commitment to community and sustainability Highlights of our actions over FY16 Diverse and inclusive workforce › AGL Shine LGBTI initiative › New flexible working arrangements for all roles Affordability initiative › $6.5m including funding for trialling ne
Slide 29: Wholesale electricity market update
FY16 Full-Year Results | 10 August 2016 27 Wholesale electricity market update Forward curves continue to strengthen Calendar 2017 flat swap › Fuel cost drivers: $100 New South Wales Victoria South Australia Queensland » LNG plants coming on line » Black coal domestic contracts resetting off $90 leg
Slide 30: Wholesale gas market update
FY16 Full-Year Results | 10 August 2016 28 Wholesale gas market update Importance of secure, flexible portfolio in context of volatile market › FY17 gas portfolio margin expected to be lower by at Average spot prices, year on year least $100m: $20 2015 2016 » Queensland gas supply curtailment, suppl
Slide 31: Consumer market update
FY16 Full-Year Results | 10 August 2016 29 Consumer market update Electricity demand stabilising; Customer value strategy driving growth › Decline in residential electricity demand per customer › Inactive and unidentified consumption program continues to show signs of flattening launched › AGL churn
Slide 32: Generation update
FY16 Full-Year Results | 10 August 2016 30 Generation update Volume increase of 14% in FY16 to 45 TWh › Generation increase in FY16 reflects: Generation volumes 50 » Full year operation of AGL Macquarie combined AGL (excluding Macquarie) with enhanced Bayswater performance Macquarie (AGL owned) 45 M
Slide 33: Outlook
FY16 Full-Year Results | 10 August 2016 31 Outlook Delivering strategic framework to drive value › FY17 guidance to be provided at the Annual General Meeting on 28 September 2016 › Earnings growth expected, but challenging start to FY17: » Unseasonably mild weather in July » Gas margin to be at leas
Slide 34: Contact information
FY16 Full-Year Results | 10 August 2016 32 Contact information Investors Nicole Rizgalla Investor Relations Manager phone: +61 2 9921 2691 agl.com.au 131 245 Download the app. mobile: +61 (0) 400 488 836 e-mail: nrizgalla@agl.com.au Media Kathryn Lamond Media Manager phone: +61 2 9921 2170 mobile: +
Slide 35: Supplementary information
FY16 Full-Year Results | 10 August 2016 33 Supplementary information 4
Slide 36: Electricity sales volume
FY16 Full-Year Results | 10 August 2016 34 Electricity sales volume GWh FY16 FY151 Change Consumer New South Wales 5,805 5,739 1.2% Victoria 3,750 3,921 (4.4%) South Australia 2,494 2,648 (5.8%) Queensland 2,585 2,549 1.4% Consumer Total 14,634 14,857 (1.5%) Business New South Wales 4,080 3,773 8.1%
Slide 37: Gas sales volume
FY16 Full-Year Results | 10 August 2016 35 Gas sales volume PJ FY16 FY15 Change Consumer New South Wales2 20.9 23.5 (11.1%) Victoria 32.5 33.7 (3.6%) South Australia 3.3 3.2 3.1% Queensland 2.7 2.6 3.8% Consumer Total 59.4 63.0 (5.7%) Business New South Wales 24.9 29.3 (15.0%) Victoria 25.4 26.4 (3.
Slide 38: Queensland wholesale gas
FY16 Full-Year Results | 10 August 2016 36 Queensland wholesale gas Firm Queensland wholesale gas customer sales 70 60 50 40 PJ 30 20 10 0 FY16 FY17 FY18 FY19
Slide 39: Customer numbers
FY16 Full-Year Results | 10 August 2016 37 Customer numbers (‘000) 30 Jun 2016 30 Jun 2015 Change Consumer Electricity New South Wales 808 806 2 Victoria 636 646 (10) South Australia 408 422 (14) Queensland 395 387 8 Total Consumer Electricity 2,247 2,261 (14) Consumer Gas New South Wales 674 700 (2
Slide 40: Consumer Market – key indicators
FY16 Full-Year Results | 10 August 2016 38 Consumer Market – key indicators Electricity FY16 FY15 Change Volume (GWh) 14,634 14,857 (1.5%) Avg. Consumer Accounts ('000) 2,255 2,264 (0.4%) Revenue ($m) 3,813 4,023 (5.2%) Gross Margin ($m) 463 426 8.7% Gross Margin to Revenue 12.1% 10.6% 1.5 ppts Gros
Slide 41: Business Customers – key indicators
FY16 Full-Year Results | 10 August 2016 39 Business Customers – key indicators Electricity FY16 FY15 Change Volume (GWh) 12,268 12,798 (4.1%) Revenue ($m) 1,573 1,818 (13.5%) Gross Margin ($m) 35 42 (16.7%) Gross margin per MWh $2.85 $3.28 (13.1%) Gas Volume (PJ) 73.7 79.1 (6.8%) Revenue ($m) 544 58
Slide 42: Energy Markets – Operating EBIT
FY16 Full-Year Results | 10 August 2016 40 Energy Markets – Operating EBIT $m FY16 FY15 Change Operating EBITDA 2,385 2,152 10.8% Depreciation and amortisation (99) (89) 11.2% Consumer Market EBIT 399 321 24.3% Electricity gross margin 463 426 8.7% Gas gross margin 334 311 7.4% Net operating costs (
Slide 43: Group Operations – Operating EBIT
FY16 Full-Year Results | 10 August 2016 41 Group Operations – Operating EBIT $m FY16 FY15 Change Operating EBITDA (523) (475) 10.1% Depreciation and amortisation (331) (254) 30.3% Thermal (675) (574) 17.6% Renewables (64) (77) (16.9%) Natural Gas (45) (23) 95.7% Other (70) (55) 27.3% Operating EBIT
Slide 44: New Energy – Operating EBIT
FY16 Full-Year Results | 10 August 2016 42 New Energy – Operating EBIT $m FY16 FY15 Change Revenue 127 119 6.7% Cost of goods sold (66) (61) 8.2% Gross margin 61 58 5.2% Operating costs (excluding D&A) (64) (45) 42.2% Operating EBITDA (3) 13 (123.1%) Depreciation & amortisation (18) (11) 63.6% Opera
Slide 45: Wholesale Contracting
FY16 Full-Year Results | 10 August 2016 43 Wholesale Contracting › AGL’s Wholesale Markets Risk Management Policy (Policy) is approved by the Board and establishes the requirements Expected electricity hedge position - (all regions) for managing risks arising from wholesale energy markets › The Poli
Slide 46: Generation portfolio
FY16 Full-Year Results | 10 August 2016 44 Generation portfolio Asset Characteristics FY16 Performance Sent Out Capacity Capacity Carbon Intensity Asset State Type Status Generation Factor (MW) (tCO2e/MWh) (GWh) (%) Bayswater NSW Coal Owned 2,640 0.95 16,849 73% Liddell NSW Coal Owned 2,000 1.01 7,6
Slide 47: Debt facilities
FY16 Full-Year Results | 10 August 2016 45 Debt facilities As at 30 June 2016 Limit Usage Maturity date $m Current Export Credit Agency Facility 11 11 Jun-17 CPI Indexed Bonds 11 11 May-17 Bank Debt - Revolver 400 - Jun-17 Non Current Bank Debt - Term 650 650 Feb-18 410 410 Jun-21 Bank Debt - Revolv
Slide 48: Disclaimer and important information
FY16 Full-Year Results | 10 August 2016 46 Disclaimer and important information The information in this presentation: › Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held. › Does not take into account the potenti