AGL Energy Limited · ASX:AGL
AGL Energy — Investor Day (2016)
97 slides from AGL Energy's investor day presentation, 2016
Slide 1: AGL Investor Day 2016
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; - Does not take into account the potential and current individual investment objectiv
Slide 3: Agenda
Agenda Market & Operations Update 1230 S| Richard Wrightson, General Manager, Wholesale Markets Wholesale Electricity: Managing Volatility a Doug Jackson, Executive General Manager, Group Operations Group Operations: Driving Value Strategy & Growth Update 1345 Andy Vesey, Managing Director & CEO Gro
Slide 4: Wholesale Electricity: Managing Volatility / Group Operations: Driving Value
Wholesale Group Electricity: Operations: Managing Driving Value Volatility NAGL . Energy in action®
Slide 5: Electricity: Managing Volatility
= Electricity: mee Managing im Volatility
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 56 55 50 50 Macquarie 45 acquisition 45 40 40 35 35 30 30 25 25 20 20 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 15 Jul 16 Jan 16 Jul 16 === New South Wales
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 25,000 20,000 15,000 10,000 5,000 0 —— 2001 2003 2005 2007 2009 201 2013 2015 2017 Pre2013 2013 2014 2015 2016 2017 mNSW SA mVIC QLD = Coal retired ® Gas mot
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) 120 120 110 HHO 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 J
Slide 9: Demand outlook appears to be improving
Demand outlook appears to be improving mn: mm: Imm: | aE: | Electricity demand (GWh) 2012 oO 2010 = 2011 2 c—) (=) (=) (=) °o S S S S S Ss (=) Ss S Ss ire) Ss D S ire) Forecast Actual = NSW eVIC QLD mSA Source: AEMO * Data is for partially complete year 9 NAGL . Energy in action?
Slide 10: AGL portfolio well-aligned to manage market risk
AGL portfolio well-aligned to manage market risk 4% 2% 5% AGL ™ Black Coal = Brown Coal = Gas = Wind Hydro Note: Other sources comprise 1% of NEM generation mix Source: AEMO 10 NAGL . Energy in action®
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) oy ss ean spore scipleranoun Yi Gf, strlen srs Sct awtoun + Stockpile drawdown = Contracted Coal = AGL Macquarie Generation FY15 FY16 L FY18F FY19F
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 @ 40,000 f=) SF 30,000 Yy Yj 3,000 = Sg wwe S = 20,000 D. Y TZ, 77, 200 “CORR eea ee: 0 - - 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 = LGC
Slide 13: SA pricing driven by thermal withdrawals
SA pricing driven by thermal withdrawals 110 2012: Northern only operates Oct-Mar. Playfordnot 100 intended to operate atall 90 80 70 60 ate Yon 60 NN Peli o Rae to half capacity 30 Mar 13 Sep 13 Source: GFI Group 13 South Australia electricity forward curve flat swap ($/MWh) Jun 15: Announcement Ju
Slide 14: Electricity: Managing Volatility
= Electricity: mee Managing im Volatility
Slide 15: Wholesale Electricity: Managing Volatility / Group Operations: Driving Value
Wholesale Electricity: Managing Volatility Group Operations: Driving Value NAGL . Energy in action®
Slide 16: Group Operations: Driving Value
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 AUG 2014 SEP 2014 OCT 2014 NOV 2014 DEC 2014 JAN 2015, FEB 2015 MAR 2015 APR 2015 MAY 2015 —==—AGL TIFR Combined 1. fr} 1 S S S S 8 a z 2s s Ss s 3 5 = TFA Employee © © » © © © © @® © &® &
Slide 18: AGL Macquarie: beating expectations two years since acquisition
AGL Macquarie: beating expectations two years since acquisition
Slide 19: Key operating statistics illustrate performance
Key operating statistics illustrate performance Lost generation due to mills (GWh) Duration of Liddell forced outages (days) 300 6.2 250 57 48 200 150 100 50 Juli? Jant2 Juli2 Jan13) Julig. Jan14 Jull4@ Jan15 JultS Jant6 Jul 16 Baseline Waterwall Reheater NIAGL . 19 Energy in action?
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.—s Mar15) = Sep15. Ss Mar16=—s Sep 16 Sep13. Mar14 = Sep14. ss Mar15.—s Sep15. = Mar16 ~~ Sep 1
Slide 21: Optimising an ageing plant
Optimising an ageing plant Finding the sweet spot at Liddell i 21 00% 80% 60% 40% 20% 0% Year-to-date commerc ial availability comparison ee Incremental generation can be priced to reflect associated operating impact Time 4 FY17 commercial availability mFY16 commercial availability Energy in action®
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-pit stockpile > Long-range planning > Machine productivity FISF SSF FFP FF FHM PCC KP PPM Pow” Overburden = Inter
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
Slide 24: Group Operations: Driving Value
Slide 25: Growth in Transition: Our Strategic Imperative
Slide 26: Growth in Transition, Power Shift, Agile Capital
26 Growth in Transition: our Strategic Imperative Power Shift: AGL Scenario Planning Agile Capital: a Growth Story NAGL . Energy in action?
Slide 27: Growth in Transition: Our Strategic Imperative
Slide 28: Growth in Transition, Power Shift, Agile Capital
28 Growth in Transition: our Strategic Imperative Power Shift: AGL Scenario Planning Agile Capital: a Growth Story NAGL . Energy in action?
Slide 29: Power Shift: AGL Scenario Planning
Slide 30: Scenario planning applies a rigorous process to strategy
Scenario planning applies a rigorous process to strategy Identify key trends Order uncertainty territories Define drivers and outcomes — = —_ ie e e =— -= — a g e@ e Monitor evolving events Write scenario narratives NAGL . 30 Energy in action®
Slide 31: Drivers and uncertainties in scenario planning
Consumer ability for control Subsidy levels a K Global demand lobalcaroan ————3> one a Sa ings ‘commitment energy resources Distributed ene Network Fossil Fuel \ resources cos = ‘ani cesign prices C0,reduction profile Network role consumer Va » engagement Subsidised low Value of Exporting Innovative
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 Energy in action®
Slide 33: Drivers and outcomes were identified
Drivers and outcomes were identified i=) = = Driver matrix for & Tr distributed energy 8 resources penetration = suggests emergence of 3 disruptive business models Low (20%) High (20%) Low (80%) ae nergy in %8 Costs action’
Slide 34: We developed scenarios to illustrate four possible futures
We developed scenarios to illustrate four possible futures EE E NAGL . Energy in action® 34
Slide 35: Scenario: 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: Anticipated values in 2025
Anticipated values in 2025 Uncertainty Monitored by territories triggers Distributed Trigger 1 Middle quartiles Middle quartiles Bottom quartile energy esr sn sn oe Consumer woe nn _ : . cue behaviour Trigger 3 Low: 20h Today's Competitive Trigger 4 Medium Low Trigger 5 Weak, high Strong, low Strong
Slide 37: Anticipated values in 2025
Anticipated values in 2025 Uncertainty Monitored Last data territories by triggers (Sep 16) #2 Distributed — Global lithium 97 GWh 400 GWh 200 GWh 125 GWh meneation nana Today's ng capacity trends om support scenario #1 NAGL . Energy in action®
Slide 38: Illustrative acid test for a business solution
Illustrative acid test for a business solution 1. Robustness test uncertainty territory Outcome Relevance Distributed energy Emergence of disruptive business models resources penetration across the value chain anging customer expectations and trust Major shifts in retail market shares and COpprofile
Slide 39: Acid Test results compare different business solutions
The results of the Acid Test allow us to compare different business solution
Slide 40: Scenarios, watch-tower and acid test form ongoing strategic conversation
The scenarios, watch-tower and acid test form the basis of an ongoing strategic conversation Identify key trends Order uncertainty territories Define drivers and outcomes = | Monitor evolving events Write scenario narratives NAGL . 40 Energy in action®
Slide 41: Agile Capital: a Growth Story
Slide 42: Growth in Transition, Power Shift, Agile Capital
42 Growth in Transition: our Strategic Imperative Power Shift: AGL Scenario Planning Agile Capital: a Growth Story NAGL . Energy in action?
Slide 43: Agile Capital: a Growth Story
‘at B Agile Capital: a fame Growth Story
Slide 44: Recent actions underpin strong performance
Recent actions underpin strong performance Total shareholder return aon | 40% + 30% 4 20% 4 10% 4 0% -10% 1 1 ; ; ; 1 Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16 —AGL —S&P/ASX200 Accumulation Index Source: Orient Capital NAGL . 44 Energy in action®
Slide 45: We are targeting increased returns
We are targeting increased returns Return on Equity . 8.0% ; East 7.5% 7.5% 1.2% Targeting improvements in FY17 and onwards FY12 FY13 FY14 FY15 FY16 NAGL . 46 Energy in action®
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 discipline and focus
NENT - i; A Asset sales reflect YY discipline and focus $948M of $1B divestment —H/ff Win 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
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 2006-2015 2015-2016 “Building the Base” “Optimisation” Asset acquisition and Asset sales, efficiency consolidation of programs and capital competitive advantage management review 49 NAGL . Energy in action?
Slide 50: Agile capital to enable an expanded core
Agile capital to enable an expanded core 50 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 geograph
Slide 51: A strong range of growth opportunities
A strong range of growth opportunities Acid test Robustness Strategy fit Optionality 5 More Cc C ) e Reflects AGL’s commitment to 20% equity stake in the Fund developed $200M From FY16 onwards, starting with NSW solar projects today e e@ G ~$300M investment through FY19 underway Potential - $50-100M
Slide 52: Summary of growth and return expectations
Summary of growth and return expectations > FY17 Underlying Profit guidance of $720-800M equates to 8% Growth at mid-point > New Dividend Policy targets PayOut ratio Of 75% of Underlying Profit > Anticipated 90% or higher EBITDA/cash conversion > Atleast $400M a year of cash being generated to suppo
Slide 53: Agile Capital: a Growth Story
‘at B Agile Capital: a fame Growth Story
Slide 54: Growth Project Break-Out Presentations
Growth Project Break-Out Presentations Stephen Mikkelsen, Executive General Manager, Energy Markets Maree Mamo General Manager, Customer, Capability & Insights Phaedra Deckart Head of Wholesale Gas Simon Moorfield Chief Information Officer Scott Thomas General Manager, Projects
Slide 55: Western Australia: Market Entry
Western =, Australia: = Market Entry Scott Thomas , a F ‘hy / General Manager, Projects
Slide 56: WA is attractive in size and accessibility
WA is attractive in size and accessibility Source: Govert 56 ment of Western Australia Department of State Development Contestable gas market ¢) ~700,000 gas sites ~10,000 business sites $711 per annum average bill Energy in action?
Slide 57: Changing dynamics to drive customer value focus
Changing dynamics to drive customer value focus 57 urce: Gove Wholesale market is responsive é AGL has investigated gas supply, transport and storage options in WA, including services that enable loads to ramp up Market has been responsive, with offers received rnment of Western Australia Department
Slide 58: Time to act with differentiated value proposition
Time to act with differentiated value proposition AGL intent Leverage competitive, macro and wholesale environment to acquire ~ 100,000 gas customers in 24 months, prior to future electricity marketderegulation 58 Build brand acceptance v Build intimacy and relevance through local area and cause- ba
Slide 59: Strategic Options in East Coast Wholesale Gas
Strategic Options s in East Coast Wholesale Gas Phaedra Deckart Head of Wholesale Gas
Slide 60: LNG demand continues to lead market transition
LNG demand continues to lead market transition By 2018, 70% of gas demand will be Queensland LNG 6000 5000 4000 3000 2000 1000 East Coast gas demand (Tu/d) 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Residential and commercial Industrial
Slide 61: Market moving to shorter-term contracts
Market moving to shorter-term contracts Re-contracting needed to meet future demand = 1500 2015 2020 2025 2030 2035 m= Contracted domestic supply mmmContractedgastoLNG |=——Domestic demand (base case) Source: AGL, Poten & Partners NAGL . 61 Energy in action?
Slide 62: Winter 2016 illustrates changing dynamic
Winter 2016 illustrates changing dynamic Spike in spot gas prices likely to recur 36 Daily spot price ($/GJ ) 12 Jun 19 Jun 26 Jun 3 Jul 10 Jul Sydney Adelaide Victoria Source: AEMO SVAGL! . 62 Energy in action?
Slide 63: Supply tightness to continue
Supply tightness to continue Shortfalls could occur in absence of further development East Coast market (TJ/d) Yh Yj <4 Yih 2016 2019 2022 2025 2028 2031 2034 === Conventional Firm sss SuratBowen Contracted © r#\Conventional Contingent + =. Surat-Bowen Contingent ===AEMO Domgas Demand Source: AEMO,
Slide 64: Disruption driving need for market reform
Disruption driving need for market reform > 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 allow s
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 > AGLinvesting $17M to ready project for final investment decision in 2018-19 Potential development cost of $200-300M Anumber of sites identified Terminal could be available by 2021 Regulatory and community engagement to commence in early 2017 vVvv Vv
Slide 67: Digital Transformation Program
hs Digital Transformation Program Maree Mamo General Manager, Customer, Capability & Insights Simon Moorfield Chief Information Officer
Slide 68: Customer-centric value streams: organising AGL around the customer
68 Customer-centric value streams- organising AGL around the customer experience Energy in action®
Slide 69: Growth in Transition, Power Shift, Agile Capital
69 Growth in Transition: our Strategic Imperative Power Shift: AGL Scenario Planning Agile Capital: a Growth Story NAGL . Energy in action?
Slide 70: New Energy: Building the Innovation Accelerator
New Energy: Building the Innovation — Accelerator 7 mK Elisabeth Brinton Executive General Manager, New Energy ° S G wy - vt
Slide 71: Applying new technologies to deliver our business definition
Applying new technologies to deliver our business definition NAGL . Energy in action? 71
Slide 72: Transition to the appropriate AGL business unit
Transition to the appropriate AGL business unit Commercial partnerships Technology investments NAGL . n Energy in action®
Slide 73: Focus on three value pools aligned with scenario planning
Focus on three value pools, aligned with scenario planning outcomes . Deploying Inventing the Gree energy low-carbon ersonalised eee Won consumer P . and “grid edge” ; retailer Parone solutions at scale External data Internal customer data 73
Slide 74: Maximising customers' solar value
— #9000 Telstra > 9:41 AM 123 Sample Street SUBURB VIC... Electricity Gas Maximising customers’ solar value caren i ed De - 23 Na $2.5M investment in Solar Analytics (from Dec 14) represents path of investmentin innovation, then scaling up costo dat Solar Command: technology solution adds new value
Slide 75: World's largest residential PV/battery virtual power plant
World’s largest residential PV/battery virtual power plant $20M demonstration project leverages strategic investment in Sunverge and is supported by Federal Government 1,000 connected customer batteries storing 7MWh of energy (equivalent to SMW peaker) in South Australia Enables AGL to provide orche
Slide 76: Australian-first service offering
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 Forests program Leverages initial Ninja Blocks investment in orchestration/loT capabilities ActiveStream digital meter captur
Slide 77: Investment in global Energy Impact Fund
= 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 4 Access to leading-edge products, technologies, partnerships, business models and market intelligence globally Channel to
Slide 78: New Energy: Building the Innovation Accelerator
New Energy: Building the Innovation “Accelerator Pa K Elisabeth Brinton (+) Executive General Manager, New Energy om IN ZK & aN “Ss SD Z CE \ SS l Z
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Slide 81: History of AGL
History of AGL 2013 2016 1 837 2 0 0 6 Macarthur Wind Farm invest derma opens and is the largest compan sumvergean Australian Gas Light AGL Energy Limited founded wind farm in the Southern offers vvectomans EV Company iscreated from merger/demerger with Hemisphere hargi us Alinta Limited charging °
Slide 82: Executive Team
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Slide 87: Largest privately-owned generator in the NEM
Slide 88: Generation portfolio
Slide 89: Lowest cost thermal generation portfolio
Slide 90: Key wholesale operating statistics
Slide 91: Strong customer and generation position
Slide 92: Customer numbers and customer churn
Slide 93: Retail energy markets across the NEM
Slide 94: Five-year profit and cash performance
Slide 95: Debt maturity and debt mix post USPP issue
Slide 96: Contact information
Slide 97: AGL Investor Day 2016