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Economic
Sustainability Performance Report 2012 15
AGL’s goal is to deliver superior growth in total shareholder returns
and enhance the quality of earnings through sound risk management
and diversification of earnings streams.
Australia is embarking upon a decade of transformational reform
within electricity and gas markets. Policies such as the Renewable
Energy Target will require approximately $30 billion of new
investment in renewable energy infrastructure by 2020. The
introduction of carbon pricing is expected to create fundamental
shifts in the way energy is produced and consumed. In this
environment, achieving growth in total shareholder returns and
diversification of earnings streams requires companies to develop
portfolio flexibility and significant rigour in their investment process.
AGL has developed sophisticated portfolio flexibility around its
core integrated business strategy to thrive in this transformational
environment. Rigorous investment processes and appropriate
hurdles for the rate of return on investments will continue to drive
total shareholder returns.
The two key focus areas for the Economic chapter of this report
are ongoing profitability and sustainable growth.
Ongoing profitability:
In a capital constrained environment,
shareholder returns as measured by underlying profit are increasingly
important. Continued focus on the integrated business strategy
and optimising returns from each business unit will position AGL to
deliver growth in coming years.
Sustainable growth:
The nature of the national energy market and
the accompanying institutional arrangements means that it is crucial
for AGL to have an investment grade credit rating. An investment
grade credit rating also generally provides more favourable
borrowing margins and offers shareholders additional confidence
in the security and sustainability of earnings.
Introduction
Economic
Ongoing profitability
Optimisation
of electricity
generation
portfolio
Optimisation
of Upstream
Gas portfolio
Efficiency
of retail energy
business
Disciplined
approach to
growth
Economic risk
management
Economic
contribution to
the community
Sustainable growth
Performance Summary
Vision
Target FY2012
Performance FY2012
Target FY2013
Ongoing profitability
Industry leading
earnings profile based
on sustainable business
practices.
Underlying profit:
$470-500million
Underlying profit:
$482
million
Underlying profit
1
:
$590-640million
Sustainable growth
Solid returns from
AGL’s existing and new
business activities.
Credit rating:
BBB
Credit rating:
BBB
Improvement in return on
funds employed.
Note
1 Underlying earnings per share: FY2012 –100 cents. FY2013 – the range is 107 to 116 cents.