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Economic
AGL Energy Limited 20
Sustainable growth
Introduction to sustainable growth
An investment grade credit rating generally provides
more favourable borrowing margins and offers
shareholders additional confidence in the security
and sustainability of earnings and dividends.
Approach
The National Electricity Market is a gross pool, uniform, first-price,
electricity market auction. The market design and accompanying
institutional arrangements require large retailers to retain
investment grade credit ratings to ensure smooth flow of trade and
transactions in the wholesale market. Critically, an investment grade
credit rating and improved capital efficiency substantially enhance
AGL’s ability to fund future growth.
Vision for sustainable growth:
AGL’s vision is to maintain a solid
credit rating reflecting underlying growth potential.
Drivers:
Applying a disciplined approach to growth (page 21) and
an appropriate economic risk management framework (page 22)
are crucial strategies in maintaining a BBB credit rating in the long
term, and allowing sustainable growth. Sustainable growth through
future investments in electricity generation and upstream gas is also
contingent on delivering new projects that provide economic benefit
to both AGL and the community.
Performance
Standard & Poors (S&P) reaffirmed AGL’s long-term credit rating
of BBB/stable following the successful completion of a $650 million
subordinated note issue and $900 million equity raising to fund the
acquisition of the remaining 67.5% of the shares in, and loan notes
issued by, Great Energy Alliance Corporation Pty Ltd (GEAC) which it
did not already own. This allowed partial repayment of existing GEAC
bank loans.
In July 2011, AGL entered into a $1 billion syndicated loan facility,
comprising of a $600 million three year term loan tranche and a
$400 million five year revolving tranche. The funds were partially
used to refinance $886.7 million of debt, repaid in October 2011.
As at 30 June 2012, $750.0 million of the facility had been utilised.
Also in July 2011, AGL entered into a $200 million loan facility
with EKF, the Danish export credit agency. The funds will be used
to partially fund AGL’s 50% interest in the construction of the
Macarthur Wind Farm. Amortising over 18 years, the loan matures
in 2031. As at 30 June 2012, $150 million of the facility had
been utilised.
In FY2013, AGL will be targetting improvement in return on
funds employed to provide a more comprehensive measure of
sustainable growth.
Debt maturity
FY13
FY15
FY17
FY19
FY21
FY23
FY25
FY27+
2,300
1,000
800
600
400
200
$ million
Legend
Loy Yang
AGL