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Economic
Sustainability Performance Report 2012 21
Sustainable growth
Disciplined approach to growth
A disciplined approach to growth is critical to improving
shareholder returns and maintaining sustainable growth.
Approach
AGL’s rigorous investment processes, appropriate hurdle rates
of return and focus on return on assets (EBIT to Funds Employed
Adjusted) will contribute to maintaining a BBB long-term
credit rating.
Performance
EBIT to Funds Employed + Adjusted
EBIT to Funds Employed Adjusted measures return on investment
and the efficiency of AGL’s assets. This metric is used to calculate
Long Term Incentive Plan entitlements for the AGL executive team
and nominated senior leaders to ensure a close alignment with
shareholders’ interests.
EBIT to Funds Employed Adjusted increased in FY2012 due to
higher operating EBIT.
Capital management and expenditure
Focus on capital management and operating cash flow has
enabled AGL to maintain a strong balance sheet. This leaves AGL
well positioned to continue investing in its pipeline of electricity
generation and upstream gas development projects. AGL has
indicative capital commitments for FY2013 of almost $800 million.
AGL maintains flexibility to accelerate or defer capital expenditure
on its projects depending on market conditions.
As discussed throughout this report, during FY2012 AGL acquired
The Great Energy Alliance Corporation, owner of Loy Yang A power
station. To fund this transaction and enable the refinancing of a
significant portion of acquired debt, AGL successfully launched
a $650 million subordinated notes issuance and a $900 million
renounceable entitlement offer equity raising.
EBIT to Funds Employed and EBIT
to Funds Employed Adjusted
9.2%
8.9%
10.4%
11.0%
%
11.3%
11.0%
9.4%
9.7%
8
10
12
FY12
FY11
FY10
FY09
Capital projects expenditure
FY12
actual
FY13
forecast
FY11
actual
FY10
actual
800
600
400
200
0
$m
Legend
EBIT to Funds Employed Adjusted
EBIT to Funds Employed
Legend
Stay in business
Upstream Gas
Oaklands Hill Wind Farm
Macarthur Wind Farm
Hallett 5 Wind Farm
Retail
Other
Dalton/Newcastle Gas
Storage Facility