Managing  Director’s  Report The purchase of 100 percent of the  Loy Yang A power station and mine  this year will provide AGL with strategic  benefits and underpin growth. It will  ensure a continued reliable and safe  supply of energy to our customers  while also being a good outcome for  our shareholders. AGL’s underlying profit increased by  11.8% to $482.0 million. Our core Retail  and Merchant businesses both performed  well and enjoyed strong growth in earnings.  This was partially offset by lower earnings  contributions from our Upstream Gas  business and from our historical investment  in the Loy Yang A power station. Our customers are the linchpin of our  business. They provide the demand for the  energy products and services that are the  foundation for the investments we make in  assets such as power stations, gas storage  facilities and gas exploration and production  assets. For AGL to continue growing into  the future, it is important that we grow and  maintain our customer base, and that we are  able to offer our customers a broad range of  energy products and services at competitive  prices. Most importantly, we need to  make sure we provide our customers  with excellent service. I am pleased to report that we made good  progress during the year on all these fronts. In total, we increased the number of AGL  customers by approximately 180,000.  Especially pleasing was the continued success  of our campaign to grow the number of  customers in New South Wales where we  added 152,000 new electricity customers. We also increased the number of “dual fuel”  customer accounts. These are customers  who buy both gas and electricity from AGL.  We now have approximately 1.62 million  such customer accounts, an increase of  more than 10% over the year. Late last year, we established AGL Energy  Online, our online service designed to allow  customers to manage their account with us.  It also provides an opportunity to reduce  the number of paper bills we send out. AGL  Energy Online has been very successful  this year. More than 300,000 households  are now registered with AGL through AGL  Energy Online. In October, we launched two new online  services, the AGL Smarter Living Centre and  AGL Smarter Living Store, to provide advice  about efficient energy usage to all energy  consumers and to promote the energy  efficiency products and services that AGL  can offer its customers. The energy industry experiences high  levels of competition. Attracting and  retaining customers is costly. Although AGL’s  rate of customer churn continues to be  materially lower than the industry average,  we have been considering a number of  options to encourage even higher levels  of customer loyalty. In April, we became a partner in the  flybuys program.  flybuys  is an Australia-wide  customer loyalty program which rewards  customers for continuing to buy goods and  services from any of the  flybuys  partners.  AGL is the only energy retailer able to  offer customers the ability to participate  in a loyalty program of this scale. Almost  200,000 of our customers now have their  accounts linked to the  flybuys  program. During the year, we re-designed the way  our Customer Service Centres handle calls  from our customers. As a result, the average  time taken to respond to enquiries from our  customers has been substantially reduced.  The quality of our responses has also  improved with more customers having their  enquiry fully resolved on the first call. AGL made further progress during the year  toward achieving its strategic objectives. In June 2012, we increased our ownership  interest in the Loy Yang A power station and  adjacent coal mine, from 32.54% to 100%. Loy Yang is Victoria’s largest power station,  producing approximately 30% of the  State’s electricity requirement. It is one of  the lowest cost generators in the National  Electricity Market. Loy Yang increases AGL’s owned or controlled  generation capacity to 6,000 MW. The  additional scale and portfolio diversification  it provides will improve AGL’s ability to  manage the wholesale cost of electricity.  The adjacent coal mine means that fuel  supply costs are substantially locked in  for the remainder of the power station’s  operating life. Loy Yang’s low fuel costs and  high levels of operating reliability should allow  it to produce substantial operating cash flows  in the years ahead. Loy Yang provides employment for  approximately 550 people and up to  500 on-site contractors. I extend a warm  welcome to AGL to all of them. In the year ahead, we will be working hard  to make sure the Loy Yang assets, and the  Loy Yang employees, are effectively brought  into the AGL portfolio. This was a major  investment for AGL, so we need to make sure  it operates safely and profitably to give our  shareholders a satisfactory rate of return. The acquisition of a coal-fired base load  generator does not alter AGL’s position as  Australia’s largest private developer, owner  and operator of renewable energy assets.  Much of our future investment program  will be in constructing additional renewable  generation assets. We have also made  Delivering on strategic objectives Our Customers 8 Michael Fraser, Managing Director