AGL Energy Limited 2012 Annual Report 13 Ongoing profitability Sustainable growth AGL’s pipeline of development projects  includes gas-fired power stations; wind  farms and solar PV; gas exploration and  development activities; and gas production  and gas storage facilities. The Loy Yang A power station and adjacent  coal mine will provide AGL with control  over one of the lowest cost generators  in Australia. It will add substantial scale,  diversity and improved risk management  capability to AGL’s business. Continued improvement in AGL’s  investment returns is important if we  are to continue to be able to access  capital on satisfactory terms. AGL’s underlying profit for FY2012 was  $482 million, up 11.8% on FY2011.  The result was largely driven by strong  Merchant and Retail results. Retail results  were higher due to higher customer  numbers and growth in gross margin  per customer. The Merchant Energy  performance benefited from non- recurrence of the severe weather events  which affected financial performance  in FY2011, combined with strong  portfolio performances in electricity,  gas and eco-markets. Dividends paid or declared to shareholders  totalled 61 cents per share, an increase of  1 cent per share on the FY2011 dividend. To operate successfully within Australia’s  energy markets, it is critical that AGL  maintains a solid investment grade credit  rating. An investment grade rating allows  AGL to manage risk by entering into high  value wholesale energy contracts. It is also  important in securing access to long-term  debt on acceptable terms and conditions. AGL completed a $650 million hybrid  security issue and a $900 million equity  raising to fund the Loy Yang acquisition.  Standard & Poor’s (S&P) have reaffirmed  AGL’s long-term credit rating of BBB/stable.  AGL expects to maintain a BBB credit rating  based on the current capital structure and  capital expenditure likely to be incurred  in FY2013. Vision Target FY2012 Performance FY2012 Target FY2013 Ongoing profitability Industry  leading  earnings  profile based  on sustainable  business  practices. Underlying profit: $470-500  million Underlying profit: $482  million Total shareholder  return. Improvement in Solid returns  from AGL’s  existing and  new business  activities. Credit rating: BBB Credit rating: BBB Improvement in  return on funds  employed.