Page 17 - AGL Sustainability Report 2011

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Economic
Sustainability Performance Report 2011 15
AGL’s goal is to deliver superior growth in total shareholder returns
and enhance the quality of earnings through sound risk management
and diversifcation 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 the proposed carbon price will also 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
1
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.
Note
1 Underlying proft refects the actual performance of AGL’s business by adjusting
statutory proft (reported in accordance with Australian Accounting Standards) by
fair value movements and one-off signifcant items.
Introduction
Economic
Economic
Ongoing profitability
Optimisation
of electricity
generation
portfolio
Optimisation
of upstream
gas portfolio
Efficiency
of retail
business
Disciplined
approach to
growth
Economic risk
management
Economic
contribution to
the community
Sustainable growth
Vision
Target FY2011
Performance FY2011
Target FY2012
Ongoing profitability
Industry-leading
earnings profile based
on sustainable business
practices.
Underlying profit:
$450-480
million
Underlying profit:
$431.1
million
Underlying profit:
$470-500
million
Sustainable growth
Solid credit rating
reflecting underlying
cash-flow potential.
Credit rating:
BBB
Credit rating:
BBB
Credit rating:
BBB