Page 23 - AGL Sustainability Report 2011

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Economic
Sustainability Performance Report 2011 21
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 decreased at the FY2011 result
due to reduced earnings from extreme weather events at the
beginning of the calendar year. An improvement on the FY2011
result is being targeted for FY2012.
Capital management and expenditure
Focus on capital management and operating cash flow has enabled
AGL to further strengthen its 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 FY2012 of almost $1.0 billion.
AGL maintains flexibility to accelerate or defer capital expenditure
on its projects depending on market conditions.
Sustainable growth
EBIT to Funds Employed and EBIT
to Funds Employed Adjusted
Capital projects expenditure
Legend
EBIT to Funds Employed Adjusted
EBIT to Funds Employed
Legend
Stay in business
Upstream Gas
Oaklands Hill Wind Farm
Hallett 5 Wind Farm
Macarthur Wind Farm
Retail
Other
Dalton/Newcastle Gas
Storage Facility
8.9%
9.4%
11.3%
10.4%
%
11.0%
10.5%
9.7%
8
10
12
FY11
FY10
FY09
FY08
1,000
800
600
400
200
0
$ million