AGL E
    Energy Limited
           Li it d

Renewable energy:
Policies set for growth
Michael Fraser, Managing Director a...
2

Disclaimer
The information in this presentation:


      › Is not an offer or recommendation to purchase or subscribe f...
3

Agenda
 g

   ›   S&P revised treatment


   ›   Drivers of renewable energy globally


   ›   Domestic policy settings...
4

S& e ses t eat e t o
S&P revises treatment of wind farm PPAs1
                            d a       s
Significant enhan...
5

Debt Capacity
 ebt Capac ty
AGL has significant headroom to fund organic growth.



                                   ...
6

Renewables: A global growth story
 e e ab es    g oba g o t sto y
Majority of newly installed capacity globally was ren...
7
Renewables: A global growth story
Wind and Hydro the primary renewable energy sources.




                             ...
8
Technology cost curve
Wind currently has a substantial cost advantage.
               350
                              ...
9
REC prices reflect policy uncertainty
Penalty raised to reflect rising cost of renewable projects.
  $/REC
      $100


...
10
Impact of Renewable Policy Setting
Fundamental changes required to generation mix.

                                   ...
11

Renewable Energy Certificate (REC) obligations
 e e ab e   e gy Ce t cate ( C) ob gat o s
Regulatory framework necessa...
12

Australia has a world class wind resource
 ust a a as      o d c ass     d esou ce

Average wind speeds (metres per se...
13

Wind farms: Success factors
   d a s             acto s

A number of critical issues can mean success or failure of a ...
14

Wind farms: Cost profile
   d a s         p o e
Significant local content built into cost structure.



              ...
15

Wind resource drives turbine selection
   d esou ce d es tu b e se ect o
                                             ...
16

Wind project diversity improves reliability
   d p oject d e s ty    p o es e ab ty
Geographical diversity enhances th...
17

AGL p ojects de e g high capacity factors
 G projects delivering g capac ty acto s
Operational performance exceeds inv...
18

St o g g o t p pe e
Strong growth pipeline
Provides strategic depth and optionality.
                              Pro...
19

Upst ea
Upstream Gas – Positioning For Growth
                os t o   g o G o t
Exploration program slowed in line wi...
20

NSW electricity privatisation
 S e ect c ty p at sat o
Disciplined bidding approach if process proceeds.




   › NSW ...
21

Su
Summary
    a y



          ›    Significant progress with renewable policies
                »   Legislation sche...
22

Further Information / Contacts
 u t e     o at o     Co tacts


A range of information on AGL Energy Limited including...
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Macquarie Conference - Keynote presentation by Michael Fraser

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Macquarie Conference - Keynote presentation by Michael Fraser, Managing Director and Chief Executive Officer, AGL Energy Limited. May 2010.

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Macquarie Conference - Keynote presentation by Michael Fraser

  1. 1. AGL E Energy Limited Li it d Renewable energy: Policies set for growth Michael Fraser, Managing Director and CEO Mi h l F M i Di t d Macquarie Conference - Sydney 5 May 2010 AGL External
  2. 2. 2 Disclaimer The information in this presentation: › Is not an offer or recommendation to purchase or subscribe for securities in AGL Energy Limited or to retain any securities currently held. › Does not take into account the potential and current individual investment objectives or the financial situation of investors. › W prepared with d Was d ith due care and attention and is current at the d tt ti di t t th date of the presentation. › Actual results may materially vary from any forecasts (where applicable) i thi presentation. li bl ) in this t ti › Before making or varying any investment in securities in AGL Energy Limited, all investors should consider the appropriateness of that investment in light of their indi id al investment objecti es in estment thei individual in estment objectives and financial situation and should seek their own independent professional advice. Macquarie Conference - Sydney 5 May 2010 AGL External
  3. 3. 3 Agenda g › S&P revised treatment › Drivers of renewable energy globally › Domestic policy settings › AGL’s Wind strategy › Upstream Gas – Creating value › NSW Electricity Privatisation › Summary Macquarie Conference - Sydney 5 May 2010 AGL External
  4. 4. 4 S& e ses t eat e t o S&P revises treatment of wind farm PPAs1 d a s Significant enhancement in capital efficiency. › S&P spent considerable time understanding risks associated with PPAs › 50% reduction in the notional capital to be applied to PPAs p pp › AGL’s balance sheet capacity immediately improved by ~$360 million › Maintaining BBB rating is important for business purposes › Increases capacity to around $900 million › Improved capital efficiency substantially enhances AGL’s ability to fund future growth 1. Power Purchase Agreements Macquarie Conference - Sydney 5 May 2010 AGL External
  5. 5. 5 Debt Capacity ebt Capac ty AGL has significant headroom to fund organic growth. LEGEND S&P 100%Weight S&P 50% Adjust. Closing FY10 Debt Operating cash flow after dividends $ million Capex Headroom Macquarie Conference - Sydney 5 May 2010 AGL External
  6. 6. 6 Renewables: A global growth story e e ab es g oba g o t sto y Majority of newly installed capacity globally was renewable. $US b 2008 bn Source: N S New Energy Finance ( 2009) E Fi 52 110 Wind Wi d 88 Other Renewable Fossil Fuel Generation Macquarie Conference - Sydney 5 May 2010 AGL External
  7. 7. 7 Renewables: A global growth story Wind and Hydro the primary renewable energy sources. Source: International Energy Agency (2009) Macquarie Conference - Sydney 5 May 2010 AGL External
  8. 8. 8 Technology cost curve Wind currently has a substantial cost advantage. 350 » Source: ACIL Tasman AGL Roam, MMA Tasman, AGL, Roam 300 250 /MWh) 200 LRMC ($/ 150 100 50 0 Brown Coal Black Coal CCGT OCGT Wind Solar PV Wave Solar thermal Macquarie Conference - Sydney 5 May 2010 AGL External
  9. 9. 9 REC prices reflect policy uncertainty Penalty raised to reflect rising cost of renewable projects. $/REC $100 $90 $80 $70 Expanded MRET announced SHW & PV increases REC Bank $60 $50 $40 $30 $20 Drought impacting Hydros LRET reform announced $10 $0 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Macquarie Conference - Sydney 5 May 2010 AGL External
  10. 10. 10 Impact of Renewable Policy Setting Fundamental changes required to generation mix. New Build Generation Mix Years of Forecast - 2010 to 2020 Coal Plant CCGT Base Plant OCGT Peak Plant Renewable Plant 20000 18000 Capaci required (MW) 16000 14000 Renewables dominate 9,500MW 9 500MW 12000 1,200MW 10000 ity 8000 4,500MW Delay to CPRS reduces 6000 5,500MW the demand for CCGT as coal-fired generation 4000 remains in service 5,500MW 2000 2,800MW 2 800MW 0 Original 2006 forecast Current 2010 forecast (ETS, 2% MRET) (ETS, 20% Expanded RET) Source: AGL Greenhouse modeling Macquarie Conference - Sydney 5 May 2010 AGL External
  11. 11. 11 Renewable Energy Certificate (REC) obligations e e ab e e gy Ce t cate ( C) ob gat o s Regulatory framework necessary to facilitate investment. › Macarthur (365MW) conditional commitment › Federal legislation requires AGL to surrender approximately 9 million RECs per annum by 2020 › Strong pipeline of development opportunities › Proven capability in site selection, project development and performance 1. Excludes long-term supply agreements and Voluntary REC demands. Macquarie Conference - Sydney 5 May 2010 AGL External
  12. 12. 12 Australia has a world class wind resource ust a a as o d c ass d esou ce Average wind speeds (metres per second) › Wind resource is best in d b Tasmania and areas in Western Australia, South Australia and Victoria › NSW, Queensland and the Northern Territory have limited large scale wind potential › The best wind sites have already been taken >8 6-8 4-6 <4 Source: CSIRO Macquarie Conference - Sydney 5 May 2010 AGL External
  13. 13. 13 Wind farms: Success factors d a s acto s A number of critical issues can mean success or failure of a wind farm development: › Wind resource › Land access (support by landowners) ( pp y ) › Capital cost › Connection access: (cost, loss factor, grid capacity) ( , ,g p y) › Wind farm scale (to absorb certain fixed cost) › O&M costs (typically only around 2% of capital cost per year) Macquarie Conference - Sydney 5 May 2010 AGL External
  14. 14. 14 Wind farms: Cost profile d a s p o e Significant local content built into cost structure. Total Capital Cost EPC Cost 2% 2% 2% % % % 2% 4% 6% 10% 12% 90% 55% 15% Pre Development Wind Turbine Generator EPC Cost Electrical (inc Switchyard) Balance of Plant Transport p Project Management Tower Civil Contingency Engineering Macquarie Conference - Sydney 5 May 2010 AGL External
  15. 15. 15 Wind resource drives turbine selection d esou ce d es tu b e se ect o Location of Hallett 1 turbines & wind speeds › Wind speed generally increases with height › Wake effects reduce yield and drives turbine spacing › Hallett Wind Farm stages 1, 2 and 4 are classic wind farm sites with prevailing winds perpendicular to ridge Wind Rose for Hallett 1 N Macquarie Conference - Sydney 5 May 2010 AGL External
  16. 16. 16 Wind project diversity improves reliability d p oject d e s ty p o es e ab ty Geographical diversity enhances the level of ’firm’ generation. Wattle Point Hallett 1 Pool Pric e 100 $10,000 90 $/MWh) 80 MW) $1,000 70 Wind generation (M Regional pool price ($ 60 50 $100 40 g l 30 $10 20 10 0 $1 Sun 06 Mon 07 Tue 08 Wed 09 Thu 10 Fri 11 Half hour time increments (6-12 April 2008) Macquarie Conference - Sydney 5 May 2010 AGL External
  17. 17. 17 AGL p ojects de e g high capacity factors G projects delivering g capac ty acto s Operational performance exceeds investment assumptions. 1 Macquarie Conference - Sydney 5 May 2010 AGL External
  18. 18. 18 St o g g o t p pe e Strong growth pipeline Provides strategic depth and optionality. Project Nominal Capacity (MW) Location Type Project Status Definition Bogong 140 Victorian Alps Hydro Commissioned Completed McKay Creek Up Rate 10 Victorian Alps Hydro Commissioned Completed Hallett 2 71 SA - Hallett Wind Commissioned Completed Hallett H ll tt 4 132 SA - H ll tt Hallett Wind Wi d Under C U d Construction t ti Committed C itt d NERATION Werribee Expansion 2 VIC - Werribee Biogas Under Construction Committed Oaklands Hill 67 VIC - West Wind Under Construction Committed Hallett 5 52 SA – Hallett Wind Under Construction Committed WABLE GEN In Development, JV with Conditional Macarthur 365 VIC - West Wind Meridian Commitment Barn Hill 130 SA - Redhill Wind DA Approved Probable Hallett 3 80 SA - Hallett Wind In Development Possible RENEW Crows Nest 150 QLD - Toowoomba Wind Permitted Possible Landowner Agreements in Ben Lomond 150 NSW - Armidale Wind Possible Place Landowner Agreements in g Coopers Gap 300 QLD - Kingaroy Wind Possible Place Other 3 Projects totalling up to 600 Various Various Under Review Possible Macquarie Conference - Sydney 5 May 2010 AGL External
  19. 19. 19 Upst ea Upstream Gas – Positioning For Growth os t o g o G o t Exploration program slowed in line with current gas market conditions. › Targeting 2,000PJ of certified 2P reserves 2 000PJ › 2P reserves entitlement up 18% (201PJ); 3P reserves entitlement up 36% (839PJ) › Camden reflects production depletion only; reserves certification at Camden and Gloucester is planned for the end of financial y p year AGL share of CSG reserves As at 31 Dec 09 As at 30 Jun 09 Change PJ 2P 3P 2P 3P 2P 3P Moranbah (50%) 506 1,027 497 1,079 2% -5% Gloucester (100%) 423 630 423 630 - - Camden (100%) 126 170 129 173 -2% -2% Spring Gully (various, small) 7 9 7 9 - - Sub-Total 1,062 1,836 1,056 1,891 1% -3% ATP 364P back-in rights (50%)* 246 1,307 51 413 382% 216% Total 1,308 3,143 1,107 2,304 18% 36% * Under a 50-year project agreement that commenced in 2000, AGL has no effective exploration rights (or ongoing cost obligations) within exploration tenement ATP 364P as these were assigned to Arrow Energy Limited. However, AGL is entitled to participate up to a 50% interest in any commercial development by contributing its share of past costs. Past costs are anticipated to be less than $0.05/GJ. Macquarie Conference - Sydney 5 May 2010 AGL External
  20. 20. 20 NSW electricity privatisation S e ect c ty p at sat o Disciplined bidding approach if process proceeds. › NSW Government still working toward opening data rooms mid-year › AGL previously stated will look at all assets › Opportunity to scale up › Only bid for assets if accretive to EPS › Maintain BBB credit rating › Any capital raising to favour existing shareholders Macquarie Conference - Sydney 5 May 2010 AGL External
  21. 21. 21 Su Summary a y › Significant progress with renewable policies » Legislation scheduled for May/June 2010 g y/ » Requires up to $30 billion of investment › Delay to CPRS will impact future generation mix › AGL’s renewable portfolio strategically well-positioned » First-mover advantage with large portfolio of sites › Capacity to leverage balance sheet » S&P revision frees additional capacity Macquarie Conference - Sydney 5 May 2010 AGL External
  22. 22. 22 Further Information / Contacts u t e o at o Co tacts A range of information on AGL Energy Limited including ASX & Media Releases, Presentations, Financial Results, Annual Reports and Sustainability Reports is available from our website: www.agl.com.au Alternatively, contact: INSTITUTIONAL INVESTORS S U O S O S & ANALYSTS RETAIL INVESTORS & MEDIA John Hobson Nathan Vass Head of Investor Relations Investor Relations & Media AGL Energy Limited AGL Energy Limited phone: +61 2 9921 2789 phone: +61 2 9921 2264 Mobile: +61 (0) 488 002 460 mobile: +61 (0) 405 040 133 e-mail: john.hobson@agl.com.au e-mail: nvass@agl.com.au Macquarie Conference - Sydney 5 May 2010 AGL External

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