## Managing Director’s Report 

AGL posted a small increase in underlying profit to $431.1 million, in line with our revised earnings guidance which followed the severe weather events experienced in late January and early February. A heat wave in South Australia, Victoria and New South Wales meant that simultaneously high temperatures in Adelaide, Melbourne and Sydney created record levels of customer demand for electricity. This demand combined with the effects of the Queensland floods and Cyclone Yasi led to a period of high wholesale electricity prices, significantly increasing the costs to AGL of meeting customers’ demand for electricity. As a result, AGL informed the market that underlying profit for the year would be approximately $30 million to $35 million lower than had previously been anticipated. 

Overall, the underlying strength of the business was demonstrated by the continued improvement in our cash-flow, highlighting our disciplined approach to capital expenditure and the strength of our balance sheet. 

Effective engagement with our customers, our employees, and our local communities is crucial to our success. 

## New South Wales Retail Market 

AGL participated in the sale process for the New South Wales electricity assets, which included the Energy Australia, Country Energy, and Integral Energy retail businesses. After completing extensive due diligence, we concluded that the price we would have needed to pay to acquire one of the retail businesses would not have represented value for our shareholders. Instead, we have chosen to pursue a strategy of growing our electricity customer base organically. 

Early results have been very encouraging with around 100,000 new electricity customers already signed up since we launched our campaign urging New South Wales consumers to ‘Switch to AGL and Save’. This campaign aims to build awareness in New South Wales of the customer benefits that can be enjoyed and the savings that can be achieved by switching to AGL. 

AGL has also launched ‘AGL Energy Online’, to provide an easy and convenient way for consumers and businesses to sign up with AGL and to manage and pay their energy accounts online. The new online initiative is already proving to be very popular with many new and existing AGL customers. 

