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## Customer Service 

Providing excellent service to our customers is crucial, particularly in an environment where many households are experiencing substantial increases in their energy bills. Our customer service levels continued to improve during the year, although we still have more work to do to achieve the service levels to which we aspire. 

In 2010, we released our new Customer Charter which set out a number of promises to our customers. This year we have tracked our delivery of each of the promises set out in the Customer Charter. I am pleased to report that, for the most part, we have met or exceeded the service level targets we set for each promise. 

I am determined to continue improving the quality of the service we provide to our customers. This will be an important objective for AGL’s senior leaders over the coming year. 

## Our People 

The extraordinary weather which affected our business earlier this year had a much wider human impact, especially as a result of the floods in Queensland. During the crisis, a number of our people demonstrated their commitment to local communities by volunteering to help with relief operations. For example, Silver Springs field operator Janis Green volunteered with the local State Emergency Service, delivering food by boat to stranded farms and arranging helicopter assistance. 

AGL employees donated $24,757 to the relief effort. AGL matched this contribution on a dollar for dollar basis and also made two further donations of $50,000 each, one to The Salvation Army Queensland Flood Relief and another to the Queensland Premier’s Disaster Relief Appeal. 

Workplace health and safety is a matter of the utmost importance at AGL. Over the last four years, we have put a lot of effort into improving our workplace safety performance. We saw the benefits of this with substantial reductions in workplace injury rates between 2007 and 2010. Unfortunately, this year, we saw a partial reversal of that trend with our Total Injury Frequency Rate increasing from 2.7 to 5.0. Although most of the injuries were not serious, we are determined to continue making improvements in this area. All leaders have, as one of their performance objectives in FY2012, the completion of actions to make AGL a safer place to work. 

I would like to thank all our employees for their dedication and hard work during what was, at times, a difficult year for AGL. 

## Delivering on Our Strategic Objectives 

During the year, AGL continued to make good progress on achieving its strategic objectives. 

In South Australia, the AGL Hallett 4 Wind Farm was commissioned in May, and substantial progress was made on the construction of the AGL Hallett 5 Wind Farm. In Victoria, work commenced on both the Oaklands Hill Wind Farm and the Macarthur Wind Farm. The Macarthur Wind Farm is being developed with our joint venture partner from New Zealand, Meridian Energy. When completed in 2013, it will be the largest wind farm in the southern hemisphere with an energy capacity of 420 MW. Tower sections have recently arrived on site following months of preparatory work. 

We have also continued to identify future wind farm development opportunities, although we made the decision to temporarily suspend investments in new wind farms until there is a recovery in the price of renewable energy certificates. 

Our hydro generation assets have also operated efficiently during the year. Increased dam storage levels have largely restored generation capacity at the Dartmouth and Eildon power stations. These renewable energy facilities will play a more important role for AGL in the future than they have done in the recent past. 

Our Upstream Gas business continued work on proving up AGL’s own reserves of gas. During the year, the proved plus probable level of reserves increased by 32.4% from 1,578 petajoules to 2,089 petajoules. These reserves will play an important part in meeting AGL’s requirements for gas from the middle of the decade. 

Within the next few years, the existing gas pipeline infrastructure will need to be supplemented to deliver sufficient quantities of gas to the major east coast population centres during periods of peak demand. The ability to store gas for use in peak periods will become an increasingly important means of allowing AGL to meet its customers’ needs. It will also allow AGL to generate additional income from providing gas storage services to third parties. 

Among the assets gained as a consequence of AGL’s acquisition this year of Mosaic Oil N.L. was a depleted underground gas reservoir located in rural Queensland, which AGL has redeveloped as a gas storage facility. AGL has already contracted with the BG Group to provide gas storage services to support BG’s construction of an LNG production plant at Gladstone. As the potential of Queensland’s LNG industry is realised, the demand for storage capacity will grow, allowing AGL to expand the storage capacity at Silver Springs. 

## The Year Ahead 

Over the next year, we will seek to further expand our retail electricity customer base in New South Wales. We believe that high quality customer service will be a point of differentiation in the highly competitive Australian energy markets, so continuing to make improvements in this area is a priority. 

Planning is now well advanced to construct a 500 MW gas- fired electricity generation plant at Dalton, north of Canberra, which will support the expected growth in electricity load in New South Wales. In the near future, AGL is also likely to proceed with the development of a gas liquification and storage facility near Newcastle in New South Wales. This facility will be used to provide natural gas to AGL’s customers in Newcastle and Sydney and will provide additional security of supply during times of peak use, particularly in the winter months. 

AGL’s contracts to supply 100% renewable energy to both the South Australian and Victorian desalination plants will commence later this year. These are long-term contracts which will make an earnings contribution for many years to come, demonstrating the value from AGL’s commitment to the construction of renewable energy assets. 

We will continue looking to expand our gas reserves in areas such as the Hunter Valley and Gloucester in New South Wales. In doing so, we will be especially mindful of the need to work more closely with regional communities to demonstrate that our exploration and development activities can co-exist with agriculture, viticulture and tourism and will not harm the environment or compromise the health and wellbeing of local residents. 

Although 2011 was a challenging year in a number of respects, we are very optimistic about AGL’s future prospects. We are confident that shareholders will enjoy the benefit of profitable growth in the year ahead. 

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