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AGL’s underlying profit increased by 11.8% to $482.0 million. Our core Retail and Merchant businesses both performed well and enjoyed strong growth in earnings. This was partially offset by lower earnings contributions from our Upstream Gas business and from our historical investment in the Loy Yang A power station. 

## Our Customers 

Our customers are the linchpin of our business. They provide the demand for the energy products and services that are the foundation for the investments we make in assets such as power stations, gas storage facilities and gas exploration and production assets. For AGL to continue growing into the future, it is important that we grow and maintain our customer base, and that we are able to offer our customers a broad range of energy products and services at competitive prices. Most importantly, we need to make sure we provide our customers with excellent service. 

I am pleased to report that we made good progress during the year on all these fronts. 

In total, we increased the number of AGL customers by approximately 180,000. Especially pleasing was the continued success of our campaign to grow the number of customers in New South Wales where we added 152,000 new electricity customers. 

We also increased the number of “dual fuel” customer accounts. These are customers who buy both gas and electricity from AGL. We now have approximately 1.62 million such customer accounts, an increase of more than 10% over the year. 

The purchase of 100 percent of the Loy Yang A power station and mine this year will provide AGL with strategic benefits and underpin growth. It will ensure a continued reliable and safe supply of energy to our customers while also being a good outcome for our shareholders. 

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Late last year, we established AGL Energy Online, our online service designed to allow customers to manage their account with us. It also provides an opportunity to reduce the number of paper bills we send out. AGL Energy Online has been very successful this year. More than 300,000 households are now registered with AGL through AGL Energy Online. 

In October, we launched two new online services, the AGL Smarter Living Centre and AGL Smarter Living Store, to provide advice about efficient energy usage to all energy consumers and to promote the energy efficiency products and services that AGL can offer its customers. 

The energy industry experiences high levels of competition. Attracting and retaining customers is costly. Although AGL’s rate of customer churn continues to be materially lower than the industry average, we have been considering a number of options to encourage even higher levels of customer loyalty. 

In April, we became a partner in the flybuys program. flybuys  is an Australia-wide customer loyalty program which rewards customers for continuing to buy goods and services from any of the flybuys  partners. AGL is the only energy retailer able to offer customers the ability to participate in a loyalty program of this scale. Almost 200,000 of our customers now have their accounts linked to the flybuys  program. 

During the year, we re-designed the way our Customer Service Centres handle calls from our customers. As a result, the average time taken to respond to enquiries from our customers has been substantially reduced. The quality of our responses has also improved with more customers having their enquiry fully resolved on the first call. 

## Delivering on strategic objectives 

AGL made further progress during the year toward achieving its strategic objectives. 

In June 2012, we increased our ownership interest in the Loy Yang A power station and adjacent coal mine, from 32.54% to 100%. 

Loy Yang is Victoria’s largest power station, producing approximately 30% of the State’s electricity requirement. It is one of the lowest cost generators in the National Electricity Market. 

Loy Yang increases AGL’s owned or controlled generation capacity to 6,000 MW. The additional scale and portfolio diversification it provides will improve AGL’s ability to manage the wholesale cost of electricity. The adjacent coal mine means that fuel supply costs are substantially locked in for the remainder of the power station’s operating life. Loy Yang’s low fuel costs and high levels of operating reliability should allow it to produce substantial operating cash flows in the years ahead. 

Loy Yang provides employment for approximately 550 people and up to 500 on-site contractors. I extend a warm welcome to AGL to all of them. 

In the year ahead, we will be working hard to make sure the Loy Yang assets, and the Loy Yang employees, are effectively brought into the AGL portfolio. This was a major investment for AGL, so we need to make sure it operates safely and profitably to give our shareholders a satisfactory rate of return. 

The acquisition of a coal-fired base load generator does not alter AGL’s position as Australia’s largest private developer, owner and operator of renewable energy assets. Much of our future investment program will be in constructing additional renewable generation assets. We have also made 

