Earnings Call: H2 2021

Aug 13, 2021

Thank you for standing by, and welcome to the AGL Energy Full Year Results 20 21 Investor Briefing Call. All participants are in a listen only mode. If you would like to ask a question following the presentation, please ensure you have pre registered via the webcast link. I would now like to hand over the conference to our CEO, Mr. Graeme Hunt. Go ahead, Graeme. Good morning, everybody. Graham Hunt speaking. Thank you for joining us for the webcast of AGL's full year I would like to begin by acknowledging the traditional custodians of this land where I am presenting from you today and pay my respects to their elders past, present and future. I I'd also like to acknowledge the traditional owners of the various lands from which you are all joining from and any people of Aboriginal and Torres Strait Islander origin on the webcast. Today, I'm joined by Damien Nix, our CFO Christine Corbett, Chief Customer Officer and Marcus Brokhoof, our Chief Operating Officer. I'll get us started before handing over to the team, and we will have time for questions at the end. Financial year 2021 was one of the toughest energy markets have seen. Wholesale electricity prices were at levels not Since 2012, while demand was impacted by lockdowns, mild weather and increasing penetration from rooftop solar. In gas, we had older legacy gas supply contracts rolling off and new contracting at more contemporary pricing. These dynamics have all impacted our FY 'twenty one financial results. Underlying EBITDA of 1.66 $1,000,000,000 was down 18%, while underlying NPAT of $537,000,000 was down 34%, reflecting the additional impact of higher depreciation expense as forecast. Our statutory result was impacted Largely as already announced by the charges associated with onerous contracts, rehabilitation provision increase, Crib Point cessation, Impairments and Integration and Separation Costs. The total dividend for the 2021 year was $0.75 This comprised $0.65 of ordinary dividend and $0.10 of special dividend in the first half. The special dividend program has now been terminated. However, AGL Energy expects to continue to pay dividends equal to 75% of underlying net profit after tax, unfranked and 100% underwritten for the final 2021 and interim 2022 dividends. While conditions have been challenging, AGL Energy has continued to deliver on its strategy. Customer service growth remains strong. We added 254,000 new services over the year through the Click acquisition and solid organic growth, maintaining our status as Australia's largest energy led multi product retailer. It is still very early days for the AGL Energy Telecommunications products, but we are seeing steady growth and the anticipated benefits to customer loyalty, multi product growth and tenure are coming to fruition. During the year, we completed a number of important acquisitions. Christine will cover the Click acquisition in more detail. The TILT acquisition via Power completed last week is a strategic JV providing a future option to leverage the expected demand for our EVs, residential batteries and demand management, while allowing customers to be active participants in the energy transition and reducing their own emissions. We remain on track to deliver on our plans for at least 8 50 Megawatts of grid scale batteries With FID reached on the Torrens Island Battery and further progress on the Liddell and Loy Yang batteries. In recognition of the important role AGL will play in the energy transition, we have proactively supported on climate movement by committing to provide shareholders with an opportunity to vote on our climate reporting at the AGMs relating to the 2022 Financial Year. Our guidance for the financial year 2022 for underlying EBITDA is $1,200,000,000 to $1,400,000,000 and for the underlying net profit after tax $220,000,000 to $340,000,000 These ranges reflect a further material step down in wholesale electricity earnings As hedging positions established when wholesale prices were materially higher, progressively roll off and the non recurrence of Loy Yang Insurance proceeds. That said, the outlook for FY 'twenty two and beyond will be impacted by wholesale electricity markets, and I'll talk more about what we are seeing there shortly. On June 30, we announced our proposal for AGL Energy to become Acel Energy and the demerger of AGL Australia. This is a complex transaction towards which we have made good progress and subject to shareholder and relevant approvals, we remain committed to Final completion in the Q4 of FY 'twenty two. The related debt financing process is progressing Well, and today, we have announced further management team appointments with more to come in due course. We are confident that this Proposed demerger will create 2 new entities with clarity of purpose and strong foundations, positioning them well to lead the energy transition, while protecting and delivering value to shareholders. Moving now to our 3 core operational areas, safety, customer experience and employee engagement. The total injury frequency Per million man hours worked decreased markedly to 2.3 for employees and contractors combined for the year. That's a material improvement on FY 'nineteen 'twenty, reflecting our strong focus on safety culture from the top down. We will continue to do more to keep improving our safety culture and practices while running our plants responsibly. We added 254,000 customer services over the year, which includes 198,000 click customers. In addition, we have delivered a further improvement in the Net Promoter Score, demonstrating customer loyalty and the improvement in our customer experience. Our employee engagement measure unfortunately has fallen 11 percentage points from FY 2020. This result was understandable given the challenges in energy markets currently and the uncertainty arising from the planned demerger. We are working to address employee engagement through strong internal communication and the establishment of the new organization structures as soon as possible. This slide shows a further summary of our financial results, which Damien will cover in more detail. Whilst these results are very disappointing, they are not inconsistent with the circumstances and challenging challenges the business has been facing. That said, we have an accountability to focus on positioning the business to be more robust in the face of such challenges going forward. Now let's take a look a more detailed look at the electricity market conditions. On the left, you can see the challenging forward In April, wholesale electricity prices improved and this became more pronounced in late May June due to the Callied and Yallourn incidents. This price improvement has been driven not only by the un Plant outages, which were previously deferred due to COVID-nineteen. Pleasingly, the dotted line indicates that Markets expect the recovery to be sustained into FY 'twenty three. On the demand side, we have seen a small through May June due to an early cold winter and a brief period of limited COVID-nineteen restrictions across Australia, Bringing with it a return in business and industrial demand. Looking ahead, we expect demand to around with intermittent lockdowns in the milder spring months. Over the short term, as Marcus will cover in more detail, Our hedge position will limit potential upside from recovery in wholesale prices. Longer term, however, Our low cost generation position will give us a relative strength amongst existing market generators, making AGL well positioned to benefit From any sustained recovery in wholesale electricity prices. Today, I am pleased to announce 2 further executives identified for the new entities: Marcus Prokof for Axcel Energy as Deputy Chief Executive Officer and Chief Operating Officer And Damian Nicks for AGL Australia as Chief Financial Officer. Marcus and Damian both have extensive industry experience and proven leadership strategic execution skills, which will be invaluable within both organizations. While the new demerger entities will be smaller organizations, These executives will have broader remits and responsibilities. These appointments will take effect upon the proposed demerger. Since our June 30 demerger proposal announcement, we have made good progress. We have Commenced with the internal separation of our IT systems and some corporate and operational divisions. The transitional services agreement is Together, which will provide a governance framework for work conducted between the entities. As we make progress on the corporate Structures for the new entities, we will have greater clarity on the expected cost basis, and I can confirm that on top of fully offsetting the cost duplication created by the demerger, both Axcel and AGL Australia are working to identify further cost efficiencies. We continue to progress the finalization of the capital structures and funding for both new entities, and we expect to provide the next update on on our demerger progress at our AGM next month. I'll now hand to Christine to take you through our customer markets result in more detail. Thank you, Graeme, and good morning, everyone. As Graeme has discussed, market conditions in FY 2021 have continued to be challenging. However, our strong customer focus has been unwavering, and this is reflected in our continued positive At the same time, we have improved the fundamentals of our business, Significantly lowered operating costs, improved the customer experience and extended our product offering. Our performance in FY 'twenty one has been underscored by continued customer growth, the execution of our energy led multiproduct retailing strategy and a focus on underlying cost efficiencies. I'm pleased to report that underlying EBITDA was $337,000,000 up 16%, reflective of higher gross margin and lower operating costs. Our investment in digital transformation in prior years, together with a continued focus on efficiencies, helped absorb the increased operating costs associated with acquisitions and new products. The increase in gross margin was driven primarily by Higher consumer gas gross margin and solid gross margin contribution from Click Energy. This was partially offset by a decrease in consumer electricity gross margin due to customers switching to lower priced products. Capital expenditure increased as a result of investments to support the launch of AGL Telecommunications, offset by a decrease in software as a service development costs. As I mentioned at our half year results, regulatory intervention, Customer behavior and high levels of competition have resulted in electricity margin compression in recent years, most prominently in Victoria. However, we expect to see retail energy margins settle to more sustainable levels in the short to medium term. In FY 'twenty two, we will continue to focus on organic growth and scaling our AGL telecommunications offerings To our energy customers, we will further improve the customer experience, while at the same time drive greater reductions in our cost base as the business further digitalized. And in the Commercial and Industrial segment, we will continue to expand our position as a leading provider of Commercial Energy Solutions. Our customer book continues to grow in size and strength. Our strategic Net Promoter Score again reached new highs in FY 'twenty one. AGL now provides over 4,200,000 services to customers and $4,500,000 if you include the Actu AGL services. This number has increased by 500,000 services over the past 3 years, driven by a combination of strong organic growth and key strategic acquisitions. Offering our customers more targeted This has been a key priority in our multiproduct strategy. As customers become increasingly connected, we want to be at the forefront of that transition and as such have expanded our services in telecommunications, which has seen robust uptake in the last few months. During the period, we also launched a carbon neutral offering across all AGL products. We've seen solid take up of Carbon Neutral Energy with good growth occurring in the second half of FY 'twenty one. And we are now providing Carbon neutral to all new and existing telecommunications services at no extra cost. Pleasingly, Against the backdrop of a highly competitive market, we have maintained low levels of churn with a slight improvement in our spread to the rest of the market. Finally, our underlying net operating cost per customer service continued to fall, driven by our investment in systems and our ongoing focus on simplification and digitization. This is a result of a significant reduction in manual back office operations and call center volumes, which are 36% lower than in FY 2018. At the same time, We have driven a 48% reduction in Ombudsman complaints and realized significant Our 4 key acquisitions has built strength and capability as we drive our multiproduct retailer ambitions. The acquisition of Southern Phone Company in December 2019 has provided a launchpad for our AGL Telecommunication offerings, which we launched earlier this year. Initial take up of the offerings has been strong. And pleasingly, more than 98% of AGL Building on our strong energy customer services growth in FY 'twenty and have successfully migrated More than 200,000 customers to AGL Systems in the last 6 months. Our retention rate of these customers was greater than And we are now realizing cost to serve savings as a result of systems and operational synergies. We have integrated on the move with our Moving services business, Connect Now, giving us an even stronger competitive position in the movers market. The acquisitions of EVO and Solgen complement and bolster our existing solar capabilities, enabling AGL Energy to deliver more tailored and innovative energy solutions for businesses. Since acquisition, both businesses have continued to win key projects With the addition of more than 38 megawatts of new commercial solar sales, we are now Australia's largest supplier of commercial solar With the systems and technology in place to deliver more than 70 megawatts of commercial solar each year. As we integrate these new acquisitions, we continue to focus on maintaining our leading technology position. Our phased investment approach We'll keep driving value today while providing real options for tomorrow. The short term horizon will use proven technology to help scale our multi product proposition while delivering further cost efficiencies over coming years. It will focus on updating the middle layer of our technology stack, such as our customer relationship management systems, making it easier for our agents to find solutions for our customers. The next horizon is centered on bringing world class technology and innovation to Australia through our partnership with OVO Energy, one of the U. K. Leading independent energy retailers. OVO's customer platform, Khuluza, provides strong optionality on future deployment on an intelligent low cost to serve core platform and presents an exciting opportunity to engage And now over to Markus. Thanks, Christine, and good morning, everyone. I will provide an overview of our integrated energy results, which covers our trading, origination and operation business areas. As you can see, this year It has been an exceptional challenging year. Gross margin and EBITDA have both foreign And capital and operating expenditure have both arisen. There are a few reasons for this. Overall, the market The confluence of outages in the EGL portfolio left us in a challenging position. This price rise may not be sustained. We have seen some margin compression With legacy gas supply contracts rolling off, while we have been successful in recontracting in the short to midterm, recent Contract prices are higher than AGL's legacy contract. COVID-nineteen has continued To have an impact both indirectly through suppressed industrial demand and directly through costs associated with ensuring that COVID-nineteen is appropriately managed on-site. Year on year, the impact of COVID-nineteen on OpEx has slightly reduced, dollars 18,000,000 In FY 2020, dollars 15,000,000 in FY 2021. In addition, the change Relative to last year is that due to the remaining term of Liddell, you will see $17,000,000 of costs Associated with Lidel flowing through OpEx rather than CapEx. As I look to the year ahead, it is clear that Capital and operational expenditure must be a focus for us. The environment requires disciplined and prudent spend. We have initiatives identified and are already underway in delivering against the FY 'twenty two reduction of $60,000,000 of OpEx and $100,000,000 of CapEx in Integrated Energy. Our OpEx reduction initiatives are targeting procurement and service contract, insourcing, Maintenance savings, reprioritizing work to reduce overtime and gaining operational efficiency. Gross capital has been reviewed and minimized on the back of lower wholesale electricity prices With the midlife refit of base water and Torrance battery comprising the major items Remaining in the FY 'twenty two budget. In addition, with our outages, We have challenged scope of work, timing and contractor cost in order to reduce This spend reduction will not be at the cost of a focus on health, safety and environment. We will be promoting continuous improvement in this space and taking on the learnings from our December incident at Niedel. I'm proud of our reduction in the total injury frequency rate. We need to progress this even further. It's a focus on making a difference in the reduction of incidents That could result in serious injuries. Another key pillar for the trading team is managing price volatility. We must match our hedging ratio to an appropriate level given our fleet availability and reliability. I will talk more on this in a minute. AGL has made good Progress this year in developing and advancing its asset development pipeline. This page illustrates how we are adding more capacity into our portfolio and exploring opportunities to add new low carbon developments To transition our thermal site, such as transforming Liddell to an integrated industrial energy hub. As we have previously disclosed, the Hub at Lydell is expected to include projects such as the waste to energy site, A grid scale battery, electrothermal solar storage with PV, pumped hydro and a wind farm is the first set of The integrated industrial energy hub is a key element in the transition for AGL with Or without the proposed demerger. The hubs will use our existing land, connection and skilled labor Advantages to create a sustainable future for the regions in which we operate. A broad partnering scheme will mean But this is not a capital intensive strategy for AGL. 2 more mature projects, The Silverton and Cooper's Gap Wind Farms have made substantial progress with Silverton achieving practical completion, While Cooper's Gap is in the final stage of testing to enable full capacity generation by end of the calendar year. As some of Australia's largest wind farms, we are proud to have this in our portfolio via our shareholding in Poa. Koopa's GAAP also played an important role in the portfolio During recent volatility in Queensland after the incident at Carlisle. As we announced earlier in the year, we have taken an investment decision on the 2 In addition, with our proposed battery development at Loyang, Brotonhill and Liddell progressing through approval stages, there has been good progress in moving to our goal and manage 8 50 Megawatts of grid scale batteries by FY 'twenty four. As you can see on this slide, the increasing penetration of new renewable generation in the NEM effect on the volatility in the market. While providing generation near 0 marginal The intermittent nature of renewables can contribute to some of the spikes of price volatility you see highlighted in This increasing penetration of renewables will no doubt change the nature and requirements of On the other hand, until long duration storage capacity is available at an appropriate scale and cost, The market volatility affirms the need for sustained investment in an aging thermal fleet To ensure stability of the networks. The rapid removal of a thermal unit It's one of the drivers in recent market volatility you can see in the chart, following the car light incident in May Hence Lille incident in December. Complementary to the thermal fleet, Investment and growth in new forms of storage can provide stability. Batteries are the most Well established example of this and one that EGL is committed to growing and introducing into its portfolio. While this volatility remains in market, sophisticated risk management and trading excellence are key. And I will talk about our hedging approach in more detail shortly. As I highlighted on the previous page, sustained investment in the aging thermal fleet is important for the ongoing supply It is changing, and our spend must be focused and prudent. There's no longer the demand for these plants to operate As baseload is high technical availability throughout the entire term. The market needs thermal plans to provide stability and flexible services to manage the intermittency of other forms of generation. To meet this need, AGL is focusing its investment on ensuring safe, reliable operations that maximize commercial availability. Commercial availability factor measures Whether the plants are available to run when pricing is higher than their short run marginal costs. This means The plants don't need to be available all the time, and we can optimize maintenance schedules and costs. The second half of the year, in particular, has demonstrated a force set. 3rd quarter prices of FY 'twenty one has been subdued due to lower temperature and higher availability of baseload generation. In contrast, In the Q4, lower availability of base load generation, including our units at Base Water and Zidell, combined with some cold spells, have caused higher prices in May June. Success in this strategy We'll see the commercial availability factor line and the corresponding regional reference Price bar follows similar trajectories. Put simply, higher availability and reliability And demand is elevated and more generation is required in the system. And then conversely, The ability to lower output and conduct maintenance when the generation is not required. There are a few ways to achieve this that we have already put into action. As some examples, we have lowered the minimum generation levels at base water To reduce out of the money run period, we are also developing digital twins at both Bayswater and Loy Yang We continue to assess options to further advance our commercial availability, And we'll be implementing this throughout FY 'twenty two. Noting volatility in the market and pricing impacts of increasing renewables penetration, hedging and prudent risk management is vitally AGL's hedging strategy has mitigated downside throughout the years by capturing prices And the curve was higher than it is today. Nevertheless, hedging levels have come down in a falling market, Which has been reflected in our results. Hedging must adapt to the aging fleet And manage the reliability and availability of risk that comes with the older plan, particularly in periods of low wholesale market prices. AGL is adapting In FY 'twenty one, IGL was slightly oversold in its position Due to a confluence of planned and unplanned outages, resulting in buying from the pool, particularly in the Q4 of the year. The gas book is also an important source of value for AGL. Our proposed Crib Point Gas import Project not receiving approval was disappointing, especially given the recent events have demonstrated the that projects like Crib Point would have had for the Victorian gas market. Nevertheless, Our gas strategy was never reliant only on Crib Point as a supply source. Our gas book is well positioned, And we are still able to contract at the right volume and tenure to secure supply for our customers, which you can see in the chart is new supply contracted in FY 'twenty one and FY 'twenty two. Our strategy is to partner and take asset like positions to derive value through our participation in the The gas book is important for EGL in the future and for EGL Australia, in particular, through our demerger It enables the flexible gas power generation position to firm renewables and also supports our dual fuel offering for commercial and industrial customers. Our team will continue to source competitively priced supplies to support our ambition in the gas space. I will now hand over to Damian. Thanks, Marcus, and good morning, everyone. I'll start by taking you through group underlying profit in more detail. The $271,000,000 reduction in underlying impact In FY 'twenty one was consistent with the material headwinds we have continually flagged over the past year. Looking at the chart from left to right, Customer markets margin was up, largely driven by higher revenue rates in the consumer gas segment, strong margin contribution from the recently acquired Click Energy and cost efficiencies. This was partially offset by a decrease in consumer electricity margin due to customers switching to lower priced products. In Integrated Energy, as Marcus discussed, both electricity and gas margins were heavily impacted as forecast, partially offset by the Loy Yang Unit 2 insurance proceeds. The positive movement in centrally managed expenses was largely driven by decreased labor and recruitment costs following internal restructuring, Reduced activity due to COVID-nineteen, resulting in lower discretionary spend on travel and consultancy and reduced spending digital transformation initiatives relative to the prior year. In addition, the reduction includes $24,000,000 of insurance transferred to Integrated Energy. The favorable movement in depreciation was driven by the asset impairments recorded during the year. Higher net finance costs were largely attributable to the embedded interest costs unwinding from the onerous contracts and rehabilitation provisions recognized at 31st December 2020. And finally, the reduction in tax expense largely reflected the fall in profits. As part of our FY 'twenty result, we committed to keeping FY 'twenty one OpEx flat excluding COVID-nineteen And I'm pleased to say that we've tracked better than expected, bringing forward a good portion of the $150,000,000 of cost reductions identified or FY 'twenty two. These savings were driven by benefits from prior year's investment in digitization and cost out initiatives. The cost out initiatives involved a significant reduction in discretionary spend, especially with regards to travel, consultancy and corporate functions and labor reductions across the business. These reductions were partially offset by enterprise Agreement wage increases and COVID-nineteen costs. Looking to FY 'twenty two, we are confident of achieving our targeted savings Through asset optimization, labor reductions, digitization, lower net bad debt expense as well as lower professional and consultancy fees. These savings have been budgeted across the business units and our leaders understand the KPIs. We're on track to deliver a $100,000,000 target of sustaining CapEx reductions by FY 'twenty three. The majority of these reductions will be achieved through the optimization of our thermal fleet, which Marcus touched on earlier, in addition to our decision to mothball One unit at Torrance B. Looking forward, growth CapEx spend in FY 'twenty two and FY 'twenty three will primarily focus on the construction of Torrens Island Battery. I want to touch on net bad debt in more detail. I'm pleased to report that our experience in FY 'twenty one Was better than we expected. Our COVID-nineteen related net bad debt expense was $29,000,000 $11,000,000 less than what we anticipated at the beginning of the year. This has been driven by improved collection performance, ongoing government stimulus and better than forecast economic conditions. We recognize, however, that there is still uncertainty around COVID-nineteen, Especially given the ongoing lockdowns and we continue to manage this risk very closely. That said, our days sales standing are at the lowest level we have seen in 2 years after peaking in October last year. Lastly, the Click Energy integration has been very successful With collections performing better than expected. I'll now cover cash and debt in more detail. Net cash from operating activities was down 41% in FY 'twenty one, driven by the reduction in underlying EBITDA And a small outflow from margin calls compared with a large inflow in FY 'twenty. Lower cash Tax paid in FY 'twenty one was consistent with the reduction in earnings and utilization of prior year tax losses. Investing cash flow was about $100,000,000 higher, Reflecting the acquisitions of Click Energy, Solgen and Ifo. Financing cash outflows were significantly lower than the previous year As FY 'twenty included higher dividend payments and the share buyback program. Pleasingly, our cash conversion rate remains very strong at 97%. Turning to debt and funding. Despite a very challenging year, we still retain sufficient headroom under our Baa2 credit rating And our debt covenants and have approximately $600,000,000 of cash and undrawn debt facilities available as of 30 June. In May, AGL redeemed $600,000,000 of medium term notes 6 months prior to maturity. This early redemption will reduce the average cost of debt in FY 'twenty two. On this slide, you can see the indicative financial split On the right hand side is predominantly comprised of corporate costs. Roughly speaking, you can expect this to be split between AGL Australia and Axcel Energy in the ratio of 60 to 40, respectively. However, this will ultimately be a function of the final organizational design. As we've previously discussed, greater detail relating to the financial profiles of both entities will be communicated in the demerger scheme documents. I'll now hand back to Graham. Thanks, Damien. I'll finish our formal presentation with our guidance and outlook. Our guidance for underlying EBITDA and underlying net profit after tax continues to reflect significant operating headwinds in FY 'twenty two. We expect our underlying FY 'twenty two EBITDA and underlying net profit after tax to be impacted by A material step down in wholesale electricity earnings as hedging positions when wholesale electricity prices were higher progressively roll off And a small impact to wholesale gas gross margin from the roll off of legacy low cost gas supply contracts. In addition, the Loi Yang Unit 2 insurance proceeds received in FY 'twenty one will not reoccur. These impacts Our COVID-nineteen expected credit losses have been lower than initially forecast. However, this will be subject to ongoing lockdowns and There is no impact to guidance as a result of the closure of Ladell Unit 3 in April 2022. The loss of generation from that unit will be largely offset by OpEx savings. The remaining three units at Ladell will continue operations until April 2023 when the plant will close completely. Operations of Ladell 2023 are uneconomic due to the large capital investment required, whilst also not in keeping with our critical transition commitments. And we have made good progress on our commitments to deliver $150,000,000 of OpEx savings in FY 'twenty two and $100,000,000 of Sustaining CapEx Savings in FY 'twenty three. We will continue to work hard to deliver savings as we rebase our cost base to reflect the challenges in energy markets currently. As we look forward, we are cautiously Domestic on the improvements in the wholesale price of our key commodities and note that AGL produces some of the lowest cost generation in the NEM. As a result, AGL Energy is well positioned to benefit from any sustained recovery in wholesale electricity prices. As we see the pace of change continue to accelerate, we are further assured and committed to our proposed demerger strategy. Subject to approval, the proposed demerger will create 2 new entities with clarity of purpose and strong foundations, which will position them well to lead the energy transition, while protecting and delivering value to shareholders. All our guidance is subject to ongoing uncertainty in relation to the economic impacts of the COVID-nineteen pandemic as well as the normal variability and trading conditions. Thank you for your time today, and we will now open to any questions. Thank you, Graham. We will take one question at a time. If time permits, we will circle back for any further questions. The first question today comes from the line of Tom Allen. Go ahead, Tom. Thanks, Chantal. Good morning, Graeme, Christine, Damien and Marcus. Just on your growth opportunities, you previously targeted returns on growth projects Providing a 300 basis point spread to your cost of capital. At the 30 June update, you told us that you couldn't commit to those prior targeted return hurdles Under the new merger, can you provide any more clarity today on your new return hurdles to growth investments that would help us understand the incremental EBITDA that you might be able from all these battery investments that you're proposing to make and the like. Tom, just to clarify, You're looking to understand what those hurdles might be for the new entities or for AGL Australia between now and Both please, Graeme. I think we will be giving more information about the latter, The post merger strategies and details as we look forward. But between now and then, we really On just delivering the capital growth investments that we've already announced as opposed to making further commitments. But I might hand to Damian to see whether he wants to add anything More to that answer. Yes. Thank you, Graeme, and good morning, Tom. Look, our Our current position has not changed for AGL Energy. I think the point you make is what we didn't do at 30 June is commit the new boards, which don't exist today, to Committing to what those returns would be in the future. Our returns today exist as 300 basis points over our weighted average cost of capital. That has not changed. It was more about saying when the new boards come together, they will ultimately make those decisions. But what I can say about any decisions we're doing today is certainly on that basis. Okay. Okay. So that applies to the battery at Torrance that we expect that to be 300 basis points above your cost of capital. But going forward, For growth projects under the demerger, no clarity yet on those returns? Yes. So what exactly right. So for the tips battery, that's exactly right. But I think you could safely assume that looking forward, those boards will set the appropriate rates of return for those new entities. Sure, sure. And just on the same theme, Marcus, when you discussed the gas portfolio on Slide 18, you mentioned that your strategy is to partner and take Asset like positions to derive value through your participation in the value chain. Can you just please clarify what you meant by this? And whether or not you're suggesting AGL is looking to make New upstream equity investments? No. I think that was not the message I wanted to give on this slide. It was mainly that we are very close to various producers and that with our contracting strategy, Most probably, we have a chance then to get more assets like contracts. That It doesn't mean that we are investing in assets. Okay. Thanks for clarifying. Thanks a lot. Thanks, Tom. The next question comes from the line of Rob Poe. Go ahead, Rob. Thanks, Chatel. Good morning, everybody. Just a quick one. Can you remind us how important to the demerger The post demerger capital structure, the asset sales, I think there's just one tiny comment in the presentation that you've received some Non binding indicative offers for those and are they kind of in the 400 mill type range that you previously targeted? Rob, I'll take that one. Yes, I'll take that one, Graeme. Thank you, Rob. So when we came out back at March, we We talked about the $400,000,000 that included both the NGSF Silver Springs, and we also talked about some of their holdings In overseas investments, the funds we own, we've kicked off the NGSF process. And as you said through the results, that process is Ongoing, and we continue to target that range of sales through those processes. Okay, great. Good luck with it. I'll get back in line. Thanks, Rob. The next question comes from Pete Wilson. Go ahead, Pete. Thanks, Chantal. I might just ask one on customer growth, if I can, and the FY 'twenty four target of 4,500,000 services. And this is probably to Christine, The rate of growth was characterized as good customer growth. But just looking at the 250,000 Growth in customers this year, if you exclude EMAICIM, it was about a 0.5% rate of growth for the full year, which doesn't To me, it looks like it's on track for FY 'twenty four and energy customers actually fell in the second half. So just a comment And I guess why you would characterize it as good and how I guess what you expect to change if you're going to hit those FY 'twenty four targets? Thanks very much, Peter. Look, I think overall, we are pleased with our customer growth story. I think if you look at the Excluding the Click integration, we delivered organic growth in the order of 27,000 consumer energy services for The full year, 9,000 of which was delivered in a particularly competitive second half. So our strong focus, In particular in the second half has been on retention reduction and that's been a really significant factor that we're really pleased with in the result. When we purchased Click Energy, we expected the Click churn to impact our numbers. And whilst the churn rate of Click Energy customers It's higher than obviously the broader AGL book. It is performing better than we expected. So that was actually a deliberate Change in focus for us in H2 was to focus on retention of the Click Energy Customers as well as the focus for us in H2 was focusing on our growth in terms of the telco products that we had launched. And again, pleasingly, you would have seen that of the telco growth, both in terms of international mobile, it Supports our business case presumption that we wanted to make sure we offered customers a bundled offer. And of those sales, as said, 98% of them have been delivered as part of an energy bundle. So it's those things combined, which actually sort of show that Focus on click retention, the launch of our telco offer, still getting organic growth in the energy book and also the strong margin management. So overall, very pleased with the customer growth story. Okay. That all sounds perfectly reasonable. The path to FY 'twenty four from here? So again, what we will still look at is, again, the competitive environment, even if you look at what's happened actually since sort of DMO, We expect it to continue to be competitive. We will actually the path forward, we're still confident with our 4.5 million customer services that we're targeting by FY 'twenty four, that is going to be across both our energy and Telco Services. So again, continued focus on strong organic growth, really delivering that simplicity and bundled offer to our customer base. So it's on track. Okay, great. Thank you. Thanks, Pete. The next question comes from the line of Dale from Barrene Jolley. Go ahead, Good morning, Graham and team. Just a quick question on your hedging volumes in FY 2022 and 2023 relative to 2021. Specifically, should we expect to see a similar oversold position possibly providing earnings risk in the rising wholesale market? And when you say potential to reduce hedging ratio with the aging fleet, can you quantify a bit what this is? Is this oversold position And 2021 a fair indication for maybe reductions in 2023? Marcus, do you want to speak to that? Yes. I think it's a bit the opposite. I think when you look at our aging fleet, I think we have to be cautious that we are not falling Into the oversell position. So we are not oversold. So we have less hedge compared to financial year 2021. And that's most probably the message which I would like to give. So we are reflecting somehow the aging fleet, particularly Liddell and the In our hedging ratio, and that is leading to less hedging. Okay. So we should assume sort of like a similar price exposure on a go forward basis relative to forward curve That's good historically. Yes. Okay. Thank you. Thanks, Dale. The next Question comes from the line of Max Dickerson. Go ahead, Max. Hi, everyone. Just wanted to ask, there's obviously been a bit of speculation around capacity markets In the press with the ESP releasing some recommendations, and then Graham, I know you mentioned that, That represents an opportunity for AGL. I just wanted to also put the question to you around carbon pricing and I know it's a little bit of a medium term issue potentially rather than short term, but just trying to understand if there is a change In market structure, so both capacity pricing and carbon pricing, who is going to wear The risk on that in the ongoing arrangements between XL and AGL. Look, I think the starting comment would be, it's clear that the market is going to continue to develop With various considerations and mechanisms to support a decarbonization pathway. At the moment though, there is the detail of that and the timeframe, as you said, is not overly clear. So if you step back from that, I think that we'd still be in a position that we think that the right thing to do is to go through with the demerger Because that really allows the 2 entities to better develop and execute their strategies In whatever the world we're facing around the carbon transition. For Axcel, we will be Continuing to focus those coal fired assets on transition towards low carbon energy hubs, the ultimate Closure dates of those facilities will be driven by whatever the overall framework and hopefully some degree of coordinated plan For coal asset requirements across the country, given that 70% of the electricity comes from coal fired generation currently. And on the AGL Australia side, obviously, that business will be best placed to continue to invest directly in more renewables or to underwrite investments of others So when we get to the scheme booklet, obviously, What you're asking about is a risk to both organizations that we'll have to spell out in terms of the best our best use about what my Future scenarios might be in taking account what that might do to the value of each entity. Thanks, Graham. I'll jump back in the queue. Thanks, Max. The next question comes from the line of Mark Samter. Go ahead, Mark. Yes. Good morning, everyone. I have a question around the remuneration that was announced this morning for both of your new CEO Raul, I guess, unfortunately, it's probably not done much to improve gender pay diversity in Corporate Australia. But I'm more interested in the fact that Traditionally higher salaries have a correlation to higher market cap and obviously the XLCO has been paid 30% more than the AGL Australia. Should we take that as an inference that you believe that XL is going to have a higher market cap, actually don't even AGL Australia? Because I guess that would be against what Thanks for your question, Mark. It's probably a question best directed to the Chairman. But in any case, I'll have a go at it. I think, Mark, Yes, market capital company size is often a significant determinator of what The salary line should be in organizations, but there are other factors as well, including the experience base of the executives. And there is never a single point salary. It's always within our range. And the consideration of where within a range it falls is It involves a lot of factors including experiences and the types of industries that they're in, what they bring to the Challenges facing the businesses. So it's not as simple as saying that it's directly related to market cap, but I can assure you that the company took External advice in terms of job sizing in putting together the arrangements that have been announced today. Okay. Thanks, Mark. Next question comes from the line of David Leach. Go ahead, David. Hi. My question is to Marcus about and thanks for taking it, about the availability factor, Particularly as it applies to Bayswater and the coal price, the 63 kcao coal prices spot is over 2 20 dollars Aussie ton at the moment. And I'm just wondering if you can give a sense of how much less energy might result from the Switch to an available capacity factor and price focus and whether the coal price is going to drive the result Or cost at all? David, that's a good question. But I would say AGL is not exposed To spot prices, we have long term contracts, which are associated with coal supplies to Vidal And wastewater, so I don't know why somebody believes that we are exposed to spot prices. We are not, That I can say, so that will not drive the profitability going forward. It will still emphasize that The base water is most probably a very profitable generator in the NIM Going forward, and that's what I would like to convey. There is no exposure to spot prices. They've all underpinned this long term supplies. Are you in a position to give a sense How much less energy might result from this change in approach looking forward to what the Thermal generators might have produced in the past? That's a difficult one because at the end of the day, the market prices During the year, we'll define how we run our fleet. In particular, now we are speaking, The prices are in the one digit area. They are below 10 Acelium per megawatt hour. So we now Go down with our generation and base water and so on to the minimum level. So that's exactly how we now run because at the end of the day, If the prices in the market are not anymore reflecting our total marginal cost for our open position, we will not run it. And most probably a lot of generator will do this. So it's hard to say what is the impact on the overall Thank you. Thanks, David. Next question comes from the line of Baden Moore. Go ahead, Baden. Good morning. Just as I think about your earnings for FY 'twenty one and then the step to 'twenty And looking at the oversold position that you've flagged, is there any volume you can talk about? And the I assume that essentially led you to be buying energy at relatively higher prices to match that position. So Is there a financial impact you can guide to on the impact of that in the FY 2021 year? And will it carry into the impact at all on an Accounting basis into 2022. I think there was some volatility within the gas market as well for the same period. I was wondering if that contributed Your loss in your gas book as well. And if you could split that out at all, that would be helpful. Maybe I start and then Damian pops in. On the volume, which we have oversold, was 600 gigawatt hour, so 0.6 terawatt hour. And the impact was clearly not healthy, particularly in the month of May June. So that was the impact. I think that on the gas side, we were not exposed. You are right. There was quite some volatility in the gas market. Prices Jumped up to A56 gigajoule per Aussie dollar per gigajoule. We were not affected by this Because I think our gas portfolio is quite resilient. We have a sizable storage position In the Johanha storage, we also used our Newcastle gas storage facility. And in addition, We have our own gas in equity gas in Silver Springs. All the supply sources have This contributed to the fact that we were not exposed on this particular volatility period. I think when we speak about the decrease in gas margin, there's various factors. I think we have still to cover quite a sizable Which has increased because also our position in Jona Suraj has slightly increased, which we had to cover, Then the most probably 40% of this entire €160,000,000 is then allocated To the decrease to the elapsing of our legacy gas context And then the rest is really associated with less gas demand on the industrial side. Thanks, Marcus. I might just jump in the back of that one just to round that one out a little bit. So as you see through our numbers, we've taken The majority of the gas, if you like, downside this year, we'll see a small, very small downside into next year. But I think what Marcus was really trying to Trey, there is in the months of May June when we certainly saw that volatility as a result of having some both planned and unplanned outages, It made it probably tougher than it otherwise would have been for those last couple of months. That's really what the call out was there. And I think Your further question there is, how does that then play through into 2022 and 2023? I know a number of Questions around what does it mean for 'twenty three. We're clearly not guiding to 'twenty three for obvious reasons. But what I would say If there are sustained increases in energy prices into 'twenty three, AGL is well positioned For those energy prices, but it is still a long way away given the volatility. We are obviously very careful in the Which we use there because just the sheer amount of time between now and 'twenty three. And do you have an estimate of the cost of that volatility To the 'twenty one year? Look, what I would say there, so yes, we do. I mean, we don't break out But we had some wins and some losses in those last couple of months of the year. But look, I'm not going to provide individual Yes, blow by blow what we did there, but it certainly it made the run home a bit tougher for us, that's for sure. Thanks, Baden. The next question comes from the line of Gordon Ramsay. Go ahead, Gordon. Thank you very much. I just wanted to stay on this gas market theme for a second. Again, just looking at the statement in your results saying your strategy is to partner and take asset like positions To derive value, can you just explain in detail what that means? Yes, for sure. I think as well as we Somehow contract longer term, all these kinds of contracts have somehow an asset Like character because we are most probably then not buying at market prices. So we are buying then at Production cost plus, and that is main thesis. It's the same as our coal contract, which we have in our book, which are supplying. Also, our old legacy contracts have a different pricing structure, and that is meant with asset light contracts. Okay. Thank you. The next question comes from the line of Ian Miles. Go ahead, Ian. Hey, good morning, guys. Just a question on the retail. You talked about the margin the gross margin cycle. Are we reaching the bottom in 2H 'twenty one of that margin cycle falling and going down? Or is it still further to come in the future years? Thanks, Ian. I would sort of say, look, we are nearing the bottom. I wouldn't say we are at the bottom, but we're certainly, I think getting close to it where we start to sort of look out the customers who have been on legacy market contracts, The level of switching to newer market sort of offers and lower price offers that are out there. So as I sort of flagged at the half year, we would think that across the next sort of 12 to 18 months, that is getting close to leveling and bottoming now. So almost there, but not quite yet. Okay. And does gas have the same pressures? Gas, different. So again, you'll actually sort of look at in terms of our margin from a customer markets perspective. We were able to improve the gas margin there, so different forces at play there. So less pressure in gas. Okay. That's great. Thanks, Ian. Next question comes from Daniel Butcher. Go ahead, Daniel. I'd have to move on, Christine Chantel. Okay. We'll skip down. And the next question comes from the line of Mark Boucetil. Go ahead, Mark. Hi, everyone. I'm just trying to get a better understanding of the fiscal 'twenty two guidance, particularly insofar as what you're guiding to on an EBITDA Basis is the lowest level in about 7 or 8 years. If we rewind a couple of weeks when Origin came out with our own EBITDA Guidance for energy markets, they talked about higher fuel costs. I think the markets sort of partially addressed this. But I guess firstly, can you confirm that you're not Seeing headwinds from higher fuel costs insofar as you've got most of that locked in 6 plus contracts. And secondly, when we started seeing the wholesale forward prices rise, it was sort of beginning to the middle of May. Have you already locked in all of your forward sales in fiscal 'twenty two by that point and therefore you haven't seen the benefit of those higher price It's come through in your 'twenty two guidance? Let me thank you, Mark. I'll take the start of that question, and then I'll hand over To Marcus on the hedging side of things. From an input cost perspective, I think, as Marcus said, we are largely Hedged on that position, so we don't see a lot of exposure there. What we've said in the guidance, we will see some small roll through of the legacy The gas contracts, just the year on year type of movement, but not exposed, if you like, from a coal perspective. So that's probably the difference you're talking 2 there. Then from a hedging perspective, we're constantly hedging throughout the period. It's not a one off point In time, but what I would say is largely the result by the time you get to sort of May, June is hedged whereby customer pricing is locked in for the consumer book And any event C and I that's rolling through the book is happening on a sort of ongoing basis. So I think the way to think about this, any changes to Pricing will be felt more heavily into the 'twenty three year than it would be in 'twenty two. Marx, I don't know if you want to just add to that? No. I think that That's true. But on the other hand, we are also doing dynamic hedging. So if we believe we can resolve Some hedges and then getting better prices then again in the market. I think we are doing also this kind of activity, so it's not all static. So we still have, for example, you can buy some positions and take in the market, which we are doing actively when prices are coming down. So this kind of hedging activities we are doing still in order to even optimize our hedging position. Great. Thank you. Next question comes from the line of Rob Koch. Go ahead, Rob. Thanks, Chantal. Can I ask a question about the remuneration report? If I read the FY 'twenty two long term incentives correctly, there's no more ROE target at all. And 25% is linked to carbon intensity and green sales as a percentage. So I'm just in relation to the carbon intensity targets, does that take account of things like unplanned outages? And for the green sales percentage, does that take account of the cost of the alternatives out there? Why don't I Graham, let me grab that one and then I'll just talk to Some of that detail there, Rob, you asked. But yes, you're right in your read of that ROE has been dropped from the target. So it's now split 75 percent to 25 percent on the climate measures, and they were the measures we put in place last year. We've rolled them out, obviously, a further year for the next LTI. In terms of your question on, I think, emissions To begin with, you're right. If we had outages, then there would be, if you like, a change to The emissions, and I'll give you an example this year alone whereby we had outages at Macquarie in a time where we are running Lydell sorry, not Lydell, Loyang Moore. So we actually had emissions up for the year because brown coal has obviously got more emissions than black. So The way we're looking at this, it's over a period of a number of years. It's not just points in time. I mean, it will be measured at a point in time. But yes, you're right, any outages We'll have an impact on that. But what we've assumed through those measures is obviously, like Dell coming out of the portfolio, they're already included in those measures. And I think your last question was on the third of those measures. Is that right, Rob? Was it On the green revenue? Yes, yes. And thanks for those answers, Damien. That makes sense. And yes, the question on the percentage of green revenue, I mean, if you just kind of increase the prices of the black products that potentially Or drop the prices of your black products, does that then help you get the price of your the percentage of your green product down? Look, again, if you took back to the extreme, yes, it would. Again, it's over a sort of a 4 year period Whereby it's over total revenue and the green revenue, obviously, to move the dial on that has to move a lot. So it's all about what are we doing selling Yes, those green products and those carbon neutral products that we have out in the market, how effectively we are moving those. And just to give you, I suppose a perspective on what that would require every I think about $100,000,000 of carbon neutral revenue Would move that percentage by about 1%. So they are very stretching targets, and there's a lot we need to do to deliver those, just to give you a bit of context on the size of those movements. Yes. That's very helpful. Yes. Sorry, Graham, go ahead. Yes. To add a couple of high level comments On the LTI arrangements, clearly, the move to relative TSR as opposed to Having an ROE target was something that was taken up by the Board after significant interaction With the market after last year's rent strike, so it was driven by that as was really the There was strong support for a decarbonization element of long term incentive. The difficulty I think that everyone sees is that You need something to drive you on the journey, not just an opening position and a closing position for years down the track. So, These kind of metrics are the best I think that we can work to. But to your concern, I guess, or potential concern that you could Not again these things, it's clear that they've been designed in such a way and the Board will have appropriate overall discretion to make sure that it's in the shareholders' best interest In an overall sense as well as hitting those targets. And maybe, Graeme, just to add to that one as well, the 3 it's The reason we've picked those 3 too Rob is exactly to that point. So they're all doing directionally The same thing, but in very different ways. So that's why we've got the controlled emissions intensity. We've got the renewable capacity. Obviously, that's driving us to get more flexible capacity into the market. And then the third one is driving some of those carbon Full products as well. So a lot of thought went into those 12, 18 months ago, and I do think they absolutely drive the right direction for the market. Okay. Cool. Yes, no doubt, a lot of thought went into it. A lot of work I know happened. So yes, all the best with achieving them. Cheers. Thanks, Rob. Next question comes from the line of Dan Butcher. Go ahead, Dan. Yes, thanks. And apologies for asking questions where I've been asked my NBN dropped Not provided by AGL, by the way. Just curious, Christine, maybe asked you about OVO and Kulu with the partnership a little bit more detail. Just curious, how may that compares to Origin's opticals platform? And would it completely replace your existing retail platform over time? Yes. I'm just curious how you think about that one. Yes. So look, early days for us. But if I look at sort of the key Objective for us, it really is when we look at and we went around globally looking at different opportunities and options that may be available. And when we landed on the Palooza platform, what we really liked about it was actually the fact that it certainly Accelerated the digitization element that aligns to sort of our strategy. But importantly, it was really built around sort of this decarbonized, decentralized future. So when we look at it, it's very much a future of energy platform that they've built. It's built around sort of this Common sort of data spine and it really allows customers into the future to engage in sort of that energy market transition. So it's sort of aligned to the future of where we see energy going. Part of that, it then obviously then has a sort of like A real time sort of billing engine and platform. And that's what sort of they're looking at and using over in the U. K. At the moment. And you look at what they're doing sort of at scale, it's the migration of the SSE customer base to that Closer platform. You come now here into Australia and the option it gives us is to work with OVO Energy Australia to localize that COLUZA platform for the Australian market conditions. And that's really sort of going to be the focus over the next Couple of months. Couple of months, couple of years, I should say. What that then does is for AGL Australia, it then gives us the option to say That could be the new energy platform that we may want to go with. So it gives us an option. It allows us To not bet the farm on that now, but to be able to test the platform, localize the platform, See how customers engage with the platform and that then shores us up and allows us to sort of manage the risk of any migration of such large customer base into the future. In the near term, what we're then looking to do is to realize and if you look at this from what I read and finding what I sort of read in the press read Kraken, Kraken is Probably, from what I understand, is based sort of around a both a cultural play in terms of the ways of working As well as the sort of cost to serve efficiency play. And we're certainly looking at those in the more immediate And you'll see that come out with both some of the underlying operating cost per service that we're already getting out and that we will be certainly realizing over the next Couple of years, but also starting to look at how do we actually make sure that we make it easier and simpler for our agents, particularly Sort of things like a more simplified and centralized product catalog to support our multiproduct retail ambitions And CRM systems to be able to make sure that what our customers see, use and want is replicated by our agent. So they're the 2 nearer term goals. But certainly, we believe the Caloza platform is really Exciting opportunity in terms of where energy will head, where energy transition will head and bring in our customers along on that journey. That's great. Thanks. Can I ask a quick one of markets actually, if that's okay? Just on your coal book, you mentioned you're not really exposed to coal prices, but I noticed you dropped the slide you usually have on the coal book. And at the half year results, you had 2,000,000 or 3,000,000 tons of coal uncontracted, which could be drawn down from stockpiles. I'm just sort of curious how to think about that in the context of your comments about Thanks, Mark. I think we are optimizing our coal supplies exactly. We have €3,100,000 or €3,300,000 at the moment at stockpile at Bayswater. So with this kind of stockpile, we have the possibility to flex supplies, and we have also the possibility To optimize in our off stakes, I think exactly that is how we optimize our call off stakes. And that means also that we are more resilient To any price peaks in the market, so we are not exposed with our generation or particularly with our short run marginal costs And to call it prices. Okay. Just to be completely clear, there was no real call impact on the FY 'twenty two guidance being down. Yes. Thank you. Thanks, Dan. Next question comes from Tom Allen. Go ahead, Tom. Thanks, Marcus. The press recently reported that the Energy Security Board recommending some market design changes Towards a decentralized capacity market. And so that would be built around a physical retail reliability obligation and that central Strategic reserve. So if those recommendations were applied, can you describe how this might change the way that you use your thermal generation assets And what upside, if any, it might provide to earnings? I think, Tom, We understand the principle of where that might go, but I think we really need to understand how it would work in detail before we could give kind of the market any Guidance as to what, when and how it might impact both from the perspective of what would happen at the retail end versus what would happen at the generation end. I think that's what's clear and where that work is heading is that there is a recognition of the fact that to get the smooth transition, There has to be appropriate commercial support for the value that generators Bring particularly coal fired generators bring to the stability in the network. So I think the devil's in the detail, and I We would need to understand that in more detail before you before we could kind of give the market any sense of The degree of a positive or negative impact, but happy for Marcus to talk broadly about it if you wanted to add anything to that. No. I think in general, I think when we speak about this kind of capacity payment structure, I think that would still mean that for example, a typical example, We took the decision to most boil Torrance B1 unit. If this kind of structure would have been in place, Most probably, it has our decision would have been different. So most probably, that's one, I would say, very concrete example Where this would play in. Otherwise, as Graeme said, I think we are looking very much forward to understand the business structure, how this payment is Applied to which generation? Because at the end of the day, most probably also Renewable existing renewable generation should then benefit from this, but all these kind of terms Are not clear. So yes, let's wait how the structure and how the concept This answers are mature. Okay. Thanks. Next question comes from Rob Coe. Go ahead, Rob. Thanks, Chantal. Okay. A question for Ms. Corbett, if I may. You've given us lots of details about the customer business and Congrats on that result. The new AGL will also have the shareholding in power. So I'm just wondering if you could give us your thoughts on The future opportunities and plans for that part of your business, please. Yes, certainly. And I'll also get Damian To lead in, but if we look at in terms of power, the exciting opportunity for AGL Australia It's obviously their development pipeline. Also when you sort of look at the recent completion of TILT under power and We are sort of 20% ownership in that. We think it is a fantastic asset for AGL Australia to really look at whether it be how we partner in terms of development opportunities or probably more so Start to sort of look at how do we underwrite renewable generation through various sort of offtake agreements. So Pinnacle and a key pillar for us under AGL Australia will really sort of be what is that pathway Towards carbon neutrality, we know on demerging will be scope 12, and that's obviously important for our invested base, but increasingly in terms of what is the pathway to really then understand how we can Worklist following sort of the merger offsetting emissions that our customers, Especially in terms of electricity supply and I think having access to a very robust strong development pipeline is the Best way for us to do that. So very important pillar. With regards to the particulars of power, let me just hand to Damien because he's been for both with Power and also the TILTA acquisition. Yes. Thanks, Christine. Look, I actually think you've covered Basically everything I was going to talk to there, I think it is the access to the power platform, but also importantly as you said, it's what else that business can do with AGL Australia in terms of firming up renewable supply from a contracting sense, and that's certainly where the customer base is going as well. Look, it's a great business. It's had some great development over the years, and we're really confident in the development for the future. So a great acquisition and I think a really Good addition, if you like, into AGL Australia's into their book. So I won't add any more on that one. I think we're almost out of time as well. Yes, cool. Thank you very much. Thanks, Rob. Next question is going to be our last question, comes from the line of Dale. Go ahead, Dale. Thank you. Hopefully, a quick one. I know your debt covenants have significant room, but there was recent news article hypothesizing With credit rating placed on negative outlook at the end of June, which was prior to today's step down in earnings guidance for FY 'twenty two, Potential for ASIL to have limited life generation assets and transformation CapEx, potentially unable to carry as much debt. Is there a scenario where the demerger might Need more equity? Is that a risk you can put a pin in today? Or are you still working through this issue and subject to earnings recovery in 2023? Look, I think sorry, why don't I start and you can just add some more to that. I think what we said at the June 30 update that we'd Made significant progress with the banks on debt structures for both new organizations And we're working through the detail of those at the moment. And so I will obviously give more detail around All of the capital structures relating to both entities down the track, but I think it's a little bit overcooked at the moment. People kind of continue to speculate about concern in those areas. But, Damian, is there anything else you want to add? Look, just really briefly, look, we are still confident in achieving investment grade grade rates for both of those entities. So I think That hasn't changed clearly since we're at 30 June. As Graham said, we're obviously working with the banks and the USPP holders as we work our way through this. And clearly, today, we've also announced the underwrite of the dividend. That underwrite the dividend, as we said, was to effectively help fund both the TILT acquisition, but also the TIPS battery project, which will occur over the next 2 years. Okay, great. Thanks guys. Okay. Well, then thanks everybody for joining us today. I appreciate your interest and hopefully we've been able to deal with all the Questions that we were able to take over the balance of the roadshow. We'll obviously touch base with many of you going forward. So look forward to that. And if there's any questions that you'd like us to consider, please reach out to Chantal and the Investor Relations staff in the meantime. So thanks very much. Look forward to catching up again soon.