Australian Power and Gas Company Ltd. : Letter to APK Shareholders from AGL

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Phil Breden

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Ashurst Australia

Level 36, Grosvenor Piace

225 George Street

Sydney NSW 2000

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GPO Box 9938

Sydney NSW 2001

Australia

18 September 2013

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AGL APG Holdings Pty Limited ACN 081 834 826 and AGL Energy Limited ACN 115 061 375 - Letter to Shareholders of Australian Power and Gas Company Limited (ASX: APK)

We act for AGL APG Holdings Pty Limited ACN 081 834 826 (a wholly owned subsidiary of AGL Energy Limited (ASX: AGK)) (AGL Bidder) in relation to its off-market takeover bid forali of the ordinary shares in Australian Power and Gas Company Limited ABN 96 077 206 583 (APK) that AGL Bidder does not already hold.

On behalf of AGL Bidder we enclose a copy of a letter which will be sent to APK shareholders today. Yours faithfully

Ashurst Australia

AUSTRALIA BELGIUM CHINA FRANCE GERMANY HONG KONG SAR INDONESIA (ASSOCIATED OFFICE) lTALY ]APAN

PAPUA NEW GUINEA SINGAPORE 5PAIN 5WEDEN UNITED ARAB EMIRATES UNITED KINGDOM UNITED 5TATES OF AMERICA

Ashurst Australia (ABN 75 304 286 095) is a generai partnership constituted under the laws of the Australia n Capitai Territory carrying on practice under the name "Ashurst" under licence from Ashurst LLP. Ashurst LLP is a llmited liability partnership reglstered in England and Wales, and is a separate legai entity from Ashurst Australia. In Asia, Ashurst Australia, Ashurst LLP and their respective affiliates provlde legai services under the name "Ashurst". Ashurst Australia, Ashurst LLP or thelr respective affillates has an office In each of the places listed above.

226750160.01

AGL Energy Limited

ABN: 74 115 061 375

L22, 101 Miller Street

North Sydney, NSW 2060

Locked Bag 1837

St Leonards NSW 2065

T: [phone]

F: [phone] www.agl.com.au

18 September 2013
Dear Shareholder,

AGL OFFER FOR AUSTRALIAN POWER & GAS NOW UNCONDITIONAL

I am writing to provide you with an update on the progress of AGL's off-market takeover offer (Offer 1) to acquire all of the shares in Australian Power and Gas Company Limited (APG) and, on behalf of the AGL Board, to encourage you to accept the Offer.

I am pleased to advise that AGL's Offer has now been declared unconditional.
The Offer
AGL is offering $0.52 cash for every 1 APG share which represents:
a 51 percent premium to the 90-day volume weighted average price of APG
shares as at the last trading day before the Offer was announced; and
a 33 percent premium to the closing price of APG shares as at the last trading day before the Offer was announced.
APG Independent Board Committee unanimously recommended the Offer
APG's Independent Board Committee unanimously recommended that APG shareholders accept the Offer in the absence of a superior proposal.
AGL is pleased to advise that APG Directors have now accepted the Offer.
AGL has achieved effective control of APG
The Offer has received strong support from APG shareholders.
AGL has obtained effective control of APG, and currently has voting power in APG in excess of 87 percent.

1 The Offer is being made by AGL APG Holdings Pty Limited, a wholly owned subsidiary of AGL.

AGL is taking action toward creating a sustainable energy future for our investors, communities and customers. Key actions are: 1

› Being Australia's largest private owner and operator of renewable energy assets

› Gaining accreditation under the National GreenPower Accreditation Program for AGL Green Energy®, AGL Green Living® and AGL Green Spirit

› Being selected as a constituent of the FTSE4Good Index Series

AGL has also achieved majority representation of AGL nominated Directors on the APG Board.
AGL is offering accelerated payment terms to APG shareholders who accept
Since declaring the Offer unconditional, AGL has also indicated that it will offer accelerated payment terms to APG shareholders who accept into the Offer by dispatching cheques to those shareholders no later than 5 business days after receipt of a valid acceptance.
AGL has also announced that it will acquire APG shares on-market at prices up to the bid price of $0.52 per share. This provides shareholders with an alternative way to sell their shares to AGL on the ASX.
How to accept the Offer?
AGL's Offer is scheduled to close at 7:00pm (AEST) on 11 October 2013, unless extended. To ACCEPT the Offer, please follow the instructions outlined in the enclosed Acceptance
Form (a copy of which was also provided to you with the Bidder's Statement).
If you have any questions in relation to the Offer or how to accept the Offer, please call the
AGL Offer Information Line on 1800 426 150 (toll-free for calls made within Australia) or
[phone] (for calls made from outside Australia) from Monday to Friday between
8:30 am and 5:30pm (AEST).
On behalf of the AGL Board, I strongly encourage you to accept the AGL Offer and receive certain and immediate value for your APG shares.
Yours sincerely,

Jeremy Maycock
Chairman

AGL is taking action toward creating a sustainable energy future for our investors, communities and customers. Key actions are: 2

› Being selected as a member of the Dow Jones Sustainability Index 2006/07

› Gaining accreditation under the National GreenPower Accreditation Program for AGL Green Energy®, AGL Green Living® and AGL Green Spirit

› Being selected as a constituent of the FTSE4Good Index Series