A little over a decade after it lost hundreds of millions of dollars on poor risk management with an ill-judged foray into New Zealand, energy utility AGL is again planning to expand abroad, although it is tight-lipped on details.

On Thursday, the company outlined a pushinto the gas retail market in WesternAustralia, as it confronts the reality of limits to growth in the local market, with more detail on its move offshore to be clarifiedby year end.

"One of the challenges we have is finding domestic opportunities for growth," AGL's chief executive Andy Vesey said. "Givenour current size, it is very difficult to do anything more than grow organically."

AGLis entering the West Australian market this year, with an investment of up to $100 million as it targets100,000 retail customers, while warning investors it will lose money on the foray, at least initially.

But selling electricity in WA "is not part of our calculus", Mr Vesey said, with the lack of its own generation capacity in that market a disincentive, he said.

With the pending move abroad, Mr Vesey said the plan is to take advantage of his company'srisk management expertise in electricity markets, with the focus on developed markets which are shifting to consumer-led demand.

He was speaking after the release of December-half earnings which disclosed higher wholesale electricity prices had offset lower volumes of electricity sold to both household and business sectors. Additionally, AGL boostedsales into the wholesale market, which typically carry smaller margins. One reason for the decline was warmer weather in some markets last winter, coupled with heightened competition for business customers.

Margins were also squeezed in the gas market, as cheaper, long-term supply contacts expired.

"We largely generatewhat we sell, which puts us in a strong position as prices rise," Mr Vesey said, with household electricitycharges to rise annually, depending on competitive pressures, with prices rising more slowly in the business market, for examplewhere many prices are fixed on two-year terms.

"A rising [forward] electricitycurve remains a key driver of profit growth," Mr Vesey said.

In the December half it posted a net profit of $325 million, a reversal from the loss of $449 million a year earlier, with the performance masking a deterioration in electricity sales volumes.

The interim dividend has been hiked to 41from 32, thanks to a change in the dividend policy, as it now targetsa payout of 75 per cent of underlying earnings up from 60-65 per cent paid out previously.

The underlying profit for the half was $389 million compared to $375 million earned a year earlier.

The company has left unchanged its forecast of a year to June underlying profit of $720 million-$800 million, although earnings are expected to reach the top half of this guidance, it said.

The firm outlook saw the shares close up4.3 per cent at $24.

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AGL to head offshore amid limited growth options locally - The Sydney Morning Herald