AGL Energy Ltd. (AGK.AU) Wednesday posted an underlying profit below analysts expectations, stuck to its annual earnings guidance and wouldn't rule out raising additional debt or equity to fund acquisitions.

Proceeds from asset sales helped the integrated energy company book a A$1.65 billion net profit for the six months to Dec.31, turning around an interim loss last year.

But a more modest rise in underlying profit missed analysts' expectations, and AGL held its interim dividend steady at 26 cents a share.

The company's shares didn't take a big beating, falling 1.2% to A$13.25 compared to a 0.1% fall in the broader market after rising as high as A$14.15 in early trade.

"In a market where 20%-50% downgrades are the norm, maintaining guidance does tend to stand out," E.L & C Baillieu analyst Ivor Ries said.

"The really big question now is what they do with their pristine balance sheet."

After recently acquiring Sydney Gas Ltd. and other coal seam gas fields in New South Wales state, AGL Chief Executive Michael Fraser, reiterated that the company will look at buying the state's retail energy assets if they are privatized by lawmakers as expected.

AGL is also conducting due diligence on CSG and generation assets owned by BG Group, for which it has an exclusive option to acquire before it expires in April.

Fraser said that AGL could buy both the BG assets and NSW retail power assets, rather than having to choose between one or the other.

"We're not going to sit around and wait for the NSW government," Fraser told Dow Jones Newswires in an interview.

"So if (both acquisition opportunities) make sense for our shareholders, and we've got the capacity to do it at the time, then that's what we'll do."

Fraser said AGL would consider how to fund an acquisition of the NSW state power assets when the government makes up its mind.

"If it came to the point where we actually needed to raise additional debt or equity in order to fund the NSW purchase I think we'd be well supported in the market," Fraser said.

AGL's net profit for the six months to Dec. 31 jumped to A$1.65 billion from a A$22.9 million net loss after it sold its stakes in the PNG LNG liquefied natural gas project, liquefied petroleum gas business Elgas and Queensland Gas Company Ltd.

Underlying profit, which removes those gains, rose 5.3% to A$192.5 million from A$182.8 million a year earlier, which missed the A$211.7 million average forecast of five analysts polled by Dow Jones Newswires.

AGL maintained its full year underlying earnings guidance for a net profit of A$370 million-A$400 million, up from last year's underlying profit of A$355.5 million.

About 90% of AGL's gross margin is generated in the mass market, which, unlike the corporate market, has been more impacted by weather outcomes than the global economic downturn, Fraser said.

E.L & C Baillieu's Ries said AGL will be "very relaxed" about meeting its guidance.

"The first half qualitatively was probably A$15 million-A$20 million better than it looked," Ries said.

First-half earnings were hit by the planned shutdown of the Townsville Power Station in Queensland for routine maintenance, and lower pool prices at the Loy Yang Power Station in Victoria, where weather conditions were, on average, milder than usual.

Fraser said AGL continued to perform well in the second half of the 2009 financial year, with extreme weather in Victoria and South Australia in late January and early February triggering "very high demand for electricity".

First half group revenue rose 5.1% to A$2.98 billion from A$2.83 billion.

By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957; ross.kelly@dowjones.com