Aurizon Holdings Limited (AZJ) Earnings Call Transcript

Good afternoon, ladies and gentlemen. I'm Tim Longstaff Horizon's Chairman. On behalf of the Board, welcome to our 2026 Annual General Meeting. And can I thank the shareholders from Brisbane here in the room who braved the storm and pests to be here. It's very kind of you to join us. I would like now to introduce James Glover, an Aurizon employee from Rock Hampton, who will provide the acknowledgment of country. James.

Good afternoon, everyone. Before we begin, I'd like to acknowledge the traditional custodians of the land on which we meet today, the [indiscernible]. I'll pay my respects to the elders past and present and extend that respect to all aboriginal and Torres Strait Islanders people here today. I acknowledge the continuing connection to First Nations people with their [indiscernible] country, culture, community and heritage. The land and waterways that surround us hold deep cultural, spiritual and environmental significance. They have sustained aboriginal and to state on the peoples for thousands of generations. As an organization, Horizon operates across many different regions with our always, infrastructure and operations traveling through alongside important lands and waterways. It is important that we recognize the responsibility that we have to respect, protect and take care of the country as we carry out our work. I would also like to acknowledge by connection to the country. I'm proud [indiscernible] man. And I'm proud of my heritage, culture and connection that I have to my people in country. So as we move people and resources across this country, let us continue to respect the land, the waterways and the communities that make up the country we work on. Thank you.

Excellent. And we now have Nicole from Carters, who's going to conduct a short briefing to explain the emergency and safety procedures for [indiscernible].

Hi, everyone. I'm Nicole from Carsten's Operations Manager for Brisbane. Just a bit of housekeeping to get us started. So as you made into the room, you'll notice male bathrooms, shared area, just had outside the room the direction. Second evacuation. Unfortunately, we are located on Level 24. So that is 24 flights of stats. So make your way down, orderly fashion, and then we will be meeting across the road Adelaide Street and Zack Square. Any other questions or concerns, please come see me, I'll be at the front desk. Thank you.

Thank you, Nicole. So we'll now move to the agenda. The notice of meeting has been provided to all shareholders and published on the company's website. It sets out the items of business and resolutions that will be put to the meeting today. The agenda for today's meeting is on the screen now. addresses will be given by myself, the Managing Director and CEO, Andrew Harding, and the directors standing for both election and reelection. We'll then move to the business of the meeting, we will take questions at 1 time on all agenda items before moving to voting on the resolutions. I would now like to introduce your Board of Directors, and they will -- they're joining me in the room today. And as I read out the names, they will put up their hand. First, we have Andrew Harding, our Managing Director and Chief Executive Officer; Marcelo Bastos Sarah Ryan, Lowell Strambi, Santero, Amanda McMillan and Andrew Adam. To my right here at the table is our Company Secretary, David Wink and our Head of Investor Relations and moderator of questions, James Co. Members of the company's executive team are also in attendance. Matthew Donaldson and Allison White of Deloitte Touche Tomaso, the company's external auditor, are in attendance today and will be able to answer questions regarding the audit of the company's financial report. So I'll now turn to my meeting address. It's a great honor to address my first Annual General Meeting as your Chairman. I've been in the role of Chairman for 9 months, but I've been on your board now for around 3 years. In that time, I visited operations in every state and territory in which Aurizon operates, engaging with customers and our people in remote and regional locations. I've had the privilege to watch a rise and grow and consolidate into its position as 1 of Australia's preeminent transport companies. In this past year, that growth has been reflected in strong operating and financial performance. Andrew will cover this in more detail, but I want to acknowledge, firstly, underlying earnings before interest, tax, depreciation and amortization or growing 9%, earnings per share up 29% and dividends up over 45% at $0.23 per share. This is a strong result for shareholders, higher earnings and a materially higher dividend, supported by strong cash generation and disciplined capital management program. Today, I would like to discuss 3 broader themes that are tied to our future growth and the contribution we can make to the economic success of Australia. Firstly, turning to our aspiration. We have a team of more than 6,000 employees, a fleet of more than 700 locomotives, 15,000 wagons and more than 5,000 kilometers of rail infrastructure. Each year, we transport hundreds of millions of tons of bulk commodities and containerized freight connecting our customers, miners, primary producers and industry with domestic and international markets. While the figures were impressive, they don't show what lies beneath the surface in terms of who we are and what we want to be, a company driven by values and where people know safe and choose safe, member of the community and a key enabler of Australia's export prosperity. We already have many of these fundamentals in place, but we also know that there's more work to do to maintain and enhance this position. So I want to turn now to how we deliver. Our values of safety, people, integrity, customer and excellence underlie everything, what we do and how we do it. Safety remains our top priority. Our efforts to support a goal of protecting ourselves each other in the communities in which we operate. We do this through implementing systems and processes, understanding and controlling safety hazards and engaging to ensure frontline safety discipline. Discipline is always key, also key, the key to our operating and financial success. For example, management of capital that strikes a balance between maintaining a healthy credit rating and our credit rating is investment grade, reinvesting back into the business and returning capital to shareholders while also allowing flexibility to invest in growth options prudently. We can see this in the past year through the strong returns to shareholders via buybacks and dividends. Indeed, our capital allocation framework has delivered over the last 4 years, $1.8 billion or around 25% of our market capitalization back to you, our shareholders. We can also see it through our BHP copper contract in South Australia, 1 of the largest road to rail conversions ever in Australia. Such a landmark contract could only be 1 because of our long sighted acquisition -- of the long side acquisition of the Takoradi Raine and the subsequent Birth 29 acquisition in Adelaide, plus our willingness and ability to invest, including a new terminal in Pima. This is smart reinvestment of capital back into the business to support organic growth. Similarly, the recently announced expansion of our containerized freight offering to support motor vehicle distribution also builds on this investment and capitalize on our national footprint of track infrastructure, rolling stock and terminals. This service offering is underpinned by new contracts with global suppliers, NYK and CEVA Logistics, that we'll see tens of thousands of cars delivered via cross-country rail for sale in metropolitan and regional Australia. These are all organic opportunities well aligned to what we already do within a framework that also allows for future shareholder value creation through acquisitions or joint ventures if they make sense and deliver value for money, underpinned by an objective of growing the business and optimizing value to you, our shareholders. And ultimately, as your Board and management team and our employees nationwide that drive this operating and financial discipline. They also ensure that we continue to put our customers first and at the everything -- at the heart of everything we do, working hard every day to make sure they are responsive and deliver safely and reliably, using capability and innovation to constantly strive for greater efficiency and continuous improvement, all with the aim of working to ensure we can be our customers' first choice when it comes to transport solutions and because ultimately, we know that their success, our customer success is our success. That is why we continue to invest in the people that deliver our employees with an employee value proposition providing competitive benefits, learning and career opportunities and a team culture that is inclusive and innovative. I'm especially proud of the opportunities we provide to the 7% of our employees who are indigenous, well above the national average, and the 23% of our people who are women with more to do on both fronts. Another key pillar of our employee value proposition developed by our employees and for our employees is the impact we can make on Australian communities. Around 85% of our workforce are based in rural and regional Australia. And we support our people where they live and work through employment, procurement and investment. We help sustain the vibrancy and social fabric of these communities. In the past year alone, we've supported 45 different community projects through the Aurizon Community Giving Fund. These funds were spent on initiatives such as Literacy kits to support children and accommodation, specialized blood warming medical equipment and community-based first aid training. Finally, we respect our people and communities through strong environmental and cultural heritage compliance and initiatives to reduce our carbon emissions as were detailed in our sustainability report. By delivering on these building blocks, we can ensure that Aurizon continues to perform well, remains an active value member of our communities and continues to be disciplined in directing our capital and capability into opportunities that deliver the greatest value to our customers and shareholders. Turning now to our contribution to the Australian economy. I'm proud not only of what our company does, but also the significant contribution we make to the Australian economy. We are leveraged to growing global demand for Australian bulk commodities driven by domestic growth, infrastructure development, energy generation and storage as well as food consumption. We are the largest transporter of coal and non Pilbara iron ore in Australia as well as grain, copper, nickel, bauxite and rare earths. And as the economy grows, so does the demand for our containerized freight business with everything from supermarket goods and consumer products to industrial inputs moving on our trains. We are privileged to hold this unique position in the center of the supply chain that delivers within Australia and to the world. So turning finally to an outlook and a conclusion. As you would have seen, we have great aspirations for Aurizon in what we do and how we do it. I do not, however, want to underestimate some of the headwinds we face. For example, cost inflation is real. Geopolitical troubles continue to challenge global fuel prices and difficulties in our customers getting major projects approved has delayed some of our growth initiatives. We have though the people and plans to navigate these challenges, and I would like to thank Andrew and his executive team who [indiscernible] in July. They are already proving to be impactful contributors and you'll hear for them later in respect of their reelection. Most importantly, though, I would like to acknowledge you, our shareholders, for your continued support. Thank you for that. And I'll now pass over to Andrew.

Thank you, Tim. Good afternoon, ladies and gentlemen. This has been a year of strong delivery for Aurizon. We have strengthened the performance of the business, progressed key strategic priorities and continue to position the company for long-term value creation in the freight and logistics markets that are critical to Australia's economy. Our focus has remained clear to operate safely, serve our customers well invest with discipline and build a more resilient, diversified and competitive horizon. The results we delivered in the financial year reflect the capability of our people, the strength of our assets and the progress we're making in executing that strategy. Today, I will take you through our safety performance, our financial and operational results and the progress we are making across our business units and growth initiatives. Most importantly, I will outline how these elements come together to support our ambition to deliver sustainable returns for shareholders while helping transport the goods commodities and products that keep Australia moving. I want to begin, as we always should, with safety. As Tim indicated, protecting our people and the communities in which we operate remains our most important responsibility. We're committed to continuous improvement and remain focused on critical controls leadership visibility and promoting a culture where safety is everyone's responsibility. Last financial year, it was pleasing to see a continued reduction in our serious injury and fatality frequency rate. These are incidents that don't occur often, but when they do, they can have high consequence. Our total recordable injury rate increased but pleasingly, was lower in the second half compared to the first half of the year. In addition to operational safety performance, we continue to invest in our level crossing education and awareness campaign. This year, we launched a new animated approach, reinforcing with road users, the need to always be safe when they approach a level crossing and to respect the sign every time. It builds on the success of our existing campaign, taking a fresh creative approach to ensure people stay engaged with the importance of this safety message. The campaign focuses on people's everyday choices and the consequences of fleeting moments of distraction. It connects the brief inconvenience of stopping at a level crossing with the moments that matter most, reinforcing that what's ahead is worth the wait. Weekend games with friends, with the wait for you, your loved ones and for our train drivers, because it's not just the moment you're rushing to that matter. It's every moment still to come, respect design every time a safety message from Aurizon. Turning from safety to overall performance. The financial year also demonstrated the strength and the resilience of the Aurizon business. This year, we delivered strong financial outcomes with positive contributions from all of our business units, resulting in improved earnings and shareholder returns as well as continued progress against our strategic objectives. In summary, Underlying earnings before interest, tax, depreciation and amortization, was up 9% to $1.724 billion on the back of higher volumes in bulk, containerized freight and to network and flat volumes in coal. Underlying net profit after tax was up 24% to $433 million. And full year dividends for shareholders were up over 45% and to $0.23 per share. Let me now turn to the business units in more detail, starting with coal. Coal delivered another solid result underpinned by operational discipline strong asset utilization and productivity improvements contributing significantly to our overall group earnings and cash flow. We made considerable progress on recontracting a number of our coal customers with more than 1/4 of the portfolio recontracted since July 2025, pushing out the length of these contracts to the mid- to late 2030s. This includes major Central Queensland customers, BMA and Whitehaven. The new BMA contract represents 100% of the tonnes tendered for recontracting and services their 5 coking coal mines in the Bowen Basin for to 12 years. While Whitehaven is a new 10-year contract for the haulage of coal from their Central Queensland mines of Blackwater and Dania. Alongside Coal, our network business remains central to the reliability and long-term value of our integrated model and continued to perform strongly. Importantly, we also made good progress with UT5. This is the latest undertaking for the Central Queensland coal network and getting it in place will provide the certainty of an access and pricing framework for 10 years. With support from the majority of our customers, we submitted a draft to the Queensland Competition Authority in December. And in June, the QCA published a draft decision supporting all the key elements. Earlier in the year, we also completed the CQCN network ownership structure review. The review supported by external advisers assessed a broad range of whole of business and minority structure options. We determined that retaining 100% ownership of network, Horizons above and below rail integrated model remain the option that best delivers long-term value for our shareholders. Beyond our established coal and network businesses, bulk continues to be an important source of growth and diversification. Bulk achieved a record result and continues to be a significant growth opportunity for Aurizon. Revenue was driven by growth in base metals, grain and West Australian iron ore. We undertook first haulage of ore for Yilgarn iron in Western Australia and AG River Energy in the Northern Territory. As Tim mentioned, we also commenced haulage for BHP copper in South Australia. This contract ships copper concentrate and cathode from road to rail between Pemba and Port Adelaide, replacing an estimated 13 million kilometers of truck movements annually. This will deliver enormous benefits in helping reduce emissions, congestion on roads and safety risk for motorists. It also illustrates the role that Aurizon and rail can play in enabling low carbon transport solutions and supporting Australia in the transition to a more sustainable economy. The same theme of disciplined growth is also evident in containerized freight, where we are building scale in a market significant long-term potential. As a result of continued cost growth, we expect our container strip business to achieve EBITDA breakeven this financial year after only standing up the new business a few years ago. We have a long-term cornerstone contract with TGE, our family Toll Global Express, 1 of Australia's largest freight and logistics companies, providing containerized rail linehaul services connecting the state capitals of Perth, Adela, Melbourne, Sydney and Brisbane. We've also seen strong growth through our customers of more than 175% in the past financial year. Strong growth through other customers of more than 1 in the last financial year. Late last month, both Tim and I attended the opening of our new $60 million Cuda terminal in Perth. This new terminal is designed to accommodate full length, double-stacked interstate freight trains of up to 1.8 kilometers in length, providing us with the scale to support growing customer demand. Our existing Perth terminal at Faresfield will be repurposed to support rail services for our national motor vehicle distribution network, as well as utilizing our extensive freight network across Australia, our expansion into the car distribution market also advances our ambition to establish a rail-based land bridge linking Asia through the Port of Darwin to the Southern and Eastern markets. We see the potential for our containerized freight business and land bridging to reshape how freight moves across Australia, both through imports and domestic movements. As modem vehicle volumes build, we will introduce innovative, purpose-built auto wagons to support the next phase with the fleet currently in production. These types of wagons have never been used in Australia and will enable more efficient high-capacity movement of vehicles across long distances. We first outlined our lanbraging ambitions after we acquired the Darwin to Cacula railway in 2022, identifying the opportunity to connect shorter shipping routes in Darwin with efficient inland rail transport. With vehicle movements already underway and customer demands building, it is exciting to see the lambraging model now moving from concept delivery. These results give us confidence, but they also -- they have also been delivered in an operating environment that continues to present challenges as well as opportunities. More broadly, we delivered this result in a complex operating environment with geopolitical uncertainty, fuel volatility, shift in commodity markets and inflationary pressures continuing to test supply chains and cost basis. Our response remains disciplined and consistent manage the controllables stay close to customers and continue to deliver safe, reliable and competitive services. At the same time, the transition to lower carbon supply chains represents a real opportunity for Aurizon. Rail already offers significant environmental advantages over road, and we will continue to work with customers and governments to improve fleet efficiency, reduce their operational emissions and support practical decarbonization across Australia's freight task. We're proud of the role that Aurizon plays in moving the goods, commodities and products that support our customers, regional communities and the broader Australian economy. With our national footprint, strategic infrastructure and experienced workforce, we're well placed to manage challenges, capture opportunities and continue building a stronger horizon. Bringing all this together, let me close with our outlook and acknowledgments. As we look ahead, Aurizon is well positioned with momentum across the business, a clear strategy and disciplined plans to keep delivering value for shareholders. We reaffirm the guidance provided in August with group underlying EBITDA expected to be in the range of $1.725 billion to $1.775 billion and a full year dividend of $0.23 to $0.24 per share. Our priorities remain clear operate safely, optimize coal and network, grow bulk and build a competitive national containerized freight market. I sincerely thank our people across horizon for their commitment and professionalism, their work underpins our results and our confidence in the opportunities ahead. For shareholders, our commitment is clear: disciplined execution, disciplined investment and a stronger, more diversified Aurizon that can deliver sustainable value over the long term. Thank you for your continued support, and I will now pass back to Tim.

Thank you, Andrew. We now come to the formal business of the meeting. There are 2 directors seeking election today, Amanda McMillan and Andrew Adam, and there are 2 directors standing for reelection today, Samantha Tough and myself. I'm delighted to hand over now to Amanda, who will say a few words, followed by Andrew, and then Samantha and I'll finish at the end.

Good afternoon. And thank you, Tim. I'm delighted to have joined the Aurizon team in January this year and to be sanding now for my first director election. Since joining, I've spent time with the management team, I have heard from some of our key customers and have been in the field with our frontline teams and have been struck by the quality of the people I met, their passion for the business, the commercial partnerships they've developed with customers and their commitment to performance improvement and growth to drive shareholder returns, balanced always with huge regard for the communities that surround and support the business. There's much still to do. Challenge sits alongside the many opportunities but 10 months in, I'm more excited than ever to play my part. Much of my career has been spent in aviation and regulated infrastructure, sectors that like rail are capital intensive, tightly regulated and depend on getting operational and safety performance right every single day. And as a finance professional, commerciality has been front and center throughout my career, seeking to grow responsibly, deliver for customers and ultimately build a business shareholders can be proud of. As a former CEO, I have deep hands on experience and a track record of delivering strategic change, commercial success and operational excellence, often undebated public and regulatory scrutiny. Together with my investment management and Board experience at Macquarie Asset Management, I hope to bring insight and challenge to all that I do at Aurizon. At Tim's request, I've joined the Safety, Health and Environment Committee and the audience, Governance and Risk Management Committee, areas I have a deep interest in and a commitment to lifelong learning. And I look forward to working with Sarah and Marcela, the chairs of those committees. Aurizon is balancing strong performance in its core coal and rail freight business today, against the infrastructure, investment and diversification needed for the future. And that's precisely the balance I've spent my career working on. I'm fully committed to this Board, and I'm able to governize in the time the role deserves. As a fellow shareholder, a proud adopted Australian, I would be delighted to have your support today for my election as a director. Thank you. I'll now hand over to Andrew Adams.

Good afternoon, everyone. And thank you, Chairman, and thank you Amanda. I was delighted earlier this year when asked to join the Board of Verizon. My career commenced in the coal industry. where I spent over a decade in the executive management, including industrial relations. For the past 27 years, my executive leadership experience within Australia and overseas is focused on end-to-end supply chain management, including ocean container terminals, bulk ports, intermodal rail terminals, containerized and bulk rail freight, road transport and freight forwarding. I was CEO of DP World Australia for 3 years. It was 1 of the Australia's largest container terminal operators and supply chain businesses with terminals in Brisbane, Sydney, Melbourne and Freemantle, handling approximately 40% of Australia's container trade. I was also President Freight for Pacific National for 6 years, which also managed the intermodal business for Pacific National. It also gave me a practical understanding of the Australian rail freight industry and also Horizon. I'm currently a Non-Executive Director of New South Wales Ports, which owns the Port Botany and also Port Kembla and I'm also independent Chair of Ares Rail. In addition to my executive experience, I'm a graduate of the Australian Institute of Company Directors, and I held a Bachelor of Economics at the University of New counsel. As Amanda pointed out, it's exciting times within Horizon and Horizon has many fantastic and important transformation activities that are important for the business today and also its future. And given my experience, I'm well placed to contribute to the company's strategic direction. I can also confirm that I have the necessary time to devote to this role, which includes being a member of the Safety and Health and Environment Committee as well as the Arden Risk Committee. And in that time, since I joined the Board in July, I've met with the management team and visited some of the operations, the impressive operations in South Australia. These meetings and visits are important to gaining valuable insights into the achievements of and the challenges faced by the business, and I look forward to continuing with them. I thank my fellow directors for recommending me for appointments and would be grateful if shareholders support my election today. I will now hand over to Samantha Tough.

Thank you, Andrew. It's a good change of batten, isn't it? I believe I'm the third and the second last 1 in this series. But good afternoon, and thank you for considering my reelection to the Board of Horizon. To date, I've been the Aurizon Board for 3 years and part of those responsibilities. I also chair the People and Remuneration Committee, a role I have held for over 10 years in a range of organizations. In that committee, we oversee the important workforce strategies and the increased focus we're finding on the complex industrial landscape. I'm also a Board of the -- member of the Aurizon Network Board and with all of that, and in that time, I remain committed to and captured by the quality of the people in the horizon and the value of the business. With Western Australia being an important strategic opportunity for Aurizon's growth, I'm pleased to be based in Western Australia and have long-standing relationships due to my own professional career with some of our key industry players and the state government. We -- as you heard from Andrew and from Tim, we recently opened the $60 million state of the freight terminal in Kewdale, we have the Forest Field logistics site supporting our national motor vehicle distribution network. And we also have the partnership with our coal [indiscernible] battery electric tender hybrid locomotive. I generally have a background in a range of sectors. They include energy, resources, infrastructure, agriculture and logistics and they include Woodside, Synergy, CBH and various engineering companies. I currently chair the -- an energy utility in Western Australia called Horizon Power which provides energy to over 120 sites in regional Western Australia. At the Horizon and Aurizon aside from having a phonetically challenging name to also share an important objective, though, of contributing to regional Australia and operating a business in a regulated environment. They share challenges of retaining and managing the safety of a regional workforce in the regions, and they also share the challenge of contracting and supporting local procurement practices in the regions. Doing these things well is rewarding for regional Australia, but also for the prosperity of Aurizon, where 85% of our workforce are in the regions. The transport sector, as many of you know, I'm sure, is an important sector for Australia contributing over 80% -- 80%, that would be significant, sorry, 8% of GDP. The transport sector is also a strategic priority for another organization I'm involved with called the Clean Energy Finance Corporation, or the CFC, and that is Australia's $35 billion Green Bank in which I've been involved with for 9 years. The CFC shows how capital is investing in large-scale infrastructure and in the transport sector. And as Andrew outlined, and I'm pleased to say, Aurizon leads the way in the long haul freight sector in its approach to sustainability in its investment in battery electric locomotives, battery electric tenders and also importantly, a very effective efficiency value driver, we call Ox Mountain, of which Aurizon owns a majority position and of which I was 1 of the founding Board members. So with that background, and I would be delighted to continue with Aurizon I also confirm that I have the time and I am committed to the create value for shareholders. Thank you for your endorsement. I also now hand over to Tim.

Thank you, Sam. Ladies and gentlemen, you've already heard rather a lot from me, so I'll be quite brief as I talk to my reelection. I've got great confidence in the potential ahead for Aurizon. And with your support, I'm looking forward to working for another 3-year term to shape and realize this opportunity. You would have seen from my background that I bring 3 key skills to bear as part of this team generating shareholder value. Firstly, financial skills as a chartered accountant. Secondly, 25 years as an investment banker where I learn what catalyzes value and share price performance. And finally, government skills gained from 3 years working in a senior role with a very senior Federal Capital Minister. As Chairman, my role is to build a board that challenges management constructively and then backs them decisively. My background, banking insight into what creates value, financial rigor and experience in government means that I understand the hard questions to ask, the power of building consensus and when to commit. I place great importance on making sure every director's voice and perspective is heard, especially when they descent. So I'm delighted to be a fellow shareholder with you in Horizon and would appreciate your support. So thank you very much. So ladies and gentlemen, we're going to now move on to the voting for the items and the relevant Q&A associated with that. And I'll now run through some housekeeping in relation to voting questions. Attendees here in person have a colored admission card informing you about your individual right to vote and ask questions today. For those with white cards, your voting paper and instructions are on the reverse side of that card. Voting cards will be collected at the end of the meeting by the returning officer and his colleagues. All eligible shareholders have the opportunity to vote in advance of the meeting. Subject to the voting exclusions detailed in the Notice of Meeting for Items 2, 4 and 5 and shareholders having marked the appropriate box, any open proxies will be voted in favor of each resolution. For those who need to leave early, you can cast your vote online at any time while voting remains open or complete your voting card and hand it to a Computershare representative as you leave the room for those here physically. For those online, there is a polling icon where you can cast your vote. You can change your vote at any time until voting closes. Voting will be conducted by way of a poll Lewis Brimelow of Computershare is appointed the returning Officer. Voting is now open until the close of the meeting. Shareholders or proxy intending in person who wish to ask a question should raise your hand with your white or blue shareholder of mission card and a microphone will be brought to you. Please state your name and any organization that you represent and then ask your question. Online attendees, can submit questions at any time by selecting the Q&A icon on your device to ask a question verbally by following the instructions below the webcast window. Questions that have been received from shareholders in advance of the meeting will also be addressed. And for efficiency, any questions addressing the same or substantially similar topics can be consolidated. So I'll now move to questions. I mean, today, as I said at the beginning, we intend to take questions on all items of business. So there's several resolutions, financial reports, remuneration reports, director reelections, grander performance rights, et cetera. So we're going to do all the questions in 1 whole road. And then we will move thereafter to show the proxy. And when we do it, but then we'll put up each resolution and run through them and show you the proxy votes and then we'll be able to go from there. So we're now moving to questions, and I'd ask if there are any questions on the floor. Yes sir.

The rail lines in WA, will that have any impact on the business and also any below rail assets that you own over there, will you be duly compensated?

So the question about taking ownership of the railway lines within Western Australia back in the government ownership. I've been on the record as saying that the deterioration in volume in Western Australia on rail over the last decade has been quite substantial. And that I think that the current moves by the government recognized that issue and would be a net positive to Western Australia. As far as Aurizon is concerned, Aurizon doesn't only the railway track in Western Australia. So it doesn't have any primary impact other than any move that increases the amount of volume that goes by train would be beneficial to Horizon as an above rail operator.

Yes, sir.

Good afternoon. George Barber, Director of Fairport Limited shareholder. Earlier this year, you had some rail disruption in Queensland with rail distortion, which had to be repaired and obviously spend a bit of money. Was the rails put back to the same standard? Or was there a change in the standard to hopefully eliminate that problem in the future?

Andrew?

There's been a number of issues with rail distortion. So I'm not particularly focusing on the particular 1 that you raised. When we get issues like that and if it is pertaining to the Central Queensland coal network and not QR track, we do a repair to our standard, that is well established. That standard is reviewed from time to time against any improvements in engineering considerations, metallurgy, we made from time to time. Also learned from previous mistakes, and we apply those learnings to improving our standards and then we actually change the standard, and we'll fix things when necessary to a new standard over time.

Thanks, sir. Any other questions in the room? Yes, ma'am.

Andrew, first of all, I'd just like to say thank you for your leadership, your commitment to staying power when the market was so negative on the 1 rail purchase and we're really going to see so much come through, I'm sure, in productivity gains over the next few years. So thank you for that and for the people skills. But just a question, could you just give us a little bit more, please, on the battery driving locomotives and how far along with that. And also with GE, how much -- how many of those customers do you think you have progressed on Torero road? All of that I see is really important because emissions, of course, at 30% of them come from transport?

Well, thank you, and thank you very much for your comments before your question. So there's 2 related battery electric activities that are being undertaken by Aurizon. The first 1 is the building of the battery electric loco, which are a refurbishment of a diesel electric loco to a battery electric, that is being done at Red Bank just Western Brisbane. That has reached the stage of having been constructed. It's entered into, well, the final stages of construction before commissioning -- the intention then is to take it to Western Australia and start conducting trials and then ultimately, operation with South32 early in the next calendar year. So it's getting close. The second battery electric activity is the battery electric tender. That project started a little later than the battery electric locomotive. The there's 2 broadly 2 components to it. There is the refurbishment of an old diesel electric to make it able to work with and interact with the actual battery electric tender behind it. That work is well advanced, that refurbishment. The battery electric tender is finishing engineering and all the safety testing that has to go on because essentially a battery electric tender is a large wagon with a lot of batteries and energy on board. So it's -- we've got to manage the construction of that well. So that work is just about to enter into the construction phase. Those 2 items will be taken again to Western Australia and will be put into work in the 28 calendar year with our co. So we're moving through those prototypes well. As far as the reference to road to rail, the predominant road to rail activity hasn't been with the containerized freight part of the business as yet. The biggest activity on road to rail was with BHP copper in South Australia, where we established a freighter service from Adelaide to a new constructed depot terminal at a place called Pemba, some 500 kilometers northwest of of Adelaide and in the centroid that allowed trucks to go from that terminal and short haul to a number of the BHP mining operations. So that activity has taken a substantial amount of road haulage. I'll haulage away from road and moved it to rail. The figures I've seen is some 13 million kilometers of truck haulage has gone to rail, and that's a 5 services a week running 500 kilometers. So between the Pemba depot, you get as a result of that, not only to your point in your question, much lower emissions, but there's significantly less congestion on the road. And I've witnessed that myself by driving the road, but I've also had that feedback generally. It's also safer. And then, of course, you said, lower emissions. That's the single largest thing that we've done in the past year. Looking forward, we've been part of encouraging and I applaud the federal government for putting in place a $55 million incentive called a track incentive, and that is designed to encourage freight forwarders to put containers on the outtake containers from road and put them on to trains. We have put in applications to that process with the intention of the -- getting quite a significant boost to our freight business from that specific road-to-rail conversion. That came about because of the Iran war, the shortage of diesel and the obvious benefit recognized by the federal government that freight moved by train is -- has 5x the less -- roughly 5x less consumption of diesel that freight moved on road. So it's targeted powered very much by the most recent issues to do with the scarcity of and the price of diesel. And I see that as being something that will be quite supportive going forward. There are many other activities, but those are probably the 2 that I print your attention. Thank you.

Thank you, Andrew. Are there any other questions here in the room? Yes, sir.

Thanks, Mr. Chairman. Ken Ryan is my name just a small shareholder and be a member of the company now since today of QR National. So I know a little bit about you. I'm pleased to come out in the rain today to support you once again. Just a couple of little questions. It appears that the northern extension of the inland rail project, the 1 that at all the publicity that's been placed in mothballs. I wonder does that have any impact on the long-term outlook for Aurizon, this maybe presents an opportunity. That's my first question. The other little question. The Wyler steel works I see is in the media once again. I wonder does why were rising any money. And if it does shut down completely, would there be any direct or indirect impact on the company?

Sure. Well, I might talk first about the inland rail and then Andrew might chat about Wyler. So the inland rail was stopped between -- was paused between parks and Brisbane. I emphasize the word pause because the rail corridor has been retained. But -- and it was paused because there was very great uncertainty about the cost and about the other aspects of the engineering of that line. What the government did do though, was to reallocate some of the billions of dollars that had been allocated to inland rail and they allocated an additional $1.75 billion towards track maintenance and upgrading of the track of the other ARTC network. They also put in place the $55 million track initiative that Andrew spoke about earlier and that was the top of $1 billion that was allocated to rail improvement in the 2025 budget. So when we had a rise and look at that, we do feel that the money allocated to improve the ARTC track is money that we'll have a much shorter and more direct impact on arisen our efficiency and our profitability, and we support that -- the bad weather this year, for example, did highlight some very significant washouts in the sort of Adelaide in the South Australia area that impacted our business in particular, Georgia's business for quite a long time. So long, long term, we believe it in and rail. It will be the right thing for Australia. But in the very short term, the pause and the reallocation of funds to network improvement is a good thing for Aurizon. Andrew, you might had about Wayala?

Yes, sure. So with Wayala, I think there's 2 things to think about when it comes to Wayala from a rail perspective. There's work that we had provided to Wayala to move iron ore from the iron ore mines near the wireless to works. And then we operated rail equipment with inside the Steelworks wet. So we supported the steelmaking process. The iron ore mines ceased scaled down dramatically over the last year or 2 and ceased operations. The steelmaking there's been an announcement that the furnace will be turned off in the for some time. There's no clarity about and no public statements about the money that's been involved in those decisions. From an risen point of view, no funds are owed to us by how we dealt with that issue in prior years from in prior years. There is, because of the fires, the most recent decision to shut down the furnaces, there is some cost associated with the small number of employees that are left in yarn sadly, we have to find alternative employment for or should they determine to leave the company, we have to deal with that issue. But that is very, very small now. The operations some significant changes have happened in past years and the very small change that would occur financially with that would not affect our guidance for the freight business.

Thanks, sir. Are there any other questions in the room? For a change, we might go and see if there are any online questions, sir.

Thanks very much, Tim. A number of questions that have been submitted ahead of the meeting and online during this meeting itself. First questions are from Ms. Natasha Lee. There's been a large increase in lease liabilities, which reflect the present value of these liabilities. Can you please advise what the growth trajectory is for these future lease liabilities?

Sure. We'll start by putting the lease liabilities in context. I mean, Aurizon has about $5.2 billion of of debt from various sources. And at the last balance date, the value of lease liabilities was $283 million. So it's a small financial exposure in the context of a -- the primary reason for the growth in lease liabilities is because we have been growing our terminal business and most of those terminals are leased. We are always open to owning terminals and other assets. We're also open to leasing them. It depends on the economic equation, but we aren't expecting there to be a very substantial blowout in leases in the future.