Aurizon Holdings Limited (AZJ) Earnings Call Transcript

Good afternoon. I'm James Coe, Head of Investor Relations, and welcome to the Aurizon Investor Day. Welcome to those that have traveled today to be with us here in Darwin and for those following online. Some housekeeping before we begin. We have 2 emergency exits here on either side of the lifts that you passed on the way in, and the bathrooms are on the far side of this floor again on the other side of the lifts. For those in the room, now is the opportunity to check your phone is on silent mode prior to the presentations beginning. And a reminder to those on the webcast that the time on the agenda that we'll see shortly is in Australian Central Standard Time. Today's session will be recorded and subsequently available on the Aurizon website. The opportunity to ask questions for those in the room will be at the very end of the session today, where all members of the Aurizon group executive team will be available to take questions. I draw everyone's attention to Slide 2 and Slide 3 in the pack. And I'll take -- ask you to take the time to read, given the substantive information that is in the pack that will be presented today. Now I'd like to welcome Elias are from the Clontarf Foundation for the acknowledgment of country.

Afternoon all. My name is Elias Penman, and I'm current year 10 student at Palmerston College, and I have been part of the Palmerston Clontarf Academy for 4 years. I would like to acknowledge that this event is being held on the traditional lands of the L. A. Care people and pay my respects to the elders, past, present and emerging. I would like to extend that I'd like to extend that respect to all aboriginal people here in attendance. Thank you, and enjoy your afternoon.

Thanks very much, Elias. Not many organizations in the country that have an operational footprint of that of Aurizon, but the Clontarf Foundation is very much of that -- of a similar footprint with 150 academies around the country. We've partnered with Clontarf for almost 10 years now, including at our local Burma base here in Darwin. I now welcome Matt Jones, General Manager of Bulk Central, for a safety share .

Thanks, James. So I've got a safety share today on level crossing safety. And I suppose I wanted to share an EMS report that occurred in Bulk Central, just a couple of months after the acquisition went through and talk about our response, I suppose, to the incident. So essentially, at our Ivanhoe Crossing, which is about 300 kilometers south of where we are today in Darwin, we had a heavy vehicle passover level crossing. And ultimately, our trance group reported that as an EMS. So we went and conducted an investigation to start with. And as a result of that investigation, ordinarily, you think, well, look, there's not too much we can do about these things because public behavior is one of the major contributors for the EMS at level crossings. However, there are actually a number of things we can do, fairly simple. And in this instance, I'd like to share those with you. So following the investigation, we ultimately reduced the track speed on that level crossing, so from 110 down to 60 kilometers an hour. We were able to level out the road access and exit to the level crossing so that the trucks that pass over that crossing don't start going uphill. We were able to clear the siting distances in both directions by removing vegetation and doing some grading work. And perhaps most significantly, our Northern Territory Operations Manager was able to travel to the nearby quarry, meet with the management and the employees at the quarry and remind them of their at-risk behaviors and their obligations as professional drivers. So for this broader audience, there's stuff we can all do here, too, and I'd encourage everyone to promote level crossing awareness and safe behaviors with your family and friends. And at Aurizon, we do exactly the same with all of our employees. And in fact, we partner with the Track Safe Australia organization, who in early August each year run rail safety week. So in just a couple of weeks, you'll probably all see in various parts of the media, the TV, radio, print, social media, a significant campaign on level crossing safety across the country. And I'd very much suggest everyone here, when you do see some of that promotional material, use that as the prompt to go and talk to your family and friends and encourage safe behaviors. And when I talk about safe behaviors, probably the top 3 things would be paying attention, both left and right before you went to a crossing, don't exceed the speed limit when approaching a level crossing and absolutely don't enter the crossing when the red lights are flashing. So that's my key safety message for everyone, and thanks for your time.

Thanks, Matt. Joining us today is the group executive team, as shown on this slide. And it may be the first time many of you are meeting Anna Dartnell and Cat Peppler, each having been appointed to the group executive team earlier on this year. Perhaps also Gareth Long, who has moved from our Group Executive Corporate to our Group Executive Containerized Freight. Now on that, I'll hand over to Andrew Harding, Managing Director and CEO.

Thanks, James. So good afternoon, and a warm welcome to those who have joined us here in Darwin and those following us on the webcast. The agenda today starts with an update of our strategic aims, and we will also look back on our performance since our Investor Day in Newcastle 2 years ago. In recognition of the investment made in Containerized Freight and Bulk, we'll then have presentations by Gareth and Anna on their respective business units. We'll round out the day with George presenting our approach to capital allocation and fleet. I'll start with the key messages we're sharing today. Aurizon has continued to build upon our position as Australia's leading integrated rail provider. Following the acquisition of One Rail, we have an operational footprint that covers each state in Mainland Australia and, of course, the Northern Territory where we meet today. We have the largest fleet of locomotives and wagons in Australia, enabling us to deploy capacity to support our customers' growth ambitions. Our network and coal businesses continue to be resilient and consistently generate free cash flow, enabling over $5 billion of returns to our investors since 2016. Following on from the introduction at our 2021 Investor Day, today, we are strengthening our bulk growth aspirations, driven by a larger addressable market and more importantly, a greater market share position on the back of our One Rail acquisition. Finally, and why we have invited everyone to Darwin, we introduced our aspirations for containerized freight, including a land-bridging concept. Darwin's proximity to Asia, combined with Aurizon's rail infrastructure, make it a logical land bridge with links to major capital cities, a journey that we estimate will save up to 7 days for freight moving from Shanghai to Melbourne compared to the traditional shipping method. We look forward to discussing these themes in more detail throughout the presentation. Before we begin and ahead of our results next month, I'll take this opportunity to briefly address the recently completed financial year. As noted at our first half results in February, prolonged wet weather has had a significant impact on our customers and supply chains. A third-party derailment in Central Queensland in late January also saw the Blackwater corridor closed for almost 2 weeks. In addition, Aurizon has not been immune from labor shortages with train drivers and electricians in short supply, which at times has impacted our operations. Full year EBITDA will be at the bottom of the range provided at the first half results with a continuation of some of the challenging operating conditions from first half continuing into the March quarter. The One Rail acquisition and divestment of East Coast rail took place during the year, and we've achieved synergies aligned with our initial projections. Total CapEx is expected to be within the guidance of $750 million to $800 million. As noted on this slide, we saw an uptick in demand in the June quarter, providing confidence going into FY '24. We're guiding to a step up in earnings in FY '24 with EBITDA of $1.59 billion to $1.68 billion. Network is supported by an uplift in the regulatory asset base to $6.2 billion as a result of actual inflation being in excess of projected inflation and the preliminary reset WACC of 8.18% applying from 1 July, up from 6.3% in the year prior. Projected volumes for network align with the regulatory assumption of 208 million tonnes. A reminder that any revenue cap amounts from FY '23 will be recovered in FY '25, and we will provide further information about this at our full year results. Coal revenue and earnings are supported by the expectation of a recovery in volumes in addition to CPI-linked contracts. Strong steel production from India and a resumption of coal trade with China are supportive of demand. For Australian supply, we expect to see production during the year from mines such as Olive Downs, Wilkie Creek, Malabar and New Acland. Bulk revenue and earnings are supported by the expectation of higher volumes and activity in addition to the full year contribution of Bulk Central. Finally, to containerized freight, which for this year will be reported in Other. We're expecting EBITDA to be broadly neutral as we ramp up to the initial schedule of 7 services a week, equivalent to around 200,000 TEUs per annum. As per our normal practice, we do not assume any material disruptions to commodity supply chains such as extreme or prolonged weather or major derailments. Moving to a brief overview of Aurizon and our strategic aims. Aurizon is the largest rail-based transport business in Australia. Our purpose is to grow regional Australia by delivering bulk commodities to the world. Each year, we transport around 250 million tonnes of product, connecting miners, primary producers and industry with international and domestic markets. Around half of our earnings and assets are attributable to our network business, which is our regulated infrastructure in Central Queensland. The network connects around 40 mines to 5 export terminals supporting 90% of Australian metallurgical coal export volume needed for steel production. The remainder of our business consists of our coal, bulk and containerized freight operations with a fleet of over 700 locomotives and 15,000 wagons serving commodity exports and critical freight across the country, including into Darwin, where we're meeting today. In response to customers seeking end-to-end solutions, we've also invested in port terminals adjacent to our rail operations in Townsville, Newcastle and most recently, Gladstone. The One Rail acquisition has increased our track infrastructure to over 5,000 kilometers when combined with the CQCN. The site tour tomorrow, we'll visit our terminal at Berrimah and then on to the Port of Darwin, where we hold a stevedoring license. With inflation and interest rates continuing to dominate business pages, I'll quickly cover this impact of the impact this has on Aurizon. For Coal and Bulk, we have revenue protections in place through quarterly or annual CPI escalation in our customer contracts. On the cost side, we have had employee agreements approved or had a positive employee ballot, covering over 85% of our VA employees over the last 18 months, with the most recent agreements being 4% to 5% wage uplifts in year 1 with the following years being tied to CPI with a cap and floor. For Network, we will see an increase in the maximum allowable revenue of $125 million in FY 2024, driven by the reset of the regulated asset base in addition to the uplift in the WACC. Our submission regarding the final WACC reset is due to the regulator at the end of this month, which will update the risk-free rate and the debt risk premium based on observed market data in June. As noted in our ASX release earlier in the month, the risk-free rate was almost 40 basis points higher than the equivalent figure in the preliminary WACC with this flowing through to the final WACC reset. The debt risk premium will be updated as part of our submission. An indicative WACC of 8.57% is shown on this slide, which represents the preliminary WACC and the uplift from the risk-free rate only. Finally, any difference between the final and preliminary WACC for FY '24 will be reflected in a revenue cap adjustment in FY '26. As Australia's largest rail freight operator, we're committed to playing a significant role in the transition to a low-carbon economy. Rail Freight has superior environmental, safety and productivity performance compared with road with 1 train equivalent to 150 trucks, the emissions and safety benefits of rail are clear. Since we published our Climate Strategy and Action plan, we've progressed initiatives such as the reduction of idling through the deployment of advanced ignition systems, the exploration of zero carbon fuels and the deployment of Trip Optimizer technology. We continue to investigate and implement new decarbonization initiatives to reduce our environmental footprint with a view to our net zero commitment by 2050. We recently announced details on our investment to build the first zero emissions capable freight locomotive in Australia. Powered by batteries, it will allow the potential future use of totally renewable energy sources for freight hauls in Australia. This could offer a significant competitive advantage for not only Aurizon, but also Australian industry as exporters in global markets. Australia is well positioned globally regarding resources and production of commodities that the world requires both now and in the decades ahead. Aurizon has a diversified portfolio and a market-leading position. In recent years, we've significantly increased our exposure to non-coal commodities through new contracts with customers such as CBH, Centrex and Tronox in addition to the One Rail acquisition. The investments we're making in standard gauge locomotives and container wagons support the growth opportunities for the bulk business unit. This rolling stock is generally able to be deployed across the nation as we continue to diversify our geographic and commodity exposure. As you can see from this slide, Australia has a great resource base. And I may be biased, but we also have great infrastructure and a strong market position to transport the resources to global markets. At Investor Day in Newcastle in 2021, we articulated the strategy to build on the very stable cash-generative platform of our existing network and coal businesses and drive towards our aspiration of doubling Bulk earnings by 2030. This strategy is largely unchanged today, although we are lifting our aspirations in Bulk, which I'll detail shortly, and have added a new growth stream in containerized freight. The effect is that the share of thermal coal revenue would further reduce in the decade ahead. In February this year, we announced the standup of the containerized freight business, that is enhancing national supply chains. The combination of the central corridor and the full national interstate schedule will provide capacity of up to 350,000 TEUs per annum. Today, we announced a further 100,000 TEUs of capacity from 2025, that includes Stage 1 of our land bridging concept, and we believe can be achieved with minimal incremental CapEx. Beyond this, we have a capacity aspiration of 550,000 to 750,000 TEUs per annum to deliver volumes of around 500,000 TEUs per annum. I'll now provide some more color on land bridging, which we think is an exciting natural extension of the assets and expertise in the containerized freight and bulk businesses. By assets, I refer to our fleet of rolling stock, including flatbed wagons suitable for containerized freight, our national interstate network, terminals and terminal access in major markets and of course, the Tarcoola to Darwin below-rail infrastructure. Let me be clear. Today's announcement is not the delivery of port shuttles but instead the establishment of nationally significant freight supply chain outside of what is currently offered in the market. Turning to the opportunity in more detail. Currently, containerized freight is predominantly shipped to Australia via traditional milk run along major capital city ports. In contrast, Aurizon's proposition is to provide a more direct link and shorter freight delivery times and greater predictability, which reduces operating and inventory costs. On this slide, we show the opportunity that utilizes the Port of Darwin and Aurizon's below rail infrastructure that goes all the way to the wolf at the port. Rather than vessels traveling down the East Coast, potentially with multiple stops to deliver into major ports, a vessel can take a single stop to the most northern port in the country. Containers can then be transferred to rail for subsequent delivery to interstate markets. To get some scale on the containerized freight market, there's around 1 million TEUs transported on interstate rail each year, up to 6 million TEUs on interstate trucking and over 8 million TEUs of throughput at major Australian ports. Our aspirational target is just a fraction of this market, but has the potential to provide a step up in earnings and a further growth platform for the business. This offering is anticipated to be at cost parity on a delivered basis to the East Coast when compared with current shipping methods. Therefore, we will be initially targeting those freight forwarders seeking a solution between transitional sea freight and costly air freight. As many of you would be aware, the land bridging concept was part of the original plans for the Alice Springs to Darwin line when it was constructed 20 years ago. So the idea is not new. But what I did want to share how we revisited and revived this concept following rigorous assessment. In the second half of 2021, we looked at the effectiveness of inland rail going all the way from Gladstone using the [ Mallee ] line. This work confirmed the advantages of operating a land bridging solution from Gladstone South, but the interesting part was that Darwin was determined to be a superior option. This analysis was taking place at the time we're pursuing the acquisition of One Rail. We challenged this analysis robustly, both internally and externally, given the accepted wisdom is that land bridging from Darwin was not competitive. We stood up an internal team to focus on thoroughly analyzing this opportunity. Together with leaders from that team, I visited the best global proxies we could find for Darwin in Prince Rupert Port Piraeus and Gdansk. The starting points for all of these success stories were an underutilized regional port, a delivery time benefit and a long growth runway suitable for staged expansion. It was a compelling case, and it was soon further strengthened. During 2022, we're approached by TGE, who are looking for a more tailored solution for their rail freight requirements. It became obvious quickly that we could leverage the capacity being developed for a national interstate network for a land bridging opportunity. Finally, after learning about the needs of a representative set of customers, we set about developing a phased solution that met the needs of potential customers and the desire to test the idea with a low no-regrets approach. This includes the procurement of 2 harbor cranes at our terminal at the Port of Darwin, equipment that can be used for both containerized bulk and freight. Before I hand over to Gareth, I'll take you through our updated strategic aims. Our highly disciplined network and coal businesses remain resilient and continue to provide a rock-solid foundation to support our aspirations for bulk and containerized freight. We have updated our bulk aspirations driven by an increase in the dated addressable bulk EBITDA market of $1.7 billion, up from $1.6 billion when we presented 2 years ago and a greater aspirational market share of 25% to 30%, up from 20% to 25% 2 years ago and largely attributable to our acquisition of One Rail. As noted already, we're pleased to introduce an aspiration for containerized freight to deliver 500,000 TEUs by 2030, and confident that higher volumes may follow. I'll now pass on to Gareth to talk in more detail about our containerized freight business.

Thank you, Andrew, and good afternoon, and welcome. I'm Gareth Long, the group exec for the newly established Containerized Freight business. Today, I'll build on a little bit more on what Andrew stepped you through and provide some further insight into 3 areas, the first being our Containerized Freight business, the market and why we like it; our performance to date and our outlook going forward; and thirdly, the land-bridge opportunities that lie ahead. But first, I'll spend a little time describing this new business. As the Containerized Freight -- as the group executive for the Containerized Freight business, I have accountability for the strategy and for delivering our growth ambition. Necessarily, that includes building the national capability, managing our commercial arrangements. And importantly, my team has responsibility for customer relations. The operational delivery of the services on a day-to-day basis is performed by Anna's team, given the existing capabilities they have and the synergies that we can capture. In terms of our operation, we announced back in February with the award of the TGE contract that we would commit to installing a national interstate capacity of some 200,000 TEU. The 11-year TGE contract connects Perth, Adelaide, Melbourne, Sydney and Brisbane. Upon standing up full operations in April 2024, this will include 5 weekly services East, West and 2 East Coast North South services. As a cornerstone customer, TGE will account for approximately 70% of this capacity. Our Central Corridor freight operations have capacity for around 150,000 TEUs when trains are at their maximum length. This capacity was part of the One Rail acquisition and primarily delivers critical freight into Darwin from Adelaide. Finally, I have accountability for developing the land-bridge opportunity that Andrew introduced earlier. This has the potential to provide an exciting alternate supply chain for customers. Our scaled entry into the container freight -- containerized freight market is very different to our prior intermodal business. A key distinction is where we are focusing our efforts and deploying our assets. Around 2/3 of our capacity in our previous intermodal business was in the North-South Brisbane, Sydney, Melbourne corridor, a market dominated by trucking given its speed and relative cost advantages on segments of the route. The remaining capacity was across the East West market, a market more suited to rail freight given the distances involved. The service offering today will see the capacity reversed with around 2/3 of the capacity deployed East West and with the remaining 1/3 on the East Coast corridor. A key focus for our participation in the Containerized Freight market will be to increase the size of the rail freight component, specifically through attracting additional volumes from road. Absent of this modal share change, the containerized freight demand at its simplest form is driven by population growth and economic activity with projections generally linked to gross domestic product. The Bureau of Infrastructure and Transport research economics projects that domestic non-bulk rail market will grow at 2.5% per annum through to 2050 at a central scenario, not dissimilar to GDP projections. With the continued ES pressures shaping policy and commercial decisions, increasing port congestion and the inland rail project, make this a very believable rate of growth for freight. These market fundamentals provide an attractive baseline, therefore, to support our current and future capital investment decisions. Moving on to our performance to date. I was appointed the Containerized Freight role back in February. Since then, we've been busy standing up the new nationwide business with all that entails. Working with Bulk colleagues, we've been recruiting train crew, securing rolling stock terminals, pass, et cetera, a significant task. When you then consider, I watched our first service part of the Victoria Dock terminal in Melbourne over the Easter weekend early this year on time and on schedule, just 7 weeks after signing the TGE contract, that really was a tremendous achievement. I'm also delighted to announce today that right about now, our second weekly Melbourne to Perth service has commenced operations. That's 2 weeks ahead of schedule, demonstrating our commitment to deliver for our customers and further building confidence in the value of our proposition to the market. In achieving this milestone, I want to thank our cornerstone customer and partner TGE for this opportunity, but also for having the shared vision to disrupt the market. I also want to take this opportunity to thank those in the Aurizon teams who've worked tirelessly to make this achievable, some of whom are in the room today. Going forward, work continues to ready for Services 3 and 7 with the latter due to commence in April 2024. Train crew are being recruited and trained rolling stock, either redeployed, refurbished or new rolling stock ordered, and terminals and pathing are well progressed. Installing this capacity, we'll see approximately 200,000 TEU available to the market with TGE taking around 70% of this volume. We know frequency of service is important to our customers. Accordingly, we are actively pursuing innovative capital-light options to increase the frequency of services in the Melbourne, Perth and Melbourne, Brisbane corridors. We hope to see this increased service frequency come online the first half of next calendar year. We also know that terminal locations and associated arrival and departure times are critical to sophisticated supply chains. That's why we're continuing to work with below rail operators to optimize schedules and continue to develop a portfolio of terminal locations that provide greater optionality for our customers. I am delighted with the performance to date. We've now run 29 services or 14 ram trips and are utilizing over 80% of our assets. Whilst our immediate focus is on standing up the new business and safely delivering the TGE ramp in services, we've also been looking at opportunities for growth. Our scaled expansion into the market has been positively received with exciting opportunities and inquiries from a range of potential customers, including large and small freight forwarders, trucking companies, shipping aligners, stevedores, importers and exporters. As expected, a significant proportion has come from the existing market, with customers seeking increased capacity on key corridors, but they're also seeking newer propositions to better meet their needs. A common theme through these discussions is the desire to drive greater containerized freight from road to rail. Not only does this reflect the recognition that rail is the best modal choice for long haul, but appears also driven by the current truck driver shortages and the increasing need to meet ESG demands of customers. Beyond these domestic opportunities, we have a number of memorandum of understanding in place with potential future customers. This is to explore various land-bridge opportunities as well as import/export volumes, project cargo and includes storage and co-location of infrastructure. To provide you with a little more detail, I'll step through some examples. The desire to optimize shipping routes, which has driven interest in land-bridging between Darwin and key Australian cities, but also other locations. Such solutions are being driven by a desire to gain greater optionality, greater resilience over supply chains to mitigate congestion and to differentiate offerings. Secondly, we're exploring our real estate and terminal footprint to support imports, exports and project cargo with a number of shipping lines and Stevedores looking for better land side logistics solutions and connectivity to service their customers. And thirdly, we're also talking to potential customers around exploring opportunities to service key commodity export areas, which in turn will support our land-bridging solution. Whilst it is very much early days, based on this level of interest, we believe there is demand to grow our domestic interstate business in a way that will also enable us to support alternate land bridge supply chains and import and export volumes. This, in turn, will allow us to enhance the scale and uniqueness of our domestic interstate containerized freight business. Whilst we're exploring multiple land-bridge opportunities, we are particularly excited by Darwin. One reason we invited you here today is that we believe Darwin's proximity to Asia, combined with Aurizon's core capabilities and assets, make it a logical location to explore a land-bridge solution. With minimal incremental CapEx requirements to achieve Stage 1, our ambitions for Darwin is a very attractive and exciting opportunity. As Andrew outlined earlier, we acquired One Rail solely based on the Bulk commodity business. Leveraging the latent and underutilized infrastructure equipment capabilities to deliver a disruptive land-bridge solution is therefore a bonus. In terms of the existing core capabilities, there are 4 that strongly support a Darwin land-bridge solution. Firstly, our existing rail assets. The Containerized Freight business already provides line haul services across Australia. Our bulk Central Tarcoola to Darwin line provides optionality to connect double-stacked operations to various parts of Australia, including Central New South Wales such as Parkes, Adelaide, Perth and Northern Melbourne, including Beverage upon completion of Phase 1 of inland rail. Secondly, our existing rail capacity. We have a large network of fungible rolling stock assets, haulage expertise and a national footprint. In addition and importantly, our Adelaide to Darwin services have capacity. Thirdly, our existing port assets. We have recently been awarded a stevedoring license at the Port of Darwin, with 2 mobile harbor cranes due to be delivered later this calendar year. These cranes are capable of 15 lifts per hour, which is enough to support our Stage 1 ambitions. And fourthly, our existing and growing terminal assets located in close proximity to key industrial nodes in each major freight destination, providing ready access to customer warehousing without the need to reverse a capital city road networks. In short, we are really well positioned to explore the attractiveness of a new land-bridging solution for customers, starting here with the Port of Darwin. The challenges of the last couple of years has highlighted how end customers, consignees, freight forwarders and liners value optionality in their supply chains. The land-bridging solution not only offers alternate supply chain option, but can potentially enhance the predictability and speed of container deliveries while generating capital efficiencies for shipping lines and the wider supply chain. One attraction for customers to explore land-bridging is the continued and likely to worsen congestion issues experienced at Australia's major existing ports. Australia's capital cities were developed around these ports and provided ready access to users. However, more than 100 years on, the ports are less ideally located to meet the industry -- needs of industry, which are now located at the outer edge of the capital cities. This means port expansion will be difficult and probably costly. And even if achieved, the problem of land site congestion will remain. This congestion provides a lack of reliability and predictability, particularly in time-critical and working capital-intensive supply chains. A Darwin land-bridge solution provides a less congested alternate. When I think back to my days in risk, both here and in oil and gas, I think about a multiport milk run across congested ports and with the potential delay and additional demurrage charges versus a single sale to Darwin, I know which I would choose, particularly if moving time-critical freight. In addition, Darwin could also offer materially reduced transit times. In the case of a Shanghai to Melbourne sale, the land-bridging saving could be up to 7 days of transit time. Again, an attractive proposition for time-critical freight. In addition to sailing times, Darwin is also attractive as it's a natural deepwater port and it has capacity. Containers can go straight from ship to rail carriage for distribution to other states and the rail solution enters each capital city at key industrial nodes in close proximity to end customers. Increased speed and predictability also has the benefit of improving capital efficiencies. For shipping lines, they can better utilize assets in more productive and profitable routes, they can cycle our assets faster and drive greater efficiencies. For end customers, it provides the ability to optimize their inventory and working capital. They can decide to warehouse longer in low-cost Asian centers or utilize lower-cost regional centers such as Darwin, Parkes or Adelaide. As Andrew indicated, land-bridging is not a new concept. Over the last 6 months, Andrew and I have visited a number of ports where land-bridging solutions have been successfully implemented and operated over the last 10 to 15 years. Canada's Port of Prince Rupert provides a good case study for the implementation and growth of a similar arrangement to here in Darwin. The port provides a key link with Asia and connects with the major Midwest rail corridor through sparsely populated areas, similar to Aurizon's planned land-bridge solution through Central Australia. Capacity of the port was increased in phases over the last decade as key infrastructure upgrades were assessed and evaluated. As you can hear from the accent, I'm from the U.K., home to the soon-to-be returned ashes. Given Australia is 32x bigger than my mother country, I am delighted to be with the prospect of land-bridging here rather than there, given there's an awful lot more land to bridge. But there are other successful reference sites to consider, including, as Andrew said earlier, the Port of Gdansk in Poland and the Port of Piraeus in Greece. Key success factors for these precedents are summarized on the right-hand side of the slide. And as you can see, Darwin possesses many of the same characteristics. Similar to the case studies, we see the Darwin land-bridging opportunity in a staged manner. Our aspiration is Stage 1 capacity of up to 450,000 TEU to be in place by FY 2025, underpinned by the Bulk Central Corridor and TGE volumes, whilst beginning to utilize regional ports to create alternate supply chains, i.e., land-bridging. This stage requires minimal CapEx as Aurizon largely has in place the assets required to deliver this volume. If Stage 1 is successful, Stage 2 rollout is expected to occur across FY 2026 to FY 2030, and we'll add between 100,000 to 300,000 TEU to bring total capacity to 550,000 to 750,000 TEU per annum by FY 2030. I should stress that the implementation of Stage 2 is subject to the application of Aurizon's capital allocation framework and the effective implementation of Stage 1. Stage 3 would then involve Aurizon exploring opportunities beyond 750,000 TEU, subject to the performance of Stage 2. Our approach to the market has and will continue to be characterized by listening to and understanding our customers' requirements, perhaps nothing novel there. But what I think is different is there a partnering approach we have taken with TGE and one we will extend to others, working collaboratively with our customers and indeed our customers customer to develop solutions that are more tailored and aligned to their requirements to support their growth is, I think, different. We know at its heart will be a need to deliver optionality, capacity and predictability. We continue to build a national network and port solutions that will deliver on this, including our land bridging aspiration, which will offer customers a truly national and international logistics solution. As we look ahead, we are excited at the prospect for growth and what this may mean not only for our customers, shareholders, but also our employees. If customer demand exists, then a target in excess of 500,000 TEU is attainable whilst remaining aligned to our disciplined capital allocation framework. To summarize then. First, we have an attractive interstate Containerized Freight business. We're committed to growing our domestic freight capability through partnering with prospective customers to refine our value proposition and align with future demand. Our initial focus is on the safe and efficient services to support our cornerstone customer with services to date tracking to our collective performance expectations. We will continue to seize the opportunity of a clear pathway for growth and value delivery through increased utilization reliability and service frequency. Second, our Containerized Freight ambitions include developing a national land bridging solution, an opportunity, which has been unlocked through leveraging Horizon's existing Bulk and Containerized Freight infrastructure and operations. The solution offers an alternate supply chain option that can enhance the predictability and the speed of container deliveries. Aurizon will assess and progress this opportunity in a staged approach with Stage 1 requiring minimal CapEx investment. This truly is an exciting time for our business and one that I'm proud to be part of as we deploy our capability and assets to our aspirations into reality. Many thanks. Back to you, James.

Thanks very much, Gareth. We are right on time, and we're at a time of the schedule to have a 20-minute break. So we'll return at 10 past 3:00 local time and for those online in exactly 20 minutes. Thank you. [Break]

Welcome back, everyone. I'm Anna Dartnell, and I was appointed to the role of Group Executive bulk in May 2023. It's great to see some familiar faces in the room from the 2021 Investor Day held in Newcastle. I'm delighted to be back with you this year and be meeting both old and new faces here in Darwin, hosted by our fantastic BulkCentral team. While my role here today is to share an update on our bulk business and discuss our aspiration for growth within the 2030 strategy as the newest member of the executive team, I thought it might be useful to share a bit about myself. I've had a long career spent in operational industries with roots dating back to early years in the West Australian mining industry. Before moving on to develop true end-to-end supply chain expertise. My operations leadership experience spans warehousing, logistics, transport, including road, rail and port operations. I've been part of the Horizon Bolt leadership team since 2018, handing out the Bulk West business as General Manager. And in that role, delivered business transformation, which unlocked the opportunity for growth across a number of significant contract wins. -- personally leading the customer engagement that underpinned agreements signed with Mineral Resources, Lynas Rare Earths and most recently, CBH Group. Through that experience, I became a strong voice in the development of our end-to-end supply chain strategy. And I've been delighted to see this progress to successful expansion of our bulk services across the country, both in my prior role and certainly with greater frequency since moving into the role of Group Executive bulk. I've spent time in each Bulk region across Australia. And the more time I spend in our above and below rail operations, our ports and terminals across the nation, the more I continue to be impressed with our people, their capability, the scale of our operations and the unique strategic footprint we have at our disposal. So let's have a look at it. I'll start by providing a brief overview of the Bulk business, which has grown significantly since our last Investor Day in 2021. This beautiful visual on the left shows the extent of our operations nationally, which now extend across the length and breadth of Australia, East to West and North to South. Aurizon Bulk now incorporates both upstream and downstream services to provide transport and logistics solutions on a truly national scale. We provide rail, road, terminal and port services operating in Queensland, Western Australia South Australia, the Northern Territory and New South Wales, plus our emerging operational footprint in Victoria. The newest part of our Bulk business in Central Australia is an integrated rail operation with 2,460 kilometers of track infrastructure at its core. The One Rail acquisition that added Bulk Central to our portfolio was completed in July 2022 and is now fully integrated into our bulk business. Projected synergies are on track with strong operational performance, including a number of key contract extensions. We continue investment to support supply chain extension and capacity growth, including enrolling stock port equipment and terminal facilities. And the people who underpin our success continue to demonstrate their drive and tenacity, delivering these expanded service offerings whilst achieving consistent improvement in our safety performance. In addition to existing capability and contract performance, our business development team is currently assessing a pipeline of over 200 growth opportunities with more than an estimated $1.5 billion in annual revenue. Now while we recognize that not all of these opportunities will progress through the production stage. We do believe it provides a strong indication of the customer demand in our markets, which will further diversify our portfolio and drive Aurizon Bulk growth. Moving on from that footprint. Where are we at on our journey? As we previously communicated, the Bulk turnaround was about getting the basics right. It was a loss-making business in 2017. The reform undertaken through this stage required us to simplify the business and focus on what mattered to our customers. In the cost base, we completed a comprehensive benchmarking process and implemented a disciplined transformation program to create a more efficient operation whilst also enabling incremental growth. This was a focus for the first 5 years, and the results demonstrate the successful delivery of our turnaround. EBITDA doubled between FY '17 and FY '22, and that's before the uplift in earnings injected from the One Rail acquisition. This turnaround gave bulk the ability to compete for capital within Aurizon, becoming our springboard for subsequent investments in rolling stock port terminals and, of course, the One Rail acquisition completed earlier last year. The results being that Bulk today has 2,500 kilometers of rail infrastructure in Central Australia, port operations in Townsville, New Class, Gladstone and now Darwin, and operational presence in each Mainland state and the Northern Territory, and a significantly diversified customer commodity mix. Through delivering further breadth to the Bulk foundations were primed to enter the next phase of growth, proactively managing and developing new opportunities and building additional capability whilst maintaining that critical focus on our cost base. The capacity we have to deploy to opportunities can best be summarized in this slide, showing the change in our operational aspects, operational assets since the end of 2019. Beyond the increase in rolling stock with an additional 83 locomotives and an almost doubling of wagons, you can see the investment we've made in end-to-end solutions across first mile trucking, the port terminals and stevedoring as well as significant addition of that rail infrastructure in Central Australia. Now we've shown the map on this slide a number of times in the past, but it's an important one when understanding both the opportunity and the investments we're making in bulk capacity. There are over 1,400 projects plotted on this map of Australia, each with the current status at exploration through the preproduction across commodities such as copper, lithium, phosphate, potash and nickel, all of which are commodity is essential to the modern economy and global energy transition. Now we recognize only a portion of these projects will progress to production and, therefore, become a haulage opportunity, but the strength of that demand profile and Australia's role in global supply provides me with confidence in the growth opportunity which lies ahead for Bulk. The other thing I like about this map is looking at the concentrated deposits and overlaying it with that bulk footprint you saw earlier. It demonstrates the operational presence in the strategic locations that we have to quickly respond to emerging customer demands wherever they might fall. This goes some way to demonstrate how that pipeline of over 200 opportunities with $1.5 billion in annual revenue is being identified and why we feel so strongly about the alignment of that pipeline to the regions where Aurizon operates. In addition to the picture of opportunity presented by the map of our Australian commodity projects, I'll also draw your attention to the diversified commodity mix you can see that we continue to build in bulk. This is another shift in our portfolio as we transition to growth. With no single commodity commanding more than 24% of revenue, a stark contrast to 2019, where both iron ore and other minerals metals, we're both sitting at around 1/4 of revenue each closely followed by Bauxite. The product mix we're looking at now is more balanced and ever more so when we overlay the increased operational footprint. We see this as an important development because our customers run complex operations. And like us, they're exposed to the natural environment and at times, difficult weather conditions, a more diverse commodity and customer base, plus the strength of our geographical breadth serves to bolster the resilience of the Bulk portfolio. Now with the addition of Bulk Central to our portfolio over a year ago, it would be remiss of me not to speak to this newly integrated business. As a reminder, sitting adjacent to Aurizon's Bulk Central operations, 2/3 of Australia's copper reserves are located in South Australia and almost all of Australia's phosphate resource is located in the Georgina Basin, straddling the Northern Territory in Queensland. To reach their export markets, customers across these key commodities have operational flexibility via our bulk central infrastructure to Darwin or to ports in South Australia. Bringing it down the next level, this slide provides a sample of the mine projects being developed in our bulk central region. Now whilst these selected projects are not an exhaustive list, given that there are around 300 mine projects, from exploration stage in South Australia and the Northern Territory. It does provide a view of the company's investing in the region, which includes both junior and major mining houses and the types of commodities they're going after. Again, strongly linked to the growth in new economy markets and to food consumption. Moving on to grain. Aurizon is the largest hauler of grain nationally. And to put that in context, drawing your attention to the chart on the left of the screen, it's an important reminder of the global scale that Australian grain volume plays. Australia stands as a dominant force in global wheat volumes, second only to Russia in single country contribution to that global export market. Looking at a rising share of the Australian grain production profile, we're primarily exposed to major export pacing regions being Western Australia and South Australia. When we met in Newcastle in 2021, I was in the midst of negotiating a rail haulage agreement with CBH Group, Australia's largest grain cooperative. I'm pleased to report that we not only won that contract, but we were asked to mobilize early, triggering the early termination of their previous haulage agreement. We delivered that task in a record-breaking harvest year and became the rail provider to the largest grain exporter in the country. Over the past 10 years, Western Australia and South Australia have continued to contribute approximately 2/3 of Australia's wheat export volumes. In addition to scale, Western Australia and South Australia are also the most stable producing regions with the lowest volatility compared to export volumes from the East Coast states, reinforcing both the strength and the robustness within the sector. Our customer, CBH, recently announced a $4 billion infrastructure investment to be made over the next 10 years. This investment is focused in unlocking haulage volume, seeking to reach a monthly export capacity of 2 million tonnes by the end of 2024 and ultimately, 3 million tonnes by 2033. Aligned to this growth target, the West Australian government has put in place a strategy to increase grain harvest transported by rail. With a joint commitment along with the Commonwealth to invest $200 million in the state's regional freight network as the first package of the Agricultural Supply Chain Investment program, ASCI. The first site developments within this package of works are underway within key rail corridors in Western Australia right now. Turning to our new markets. Over the last 2 years, we progressed our plans to increase Aurizon's exposure to non-coal commodities. New Bulk contracts, such as CBH and Centrex and Tronox, in addition to the One Rail acquisition, provide a strong pathway and demonstrate our success in increasing product diversification. In addition, these investments we are making in standard gauge locomotives and container wagons also support growth opportunities presenting to the Bulk business unit, and they're generally able to be deployed across the nation in pursuit of the most attractive growth opportunity. So let's look at how this has played out with a handful of recent Bulk growth examples, each, of which demonstrates the operational delivery and optionality within the Bulk service offering. Firstly, our Tronox service, which commenced in 2022, was our first genuine East West haul, transporting mineral sands concentrates from the Ivanhoe rail terminal in New South Wales by Broken Hill to Aquanana Depot in Western Australia. The service was designed as a modal conversion from sea freight to rail freight, which allowed us to eliminate 3 major transport segments for the customer and streamline logistics ultimately enabling Tronox to exert more immediate product control of their feedstock quality. Whilst this customer was hampered by extreme weather conditions in 2022, significantly impacting their ability to transport product from the mines to the Ivanhoe rail terminal in the second half of FY '23. The Tronox service, in some ways -- and in some ways, that temporary reduction in demand caused by weather actually unlocked the opportunity to hold general freight from Melbourne to Perth over the high demand period leading into Christmas 2022. This initiative, known as the Christmas Train, demonstrated our agility as a Bulk team to seize opportunities amidst disruption. It became the blueprint for our new TGU services upon securing the Containerized Freight contract in 2023. Centrex is actually a relationship that's been fostered over many years for Bulk. It was ultimately secured as a contract, providing end-to-end supply chain services using the stevedoring and terminal capabilities we acquired through the addition of Townsville Bulk Storage and handling to Aurizon port services. Using the capabilities and assets of TBSH, the business that Aurizon had acquired in March 2020, the task in malls bringing loaded containers to the former TBSH Terminal Mount Isa, operating trains into a terminal in Townsville, storing containers at the port and using our devouring capabilities to load phosphate rock onto ships. It's a great example of the opportunities created through seeking to link together previous discrete aspects of the customer supply chain and providing an end-to-end solution. What I love about this contract is the synergies that the team were able to unlock with both the new and existing contract opportunities as we take IPL sulphur out to Mount Isa, and we bring back Centrex phosphate rock into -- in the same container into Townsville, ensuring we've loaded containers moving in each direction along that corridor. And the final example I have here is GRA gypsum in the Bulk Central business. This is an example of a recontracted box central hall that Aurizon have invested in both above and below rail operations to unlock additional efficiencies in volume. It's been a great example of locomotive fungibility this time with our narrow gauge fleet, where we cascaded locos from Queensland into Bulk Central. And I can tell you that the resulting peaks of white that you see located at Port [indiscernible] are really a site to behold. So reflecting on our extension to end-to-end supply chain services plus the addition of Bulk Central to our portfolio. What is that investment unlocked in terms of growth aspiration? And where do we set our sights as we look towards 2030? Two years ago, we presented a bulk ambition of achieving 20% to 25% of a market share that we had estimated with an addressable profit pool of $1.2 billion in EBIT terms or $1.6 billion in EBITDA terms by 2030. This implied a bulk EBITDA position of $300 million to $360 million. Since then, Aurizon Bulk has successfully regained the CBH contract, the largest grain contract in Australia. We've delivered other bulk commodity contracts through competitive tenders and disruptive supply chain proposals such as Tronox and Centrex. And of course, we've added the One Rail business to create Bulk Central. We are also provided with exposure to opportunities in South Australia and the Northern Territory regions where Aurizon previously had no footprint. These factors, when combined with the continued demand for Australian bulk commodities, has resulted in us updating our assessment of the market size to an EBITDA pool of $1.7 billion and a revision of our market share aspiration to capture now 25% to 30% of this pool by FY 2030. Achieving this aspiration would imply an EBITDA of $400 million to $500 million for Bulk. Unlocking a truly national footprint, the Bulk business provides primary reduces access to safe and reliable supply chain solutions wherever they require them. Bulk continues to evolve and deliver value for a growing customer portfolio and the strength of our pipeline paired with Australia's role in global supply of future-facing commodities gives me great confidence in the opportunity ahead for Aurizon. I'm pleased to leave you with 4 key takeaways from today's discussion. First, our revised EBITDA aspiration for Bulk. The second, reinforcing the strength of our growing infrastructure footprint across above and below rail operations, ports and terminals. Third, the role we play in serving growth commodities linked to the modern economy. And finally, the flexibility and efficiencies unlocked through the scale and diversity of our operations across a unique strategic footprint. I'm going to hand over to George now to talk about the far more fun focus of capital allocation.

Thanks, Anna. Thanks to those joining us online, and those who've made the journey to be with us here today in Darwin. I know some of you have come from as far away as Melbourne and also as far away as Singapore. Now what's common between those 2 major cities is that they're both a bit more than 3,000 kilometers from where we stand today. Now I say that upfront to highlight Darwin's proximity to Asia as well as the sheer scale of Australia. It's this geographic scale and the commodities in the ground that support the Containerized Freight and Bulk aspirations outlined earlier. And while those aspirations have changed for Aurizon, what hasn't changed is what I'm going to start with our capital allocation framework. Aurizon has been utilizing the same framework shown on this page for 7 years. This framework starts by looking at operating cash flows on the left, prioritizing capital to sustain our existing operations and then targets a dividend of 70% to 100% of underlying NPAT. Whether we're towards the lower end as we have been in recent years, or the upper end as we were from FY '16 to '21, is dependent on whether they're a value-accretive capital management and growth opportunities. The additional detail we provided on the right-hand side is our minimum target IRRs across our business units. And other than commodity type, it assumes all else is equal. For example, the same contract terms, mine and counter-party quality. As I'll highlight in our commodity scenarios in a few pages time, the higher rates for thermal coal reflect the more varied outlooks when you look at that commodity longer term relative to, say, bulk and containerized freight. The other point I'd make is that these returns reflect not only our current thresholds, but also what we've been targeting as part of customer contracting and new investments over the past 3 years. I wanted to step back and highlight on this page where capital has been deployed under this framework since FY '16. I'm pleased that we've returned $5 billion to shareholders. Now that's about 70% of our current market capitalization through dividends and capital management. Those returns to shareholders have also been achieved while maintaining a strong investment-grade rating, reinvesting $3.6 billion to sustain our operations and more recently, investing $2.1 billion in growth that underpins the aspirations covered today. All of this is being delivered while not seeking any equity capital from our shareholders. These factors tell me that our capital allocation framework is working as it's intended. However, like all frameworks, it needs to be retested based on what our business is seeking to achieve going forward. The management team and Board has gone through that exercise, and we believe the framework remains appropriate. There's 2 core reasons for that. Firstly, we've invested in key infrastructure and rolling stock that has significant capacity yet to be utilized. And secondly, the Aurizon business has a history of producing resilient free cash flows, which is where I wanted to start on this next page. From FY '16 to '22, this page shows where capital has been deployed in the bars on the bottom and running along the top are annual free cash flows. That's cash flows, including continuing and discontinued operations. As you can see, free cash flows exceed dividends by over $200 million in 5 out of 7 financial years. And in all but 1 of those years, dividends were paid at 100% of NPAT. This underscores the free cash flow production of Aurizon, particularly our Coal and Network businesses, and I'd add was during a period of time where our network regulatory asset base was in the mid-5s and our WACC was 6.3%. Now for context, those numbers in FY '24 are $6.2 billion and 8.18%. What I'd also like to highlight on this page is our track record of paying dividends at the top end of the range and pursuing capital management. In the 6 years from FY '16, we paid out at 100%. And in 4 of those 6 years, we undertook on market buybacks. What changed in FY '22 was the opportunity to acquire One Rail and invest to support several major contract wins. But it's these decisions that we believe will support the business for many decades to come and underpin growth in future returns to shareholders. I mentioned earlier that One of the reasons we've maintained our capital allocation framework is the level of installed capacity yet to be fully utilized. As Anna highlighted, in our Bulk business over the past few years, we've acquired 2,500 kilometers of track. We've invested in 4 port terminals in key commodity locations and we've materially grown our loco and wagon footprint. It's these investments that will underpin an expected uplift in our FY '24 EBITDA for Bulk. But we believe these investments can support earnings well beyond current levels. And as Andrew spoke about, we have an aspiration to achieve a 25% to 30% market share within a growing market and therefore, implied EBITDA of $400 million to $500 million in FY '30. To achieve that aspiration at the lower end is likely to require capital of approximately $60 million per annum from FY '25, predominantly for rolling stock, lifting equipment and terminal investments. I say this to highlight that we aren't expecting or need material M&A, but also to demonstrate our belief in the available track, terminal and rolling stock capacity. This belief is matched by the opportunity for Australia, it's miners, its primary producers and Aurizon to deliver the bulk commodities to support a population that's growing and at the beginning of a once-in-generation energy transition. Now one of the questions we consistently got after our 2021 Investor Day was about capital and what level of capital might be required to deliver our aspirations. I hope I've now given you an indication of that for our updated bulk aspiration. Now I'll try to do the same for Containerized Freight. As indicated, Aurizon has an aspiration to move more than 500,000 TEUs in FY '30 while targeting an EBITDA margin of 20% to 30%. What I'd add to that is that our return target for investments in Containerized Freight is low double digits to mid-teens. That aspiration includes what we call Stage 2 of land bridging and is shown in the third column on this page. I haven't outlined the capital requirement for that as it will depend on a number of factors, including what role Aurizon plays compared with third-party port, terminal and shipping providers. What I would like to focus on are the operating and planned columns. Operating covers up to and including FY '24 and planned covers FY '25. There are 2 things you should notice from these columns. Firstly, that the aggregate capital to stand up our national interstate and Stage 1 of land bridging is approximately $425 million. Secondly, that this represents limited incremental capital compared with what I spoke to you about when we announced half year results and the TGE contract in February. The reason for that is that our investments can come together and be leveraged for this broader market opportunity. We bought the Bulk Central track infrastructure a year ago. At the same time, we committed to new locomotives and flatbed wagons, and we highlighted in February that we'd ordered 2 mobile harbor cranes for Darwin and that we have spare capacity on our existing bulk central and national interstate services. These are also the factors of production for Stage 1 of land bridging. We're confident we will have the key assets in place, and we continually study the market demand. This practice of considering end market demand isn't new to Aurizon. And at the 2021 Investor Day, I spoke at length about our strategy and uncertainty or SIU process. You remember that my focus 2 years ago was Aurizon 6 coal SIU scenario shown on the right. The general approach to these scenarios hasn't changed, namely that we use a broad range to ensure we're testing our key business decisions. What also hasn't changed is that 5 of the 6 scenarios have positive growth rates in the first 10 years, but greater divergence thereafter. It also remains the case that there's much greater spread of outcomes when it comes to thermal coal, given there are current alternatives to thermal coal-fired power generation and that this should be contrasted with metallurgical coal, which is the predominant feedstock along with iron ore for Asian steel production and is expected to grow under all scenarios in the next decade, largely supported by Indian urbanization and economic growth. Now while I started by talking about coal, this page also shows scenarios for bulk and containerized freight. Firstly, on Containerized Freight, which clearly wasn't a topic of discussion at our last Investor Day. You'll notice that the 3 containerized freight scenarios are produced by government rather than Aurizon and they all project positive growth over the next 2 decades. This is mainly driven by Australian GDP and with the low case having a volume growth rate in the low 2s and in the high case, above 3%. Then in the middle of this page, you can see 4 Aurizon scenarios on Bulk volumes. These are built up on a project-by-project basis, but draw on similar macro themes to coal with current economics, the black line, assuming the same demand supply drivers we have today. Commodity is strong, the orange line, assuming stronger Asian economic growth and food consumption per capita. Australian market share loss, the brown line, assuming that demand remains, but Australia fails to capture the opportunity because of regulatory barriers, lack of cost competitiveness or unfavorable crop conditions and finally, rapid decarbonization, the light gray line, assuming faster global climate change actions, which in turn drive demand for battery commodities and changing steel production methods longer term. If you step back and compare these scenarios, you noticed that the challenged coal and particularly thermal coal faces in a rapid decarbonization scenario could provide a tailwind for Bulk via demand for copper, rare earths, nickel and high-grade iron ore. Containerized Freight also has a potential in a decarbonizing world, given the emissions benefits of rail freight over road. Now it's important for me to remind you that these are scenarios are not predictions nor do they generate a forecast or projection. They are possible scenarios that we use in various ways in our business including the way we think about strategy and the allocation of capital in the context of climate change risks and opportunities. Next, I will show you those same 4 scenarios for Bulk at the subsegment level. And you can see that here split across Bulk West, Bulk Central and Bulk East. The trends are similar but more pronounced depending on the key commodity exposures in each geography. There's a few key call-outs. Starting with Bulk West. Key commodities include magnetite iron ore and nickel, driven by infrastructure and new economy materials as well as wheat of which WA contributes about half of Australia's exports. For Bulk Central, in addition to magnetite and rare earths, our exposure to copper has increased significantly, with South Australia holding 2/3 of Australia's copper resources, which, of course, is essential in EVs, batteries and charging infrastructure. And finally, Bulk East. Key commodities include phosphate, vanadium and zinc. Phosphate is a key fertilizer while vanadium and zinc are expected to grow beyond traditional users playing a role in the future of batteries and energy storage. These scenarios highlight the attractiveness of the underlying commodities in key bulk regions, they also draw out how our fleet position can be leveraged more fully post the Bulk Central acquisition as the holder of Australia's largest rail fleet and with a footprint now across the country. We can shift fleet from where demand might reduce and shift it to where demand is growing. After establishing our scenarios, it's important to understand how we then use them to inform our strategy and test the resilience of our business. The volume-based heat map on the left demonstrates how our business is well balanced across the scenarios modeled and the counter-cyclic nature of the bulk and containerized freight units. I'd also remind everyone that while network volumes are shown as negative in the bottom scenario, it's not volumes that drive network earnings. Instead, it's the regulated asset base and regulated WACC I spoke of earlier. Turning to the right-hand side of this page. You may recall that at our Investor Day in 2021, we presented an indicative average cash flow range based on our scenarios. I don't want to get into the habit of providing a quantitative update to that analysis each Investor Day. Instead, what is shown is the directional impact of the developments over the past 2 years: the One Rail acquisition, establishment of containerized freight and Bulk contract growth provides positive support to cash flows and each have the potential to benefit in a rapid decarbonization scenario. Now there are 2 sides to every coin. And therefore, what we've also shown is that we're 2 years on from our last Investor Day, and therefore, closer to a potential demand drop for thermal coal if you believe a rapid decarbonization scenario, one where global-thermal coal-fired power stations are turned off in the early 2030s, well before the end of their useful lives. Of course, should that scenario eventuate, we would focus on rightsizing our coal cost base and shifting our fleet to other markets across Australia. It's that fleet position that I want to turn to next. Hopefully, through today's presentation, you've picked up the importance of our fleet. Given the importance of fleet to our strategy and that it's our largest capital item outside of our track infrastructure, asset management reports to me within Aurizon. To put a health warning on this, though, my knowledge of locomotive terminology and components is good, but it's not as good as James Petty, who is our Head of Asset Management and is in the room today. James, you want to put your hand. For those of you who would like to talk about the differences between piston and screw type air compression, James is your man. If however you'd like to talk about our installed fleet, the allocation of our fleet and the potential decarbonization of it, I'm going to try and cover that right now. This slide breaks our fleet down by state and fleet numbers. There's 3 things I'd like you to take away from it. The first is our scale, 700 locomotives and 15,000 wagons. Now to put that in context, our biggest competitor has a bit more than 500 locomotives. And if you go to every other rail freight company in Australia, they have less than 100 locomotives. The second item I'd focus you want is our stored fleet shown at the bottom of this page. With over 100 locomotives not being utilized currently. Now these assets are all at varying states of operational readiness, but the point is that a large number of them could be reintroduced to operations at a much lower cost and shorter time than buying new. This is a key advantage for Aurizon. And lastly, the redeployment opportunity, which is shown on the right I stood in front of you 2 years ago at our last Investor Day, and I said that we would more actively allocate and redeploy our locomotives, and we've done just that. 16 locomotives and 90 wagons shifted from Coal to Bulk so far. And pleasingly, our contracted tonnages in Coal and our potential capacity for customers remains strong in Coal. This means we're managing our assets more efficiently for existing customers while also delivering for new customers across the country. The strategic approach we are taking with our fleet is best seen with recent examples on this page. Let's start with more specifics on the redeployments in the middle of this page. I've touched on the loco transfers, and I've touched on the 90 wagon transfers. More than 60 of those wagons were converted to grain wagons, which are in operations today in New South Wales. Now it costs money to make the modifications to turn a grain -- a coal wagon into a grain wagon, but it's less than 50% of the cost of buying a new wagon. You can do it in half the time and you get a better payload. Lastly, on deployments. You can see an example that highlights that narrow gauge doesn't only exist in Queensland. In fact, we recently transferred 2 narrow-gauge locos down to South Australia for the Gypsum Hall Anna spoke of earlier. They replaced 7 50-year old inefficient locos. That means we're now using much less fuel, and we've got a happier customer and happier train crew. Turning then to new investments. And as you can see on the right, this includes re-lifing older medium horsepower assets that are stored such as our LZs. We can then deploy these into existing halls, which don't require high horsepower locos. This lets us optimize our fleet and deliver growth such as national interstate or land bridging halls, which do require high horsepower assets given they're traveling for long distances at very high speeds. To supplement our existing fleet, we've also bought new locos and new wagons, as you can see on this page. Those commitments, however, are small in the scheme of Aurizon's overall fleet with them adding 4% to our locomotive fleet and 3% to our wagon fleet. One of the outcomes of this work is that you've seen the size of our fleet allocated to bulk grow, as shown on the bottom of this page. Bulk has 10 of those new locomotives, has benefited from 16 from coal and acquired 66 from One Rail while storing 9, including those 50-year-old locos we took off the gypsum hall. That means our Bulk fleet has grown to over 250 locomotives. So if Bulk was its own rail freight company, it will be the third largest in Australia behind Aurizon and Pacific National and it would be about 2.5x its next biggest competitor. I've spoken a lot about the allocation of our 700 locomotives, but we also need to have an eye to the decarbonization of this fleet. We're fortunate that around 150 of those locos are electrics in Queensland. Therefore, as the grid decarbonizes, our scope 2 emissions will reduce. The remaining locos, however, are diesels, and we, therefore, need to be proactive in considering how we reduce our Scope 1 emissions. That's something our customers, investors, employees and broader stakeholders want to see. But these are long-life, capital-intensive assets with a long remaining life. The major fleet renewals for Aurizon will occur in the 2030s and 2040s. And therefore, we need to work on what the decarbonization platforms are likely to be then and invest in testing to prove up those platforms, so they can be economically delivered over the coming decades. Our first platform is the battery electric locomotive or BEL. We think it can be deployed on hauls of up to 400 kilometers on a single charge and therefore cover about 30% of our FY '22 halls. That is excluding Bulk Central and Containerized Freight. There's 2 ways we can develop BELs. The first is buying new from OEMs. The second and one we announced a few weeks back is retrofitting an existing loco by taking the diesel engine and alternator out and replacing it with a battery pack. Now it's much more complex than what I've just described, and I don't want to undersell the engineering required. But the concept is to reuse the parts of our assets that have remaining life and are well suited to our existing halls. We believe this option will allow us to choose the right fleet and convert it from diesel to bell much quicker and cheaper than buying new. The second and third platforms are what I call range extenders. These trail behind the locomotive to provide a further energy source. There are 2 forms. The first, a containerized battery pack or bet and the second, a hydrogen electric tender or hit. These range extenders can take our potential haul distances above 1,500 kilometers. Beyond that distance, the key is to modularize these range extenders so that we could, for instance, take a bit off the train seamlessly using a forklift or a reach stacker when the energy has been used and replace it with a bet that's being recharged at an interchange point along the rail corridor. This would extend the range further. And as a concept, we will need to explore with renewable energy developers alongside our longer rail corridors across the country. What you don't see on this page is renewable fuels. That is part of our plan and is something we will look to trial in traditional diesel combustion engines, but it's reliant on the fuel being available at an affordable price. This is an approach being taken by Class -- is in North America, and we could see these economics work long term in Australia, but it's not something Aurizon wants to rely on. Aurizon has been on this decarbonization journey for the past 3 years. We've been taking the lead in partnering with major universities and mining companies. I believe we're on the right path and importantly, our trajectory matches our commitments. I'd say that having a decarbonization plan such as this is important, not just for our investors and customers, but also for other stakeholders such as our banks and insurers. 2 stakeholders I want to touch on briefly now. For close to a decade, we have seen the number of banks supporting Aurizon increase at a group level. This has included support from all major Australian banks and the major Japanese banks. What's also pleasing is that at the same time, Aurizon has seen its weighted average bank debt margins reduced by 16% over this period. This is a sign of how our banks view the credit quality of Aurizon, something that's also reflected in our net debt-to-EBITDA figures shown in the middle of this page. As I said upfront, we are committed to strong investment-grade ratings, which are supported by these net debt-to-EBITDA figures and our contracted and regulatory revenue streams in Aurizon operations and network, respectively. Lastly, on this page, I want to touch on our insurers, who are an important provider for any large industrial company. In 2014, Aurizon made the decision to establish a captive insurer, which meant that while we still rely on third-party insurers for annual coverage, we take on the task of self-insuring the first tranche of property-related claims, that tranche or retention level at approximately $25 million hasn't changed for the past 10 years. But what you can see is that our premiums paid to third-party insurers have reduced by 34% Also, when you combine those third-party insurance premiums with self-insured retentions, the aggregate cost to Aurizon has reduced by 20%. This is testament to Aurizon's operating performance as well as the support that we continue to receive from third-party insurers. I'll now finish briefly with where I started. Our capital allocation framework is unchanged, and we're proud that it has seen $5 billion return to shareholders since FY '16. As well as returning significant capital to shareholders, we've made recent investments in Bulk and Containerized Freight, which provide capacity to drive our updated 2030 aspirations. Our investments have the potential to benefit from Asian economic growth along with the energy transition, which Australia has a major opportunity to support [indiscernible] mining sector. And lastly, Aurizon has the infrastructure, the fleet, the bank and the insurers support to deliver for its customers and ultimately for our shareholders. Thank you, and I'll now hand back to Andrew.

Thanks, George. In summary, we greatly appreciate you joining us here today in Darwin to hear more about Aurizon and how we're delivering on our growth ambitions. We're excited by what lies ahead, in particular, the enhanced bulk opportunity and our containerized freight solution, which have been unlocked by our investment in One Rail. We believe land bridging has the potential to revolutionize supply chains in Australia and are excited by the opportunity it presents, not only to Aurizon, but also to our national economy. We look forward to continuing the journey with you as we progress against our strategic aims and accelerate rail freights ESG contribution in the transition to a low carbon economy. Thank you. I'll now hand over to James.

Thanks very much, Andrew. We're now at the Q&A session of today's presentation, where we have just short of 60 minutes for Q&A. So if I can invite Andrew and the group executive team up. Now on the [indiscernible] the presenters today, but we also have Cap, Pam and Ed sitting in the front row. So if there are any questions in those respective business areas, they will certainly step up and take the microphone. As usual, with any Q&A session with a webcast link, we do, of course, have a microphone. So please do wait until Lippiatt kindly brings the microphone over before asking a question. Matt, you're very swift with your hand up, so all yours for the first question. And if you could also just say your name and the organization as well.

So it's Matt Ryan from Barrenjoey. I just had a question about the $60 million of bulk CapEx that you're calling out and what benefit do you get from the redeployment of coal kits? And if you can just talk about how that number might change if you were to get to top end of your $400 million to $500 million, if there's much leverage involved in that?

I think this is one for you, George.

Thanks, Matt. Kicking yourself. There's no redeployment of coal kit assumed in that $60 million per annum. And the reason for that is we don't control nor do we want our thermal coal volumes to decline. We actually want to continue them and the diversification that we'll get is from growing our bulk business. So the first part of your question is there's no assumed coal cascade in that $60 million per annum. The second part to your question is, how does it change at the upper end? Because that $60 million reflects the lower end of that $400 million implied EBITDA to 2030. The answer to that is it depends on where the growth comes from and whether we've got the existing infrastructure. So to give you an example that might draw that out. If we see a new customer come on around Tennant Creek, we've already got the track infrastructure. We've got existing trains running. And depending on the volume, it might be that we just need to add wagons to that existing train start. So I know that's not going to make it easy for you to model. But the short answer is it depends on where the volumes come on, which is why I've deliberately targeted a number at the bottom end of that range.

That's helpful. And just looking at the Containerized Freight CapEx. So you've obviously given some numbers for Stage 1 of the land-bridging. Is there much of a reason as to why that CapEx number would be materially different as you move to Stage 2 and 3 of land-bridging? And can you talk about what's actually involved in Stage 2 and 3?

Do you want me to do the first part and then... Perfect. Okay. So Stage 1 is easy for us to tell you what the CapEx is because we've got line of sight to those factors of production, as I said. We've got the 2 mobile harbor cranes. We've got a lot of the rolling stock on order it's going to arrive. And we've got the existing Berrimah terminal that those of you have traveled to Darwin will get to see tomorrow. When you start talking about Stage 2 and Stage 3, the question is where the capacity is created because there's multiple ways to create it. You could expand within the port and therefore, the CapEx is for the port or we could expand at our rail terminal in Berrimah, which is 3 kilometers south of the port. And if we did it that way, more CapEx would be for Aurizon. You still get the same volume. It's just who puts the money in and therefore gets the benefit. But economically, the whole system should benefit. The reason we haven't given you that capital estimate is there's a lot more to play out with discussions with those third-party port and terminal providers. And that's just the part of Darwin. Then you've got expansions of other terminals that may be required at places like Melbourne, Sydney and Perth.

Thanks, George. You've kind of answered the aspects of what it is we need to do to increase volumes. Part of it is, for example, the cranes. So if you increase volume through the port, you're looking more at ship-to-shore type crane arrangements, which would require additional CapEx. The Berrimah terminal itself has significant space for us to expand operations, which again, would see anything from gantry cranes through to balloon loops around the terminal. And then when you think across that central corridor, as you increase volumes, you increase throughput, we might be looking at additional passing loops as we venture South. And then at those Southern terminals, again, you'll be looking at what sort of capacity do we have at our existing footprint or in those terminals that we're yet to secure and to develop. So those are the sort of key decisions we'll be thinking about as we further develop that Stage 1 opportunity.

John Silo in. Sorry, Cameron. Sorry, mic.

Cameron Madon from E&P. Sorry, just going -- sticking with Containerized Freight. And on that Slide 21, where you outlined the 200,000 to 150,000 and then additional 150,000. And I think you said in the central line, you've got the or the central corridor, you've got 150,000 containers going South to North. So given the whole strategy here is to get more volume into Darwin, why aren't the shipping companies currently shipping 170,000 containers into Darwin if the existing demand for Darwin is 170,000? Why is it being shipped into Adelaide and being shipped north? .

So in terms of the capacity that we talked about, 150,000 TEU, 75,000 South 75,000 North. So it's across that system. Just to clarify, it's 150,000 TEU across Bulk Central. In terms of your question why aren't shipping liners already doing it. Well, it's a combination of factors. First of all, has the port or the capacity to ship those -- that number of boxes. The acquisition of those cranes to our mind, at least, creates that opportunity for liners to divert and bring volumes through. And we've certainly seen that in Anna's business at Gladstone. When we introduced and installed a crane, then the volumes flowed with some of those recent deliveries from AML. So it really does depend upon the installation of the capacity in the facilities to support it.

And so just to follow up on that, then, once you've got that capacity, why don't you lose the 75,000 containers flowing to the North if you're going to get delivered? Look, it makes the most sense to deliver the boxes where the demand is. So those boxes presumably won't be being delivered into Adelaide anymore. They'll come into Darwin with that demand. So don't you lose the 75,000?

No, you don't. So just to clarify again, that's capacity, installed capacity through that bulk central corridor. I think as I mentioned in my speech, there is available capacity in addition to what and his team already shift that we think is in the order of around 50,000 TEUs. So we actually think there is already existing capacity of those trains run full length to support that land bridge aspiration, certainly Stage 1 without installing any additional train services.

Just some additional color, Cameron, and you can follow up with this with Matt Jones, if you like. But one of the biggest things that's in the box that we move from Adelaide to Darwin is, for example, beer. Now that's not made in Asia. That's made in Australia, and it comes up to Darwin from that Adelaide line. So there's a number of things in the container that are actually produced in Australia that will continue to go via rail up to Darwin from Adelaide.

Thanks very much for a very good presentation. I'm from Shaun Partners in Sydney. Just in terms of your numbers on Page 9, particularly showing the increased volumes from the March '23 quarter, the June '23 quarter. How do you project -- do you think those quarterly numbers would be a good indication for the coming 12 months? And particularly what I'm interested in, how much of the because you say this on Slide 10, how much of the problems that you've estimated here in terms of weather, wet weather, mine production and labor shortages, which 1 of those 3 factors is the most important in terms of where those volumes are going to go?

George, I might get you to talk about the quarter and the forecast.

Sure. Yes. Tony, so the thing to remember is there is some seasonality in our business. And so the fourth quarter volumes, particularly in coal and network, tend to be stronger already. But what you saw or the reason we wanted to show it is that the fourth quarter in FY '23 was stronger than the fourth quarter in FY '22. So that's what gives us confidence in the step-up to FY '24 EBITDA. The other thing to remember about FY '24 EBITDA, and I said this in my presentation, is it's not volumes that really drive network earnings. It's the regulated asset base and the WACC and both of those have stepped up as at the first of July. Our assumption then for network volumes is that it matches the regulatory assumption of 207.8 million tonnes. Now if volumes end up being more than that, we would over recover in FY '24, but we'd have to give that back in 2 years' time. So hopefully, that answers the '24 part. In terms of the '23 part, it's really hard to give you a specific breakdown of those 3 factors, partly because some of them are interrelated. So take weather and mine production, for example. Whether it impacts the rail corridor but it also impacts the miners. And sometimes, the miners will say, we don't have the product for you because of weather or they'll say we don't have the product for you because of ABC and it's hard for us to unpick exactly what the flow on is.

How severe is the labor shortages affecting your operations?

So I think you need to think about that mostly in the historical context. So we had cover border shutdowns and those sort of things. At the same time, we're starting up some new business in, say, Western Australia with the CBH contract. So for a period of time, there was a labor shortage as a challenge, just getting labor into the state and then training the train drivers often from scratch. That issue has, I'm going to say, at least from my level in the business gone away. When you actually look at what's happening on the -- in Queensland, that's the reflection of another rail business starting up by one of the mine owners up there in the form of Brothers. Recruit -- if you think about where you get staff if you need, you want to recruit them, you recruit them from the biggest rail company in that area. So we had an instantaneous hit. And then because of the COVID-related issues of spike or a significant reduction in the number of electricians that were available. Driver training has been resolved across the country to a large degree by standing up a team actually meet with me on a monthly basis, go through my number in detail to make sure that there's every possible asset that can be used to actually push drivers through the training program is actually undertaken. And we've done that, and we're seeing the benefits now. So it's largely something behind us. Electricians is still an issue that we have to deal with, but it's by no means the hot issue was back 3, 4, 5 months ago. So most of those issues well managed are behind us at this point in time.

Can I ask another question or should I...

Maybe we'll come back if we got time.

But unfortunately, I'm going to ask a cold question. Sorry, I have to. You mentioned in the outlook statement that the yields are starting to look a little bit better. Are you referring there to maybe the pricing environment is starting to get better than you thought? Or are we talking here about sort of unit EBIT that's starting to improve a little bit because of precision railroading and asset management.

Okay. Ed's been dying for someone to ask a question that wasn't Bulk. So do you want to explain yield, what does yield mean.

And thank you for the attention. I think the comment around the improvement yield is really driven by the 3 factors. One is the CPI pass-through. So most of our contracts obviously escalate on the CPI. And obviously, we're expecting a sort of return of some volume kind of aligned with the fourth quarter, as we've just talked about. That's diluted though. Remember, that's diluted by the effective capacity charge being spread over a broader base. And so it's not dollar for dollar. And the other factor to take into consideration when you're modeling is the whole mix. So not all the same contracts are the same repositions in the same terms. So you've got -- depending on where the volumes show up, it can impact your yield. But broadly, yield will be moderately up on last year.

Got it. And maybe, I suppose, a related question for George. So correct me if I'm wrong, but it looks like the only incremental CapEx that you've announced today is a couple of hundred million for basically standing up first stage of land bridge, plus then obviously, the Bulk 60-odd million. Is your thinking still that you can maybe de-gear the balance sheet enough by FY '26 to be able to get that payout ratio up again?

I'll stay away from the '26 payout ratio because that will be a matter for the Board at the time. But I will touch on the other 2 components. So maybe let me try and be even clearer about the containerized freight incremental capital. So you might remember that when we announced TG in half year results, we said there was about $550 million of capital spread across Containerized Freight and Bulk. And of that $550 million, about $280 million, $300 million was for Containerized Freight, which was National Interstate. If you then go from $300 million up, we had the mobile harbor cranes. We had additional locos. That's about an extra $100 million. Those are 4 stage 1 of land-bridging. So that gets you close to $400 million. And then what I've said today is we're expecting for Stage 1 land-bridging a national interstate it to be a capital base of about $425 million. So it's even less than that couple of hundred.

Nathan Lead from Morgans. George, obviously, we got the benefit of the network revenue step-up coming through and partly that's to do with the WACC increase. But my understanding is your interest rate hedges expired in June and you're in the market putting in a lot of new interest rate hedges for the next 4 years. Could you give us an idea of how much hedging you put in place and what the average cost of that was? And if I can even temp you to give us an idea of maybe what your interest bill might be over the next year just because you'd have a lot of certainty on that.

I knew you'd ask that question, Nathan. And you're making full year results more and more boring by dragging this out of me. So the hedging for network, we deliberately had expiring as at 30 June because that's when the averaging period for the network WACC was. And we didn't want to make money or lose money through that. So we deliberately targeted all that hedging through June. And so for network, we're about 85%, almost 90% hedged of that debt book through June, matching that WACC averaging period. In terms of the cost of debt in FY '23 will be somewhere between the low and mid-4% range. That's at a group level. And then I expect it for FY '24 to be closer to the mid-5s to give you an indication. I'll try and be even more specific for you at full year results.

Okay. Great. Next question for me, the FY '30 targets you're putting out there, I just want to make sure that -- they are a nominal or real, as in do you have an inflation assumption built into those?

They are nominal, and I'd say they're an aspiration, not a target.

Okay. And then the I suppose a question having looked at the space for a while. The Slide 23, where you've got the sort of the intermodal forecast, the TEU for the forecast. So when we look at that, over quite some years now, those volumes have been bumpy, but relatively flat. So I know the forecasts have it going up. But what gives you confidence? I know it's a government forecast. But what gives you confidence we're actually going to go from being a relatively bumpy flat to upward rising sort of view.

I guess my context for this is one of the first times I met Andrew was when I had an MR freight review, which said that we should shut down our old intermodal business. And at the time, that business was losing $60 million and the volumes haven't increased. I think there's a few things that have changed since then. The first is that it's harder to get drivers, both drivers of trucks and drivers of trains. And when you look at how many drivers you need to move 100 boxes on a train, it's a lot fewer the drivers than when you're talking about moving 100 boxes on trucks. So that's the first point. I think the second one is ESG trends that Gareth spoke about, Andrew spoke about, I spoke about. I've never seen before a trucking company which principally is what a freight forwarder is, talk about moving freight from road to rail, but that's exactly what they did when we announced the TGE contract in February. I think the other thing I'd say is that there's opportunities to shift freight flows because of the dynamics Gareth mentioned. And we think that's real. We know it's been talked about 20 years ago, but we think there are a number of dynamics that make it real now.

Ian Myles from Macquarie. Just going back on to the land-bridging. Maybe give some -- and it sort of goes back to your statement then, George. Maybe give some color. What's changed between the failed land-bridging exercise when the South Australian North territory train track was draped up to where we are today to give the framework for people actually wanting to use this?

So I'll start, but there's quite a few things. So the first thing is the world kind of changed. And that's the -- you might have noticed the whole sort of ordering things online and things arriving in packages. So there's been a change in that. Then you've got a congestion on the East Coast as the population has driven up the overall demand and the online ordering type effects have led to congestion, which has been going on for a large amount of time at the ports. So bigger population are changing the way people order things. George, I'm sure there's more than that or do you want to talk, add some more on that.

Just building on that. The volume of time-critical freight, I think, has increased as well because of some of those consumer behaviors and changes, whilst at the same time, more broadly, you've got congestion both at Port but also on the land side. So I think what you've got now with Darwin is, I suppose, a number of tailwinds that are, I think, far better positioned for today than perhaps historically was the case.

Can you give me an idea what your customer is? Like it's not the guy probably or go shipping tiles from China into Australia. What sort of freight are you expecting to put on the back of your trains? And like you mentioned 7 days saving from Shanghai, but do you have an idea or it takes to get from Shanghai to Melbourne anyway.

Yes. So listen, we're not at this stage talking to some of those beneficial consignees. So those that actually are moving the -- whether it be the pain, the plasma television, et cetera, the people we're talking to are the liners, the stevedores -- sorry, the shipping lines and the international freight forward as they're the people whom we're having those initial engagements with, they move those products that you talk about on to the back of our trains.

So this is a global trend that has been happening for many decades. And if you look at how some of the more successful examples that we showed like the Prince Rupert, their growth is based on the back of 2 days, a 2-day benefit, actually, over Long Beach is what's actually driven their volumes up, as I understand it, talking to the operators there. So 7 days is actually something that would be remarkably better delivered into a Melbourne environment.

And you can deliver that at exactly the same cost to the warehouse as the alternate route or lower?

So I'd say cost parity and what it is -- and we know that because we know the cost of getting currently, containers from Darwin to Adelaide or Tarcoola and back again, and we know how much to move containers across the country. We actually experienced that on a regular basis. And we can go and ask in the market any day what the shipping alternative cost is all the way around, and then we can actually do a comparison between the 2. And then just to make sure that we're not worried about doing what it cost today because we could be in a low point in the market, which we are, I would have been really neat to do this a year or 2 ago in the middle of the pandemic have been screamingly successful. You've got to do it over the long term. So we compare it against the long term because our solution isn't about being in the market for a couple of days or a couple of months. It's about a very long-term long burn as we actually build up capacity through it. George, do you want to say something?

Yes. The other thing that cost bucket doesn't pick up is capital efficiency. And it goes to your first question you asked, what are the benefits for the end customer. Think about the shipper. And if I was the CFO of a shipper, I'd be focused on how do I get the same TEUs and the same revenue by deploying fewer assets. And think about a ship coming out of Vietnam or China or Malaysia, coming just into Darwin and back as opposed to going all the way around Australia. So it's cost, there's time, but there's capital efficiency as well.

Those ships going actually to Hong Kong or Singapore and actually cross-docking there and doing all that effective work there as opposed to Darwin, so that you're substituting that transition of cross-docking to virtue of land-bridging instead?

So we've been an example of Shanghai land-bridging through Darwin, but the shift could come from Singapore, right? It's about the benefit that actually accrues here. And the benefit of a cruise here is technically 7 days at the same cost, right? That's technically accruable at this moment in time. That will be -- that is attractive to the shipping businesses. I can't even imagine why they would want to actually pay the same amount of money or more to get the -- to keep their ship busy going around the coast. And the point I'd make is our utilization will be the same from or their ship utilization will be the same from whatever port they're leading to Darwin and -- if they go around the coast, it starts off being very high utilization, and then they get to Brisbane and they throw a few containers off the utilization falls, and they shut down to Sydney and the utilization falls again, and then they shut down to Melbourne. And then if they're really silly, they go to Adelaide, where actually most people miss Adelaide, and then go around the Perth and then back up. So the utilization is much worse for the ship in that circumstances. That's why people are interested in talking to us about it, and it's just a technical benefit.

And again, a dumb question. Can the Port of Darwin actually take all the current size ships which are running around Australia? And actually, could you have handled a current size ship running around Australia at the Port of Darwin in terms of actually the number of boxes coming off.

I'll let you answer that question.

So in short, no, you can't service all of the scale of ships that currently traverse Australia. The type of vessel size of those feeder max and probably the smaller Panamax. So anything up to around 4,000 TEU you can get within the port. And certainly, for our Stage 1 aspiration, we're probably more at that 1,000, 2,000, 2,500 TEU size vessels.

And one final question on this, and I'll let someone else talk. I think you sort of implied about what, 25,000 TEUs coming on that track at the moment. Are you going to go after that market share? Because you don't actually hold boxes on that track at this point in time and a good lead indicator of capability would be to do some of that yourself.

We do hold. Yes.

I'll rephrase. You're not the primary hauler on that track of the -- it would probably be your competitor [indiscernible]. But isn't it all your competitors' boxes being put on your [ trends? ]

[indiscernible] that operation tomorrow when you go out, Matt and his team can show you the...

So that's a huge capability improvement in a couple of seconds there.

Next question.

It's Owen Birrell from RBC. Maybe just a little bit of further to that question, really around that cost to parity question. You've obviously done a lot of your own detailed research. Can you give us a sense of, I guess, where the big wins and losses are if we're comparing just a pure milk run ship rate route versus the land-bridge option? Because I mean, I would have thought that the cost of moving a box on the rail would have been incrementally more expensive than just having it sitting on the boat for that distance. That's just the first question. And then the second one is in terms of achieving that cost parity, how much of that cost parity is you adjusting your prices on the rail for the customer to achieve cost parity? Or is it based on the assumption of a pure market price on the rail?

Do you want to [ think ] about that?

Yes. So in terms of that cost -- the cost comparison, yes, you're right. We have done an awful lot of work around understanding what those costs look like, looking at it over a 10-year time horizon. In terms of those cost elements, we are confident that it is line ball, the same sort of cost. And so on your question around, does it include an additional margin in terms of Horizon's operation? No, it doesn't. So it is line-for-line cost comparable.

So just what you're saying is that the costs that you're charging the users for the rail component is a market price for that rail component.

Yes.

And just, I guess, another question. One thing that we're seeing a lot on the East Coast is some very, very high infrastructure charges at the ports that are being passed on to the customers. Are you able to give us a sense of what the comparative infrastructure charge that you are facing at the Port of Darwin [ if at all ]?

Yes. In terms of the infrastructure cost at Darwin, we're very much at that early phase yet with regard to the containerized freight and the land-bridge solution. So that is an area that we're currently in discussions with the port. So I couldn't give you an exact number here today.