Good morning and welcome to the full year 2025 results. We're in Brisbane today, therefore I acknowledge the traditional custodians of this land, the Turrbal and Jagera people. I pay my respects to the elders past, present, and future, for they hold the memories, the traditions, the culture, and hopes of Aboriginal Australia. We must always remember that under the ballasts, sleepers, rail systems, and office buildings where Aurizon does business was and always will be traditional Aboriginal land. I'm joined on the call by Gareth Long, Acting CFO and Group Executive Strategy, George Lippiatt, Group Executive Bulk and Containerized Freight, Ed McKeiver, Group Executive Coal, and David Wenck, General Counsel and Head of People. After 15 years at Aurizon, including five leading network, Pam Bains retired earlier this month, having progressed UT6 to the signing of a non-binding term sheet, a significant achievement.
Cat Peppler, who has been at Aurizon for more than 13 years and was most recently Group Executive Corporate, has stepped into the role and joins us today as Group Executive Network. George will be presenting the financial results today for the last time, having been the CFO for the reporting period. Aligned with Aurizon's strategy, the strength of our network and coal businesses provides the opportunity to pursue growth in bulk and containerized freight. Our network business is nearly 2,700 kilometers of track infrastructure in Central Queensland, supporting 90% of Australia's coking coal exports. An 8.5% return is currently booked across the $6.2 billion asset, with more than half of group earnings coming from this regulated revenue base. Our coal business is linked to the ongoing demand for Australian coal across global markets.
India is already Australia's largest trading partner for steelmaking coal and is expected to be the largest driver of demand over the coming decades. Last year, we saw another record for steel production in India, up 6% on the prior year, which itself was a record. For thermal coal, last year saw a net increase in global coal-fired generation capacity, with 95% of this built in Asia, a continent where nearly all of Australian thermal coal is exported to. The average age of the coal-fired fleet in this continent is just 15 years, against a typical economic life of 40 plus years. Coal accounts for a third of group earnings and is backed with long-duration contracts. The bulk opportunity is based on the growth in global demand for Australian commodities such as base metals, grain, and magnetite, and the strategic importance of the Tarcoola to Darwin rail line.
While still a small contributor to our earnings, this is where our strongest growth prospects lie. For containerized freight, which is reported in our other segment, the opportunity is based on Australian GDP growth and land bridging volume from the port of Darwin to southern capital cities, which is progressing. Turning to our safety performance, we experienced a deterioration in both the total recordable injury frequency rate and the actual and potential serious injury and fatality frequency rate over the past year. Across the business, soft muscle injuries and foot injuries from walking on ballast are the most common injuries. Our focus remains on incidents that have the potential for serious injury or a fatality and protecting our employees, our customers, and the communities in which we operate. Level crossing safety is a continuing issue for the rail industry and was a focus in this year's National Rail Safety Week.
Adding to our existing level crossing campaign, we released a new series of videos called One, Two, Three Brace, featuring our drivers once again sharing their personal experiences and urging the community to take greater care around level crossings. Collectively, we must step up efforts and investment to improve safety at level crossings. This includes the rail and road industries, all levels of government, enforcement, and road safety agencies, and the general community. Turning to the results, as communicated in late June, underlying earnings for the year were impacted by a deferral of network revenue as a result of lower rail volumes and an increase in the provisions relating to three bulk customers. Outside of these two items, Group EBITDA for the year would have been over $100 million higher. The payout ratio has been maintained at 80% with a dividend of $0.65, fully franked.
Today, we announce a new on-market buyback of up to $150 million, following on from the completion of a $300 million buyback last year. It's important to note that commodity prices across nearly all of the major commodities we haul are lower over the past 12 months. When combined with inflationary pressures, it results in a tough operating environment for Australian producers. This doesn't just impact our bulk business; both thermal coal and coking coal prices are down 20% compared to a year ago. As a result, we suspended railing for two coal customers, which incurred an associated provision. We're combining the management of our bulk and containerized freight operations under the leadership of George Lippiatt to unlock commercial and operational synergies and streamline accountability. Three significant items have been booked in the half, resulting in the variance between underlying and statutory net profit after tax.
George will talk to these items shortly, but I did want to talk to one briefly: the impairment of goodwill associated with the bulk business. It is important to note this impairment of $57 million represents around 3% of the book carrying value of the bulk business. It is a result of some changes in timing of growth opportunities, plus changes in assumptions of future capital carbon costs associated with bulk rail haulage. Specifically, in terms of the latter, it relates to the higher assumed cost for Australian carbon credit units, or ACUs, and emissions intensity. The net present cost of carbon is now around $170 million, or 8% of the book carrying value of the bulk business.
Not only is future modeling under the safeguard mechanism challenging, but we still have the perverse policy outcome where most of the trucking industry is exempt, and rail, the far more environmentally friendly mode of transport, is not. I am of the firm view further reform of the safeguard mechanism is needed to give business greater certainty and address this anomaly. Turning to actions in progress, at first half results, I shared some of the actions we are taking in response to market dynamics. Although Aurizon has inflation protection in the network business through the regulatory framework and also through our commercial contracting, we are seeing price escalations in some parts of the cost base in excess of this protection. Having initially targeted $50 million in annualized savings in our non-operational cost base, a further $10 million has been identified.
Importantly, all $60 million has been actioned and will flow through in its entirety in FY 2026. This review focused on achieving greater efficiencies and includes a reduction of approximately 200 full-time equivalent roles. During the half, we also successfully priced our inaugural hybrid, which George will speak about shortly. Identified as part of the actions in progress at the first half results, a network ownership review is taking place. The review is ongoing and no decision has been made. The Aurizon board regularly undertakes a detailed assessment of the portfolio and capital structure of the company. The outcome of the review was last published externally in 2019 and found that based on the five elements as published on this slide, the benefits of integration outweighed the benefits of separation at the time.
We are drawing upon the same elements in the current review and we have appointed an investment bank to assist with the process. The progression of UT6 to a non-binding term sheet with customers supports engagement with prospective investors. Turning to business units, despite the impact of approximately $50 million of deferred revenue and in addition to lower external revenue, network earnings increased, driven by the step up in regulatory revenue. To better match the cost of operating and maintaining the network with the revenue received, we are changing our revenue recognition approach from FY 2026, which George will speak to in more detail shortly. The assumption for regulatory volumes in FY 2026 is more than 6% higher than actual volumes in FY 2025. Under the new approach, any variance in volumes will no longer be deferred to future periods.
As noted earlier, we are pleased to report that UT6 has progressed to a non-binding term sheet with customers. This is a very complex undertaking and now provides the pathway to securing the earnings profile of network from mid-2027. Coal earnings were flat, with higher volumes and higher yield, offset by higher operating costs. Contract utilization is still below what is considered a normal level, and our expectations are for this to step up in FY 2026. TrainGuard is operating in the Blackwater and Goonyella corridors and is projected to reduce the number of train drivers by around 50 during FY 2026. Our contract with Whitehaven's Gunnedah Iron Mines will cease in June 2026. I am proud of the performance hauling for Whitehaven over the past decade and more generally on our superior operational performance in the Hunter Valley over the last 12 months.
We tried really hard to retain Whitehaven, and I am disappointed that we were not chosen as their rail operator going forward. The impact on our Hunter Valley operations from FY 2027 is dependent on the redeployment of capacity, noting we have multiple strategies available in this regard. Bulk EBITDA was lower, with contract growth more than offset by the cessation of a rail maintenance contract, lower South Australian grains, and an increase in doubtful debt provisions, as previously disclosed. In addition to the BHP copper South Australia contract, we also signed 10-year contract extensions for Manara and Karara in Western Australia. These are decade-long contracts that provide a foundation for the bulk portfolio to build on.
Finally, to containerized freight, where although we are not yet breaking even at an EBITDA level, we have stepped up volumes in the three months to July, up 30% compared to the same period last year. Non-foundation customer TEUs increased fourfold over the same period, and we have made some operational changes to support both the cost base and customer offering, including the extension of a bulk Broken Hill to Perth service to Sydney for an added frequency and bringing all of our containerized freight services together at a single facility in Adelaide, as we showcased at our site visit last month. Land bridging volume began during the year, with containers now railing down to Melbourne in addition to Adelaide. We are continuing to work with auto logistics company NYK to support the import and distribution of motor vehicles into Australia.
I look forward to updating the market on this exciting development in due course. Finally, I want to take the opportunity to talk about our investment in bulk and the connection to the recently announced BHP copper South Australia contract. Although a challenging year, the growth opportunity remains. The infrastructure investment and recent contract signings provide a solid foundation to build upon. As recently as FY 2017, bulk was loss-making at the EBIT level and was best characterized as a grouping of contracts rather than a business unit with a clear strategy. I brought together the business unit under a single Group Executive, bringing both accountability and the opportunity for growth. As shown on the slide, we have delivered growth. Our operations are located in key mining regions of Australia, and we hold the lease of the strategically important Tarcoola to Darwin line through to the mid-2050s.
Central Australia holds two-thirds of Australia's copper resources, about half of Australia's magnetite resources, and significant rare earths and phosphate rock resources. Recent contracting for customers such as BHP South Australia, Karara Mining, and South 32 has pushed out the average contract length of the bulk portfolio by three years to eight years. When including the Tarcoola to Darwin concession, this extends to 12 years. Our investment in bulk capacity enabled the successful contracting for the largest copper operations in Australia. As announced in June, Aurizon has been awarded a contract for BHP's Copper South Australia operations, including all rail and road haulage tasks, with a total contract length of up to 15 years. It is understood to be Australia's largest ever road-to-rail conversion for a major minerals project.
The contract begins in October this year and is in addition to Aurizon's existing haulage of copper concentrate from Wirrada to Tennant Creek. The contract is expected to deliver revenue of $1.5 billion over the first 10 years. The integrated logistics solution is highly scalable and means we can quickly capture additional volumes should BHP proceed with identified growth opportunities in South Australia. The transport of copper concentrate and cathode from BHP's Olympic Dam, Carrapateena, and Prominent Hill mines, as well as inbound freight, will shift to rail between Pimba and Port Adelaide. Leveraging our extensive South Australian footprint, including port terminal assets at Port Adelaide and the Gillman Freight Terminal, was critical to securing these contracts. The largest single new investment is a new rail freight terminal being constructed at Pimba at a cost of $40 million, which will act as a centralized logistics hub for BHP's operations.
Our investment in bulk is built around delivering contracts like this. That is, having the assets, capacity, and the capability to deliver bulk commodities over long distances on behalf of customers. This is a major differentiator for Aurizon and stands us in good stead to secure further contracts with such high-quality counterparties. On that, I will hand over to George.
Thank you, Andrew. As published in our guidance update in late June, underlying earnings for the year decreased by 3% to $1.576 billion, below our originally stated guidance due to the deferral of network earnings and an increase in provisions primarily relating to three bulk customers. As noted earlier by Andrew, outside of these two items, group EBITDA for the year would have been more than $100 million higher than the result published today. The deferred network earnings will be caught up in FY 2027, and we're expecting a 9% EBITDA uplift in FY 2026, being the middle of our guidance range. We've also increased available capital due to the subordinated note issuance and lower capital expenditure during FY 2025. These factors support the $150 million of additional share buybacks announced today and take the total buyback amount to up to $450 million across FY 2025 and FY 2026.
Revenue increased by 3%, driven by coal, bulk, and containerized freight, which is reported within other. Network revenue was flat, with an uplift in regulatory revenue being offset by a reduction in external construction works. Operating costs increased due to higher doubtful debt provisions, which I'll discuss further in the coal and bulk slides, higher labor escalation, and additional train crew and maintenance required due to growth volumes. Staying at a group level, you can see in the table that depreciation increased by 4%. Approximately three-quarters of this step up was driven by higher network depreciation due to increased capital investment and therefore regulatory asset-based growth. We also saw a favorable provision release in FY 2025 of around $50 million, including the contribution from lower short-term incentive payments and fewer insurance events.
Unlike in prior years, you'll note that statutory EBITDA is $43 million lower than the underlying figure due to a few significant items. Firstly, a favorable $37 million from the settlement of a longstanding legal matter, as we talked about at the half year. Secondly, $23 million of costs related to the review of our non-operating cost base, $18 million of which relates to redundancies. Lastly, a non-cash impairment. This equates to all of the goodwill in the bulk business, or $57 million, and represents 3% of the book carrying value. This impairment has been based on an assumed delay to the timing and conversion of future growth opportunities, as well as an increase in the estimated net present cost of carbon.
The latter is driven by a higher carbon cost forward curve, and I note that our bulk business is sensitive to this assumption given the longer haul lengths, non-electrified nature of haulage, and the current structure of the government safeguard mechanism. The variance from these significant items at the EBITDA line is $45 million. We continue to generate strong free cash flow, and while this was 22% lower than the prior year, it was up 19% in the second half. In addition, approximately $30 million of network take or pay being accrued in FY 2025 is due to be received in early FY 2026. Note this free cash flow excludes significant items. The board has declared a final dividend of $0.65 per share, representing a payout ratio of 80% in the second half, which will be fully franked due to the normalization of cash tax in calendar year 2025.
This brings the total dividend for FY 2025 to $15.7 per share. Moving now to network, network EBITDA increased $26 million, or 3% to $956 million. This was driven by higher regulatory revenue, the result of the uplift in WACC to 8.51% from 1 July. This has been partly offset by lower external construction works and a volume-related under-recovery versus FY 2024, which saw a volume-related over-recovery. In FY 2025, volumes were 9 million tons lower than the regulatory volume assumption of 217 million tons, which when combined with higher maintenance spend resulted in deferred earnings of around $50 million. These earnings are expected to be recovered in FY 2027 through the usual RevCap regulatory process. In the bridge on the right, you can see excess revenue was $60 million higher, driven by the application of the final reset WACC of 8.51%.
Note these figures are net of fuel and electricity charges, which are passed through to network customers. Operating costs increased by $22 million due to higher maintenance costs, largely due to labor inflation and a proactive drainage program being undertaken to further increase the weather resilience of the Central Queensland Coal Network. Compared with the maintenance allowance, we were over by around $15 million in FY 2025. Subject to approval under the regulatory regime, we would recover this overspend in FY 2027, with it being included in the $50 million RevCap I mentioned earlier. Network benefited from strong non-recurring third-party construction works in FY 2024, which meant in FY 2025 this was $9 million lower.
In terms of the broader maximum allowable revenue, or MAR, we will see a further step up of around $93 million in FY 2026, driven by RevCap of $30 million from FY 2024 and the usual regulatory revenue and capital true-ups. I expect about 50% of this to flow through to increased FY 2026 EBITDA due to it being offset by a step up in maintenance costs, rebates, and a small reduction in GAEP earnings. We've also included FY 2027 MAR in the appendix, which will see a further $60 million step up from FY 2026 to FY 2027. Moving to coal, coal volume and revenue increased by 2%. However, this was offset by the 3% increase in operating costs, which was aligned with inflation and resulted in flat earnings.
In the EBITDA waterfall chart on the right, you can see the benefit of the additional 3.2 million tons hauled, equating to $19 million net of the costs of hauling the additional volume. Inside of the dotted area, we show the yield increase of $15 million, which includes the contract rate indexation benefit, partly offset by an adverse shift in customer mix. You may recall that at the start of the year, we had expected a lower yield result given higher volumes, particularly in the Goonyella corridor. While this did partly flow through in FY 2025, we now expect this yield normalization to complete in FY 2026 as volumes in the Goonyella corridor step up again. The next bar is operating costs that are not directly associated with the uplift in volumes, an example being labor and materials escalation.
As you can see, these costs increased by $28 million and broadly mirror the benefits seen from contract indexation, highlighting the inflation protection mechanisms in our haulage businesses. Lastly, we had higher doubtful debt provisions as a result of two coal customers entering administration. The amounts provided for represent the entire amount owing to Aurizon, and while we have suspended rail services for both customers, some of the installed capacity has already been absorbed by additional demand from existing customers. Looking forward, we expect FY 2026 to see a small uplift in earnings with a volume increase, CQCN train crew reduction, and a reduction in the non-operating cost base, which will be partly offset by the yield reduction I mentioned earlier and further cost increases, for example, as historic EAs are renegotiated.
Moving now to bulk, bulk revenue was up 2% at $1.12 billion, driven by new customer contracts being partly offset by the cessation of a rail maintenance contract in the Pilbara, lower iron ore volumes, and lower South Australia grain volumes. Operating costs increased by $86 million, or 10%, largely driven by an increase in doubtful debt provisions, higher labor escalation, and costs to support customer growth. Excluding doubtful debt provisions, operating costs increased by 3%. Earnings for bulk as a result were 26% lower to $169 million. In the waterfall on the right, you can see $16 million of earnings uplift from customer growth, excluding grain and iron ore.
Earnings for grain were $8 million lower, largely driven by South Australian grain volumes, although we saw improved grain volumes in the second half given the strong Western Australian harvest and should see these railings continue into the first half of FY 2026. Iron ore was down $12 million and includes the impact of the cessation of the MRL contract, which we talked about at the half year. This will flow into FY 2026 given the MRL mines in the Yilgarn region ceased production in December 2024. Doubtful debt provisions for three bulk customers, which entered voluntary administration in the second half of FY 2025, were $56 million.
While there are some potential headwinds in FY 2026, such as the reduced iron ore volumes for MRL and OneSteel, and any restart of Northern Iron ore Centrex operations not expected at scale until at least the second half, we do anticipate a stronger year overall for grain, the startup and contribution from the new BHP contract, and the benefit of cost-based reductions mentioned earlier. Now moving to gearing and funding. Looking to the chart on the right of slide 17, it's pleasing to see the work done during the year to lengthen, smooth, and diversify the funding profile. This reinforces what I've said for the last few years, that banks and debt investors continue to be attracted to Aurizon's credit profile. During the second half, we saw positive credit market conditions, which supported our inaugural $500 million subordinated notes issuance.
These notes provide 50% equity credit and mature in FY 2055, with the first optional redemption date in FY 2031. This additional source of capital will form part of the group's long-term capital structure and gives additional capacity and flexibility. This completes the group capital structure review we flagged in February, noting that the network ownership review is ongoing. As we highlighted when we raised the funds, any potential change in network ownership wouldn't impact the structure or guarantees provided under the subordinated notes. In the second half, we completed a further private placement of $53 million. This is noteworthy because it's Aurizon's longest dated senior debt issuance, maturing in FY 2040 as shown in the chart. This is in addition to the two capital markets issuances of $100 million and $300 million completed in the first half.
All three of these issuances were priced well inside network's 250 basis point debt risk premium. We also successfully refinanced $1.7 billion of bank facilities across both operations and network. The funding activities completed throughout the year continue to show that we have strong support from our debt investor base, which includes high-quality Asian and domestic accounts. Looking at some of the other metrics on the page, I note the weighted average cost of drawn debt at 6.3% versus 6.2% in FY 2024, and the weighted average senior debt maturity now sitting at 4.9 years versus 4.6 years in FY 2024. The funding strategy remains unchanged, that is to ensure we access multiple pools of capital and lengthen the debt maturity profile to align it with Aurizon's long-duration assets.
Importantly, we maintain a commitment to strong investment-grade ratings with Aurizon Operations and Aurizon Network credit ratings, both at BBB+ and Baa1. This commitment is supported by group net debt at $5.2 billion, as well as net debt to EBITDA, which now stands at 3.3 times. At a subsidiary level, net debt to EBITDA for Network is still around four times, while Operations is less than two times. Moving to capital allocation, Aurizon's ability to generate solid free cash flows and reduce growth capital has seen us increase returns to shareholders in the form of dividends and buybacks during FY 2025. As shown in the chart on the left, total CapEx for the year was $695 million, a 17% reduction compared to the prior period. Of this, $593 million was non-growth capital, with approximately 60% allocated to the network business, contributing directly to the regulated asset base.
As can be seen in the chart, total growth CapEx for the year was $102 million, just over $100 million below the previous year. This variance is mainly due to lower capital requirements in bulk and containerized freight as they ramped up operations. As Andrew will touch on later, we expect growth CapEx in FY 2026 to be in the range of $100 million- $150 million. One-third of this contract is contract-backed to support bulk, specifically the BHP contract, and the remaining two-thirds is containerized freight related. It's consistent with the CapEx we announced to stand up the business two years ago. This mainly relates to our new container terminal in Perth, the destination for the majority of our services on the corridor that rail has three-quarters of the modal share.
Turning to the right-hand side of the slide, you can see that the percentage of capital allocated to shareholders in FY 2025 has returned to levels seen during the FY 2016 to FY 2021 period. You will also see a different mix, with buybacks and cash dividends equally contributing to shareholder returns during the year. Dividends have benefited from the increase in the payout ratio to 80% of underlying EMPAT, which, as noted at our FY 2024 full-year results, reflects a level we believe to be sustainable. In line with our capital management framework, we are able to maintain our strong investment-grade credit ratings and deliver capital back to shareholders while at the same time focusing on earnings growth.
As mentioned earlier, the additional flexibility from the subordinated notes, combined with lower FY 2025 CapEx and an expected FY 2026 earnings step up, enables us to return up to an additional $150 million in capital to shareholders in FY 2026 through further buybacks. Finally, moving to my last slide on revenue recognition in network. As Andrew noted earlier, from FY 2026, we are changing how underlying revenue is recognized. This is being done alongside an IFRS draft accounting standard for regulated entities. Although not expected to be implemented for a few years, we are making the change from FY 2026 as we believe it best reflects the revenue profile of network and matches underlying revenue with the annual cost of operating and maintaining the network for customers. As a reminder, network regulatory revenue is always recovered via take or pay and/or revenue cap within two years.
Where revenue is deferred by two years, it can result in earnings volatility. The primary driver of deferred revenue through revenue cap is where volumes differ from the regulatory assumption as set by the Queensland Competition Authority. This occurred in FY 2025 as well as FY 2023, as shown in the top chart. From FY 2026, the estimated future revenue cap will be recognized as underlying revenue. The lower chart shows a worked example using FY 2025. Compared to the regulatory revenue set at the start of the financial year, $70 million was under-recovered due to volumes being lower than the regulatory assumption. Take or pay recovered $32 million within the year, therefore leaving $38 million still to be recovered. When combined with $12 million of other adjustments, primarily maintenance overspend, this results in an estimated RevCap of $50 million to be recovered in FY 2027.
Under the new approach to be adopted in FY 2026, this $50 million revenue cap adjustment would also be recognized in underlying revenue within the same year. For FY 2026 and 2027, the recognized MAR will continue to include any prior period RevCap amounts, given they are yet to be recognized. This transition ensures FY 2026 and 2027 dividends, which are declared based on underlying earnings, reflect the deferral of past period network earnings from FY 2024 and 2025. From FY 2028, the recognized MAR will exclude prior period RevCap amounts, given they will have already been recognized in underlying revenue in prior periods. This change represents a preemptive step toward alignment with international accounting standards, and it will enhance the clarity of our guidance and financial reporting going forward.
This will be my final result as CFO, and I've been proud to hold that role for over the past five years. I'm equally proud to now step into my new role leading our bulk and containerized freight businesses. We're a critical part of Australia's economy. We have a growing container presence and are the largest hauler of copper, grain, bulk site, alumina, rare earths, and iron ore outside the Pilbara. I know this business can perform for our customers, employees, and shareholders, and I'm looking forward to demonstrating this over the coming years. Thank you, and I'll now hand back to Andrew. Thanks, George. Turning to the outlook, group underlying EBITDA for FY 2026 is expected to be in the range of $1.68 billion- $1.75 billion. Supported by the change in network revenue recognition, we have introduced full-year dividend guidance.
Although ultimately determined by the Aurizon board, we expect total dividends to be between $0.19 and $0.20 per share. Sustaining CapEx is expected to be $610 million - $660 million, including $30 million of transformation capital. Growth CapEx is expected to be $100 million - $150 million. Network earnings are supported by an increase in the regulatory revenue, partially offset by increased direct costs. Allowable revenue is to be entirely recognized in underlying revenue, regardless of volumes railed. Coal earnings are expected to be higher than FY 2025, driven by higher volumes and flat unit costs, partly offset by lower yield due to corridor and customer mix. Bulk earnings are expected to be higher than FY 2025, driven by the non-recurrence of provisions and increased grain volumes, partly offset by lower iron ore volumes.
Earnings in the other segment are expected to be higher than FY 2025, with an improved containerized freight contribution offsetting the non-recurrence of the settlement of legal matters from FY 2025. As usual, this is subject to no significant disruptions to supply chains and customers, such as major derailments, extreme, or prolonged wet weather. Although I note the continuing investment made by both Aurizon and other rail network operators across Australia in increasing the resilience of respective rail networks. I'm excited about the year ahead and have complete faith in the team to continue making good progress against our clear growth strategy. On that, I will hand over to the operator for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Andre Fromhyr with UBS. Please go ahead.
Thank you. Good morning. I just wanted to start with coal. Your guidance is essentially pointing to margin pressure next year, if I just base that on the flat unit costs, but lower yield. I am just wondering if we could better understand the dynamics around that. I understand the comments earlier about Goonyella expecting to be the source of volume growth next year. Is that a yield pressure because it's just lower pricing on average, or you're already recognizing take or pay on those volumes? When they return, they're not as accretive. Maybe that's a question more broadly about the contracting environment in coal and what you're seeing from pricing pressure.
I might get George to see if he can give some insight into that. What is a complex matter?
Sure, Andre. For FY 2026 in coal, it's not about contracted rates. It's more to do with that second point you mentioned, that particularly in the Goonyella corridor, where we have higher take or pay. When those volumes return to a higher utilization, they're not as accretive given the high take or pay and therefore revenue recognized in FY 2025. I think I mentioned in my speech we expected some of that normalization to happen this year. It will just flow into FY 2026.
Okay. My next question is probably for George again, around the provision. I guess we can see the bad and doubtful debt provisions, $56 million in Bulk, and then there's $7 million in Coal. You've called out $50 million of provision releases recognized in the period. That's in underlying earnings, I understand. Does that mean those are flowing through in the other segments? I just wanted to reconfirm something we discussed at the half. I think does the Other still include legal benefits in the underlying earnings, notwithstanding the amount that you've recognized in significant items?
Yep. Let's start with the legal matters. The legal settlement was about $37 million below the line and about $20 million above the line that was booked in other in the first half. That's the legal part of your question. You're right on the provision for doubtful debts, about a $56 million increase in bulk. That's a $7 million increase in coal. In terms of the provision releases, it's about $50 million relating to lower STI payments and also insurance events. The vast majority of that is allocated to the business units, so it does not appear in other.
Right. Okay. Great. Thank you very much.
Your next question comes from Jacob Cakarnis with Jarden Australia. Please go ahead.
Morning, Andrew. Morning, George. Two for George and one for Andrew, if we can. George, just on the FY 2026 guidance, just noting that you guys provided a DPS guide for FY 2026. Can we gross that up by the average payout ratio over the last few years? Can we gross that up at 80% to get a rough guide for core EPS for FY 2026, please?
You could do that, Jake. I mean, what I would say to you, though, is we've been paying out consistently at 80%. The Aurizon board maintains the discretion to change that payout ratio. The other things, obviously, you've got to make assumptions on around depreciation and net finance costs. Rather than give each three of those assumptions, we thought we'd jump straight to the end point and give you that $0.19 - $0.20 per share DPS guidance.
Okay. That wouldn't be miles off, though, if we gross that up by 80%, if I understand your answer correctly.
It shouldn't be, no.
Okay. Thank you. I think you've answered this partially, for Andrew's question about the allocation of the provision unwind for the STIs. Can you just, when you're booking that, let's say we move to 2026 and things are performing as you expect and you rebook that, is that an expense that also comes back into the business on the reverse?
Yes, that is correct. Obviously, the STI payments are dependent on us hitting our targets, and the insurance events are depending really on what events occur in the way of derailments. That is an item that occurs because we self-insure. Where we have very few events, as we did in FY 2025, the business gets the benefit of that.
Yeah, I guess that you've hinted on where the angle of the question's going, George. Just that self-insured amount, is there any way that we can reconcile how that's changed through time in the accounts that you provide to us? Is there somewhere in the financial notes that you can point to that I can track that through time, please?
No, there's not, but what I can say is two things that I've touched on in prior earnings calls. The first is that over the last seven or eight years, we have not had a year where, in terms of the liability for property damage, the amount has gone above our self-insurance amount. We've got a really good track record there. The second thing is to back that up, I've said before we're paying less in insurance now than we were 10 years ago. That's partly because of that track record.
Okay. I promise one for Andrew. Andrew, just on slide nine, you're saying that there's a lot of opportunities in coal for the redeployment of that Whitehaven capacity. Obviously, that's sitting on standard gauge, I assume fully depreciated kit. What's the play there? Do you go after the New South Wales market again, or do you look at Bulk Central, which has a similar gauge, and choose to play deeper there, please?
Yeah, good question. I'm going to get Ed to talk about his thoughts of responding to that challenge.
Yeah, thank you, Andrew. To put the volume, the impact of the Whitehaven loss in context, our contract with them in New South Wales accounts for about 5% of the portfolio. The contract book, we expect the available capacity from 2027, that there'll be opportunities to replace those volumes by either increasing our rollings for existing or potentially new customers in both. As your question goes to even bulk markets where in standard gauge markets, where we've got, as you know, we've got a track record for cascading assets and people, redeploying them to respond to the market. There's also other contracts in New South Wales in the ramp-up phase, our other customers, and several others up for tender over the next three years.
To bring it back, Andrew, just to bring it back to you, is the commitment to shareholders that that's going to get an equivalent return on the capital as you look to redeploy it? How do we think about what happens, I guess, on a mix and ROIC basis as well as you try and remix that?
As we have, you should be able to clearly see that we have some good practices about how we actually determine where to allocate the equipment, and it is based on value. We will be pursuing exactly that same process as we deal with the equipment that we've got that would become available in the Hunter Valley. We'll look at all of the options, and we'll make a considered decision based on the data in front of us at the time.
Thanks for the opportunity for questions, guys.
Your next question comes from Matt Ryan with Barrenjoey. Please go ahead.
Thank you. I was looking at slide seven, the actions in process, or sorry, progress banner. I was listening to your comments a bit earlier around the difficult operating conditions that you're hearing about from your customers. I just wanted to understand, are you sort of linking those conditions to needing to do more on the cost front, or are these the sorts of things that you think you should be doing anyway?
Oh, no, don't link them. The reality is there's a normal course of business, cost reductions, and improvement that you do every year. There's also, when I spoke about these other bases for some of the cost reductions that you'd see in the non-operational space, we've seen the impact of the application of machine learning in some of the more technical parts of our business and the opportunity to improve cost performance in those areas. There is a deep requirement to keep an eye on your competitors and make sure that we manage our costs appropriately in that environment. You learn from your competitors and you do things that are actually smart in that place.
We also, on this occasion, looked at what's happening outside of the rail industry, in industry in general, both inside Australia and outside Australia for best practice, and made some changes that resulted from doing that.
Okay, thank you. The UT6 process from here, I think you've made a few more comments around that advancing. I guess the thing that I was wondering about was, do you think that there's going to be obvious changes that you could be making considering this is, I guess, the second version of what you put in place a few years ago?
Look, when we put those changes in that led to UT5, that was a very long, exhaustive process, and there was considerable change that was made. The idea that you're confronted with when you actually will walk what comes at the end of that contract is, and I think, as I said many times, even recently, is that you work really hard to build a great relationship with your customers. You do that through the framework that supported UT5 so that no one wants to change, you know, in a wholesale fashion. You want to build upon what you've got so that it actually works better for the customers and ourselves. That's the thinking and the work that we've done to get to the non-binding stage at this stage of the process, which is a significant milestone given the number of players that are in place.
We work through to finalizing that hopefully by the end of the year.
Thank you.
Your next question comes from Anthony Moulder with Jefferies. Please go ahead.
Good morning all. If I can start in containerized freight, I appreciate it's a small part of the business, but we're still not, you're still not at break even. You're talking about these new contracts that have been added. I wondered if they're contracts or they're still spot volumes. Also, just your confidence in whether or not FY 2026 will actually see a break even, albeit to EBITDA not EBIT for containerized freight, please.
I think I'll get George, can you just give us as much color as you can to Anthony to help him understand where we're at and where we're likely to be?
Sure. Anthony, I'll start with contracts. That was the first part of your question. Then I'll go to utilization and financial performance. In terms of contracts, we have two additional non-TGE contracted customers. We are, however, moving volumes for more than 30 customers at present. We're pleased to see that growth. If I then move to volumes and progress throughout the year, you'd remember on our half-year results call in February, we were talking at about 60% utilization. Through the financial year, we're now in the high 60s. That's the exit run rate at the end of FY 2025. To give you a bit more color, the July container volumes were about 13,000 TUs. If you multiply that by 12, you get to about 75% utilization. Having said that, that includes the bulk mineral sands containerized volumes that Andrew touched on in his speech.
If you back that out, we are at the high 60% utilization range. Really pleased with the progress. Another data point to give you a sense of it is we've grown our non-TGE volumes by fourfold over FY 2025. Good progress and credit to Gareth and the containerized freight team for the work they've done there. In terms of the financial performance in FY 2026, given it is a non-take or pay market, it's hard to predict, but we are confident that we will see a favorable variance from FY 2025. Given those utilization figures that I mentioned, we are expecting that EBITDA performance to improve from FY 2025 to FY 2026.
Thank you. Your next question comes from Sam Seow with Citi. Please go ahead.
Good morning, guys, and thanks for taking the question. Just a quick one on the network ownership review. I guess given you regularly do this kind of capital structure assessment, is there any kind of timing that we can expect on this review?
Yeah, we've been looking at an answer this year, more or less. The thing that I'd add to how you spoke about this being a regular is that from time to time, over the years, we've gone out to various parts of the group, the decision-making criteria, and we've gone out to various contributors to that group, that decision-making area. For example, I'll probably be better with an example, like the customers. What do the customers think about this? We go out and we talk to the customers and find out what they think. From time to time, you get new customers. At some point in time, we'll do another process like that.
On this occasion, I decided that it would be good to actually get an understanding of what the real value of the business was, and that's the process that I undertook, undertaking with the support of a bank. The reality is that you'll get some information back, and we can act on that information. If you think about it, you've probably got a continuum. At the bottom end of the continuum, you've got pricing that makes the decision really easy because you just can't even possibly go there. At the top end of the continuum, you get values that actually say this is extraordinarily high, and you have an easy decision.
In the middle of the continuum, you get a whole bunch of numbers that, you know, they're in the soggy center, and there are many other issues that you have to actually consider and think about while you're working through that. Hopefully what I've done is paint for you the fact that we've been through year-on-year processes. From time to time, we may go external to seek other information to make sure that our decision-making is accurate and relevant and still current. That's what we're doing this time. When we went to the customer group, for example, they kept it a secret. When we went to the group that we've just spoken about, even though they're under NDAs, they didn't keep it a secret. That's all that's happened.
Okay. Maybe just a quick question on coal. The regulatory volumes expected to kind of tick up, you know, quite materially, mid-single digit. I noticed, I guess, in your coal division, the contracted volumes as we look out in the term are probably flat to down. Could you perhaps maybe join the dots there and just marry up the two kind of data points?
Ed um, if you talk about that.
Yes, certainly. Thanks for the question, Sam. I think you're referring to what's effectively a 6.5% uplift in regulated volumes on the network and what the impact on the coal business share would be. I think if you applied 96% of the regulated volumes were railed this year on the network, and if you applied the same sort of pro rata, that equates to about an 8 million ton uplift in actuals if that holds. With more than half the volume of the network, that's aligned with our modest uplift for FY 2026.
George, I might just get you to give your take on that.
Sure, Sam. I mean, the regulator sets those volumes pretty early in calendar year 2025, and it's based on the information they get at that point in time. My guess would be if they were setting that volume figure now, it would be a lower figure. Of course, that won't impact network underlying earnings because of the regulatory revenue recognition change that we've talked about this year. Hopefully that helps bridge some of it. We're not expecting a similar step up in coal volumes from a % perspective to what the regulatory volume step up is in network.
Got it. Just an easy one, maybe on bulk, but it's just wanting to clarify the terminology you've used in the guidance. In particular, where you mentioned the non-recurrence of provisions, I just wanted to clarify whether you mean none of your current customers are expected to result in a provision in 2026, or if there's something that might reverse that we can add back in FY 2026. I guess it's the latter, I mean the former, but just wanted to understand that a bit better.
Sam, it is the former. We don't expect to have further provisions for doubtful debts in 2026, but what I would say is that we continue to pursue all legal and commercial avenues for recovering those amounts from those three companies that are in involuntary administration.
Got it. That's really helpful. Thanks, guys.
The next question comes from Cameron McDonald with ENP. Please go ahead.
Good morning. Thanks for the update just on the Whitehaven contract. Just as an extension to that other, to the last question on the contracted volumes within coal itself, not the network, just coming back from 233 to 229, can you either confirm or deny that you've actually retained all of the existing contracts, or is there another contract rolling off within the 2026 year, albeit it won't be material, but will impact FY 2027?
George, do you want to just talk about the...
Yeah, sure. Cameron, the shift from 232 to 229 is more to do with customer nominations. Customers are able to nominate plus or minus a band. Each contract is different, but that's the bigger drive of 232 to 229. The Whitehaven contract is an FY 2027 outcome. It's more contract nominations that have resulted in 229 versus 232. You might remember that at the half year, we took the step of giving an estimate for contracted volumes, and we said it'd be circa 230. 229 is pretty close to that circa 230.
Okay, just an extension to that, there are no other contracts that you have lost?
No, not that I'm aware of.
Thank you. In terms of some recent press reports, particularly around Mount Isa and Glencore, is there anything we should be aware of or concerned about with what they could potentially be doing up there?
I think the situation on the Mount Isa line and the decisions that need to be made, there are many different outcomes that could actually occur, and they impact the area and ourselves in a number of different ways. We have to wait and see what the actual decision-making is as you get to the end of the process. The thing I would point out is that there are the resources that are in the ground that cause, you know, like copper and that are still in the ground, and they get mined, and they get moved. It's just where they get moved to and in what volume they get moved. If they're moved as a concentrate, they get moved as a high, is there a higher % if they get moved as a cathode? They're actually a much lower volume. There is just so much complexity in that.
It's just not useful to speculate.
Okay, thank you. Just on the network review, I appreciate the comments that you made earlier, Andrew. In terms of that process, is there anyone actually conducting third-party due diligence?
No, I'm not going to talk about the process, but we're very early stages in our process. They're just collecting people's interest and valuation.
In terms of that valuation, though, has anyone actually tabled the valuation with you?
I'm not going to get into the details of the process that we're in, other than to say that we've got a bank engaged, and we're actually interested this year in understanding the value that the actual network brings, rather than actually having our estimate of what we think it is. That's what I'm doing.
Okay, thank you.
Your next question comes from Ian Myles with Macquarie Capital. Please go ahead.
Hey guys, can we just look at the network for a second? If you talked in your guidance, I think, about higher direct costs as one of the counterpoints to the additional revenue, you've shown us that you expect to get, or you'll book $93 million of additional revenue. In the slides, you've highlighted that overspends on maintenance and the like, which are recoverable, will also be excluded from being expenses that get put into or adjusted. I'm just trying to work out why you said only 50% of the revenue would get converted to EBITDA.
George, do you want to deal with that?
Yeah, Ian, there's three things. Bear in mind, when we talk $90 million up in the MAR, that includes the rev cap from two years prior. When I talk about the offsetting items, there's three. There's maintenance costs, which will go up. The second one is rebates. We're expecting to have higher rebates as volumes increase in network. The third one, which is more minor, is the usual roll down of GAEP revenue. It was unusual in 2025 with GAEP, given we had the risk-free rate step up. GAEP will return to the typical reduction year on year because the asset base doesn't inflate. They're the three factors.
Okay. You've got a lot of provisions moving. You've got an unwind of a $50 million p rovision and you've got bad debt provision going forward. What is, being more direct, I guess, if we look at the bulk business, what is the net provisional drag or benefit during the period, and likewise with the coal business?
Yeah, I think it's impossible for us to give you an exact number on that, Ian, because bear in mind some of it relates to insurance events, which we don't know what will occur throughout the year. To give you maybe a steer, bulk had a $56 million negative provision for doubtful debt. That doesn't repeat. That's a $56 million benefit. If you assume that the provision release and bulk share of that $50 million doesn't repeat, that will be much less than the $56 million. In terms of coal, it will have a net headwind from that provision release because the doubtful debt provision that won't or shouldn't repeat in FY 2026 was only $7 million.
Okay. Does Networks get much benefit from these provision releases?
Network is different from an insurance perspective in that network is effectively self-insured given the way the regulation works. It doesn't get a benefit of that insurance event, but it will have a benefit in FY 2025 from lower STI payments.
Okay. Just to be perfectly clear, I think Cameron asked a question around containerized freight and profitability. You said EBITDA improves, but Cameron asked the question, will it actually break even? Will containerized freight be able to break even in FY 2026? I guess the extension to that is when do you expect it to break even if it doesn't?
I expect it will be close in FY 2026, Ian. I'm not going to give effective guidance by BU, but I expect it will be close. I absolutely expect it to more than break even in FY2027.
Okay, look, that's great. Thanks.
Your next question comes from Justin Barratt with C LSA. Please go ahead.
Hey guys, thanks very much for your time. I just wanted to try and reconcile a couple of comments you made around the coal business and volume expectations into FY 2026. I think, Andrew, you mentioned that you expect your utilization to increase and you also expect a growth year on year in your actual volumes, but not to the same extent as network. If I do my maths, it looks like there's actually going to be, or you generally expect, a relatively significant improvement in utilization in FY 2026. Is that broadly correct?
If you go back in history and you look at the high utilizations that we have achieved, they've been in the low 90%. A couple of years ago, the utilization of contract got the book got down to 80%, I think, from maybe 81%. It's been slowly increasing for the last year or two, and we do expect contract utilization to improve longer term.
Okay, great. The next one just on coal yields. We've seen obviously a mix effect over the last couple of years. I just wanted to confirm, I think you said in your prepared remarks, Andrew, that you expect that impact to, I guess, FY 2026 to be the last year of that impact. I just wanted to confirm that. More broadly, I think the question's been asked before, but also just recheck how the Whitehaven coal losing that contract may impact yields in terms of mix going into FY2027.
Yeah, look, when we talk, the vast majority of the discussion around yield and mix is basically driven by volumes railed in Queensland and which of some of the customers rail well or don't rail. The challenge is, of course, you know, a customer may not rail well one year and then for another reason they may not rail the next year and then they might rail well the year after. Predicting when that individual customers are going to do the railings that they say they're going to do and therefore drive your mix is a pretty difficult task because you're relying on the numbers they give you and their ability to actually achieve them. It's not just that individual customer. You may get another customer that actually rails much better than expected or much worse than expected.
That's what makes mix something that you can't, to your, because in part of your question you said, and you'll get out of this and it'll be gone. You don't get out of it and be gone. It's a description of what happens. We make assumptions for what will happen in the year ahead, and then we describe how we went against that assumption at the end of the year. It all depends on various customers' performance. I hope that ramble actually made some sense.
No, it definitely does. Thank you for that. Just one final one, if I can. Just the non-operational cost base, I guess, review. I just wanted to understand, is that, you know, in terms of this one complete now or is it ongoing and there's a potential chance that we hear more about, I guess, some cost rationalization going forward?
Oh, look, I think what we did on this occasion has finished, and some of the things that actually caused the changes, you know, we've captured that value and we'll move on. If you look at every year that Aurizon's done business, there's a cost reduction that takes place of some sort in some area for some reason. The normal course of business is what I'm describing. We'll have reasons to make changes just like other parts of industry. We are, like everyone, looking at the application of that broad suite of the broad AI suite as to what can actually, can that do to contribute to our productivity improvement because that's what we've got to do year on year.
Thank you.
Your next question comes from Samantha Edie with Morgan Stanley. Please go ahead.
Good morning. Congratulations on the result. I just have two questions today, please. If you go ahead and sell down the network business, would you then have to pay back the hybrid debt in full? Is there any other debt that needs to be paid back as well?
George, do you want to talk about debt management?
Sure. Samantha, the hybrid was raised at the Holdings entity, and I referred in my speech to the fact that the guarantees that exist under that hybrid instrument would remain on foot regardless of any change in network ownership.
Okay, cool. Thank you. Just the second question, can we have an update on the Mount Pleasant coal contract considering the EPA has knocked back the 22-year mine extension? I think that coal mine is meant to expire in 2026.
Yeah, I'd have to say I was almost going to hand that question to Ed. Can you say, I've got to remember we're not talking about...
That's right. That's where we're going to start. We prefer not to talk about customers in particular contracts. That is in the public domain. We're working with the customer, and we're hopeful that they will get through the process. We've supported many customers in similar ways in the Valley and in Queensland.
Okay, thank you.
Our next question comes from Nathan Lead with Morgans. Please go ahead.
Good day, Andrew and team. Thanks for your presentation. Just two or three for me if you don't mind. First up, just in terms of network, can you tell us what Aurizon's tax cost base is for network for CGT purposes? Just so we can understand the tax disentities that might be involved in a transaction.
Good question, Nathan. I'll give that to George.
We don't disclose the tax cost base of network, Nathan, but you can get a proxy of it by looking at the PP&E of network that is in our accounts and then looking at the deferred tax liability, which is a public number. It's about $990 million in our most recent accounts. That should give you a pretty good proxy if you're wanting to calculate it.
That's coming out of like $2.85 billion or so. All right. Second question is for Network. Just wanted to get an idea of some key timing. So UT6, when do you expect to have that finalized? Because obviously there's been a history of these things dragging on well past the end of the regulatory cycle. Then secondly, I suppose, and it tees in with it, just timing on actually making a decision on what's going on with Network's ownership.
As far as the UT6 progress goes, I'll pick up that issue you say they drag on past the end of the regulatory cycle. That was the old way that we worked together where there was an imposed decision by the regulator and, you know, sometimes they did, to your point, last go several years past the end of the regulatory period. We're in a different dynamic. It's a customer agreement that we negotiated many years ago. Several years in front of that, which is the mid-2027, customers and ourselves started a process to work on replacing it with another agreement. Hence, you've seen a non-binding agreement, a submission to the QCA put forward and noted briefly by ourselves. That's happened.
There's still quite a degree of work to go from that in principle agreement and take it forward to a, as usual, it's that they're very complex and lengthy documents. There's a number of players involved in it, a number of parties involved in it. That does potentially lead to the situation going longer than one would hope. In a way of providing an estimate, estimating that we'll finish it by the end of the year. We'll get to the end of the year and then I'll tell you whether we made it or not.
Sorry, that's end of calendar year, Andrew?
End of the calendar year, to be more accurate.
Calendar year. Okay, great. The ownership decision is teeing off that.
The process that we've entered into is something that we do every year. We're getting, we collect information, we take that information on board, and then we make a decision about what we will do. You've seen the results of the board doing that every single year. As far as to when and how we'll make this decision, we'll see how it goes through the year. If I was putting myself in the shoes of somebody who was interested in the network, I'd be very interested to know the details that are in the next agreement with customers. That would clearly play into a process like that more from a timing point of view than anything. It may or may not change anything that people may want to do.
Right. Final question for me, and I suppose it sort of talks to more Bulk's longer-term earnings prospects, but slide 10, you call out the Karara iron ore recontracting. My understanding, that was a pretty hard-fought sort of tender process. Can you make any comment about what sort of earnings impact that would have given when you first entered into that agreement? It was a greenfield mine, and there's been a long period of inflation-linked tariffs. If you could just make a comment there.
George, do you want to talk about that?
Yeah, Nathan. We're really pleased to have recontracted that. It's a 10-year extension with that extension commencing in a couple of years, so about 12 years left to run on the contract. As you said, longstanding customer, and I think the customer themselves on their website commented that rates would be lower. I'm not going to quantify the earnings impact because we don't do that on individual contracts. I would say we're focused on delivering for that customer from a volume perspective, and that customer is looking at increased volumes going forward. We're excited to deliver that additional volume profile for the customer in time.
Thank you.
Your next question comes from Anthony Moulder with Jefferies. Please go ahead.
Good morning again. I just wanted to follow up on Bulk. You've got three customers, obviously, that drove those doubtful debts. I think you mentioned Centrix is potentially earnings contributing perhaps in the second half. Are you expecting much to come from those three customers through FY 2026, please?
George?
Yeah, sure. I mean, let's take each one, Anthony. We continue to rail for OneSteel, both the internal steelworks and export iron ore out of Whyalla. The iron ore volumes are lower and expected to be lower in FY 2026 compared with FY 2025. In terms of Centrex, they are going through a process with a listed company called PRL, who's looking at acquiring that mine to add it to their existing phosphate rock mine. We're talking to them around when the volumes could ramp up. As I said in my speech, I wouldn't expect that in the first half, and if it is in the second half, it would be small volumes. The third one is Northern Iron. They are not railing at present, and I also don't expect them to rail in a meaningful way in the first half.
I won't preempt what the second half could look like, but we are working closely with the administrator and receiver of the Northern Iron or Warrego project.
All right. It doesn't sound like you'd have a lot of expectations for those three customers, and your expectations for EBITDA growth from bulk in 2026. Is that fair?
That's fair.
Lastly, if I could, on coal, we've seen one of the other large coal haulage providers lose a lot of customers. Is that putting in and now having one more of the Whitehaven? Are you seeing more pricing pressure from that other rail haulage provider in the market, specifically in the Hunter Valley?
Ed, would you like to say a few words?
Yeah, sure. The market always is, you know, it's resilient, I'll start with, and freight pricing, you know, in the short term certainly got some headwinds in the Valley. That said, our contract structure and CPI-linked mechanisms help buffer the volatility, and we always compete with a view to stable cash flows through the cycle. The contract negotiators are always price competitive. That's not surprising. We will compete aggressively to retain business and protect those earnings. As I've said on previous calls, it's difficult to predict what rates will actually do in future or in a particular negotiation because it's a function of the specific customer requirements, the available capacity at the time, but also the timing of negotiations. Rates are always important to our customers given their cost focus, but they also value flexibility and service reliability, which the tenders often factor in.
Very good. Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Scott Ryall with Rimor Equity Research. Please go ahead.
Hi, thank you. You've preempted my annual question on the network review, so I'm going to ask Ed McKeiver a question if that's all right. Ed, Andrew talked a little bit about the needs of productivity across the business to, you know, face various pressures and things like that, which is very sensible. I guess just specifically on coal, I wonder if you can talk or just give us an update on the implementation of TrainGuard, how that's progressing. Is that the main driver of being able to keep operating costs flat next year in your guidance? Yeah, just give us an update on where the implementation of that fits, please.
Yeah, sure. Thanks for the question, Scott. I'll start by saying costs are always a focus. As I reported at the half year, we expect to hold unit costs per NTK flat into FY 2026. There are three key levers. One is the cost-out program benefits, which Andrew and George have spoken about. The second one, of course, is the train crew costs driven by the TrainGuard implementation. The third is the productivity dividend we're seeing through embedding cycle time and cancellation improvements in the Central Queensland Coal Network. We saw the best losses in over six years, reduced improvement in six years during the last financial year. Just to go specifically to your TrainGuard question, it's going very well. This year, we completed the rollout through the branch lines. Now we have all of Blackwater and Goonyella complete, and we're operating due services across those systems.
We've got 32 consists operational across 1,900 km. 750 train crew have been trained in the system. 250 technical staff have been trained. We've done about 8,000 due services, driver-only services during the year. Approximately 50 drivers have left the business as a consequence. We retained some during FY 2025 to deal with growth and surge. We also expect a further 50 to attrit this financial year, FY 2026.
Okay, great. How does it tie in? I noticed in the appendix here, EVA expires March 2026. Is this something that becomes an issue for the discussion with the unions, or have you taken them on the journey sufficiently that it's just part of the annual discussions that you have with them?
Absolutely, Scott. It's the latter. It's taking them on the journey. Our people have been fantastic in relation to embracing the technology. It, of course, makes their role, their jobs safer. We haven't had a mainline SPAD on a TrainGuard-enabled train since implementation in over two years. Right from the outset, our EAs require us to negotiate and consult with our employees around workplace change. I couldn't be happier in the way that the workforce and the unions have supported the rollout.
I think, Scott, just to context, when Ed says there's no mainline SPAD in the year, my memory prior to TrainGuard being put in is you're looking at 20 to 30 a year. Reducing that has vastly reduced the safety risk to train drivers from that quite significant event.
Yeah. Okay, great. Thank you. That's all I had.
Thank you. There are no further questions at this time. I'll now hand back for closing remarks.
Look, thank you all for joining the call today. I look forward to delivering for investors in 2026 and against our longer-term aspirations. Thank you.