Thank you for standing by, and welcome to the Aurizon Analyst Teleconference. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Andrew Harding. Please go ahead.
Good morning, and welcome to the full year results for the FY 2021. We're based in Brisbane today. I acknowledge the traditional custodians of this land, the Turrbal and Jagera people, and 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 ballast, sleepers, rail systems, and office buildings where Aurizon does business was and always will be traditional Aboriginal land. It is obviously a challenging time with the current COVID situation, and our thoughts are with individuals and communities that are being impacted. We continue to maintain our COVID protocols to ensure the continued well-being of our team. Flexible and remote working will be an ongoing feature for many of our head office staff for some time.
This call is being made from our head office this morning, and I'm here with our CFO, George Lippiatt. Joining me on the call, but dialing in from outside of the office are Ed McKeiver, Group Executive Coal; Clay McDonald, Group Executive Bulk; Pam Bains, Group Executive Network; and Gareth Long, Group Executive Corporate. We will shortly go through the presentation that we lodged with the ASX this morning, which is available on our website. At the end, we will take your questions with the rest of the executive team. Mike Carter, who many of you know and has been with Aurizon and previously QR for more than 30 years, will be leaving Aurizon later this year after the consolidation of various functions as part of our corporate support area review. I thank Mike for his many years of contribution to the company.
Mike is also on the line and will be happy to take any questions. Now turning to safety performance. Our results have been flat across the safety metrics of total recordable injury frequency rate, TRIFR, lost time injury frequency rate, the LTIFR, and rail process safety, RPS. TRIFR has deteriorated 3% in comparison with last year's 10% improvement. This deterioration has been the result of an increase in low-severity strain and sprain injuries. LTIFR has improved 8% year-on-year, which is a positive trend. RPS, a measure designed by Aurizon to improve rail safety operations, including derailments, signals passed at danger, and rolling stock collisions, has been flat in recent years. RPS deteriorated 8% in FY 2021. This has been caused by an increase in low-severity yard derailments.
During the year, we continued the safety leadership program that equips operational leaders with skills to effectively lead our safety strategy and continually improve safety in their team. We are also focusing on initiatives to accelerate safety improvement through targeting the main contributors to TRIFR and RPS, and a specific focus on identifying and learning from events that have the potential for serious injury and fatality. Turning to an overview of performance. Before we get into the results for the year, I wanted to take a moment to reflect on the Investor Day and some of the key takeaways. This slide shows that each business unit has a unique focus, but they are all aligned to common enterprise objectives. Aurizon has a unique place in critical supply chains across the nation. Our involvement in improving these supply chains will support long-term demands for key commodities on global export markets.
We will continue to deploy capital efficiently to support these supply chains with a view of generating attractive growth and shareholder returns. For Coal, the focus is return on invested capital and free cash flow. With a contract book well set, this can be achieved through a continuous push on transformation and productivity. Capital will be spent carefully with some assets able to be deployed into or shared with Bulk to support their growth ambitions because of Coal's efficiency improvements. For Bulk, with growing markets and new adjacencies, the focus is on revenue and earnings growth. This requires more capital, such as the two Aurizon Port Services businesses, but it can also take advantage of assets from Coal that can be cascaded to support these growth markets.
For Network, the focus is on embedding UT5 to ensure long-term regulatory certainty, reducing costs, and enhancing the efficiency of the supply chain, which will ultimately increase throughput for the entire industry. I just reminded you about the different focus areas of the business units. That is because this focus enables Coal and Network to provide a resilient base, which provides value to our shareholders and supports the growth ambitions of Bulk. demand for Bulk commodities is expected to grow strongly. Aurizon is well-positioned to capture this growth, as well as new markets such as Bulk port terminals. These new markets provide a much larger potential profit pool, which underpins our aspiration to more than double Bulk's current EBIT to AUD 250 million over the next 10 years. This growth could result in the commodity mix changing within Aurizon.
Consequently, if Aurizon is able to capitalize on this, revenue from thermal Coal could be less than 20% of the Above Rail portfolio by 2030. The detailed presentation, including transcripts and the webcast, is available on our website for those who missed it. Moving on to the financial results. We are pleased with the results of AUD 903 million underlying EBIT being at the top of the guidance range of AUD 870 million-AUD 910 million. EBITDA of almost AUD 1.5 billion was up 1%, and it is this measure that we will focus on going forward, along with CapEx, as they are a proxy for free cash flow. The results reflect the continued growth in Bulks, which now accounts for 32% of Above Rail's revenue and the commencement of WIRP fees in Network. This offsets the impact from lower volumes in Network and a 6% reduction in Coal volumes.
We expect Coal volumes to improve this year with improved demand, strong commodity prices, and seaborne markets now rebalanced to offset the impact of the ongoing trade situation with China. Statutory NPAT was steady at AUD 607 million, and ROIC was down slightly at 10.7%, consistent with the slight decline in EBIT. Free cash flow was up slightly to AUD 734 million, noting that this number includes the after-tax proceeds from the sale of Acacia Ridge, which completed in March. Finally, our record of strong shareholder distribution through dividends and buybacks has again been demonstrated this year. We completed our AUD 300 million buyback, taking the total buybacks completed to AUD 1.3 billion since 2016. The final dividend of AUD 0.144 is 5% higher than last year and is equal to the interim dividend, which was our highest ever.
It maintains our payout ratio at 100% for over six years, with the increase reflecting the benefit from buybacks reducing the share count. Moving to an update on commodity markets. After being heavily impacted in the first half of 2020, steel production recovered during the remainder of the year and into 2021, with production returning to pre-COVID levels as economic activity resumed in major export nations. The month of June was the 11th consecutive month of year-on-year growth in global crude steel production. Based on crude steel production in the first six months of 2021, India is projected to set a new annual record for this calendar year. India is, of course, Australia's largest metallurgical Coal export market, representing one-third of volume in FY 2021.
Thermal Coal electricity generation has also returned to pre-COVID levels, with the International Energy Agency noting last month that after declining by 4.6% in 2020, global thermal Coal electricity will increase by almost 5% in 2021. In further data released by the IEA just last week, the Asia share of global Coal trade has reached a record high, representing 85% of the market. A reminder that this is a continent where nearly all Australian Coal is destined. Southeast Asia now accounts for over 40 million tons of Australian export volume, doubling in just three years. Despite the Chinese ban on Australian Coal import volume continuing, our customers are successfully exporting to markets outside of China, with export volume in the June quarter just 1% lower than the prior year, despite zero export volume to China.
Although not seeing a resolution in the foreseeable future, evidence to date continues to show the resilience of Australian Coal in the face of this challenge. We've also shown here some indicators of Bulk markets, although this is a more challenging task to summarize on a slide given the diversity of the commodities and the multiple drivers of demands. Given Asia is the major key destination of Bulk commodities, PMI, or Purchasing Managers Index, for manufacturing industry is a reasonable starting point. This index, of course, measures sentiment with a reading above 50 indicating expansion in the sector and below 50 indicating a contraction. As noted on the chart, we've now seen 12 consecutive months of expansion readings. Beyond infrastructure development, commodities such as copper and nickel that are associated with battery storage and electric vehicles are at a multi-year high.
From an Australian perspective, the most recent six-year supply projections from the Office of the Chief Economist shows annual compound growth of 5.4% for nickel, 3.5% for zinc and iron ore, and some 16% for lithium. This has translated through to confidence in capital expenditure in metal ore mining, as shown on the slide. Annual capital expenditure was at a six-year high in 2020 and in the latest quarterly data. March CapEx was over 20% higher than the same period of the prior year. Turning to the Coal business. The focus for the Coal business is on preserving returns and free cash flow through ongoing transformation and productivity. This, along with Network, provides a stable base which supports growth ambitions elsewhere in the company.
The financial results of EBITDA, down 13% to AUD 533 million this year, were mainly driven by a 6% decline in haulage volumes, which we expect to recover and grow around 5% this year. On the contracting front, we are pleased to announce that we have executed contract extensions for existing agreements for all our Queensland mines with Glencore. This is an addition to the new agreement with Anglo in Queensland across multiple mines we announced in June. After these announcements, our contracted tonnage position for FY 2022 is now forecast at 230 million tons, which includes the end of New Acland mine later this year. Importantly, when looking at our contracting chart, just 10% of volumes expire within the next four years, of which only around 70% is considered contestable. Progress on the major operational efficiencies continues as we went through in detail at the Investor Day.
Precision is an enterprise-wide program designed to improve throughput for our customers and capital productivity. We achieve this by reducing asset turnaround time, which is a wider measure of capital productivity compared to measures such as system velocity. Asset turnaround time captures the relationship between throughput, the number of train sets deployed, and the average time it takes each train set to complete a cycle. In its simplest form, our aim is to achieve faster train cycles to deliver more tons using less trains. This year, Network worked in conjunction with all operators to test the application of these principles in an integrated planning process. This voluntary process enabled the Network to assist operators in developing optimized weekly train plans in response to customer orders. The integrated planning approach removes contested access requests, whereby two or more operators seek the same path on the Network.
This integrated planning revealed that planned throughput improvements were able to be achieved when compared with conventional planning methods. Also contributing to Precision was work done during the year to reduce the time trains spent in yards. This included streamlining of wagon maintenance into blocks, which combined with on-train repair work, reduced the numbers of shunting movements required. A good example of the combined results of Precision initiatives occurred in Moura, where we were able to reduce asset turnaround time by around 1.7 hours on a prior-comparative-period basis. For our ARAM, benefits can be seen in reductions in maintenance cost and capital. Component change-out, for example, reduces overhaul costs by 10%-15% for our 2800 class locomotives for our Bulk business and has now commenced in our Coal depots.
Finally, with TrainGuard, there have been some delays in the rollout of this key program of work due to supplier issues, as we've previously indicated. Pleasingly, in Blackwater, all locomotive and network hardware installations have been completed, while in Goonyella, installation has commenced on locomotives and rail infrastructure. This project provides safety benefits through enhancements to speed control and signal enforcement, and also provides a pathway to expanding driver-only operations in Central Queensland. In Blackwater, it is scheduled for deployment in the first half of next calendar year. Moving to Bulk. The Bulk business continues to perform strongly with EBIT of AUD 112 million and EBITDA up 27% to AUD 140 million. Bulk now represents 32% of revenue and 26% of EBIT for the Above Rail business. As we've previously said, we expect these numbers to increase in coming years.
We have commented before how busy the team has been, and you will have seen our announcement regarding a 10-year agreement to haul grain for CBH. This comes off the back of a short-term deal we announced earlier this year and completes the return to hauling for this customer after 10 years. We are very happy to be back in the WA grain market in what is shaping to be a strong harvest for the farmers. Today, we also announced a three-year extension of our contract with South32 for the haulage of alumina and associated inputs at their Worsley refinery, south of Perth. This continues our long-standing relationship with one of our largest customers in Western Australia. We have previously advised of the two other major contract moves on the page, and our team is working hard on converting more opportunities across all regions in which we operate.
When I gave the recap on Investor Day, i spoke about the long-term aspiration of Bulk to more than double EBIT over 10 years. Part of this journey is moving into other parts of the supply chain, including Bulk port terminals, and we're pleased with how Aurizon Port Services is tracking in both Townsville and Newcastle. These terminals are strategically linked to very important minerals provinces and provide an expanded service offering to our customers. In addition to this diversification beyond rail haulage, the Bulk business is also diversified at a commodity level, with no single commodity accounting for more than 28% of revenue. Looking forward into FY 2022, we are pleased with the fundamental demand drivers for the Bulk business. In the agricultural sector, WA, Queensland, and New South Wales have received good autumn rains that are widespread and have supported a significant winter planting.
Iron ore prices and demand remain strong, the minerals, metals, and rare earths sector continue to see positive investment in exploration and project development off the back of increasing input requirements driven by the future economy. We expect these conditions to underpin another solid year for the Bulk business. Turning now to network. EBITDA for network was up 6% to AUD 849 million, with revenue from WIRP fees offsetting an under recovery from lower volumes. AUD 60 million of WIRP fees were recognized in FY 2021, with AUD 49 million relating to prior years and AUD 11 million being the approximate annual value of fees each year until 2035. The appeal of the expert determination commenced last December, with the outcome to determine the final amount of the fees payable by customers.
We indicated at the half that based on volumes to date, take or pay would trigger in some of the systems.
The final volumes resulted in take or pay triggering across all major systems of AUD 88 million, bringing forward the revenue recovery to this year. The revenue cap in two years is now expected to be minimal given this larger recovery this year and the delay to the independent expert report. In terms of that report, what is called the Initial Capacity Assessment Report, it remains our expectation that this will be delivered by the independent expert at the end of September. Today's results demonstrate the effectiveness of the revenue protection mechanisms with take or pay offsetting a large part of the volume driven under recovery this year. The chart on the left shows the history of access revenue compared to volumes. You can see that revenue has remained reasonably stable despite volumes moving, particularly in 2017 and this year, due to take or pay and revenue caps.
We think this is a good visual representation of Network's resilience and stability over time. Before I hand over to George, an update on the progress of some other matters. The sale of Acacia Ridge completed in March, which was a great result after many years of uncertainty. Likewise, the commencement of WIRP fees. As I just said, there remains an ongoing process with the appeal of the expert determination, we will keep you updated on that progress. There remains no significant update on the legal proceedings against Genesee & Wyoming, with the matter currently before the court with no trial date set as yet. Finally, a date has been set with the declaratory relief proceedings with the ATO of March next year. As a reminder, this relates to the treatment of our share capital account balance from prior to the IPO.
On that note, I will hand over to George.
Thank you, Andrew, and good morning to everyone on the call. It's my second time talking to you about Aurizon's full-year results, and you'll notice Andrew and I are saying very similar things to what we did this time last year. That's because, as this first page shows, the results are consistent with last year, highlighting that the business has performed well enough to offset the demand impacts from COVID and China import bans. It will be no surprise to listeners on today's call that free cash flow is a measure I often speak of when presenting, not only Aurizon's ability to generate strong cash flows, but importantly, the options available to deploy this cash, either through growth opportunities, primarily in our Bulk business, or return to shareholders as we have consistently demonstrated.
With this emphasis on free cash flow, we are focusing more on EBITDA and CapEx, given they are a proxy for free cash flow. This will also be used for guidance, as Andrew will present shortly. The flat EBITDA and EBIT performance was driven by a volume decline in Coal being offset by improved earnings in Bulk from revenue growth and Network, primarily due to the commencement of WIRP fee billing. There was also an improvement in the other segment with lower central costs and profit on sale of minor real estate assets. Group revenue declined 1%, with revenue growth in Bulk driven by new contracts and in Network driven by recognizing WIRP fees for the first time following the Supreme Court decision in September 2020. Coal revenue decreased by 9%, driven by volume and lower track access revenue. I will provide more detail for each business unit shortly.
There was a flat result for both NPAT and statutory NPAT, with the FY 2020 result including the post-tax net gain of AUD 74 million on the sale of Rail Grinding, while the FY 2021 result excludes the post-tax net gain of AUD 113 million on the sale of Acacia Ridge. Although both were asset disposals, Acacia Ridge was treated as discontinued, whereas Rail Grinding was considered continuing. The reason for that, as you may remember, is that we announced the sale of Acacia Ridge almost three years ago, whereas we started and completed the sale of Rail Grinding within a single year. Given the difference in treatment, free cash flow from continuing operations is lower this year, but this is because the proceeds from Rail Grinding are in the FY 2020 results.
To assist in comparison, we have included free cash flow figures that include both continuing and discontinued, which show a 1% increase in FY 2021 to AUD 734 million. We continue to maintain our 100% dividend payout ratio with a final dividend of AUD 0.144 per share, up 5% despite the flat underlying NPAT. The dividend is franked at 70% and takes the full-year dividend to a record AUD 0.288 per share. Moving now to Coal. EBITDA decreased AUD 83 million or 13% to AUD 533 million, with volumes down 6% to 202 million tons, primarily driven by lower end market demand impacted by COVID-19 and the challenging trade environment with China. Beyond volumes, revenue and also EBITDA was impacted by some access rights being transferred to end users, non-pass-through of network take or pay, and lower yields shown in net revenue quality on the bridge.
Lower volumes also resulted in lower operating costs related to fuel, train crew, and maintenance. There was an increase in Depreciation and support costs following investment in capacity, technology, and overhauls completed on rolling stock. As a result, operating costs excluding fuel and access were flat. Operationally, key productivity metrics deteriorated with lower volumes and NTKs. Average payloads and velocity have increased as a result of successful efficiency initiatives, including increasing train lengths in the Hunter Valley and Southeast Queensland, implementing improved driver methodologies, and a reduction in empty wagons on the CQCN. Moving now to Bulk. Bulk continues its strong performance with EBITDA growth of 27% to AUD 140 million. Previously, we spoke of Bulk achieving AUD 100 million EBIT, which Clay and his team were able to not only meet but surpass.
Bulk has shown it's pretty good at outperforming expectations, and we hope that's a pattern that will repeat. In the table, you can see a 23% reduction to access costs during the year. The driver of that is a Mount Isa corridor customer taking an access agreement in-house rather than held through Aurizon. Given the pass-through nature of access, that also reduced revenue by a similar amount in FY 2021. While the table shows revenue up 4%, putting aside access, revenue would have increased by 10%. Turning to the bridge, and I still remember looking at a bridge for the Bulk business in 2017 that started and ended with a negative number. It's nice to reflect on that and see where we are now. As with previous reporting periods, the EBITDA bridge is straightforward, with volumes driving revenue growth and higher operating costs to support that revenue growth.
If we turn back to the table, you can see that depreciation increased year-on-year. It will continue to increase as we invest further capital into Bulk, both in absolute AUD terms and as a percentage of the overall group. This allocation of capital is based on our confidence in retaining and attracting new Bulk customers, as well as our view that Australian Bulk commodity exports will grow at GDP plus rates. In terms of tons, Bulk's East Coast volumes were flat, driven by stronger grain volumes in New South Wales and Queensland, offset by lower livestock volumes. In the West, iron ore volumes were up 3 million tons, driven by the ramp-up of Mineral Resources volumes, partly offset by lower Mount Gibson volumes due to end of mine life.
We expect an uplift in Bulk volumes in FY 2022 due to the commencement of our long-term agreement with CBH, Australia's leading grain cooperative. This year saw the initial contribution of both Aurizon Port Services businesses, and we should see some incremental growth to EBITDA in the future as they ramp up. In summary, another strong performance from Bulk. Moving to Network. Network EBITDA increased AUD 51 million or 6% to AUD 849 million. This was due to the commencement of WIRP fees and operating cost improvements offsetting a revenue under recovery due to an 8% reduction in volumes. As Andrew demonstrated earlier, the regulatory model provides revenue protection in periods of lower volumes. A quick reminder on how the two mechanisms operate. take or pay, or as it would be better called early recovery, is a contractual measure that recovers revenue in the same year.
While revenue cap, or as it would be better called delayed recovery, is the mechanism which recovers anything left after take or pay and other adjustments two years later. As usual, a summary of these mechanisms, in addition to a forward view of the Maximum Allowable Revenue or MAR, is included in the appendices. Turning to the earnings bridge, you can see the track access revenue increased by AUD 47 million with historical WIRP fees and take or pay more than offsetting the volume related under recovery. The tariffs approved by the QCA were based on a regulatory system forecast of 239.7 million tons, while actual tons were 208.3. As such, and given the low level of Aurizon Network-caused cancellations, AUD 88 million of take or pay was booked across the Blackwater, Goonyella, Moura, and Newlands systems.
At the half, we indicated that take or pay would trigger in at least three systems and total around AUD 60 million. It also triggered in Blackwater, increasing the amount of take or pay this year. This brings forward the recovery from FY 2023, and our revenue cap expectation, excluding GAPE for that year, is now close to zero, given the repayment of WACC, due mainly to the delay in the independent expert report. In relation to the work fee, looking forward, we expect the annual amount to be around AUD 11 million until 2035. The final amount will be subject to Aurizon's appeal of the expert determination and the finalization of a cost variation factor related to WIRP project costs. Other revenue, as shown in the bridge, decreased by AUD 11 million due to lower external construction works and insurance recoveries.
Operating costs decreased by around AUD 15 million due to lower external construction costs associated with the lower revenue, reduced electric traction charges, and lower maintenance costs, partially offset by expenditure incurred on the Project Precision Railroading initiative. Turning to cash flow. Any page with free cash flow in the title is typically my favorite slide, and this is no exception. On the left, we highlight the historical amounts we make from operating the business, less the amount of money we spend to sustain the operations. What's left, free cash flow, is then available to either be distributed to shareholders or invested in further growing the business. Following on from IPO in late 2010, you can see a period of heavy investment. While post-2016, Aurizon instigated greater focus on capital and efficiency to enable stronger cash flows.
You can also see that Coal volumes, shown by the orange line, aren't the key driver of free cash flow for Aurizon, and that should be reinforced as our Bulk business continues to grow. Importantly, the black line is very consistent from 2017 onwards. It is this stability in cash flows that has enabled shareholder returns with over AUD 4 billion distributed since 2016 in the form of dividends and on-market buybacks. Briefly to CapEx. CapEx totaled AUD 490 million in FY 2021, which is AUD 37 million lower than the prior year and slightly lower than our full-year guidance, mainly attributable to lower network asset renewals. Non-growth capital expenditure guidance for FY 2022 is AUD 475 million-AUD 525 million. This figure excludes growth capital and any M&A activity. FY 2022 growth CapEx is dependent on Bulk contracting outcomes where there are a few live opportunities.
We will be able to provide more detail at the next result, but expect this to be at least AUD 50 million. Long-term expectations sustained business CapEx remain around AUD 500 million per year. Although this is constantly reviewed in conjunction with our long-term volume outlook. Turning to the next slide. I know this chart on the left is partly a repeat from Investor Day in June, but there are two important points it emphasizes. Firstly, you can see the differential between historical free cash flow and dividends. This demonstrates that even at 100% payout of NPAT, we still have surplus cash flow to deploy within the business or return to shareholders. Secondly, while aggregate dividends have remained relatively constant, dividend per share has increased due to about 150 million shares being bought back and canceled over the last two years.
This year's record total dividend payment of AUD 0.288 per share is 20% higher than two years ago. As I've noted previously, we want Aurizon to be known as a company that is predictable, resilient, and is constantly striving to create value and reward shareholders with strong returns. Last but not least, to funding. During the year, the treasury team executed three debt market capital issuances representing a combined AUD 1.075 billion with 7-10 year terms and coupons of 2.9%-3.3%. This included an inaugural issuance for Aurizon Operations, a 7-year AUD 500 million note at a coupon of 3%. The three FY 2021 issuances can be seen in the chart on the right-hand side, where we continue to lengthen the tenor of debt facilities with no maturities now until June 2023. We also have significant available liquidity with over AUD 1 billion, including undrawn working capital facilities.
As noted at the half, with interest rates coming down, we expect our interest costs to trend lower, albeit at a slower pace, given we have high levels of fixed debt within the network to align to the regulatory reset period at the end of FY 2023. The recent bonds will, however, help to bring average rates lower, with all debt floating beyond FY 2023, interest costs will come down again from that point, assuming rates remain low. Finally, can I say how pleasing it is to have taken you through these financial results for FY 2021? While a lot of external factors have had an impact on the markets where we operate, not much has changed for Aurizon financially. Our earnings have been stable, our cash flows are strong, and we've lengthened our debt profile thanks to the continuing support of capital markets.
Thank you. I'll now hand back to Andrew.
Thanks, George. Turning now to the financial outlook for the 2022 financial year. With our focus on free cash flow, we've determined to provide guidance for both EBITDA and sustaining CapEx as a proxy for free cash flow. Our EBITDA guidance range is AUD 1.425 billion-AUD 1.5 billion, which compares to this year's AUD 1.482 billion. Our sustaining CapEx guidance is AUD 475 million-AUD 525 million. As George noted before, growth CapEx will be in addition to that, and we can provide a firmer picture of that next year with some Bulk growth opportunities still to be decided. We have listed our key assumptions by business unit, as we believe that will be the most useful and effective way to help investors and analysts understand the major drivers.
For Coal, we assume EBITDA will be broadly flat with the volume growth of around 5% and lower costs from transformation being offset by lower contracted rates. We are not providing a range of volumes given we don't believe there is a strong connection between that assumption and group earnings. We do want to give an indication of volume direction. We will also no longer provide quarterly above-rail volumes, but will continue to report volumes at each financial results. Bulk is expected to grow with the full year benefit of recent contract wins and port acquisitions. Network is expected to be lower with the retrospective WIRP fees of AUD 49 million not repeating and the MAR being lower mainly due to capital recoveries to reflect lower than forecast CapEx spend.
Network volumes will be relevant to the timing of revenue recovery as we saw this year, and we will update you on that early next year. As per our normal practice, we do not assume any material disruptions to commodity supply chains, such as adverse weather or COVID-related restrictions. In conclusion, this slide summarizes Aurizon's value creation record over the past few years and provides a platform for the future. All the activities shown here have set up each business unit and ultimately the group for the future by ensuring a resilient foundation. This has resulted in stable cash flow, which has delivered consistent distributions to our shareholders, as evidenced by the chart on the right. As noted earlier, Aurizon has a unique place in critical supply chains supporting Australian commodities in global export markets.
We will continue to deploy capital efficiently to support these supply chains with a view to generating attractive growth and shareholder returns. For Coal, the focus is return on invested capital and free cash flow. With a contract book well set, this can be achieved through a continuous push on transformation and productivity. Capital will be spent carefully with some assets able to be deployed into or shared with Bulk to support their growth ambitions because of Coal's efficiency improvements. For Bulk, with growing markets and new adjacencies, the focus is on revenue and earnings growth. It will need more capital, which has already begun, such as the two Aurizon Port Services businesses. It can also take advantage of fleet from Coal that can be cascaded to support these growth markets.
For Network, the focus is on bedding UT5 to ensure long-term regulatory certainty, reducing costs, and enhancing the efficiency of the supply chain, which will ultimately increase throughput for the entire industry. The result is a business with a stable and resilient core through Coal and Network, which provide a platform for Bulk to achieve its growth aspirations. We look forward to continuing the journey for Aurizon and to continue to create value for shareholders. I now welcome your questions.
Thank you. If you wish to ask a question, you need to 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 comes from Matt Ryan from Barrenjoey. Please go ahead.
Hi, Andrew. Hi, George. Just with capital management, I think you just mentioned in your last slide that there's still some Bulk growth opportunities that are yet to be decided. Can we assume from the lack of the buyback announcement today that that decision's got something to do with the One Rail process that's still ongoing?
Hi, Matt. Look, I think we will leave it at the level of that which we said, which is that there are a number of opportunities in front of Bulk. While those opportunities exist and the opportunity to add value through them may occur, we want to actually stay where we're currently at from a buyback point of view.
Okay. I'm not sure whether Clay is on the line or not, but my understanding is that, the deal that you did last week with CBH, only about 60% of the 14 million tons is on rail at the moment. Just curious on whether it's going to be possible to move more of those tons to rail over time, and just any color that you can talk about in regards to what you're going to be contributing for train sets. I understand that there's only something like three of the 13 train sets that need to come from Aurizon, so just any color there would be helpful.
Look, my hope You are there, Clay?
Thanks, Andrew. Thanks, Matt. Listen, Matt, we're delighted to be working with CBH again. For those that don't know much about CBH, they're Australia's largest grain exporter with about 40% of the total grain market. An average yield of around 14.5 million tons. You're right about the road to rail split at the moment. It's about 60/40. CBH is on the record as saying that they have been disappointed with the performance of their supply chain, particularly in the rail area, and looking for a counterparty who can perform more reliably and add value to their customers' products. When you think about that, it's about the benefits and efficiency of moving more of their product to rail. We're very keen to do that.
Obviously, it's got a symbiotic benefit in a cost improvement for CBH and their customers and a volume benefit for us. If you think about what we tried to do here, I use this as the classic case of two years of hard work to achieve an overnight success with CBH. We've been working with them for some time on wagon leasing, fleet renewal work, and providing additional capacity in some of their regions. Our RFP was all about utilizing our key land and locations to enhance their operational and maintenance outcomes. That flexi fleet that you spoke about, putting three additional fleets in, two narrow gauge and one standard gauge, to increase throughput in the key delivery windows for them.
They have this key delivery window where their growers get a higher price for their product on the international market, and they were very keen to see that window or volumes through that window increase. We'll be targeting that with those three additional fleets.
Can I just ask on that, how unique is this opportunity whereby there is already train sets in place? Is this something that you think there is more of out there for you?
Do you mean more CBH-type style customers?
Yeah. Just the idea that they've already got something like 10 of their own train sets and that you're only having to contribute a few of your own.
Well, if you look across our portfolio, Matt, we do something similar with MRL. We've got hook and pull style contracts with Glencore. These style of or type of contracts are not unusual in the Bulk market. Whether you're operating and maintaining a customer's fleet and capital or whether you're augmenting that with your own, you're always after what's the value proposition here for the customer? What makes your proposition unique? In this case, it was those key land locations of Avon and Forrestfield and Albany where we've got maintenance facilities and the ability to schedule trains from Avon down to their key port of Kwinana better than what was happening today. We can stage them out of Avon to increase throughput on rail. Those sort of opportunities are around, probably not on the scale of CBH in the grain market.
This is the largest grain producer in Australia by a long way.
Thank you.
Thank you. Your next question comes from Jakob Cakarnis from Jarden. Please go ahead.
Morning, guys. Can I just start off with maybe Ed and George in the Coal business. Can you just describe the dynamic there of the non-passthrough of the take-or-pay in the period and what that relates to and whether that's something that we should expect moving forward?
I might get George to go first on that, and then Ed can come in the back end if needed. Yeah.
Jakob, you can see that in the bridge under Coal, about AUD 10 million, it was booked in the second half, which is why you might notice that second half earnings in Coal were a bit weaker than the first half. That relates to a small number of customer contracts, where we hold the take-or-pay risk. They are legacy contracts. They've been renewed since, they are legacy contracts, it is a small number of them. Hopefully, that gives you some color.
Thank you.
I don't have anything to add.
For FY 2022, are we expecting that the relationship of the change between CapEx and the change between D&A keeps outsized in the sense that D&A or the change in D&A is going to be higher than the change in CapEx, just given the CapEx is going into Bulk?
Yeah, Jakob, I think I missed the first part of your question, but I think generally it was about D&A and CapEx. Let me answer that and tell me if there's anything else. We saw depreciation and amortisation increase by about AUD 20 million from FY 2020 to FY 2021. We expect it to go up again from FY 2021 to FY 2022. In terms of CapEx, I think that'll largely be a function of growth CapEx in Bulk.
We hope to give a bit more color on that at the half-year results. Generally speaking, you can expect D&A to go up a little bit more year-over-year from 2021 to 2022.
Thanks, guys.
Thank you. Your next question comes from Anthony Moulder from Jefferies. Please go ahead.
Good morning, all. If I can start on Coal, please. I think, Andrew, you mentioned that 70% of those contracts that are renewing are contestable. How do you determine the contestability of those contracts, please?
Ed, I might get you to answer that question. Thanks.
Thank you, Andrew, and thank you for the question, Anthony. The reason we're saying we believe 70% of them are contestable is because the other 30% relate to options we have and nominations. In relation to the 70% contestable, we have a reasonable level of confidence around our ability to recontract. We have a good track record, and we have some of the balance of our customer focus and service, and also the mechanisms we have have served us well. We never take that for granted, Anthony. Rest assured we're working on positioning ourselves for those recontracts.
Yeah. Anthony, I might just add that a significant amount of the volume relates to the New Hope operation, which is winding down. By that very nature of it's not contestable. There is another operation that I can't name for contractual reasons, the customer references confidentiality on a repeated basis. It was a contract that we lost many years ago, but actually terminates in the near future.
Just related to that competitive dynamic on the Coal market, obviously we've seen One Rail going into Queensland that I don't know whether or not that's part of the Hail Creek 1 million-2 million tons coming out. Just as to what you're seeing from them and the level of competitiveness from Pacific National also, please.
Yeah, look, I've probably addressed this question many times over the years, and I don't think it actually changes much, Anthony. We're seeing very similar levels of competition in the market now for a number of years. Nothing much has changed from our point of view. As to exactly what One Rail is up to, we don't actually get a lot of insight into that, so I can't really speak to the detail of what they might be doing, particularly if it's at a competitor hauled operation.
Okay. Thought I'd try again. The last question I had was around CapEx. Obviously, maintenance CapEx seems to be fairly stubbornly at around that same sort of level. Appreciate there is growth CapEx, and that's nice to see growth CapEx, but appreciate that trains are getting longer. There are less assets required to haul the same tonnages effectively. When could we start to see that maintenance level of CapEx starting to come down?
There's a number of, what you would say, overlapping issues that you're looking at when you're looking at forward CapEx spend for maintenance spend. I've highlighted in my talking points about the Above Rail Asset Management program. That is a program that is designed to cause significant reductions in the cost of maintenance and improvements in the way maintenance is done. We've been seeing that program rolling out for some time now to good effect, and that will continue for a very long time. That's a tailwind of an improving ability to do maintenance and do it at an improving cost. As far as the actual maintenance task itself, and I think you were just referring to rolling stock in your question, but it kind of does also relate to below rail. It's a very mathematical thing, the maintenance cost.
The metal light wheels wear depending on the volume just haul the distance traveled. It's not something that goes down if you do more work at a physical level, only if you're actually better at executing the cost of maintenance. All that said, we will absolutely see improvements in our efficiency of asset management, and we have done quite spectacularly in the last year or so. We'll see that again for a number of years. As the actual activity task goes up, that's not going to help maintenance levels drop. It's actually quite sort of intrinsically mathematically related, if that makes sense.
Right. Lovely. Thank you.
Thank you. Your next question comes from Rob Koh from Morgan Stanley. Please go ahead.
Thank you. Can I ask excuse me. I just want to ask some, I guess, treasury style questions. Can you give us an update on where you're seeing your debt headroom versus the rating metrics? I presume you're not changing your target ratings.
Rob, I'm going to hand this very quickly over to George.
Hi, Rob. We are still BBB plus, Baa1 across Network and Operations. Our FFO to debt metrics in Network are 13%. We are much closer to 20% than 13%. When we look out, range between 17% and 20%, there is a bit of headroom there. On Operations, while it is the same rating, different FFO to debt metrics. The FFO to debt threshold there is 50%. Noting my comments around capacity and balance sheet capacity, that is largely on the Operations side as well. Compared with that 50% FFO to debt threshold, we are going to range between 70%-100% when we look forward. That is obviously as we sit here today and depends on how we use that balance sheet capacity, but hopefully that gives you a sense.
Okay, cool. Thank you. Just, seeing as it seems you guys love treasury questions, I'll ask another one. The rate hedging strategy, did I hear correctly that you're actually largely floating from FY 2023? Just the rationale behind that. That's a change in policy if I'm not mistaken.
Rob, it's a continuation. The rationale for that is most of our debt sits in network at this point of time. There is a WACC reset in FY 2023 in network. We're floating in terms of debt beyond that to hedge ourselves to that WACC reset. If you look between now and FY 2023, our hedging, we're about 80%-90% fixed between now and FY 2023.
Yeah. Okay, cool. That makes a lot of sense. Thank you very much. That's it from me.
Thank you. Your next question comes from Justin Barratt from CLSA. Please go ahead.
Hi, guys. Thanks again for your time this morning. Just one quick question for George. I think you highlighted, or mentioned very quickly, the impact on EBITDA margins from the new contracts in Bulk. Can you just maybe provide a little bit more detail? Could broader Bulk margins be a little bit compressed as you onboard these contracts and then expand as they are up and running?
I might start that one and then maybe Clay can see if he wants to add anything. If you look, Justin, at the EBIT margin results for Bulk year-over-year, our EBIT margins have actually improved. If you go back to FY 2020, our EBIT margins were around 15%. EBIT margins as we look at FY 2021 results are closer to 18%, and that's EBIT divided by revenue, including access. In terms of the forward view, it'll really depend on where Bulk is growing, and whether that's growth through taking share off road or whether that's growing with our existing Bulk commodity customers. That's the view as we sit here today. I might see if Clay wants to add anything.
I think you're spot on, George. It's a case-by-case basis. Competition in some sectors and some corridors, there's more competition there than others. Sometimes in a well-established contract, the ability to renew that contract on reasonable returns, others when you're trying to break into the market, et cetera. I think that's a fair response.
Great. Thanks very much for your time, guys.
Thank you. Your next question comes from Scott Ryall from Rimor Equity Research. Please go ahead.
Hi there. Thank you very much. George, I was hoping to follow up on Rob's question on the balance sheet capacity. Could you just specify exactly how much capacity you believe you've got left after the capital management activity you've done in the last couple of years?
Yeah, Scott. About AUD 900 million of balance sheet capacity.
AUD 900 million.
Yeah. That's obviously after the AUD 300 million buyback we did in FY 2021.
Yep, gotcha. Okay. Thank you. This is probably going to end up with Ed, but Andrew, maybe you want to start with it. The Coal contracted volumes of 230 million tons are down 5% from the year just gone. Is that mostly New Acland expiring?
Look, I might actually just give that straight to Ed. Ed?
Okay.
Hi, Scott. Yes, it is New Acland, but it's also the contract Andrew alluded to in New South Wales in the Hunter Valley system that we're not obliged to comment on. It factors in the loss of Stanwell from December, eight months ago, which is not carrying forward as well, of course.
Yep. Okay. Then just to follow on on that, your contracted volume's down 5%, your volumes, you're expecting up 5%, I understand there's been some disruptions and things in the last 12 months, obviously. That would get you to a contract utilization rate that you haven't seen since FY 2018. Is that something, obviously you're comfortable with it to talk about it, but what do you think is the driver behind getting back to strong contract utilization rates, please?
Yeah. Thank you. I would actually think that getting back to that sort of 90% contract utilization rates are not particularly strong or the early 90s%. As you know, we had 244 million tons contracted, moving to 230 million tons. We railed in the mid or low 80s% of that. Historically, we've had a good track record of delivering around those low 90s% in the contract utilization. We're seeing now our producers, our customers, have found new end markets and seaborne trade has rebalanced. We're seeing a reasonable start to this financial year with July just closed and some of our competitors jostling for capacity certainly in the Queensland system. It's always difficult to predict where things are going to be, but gives me some certainty and us some certainty around the 5% volume uplift to about 212 million tons.
Okay. All right, great. My last one is probably for Andrew. Could you just talk about the independent expert on network and just clarify, obviously that's a process that's been delayed and I'm sure a source of frustration. You have confidence that the report will come by the end of September?
Yes, Scott, I've got a lot of confidence in it. I will actually hand over to Pam, who lives and breathes this stuff and is very much ready for your question. Pam?
Thanks, Andrew. Thanks, Scott. Yes, the current expectation has not changed as we've talked about Investor Day. in terms of confidence levels, we're obviously very closely working with the independent expert. We know they're well-resourced and both internal staff and also consultants. The system operating parameters, which is a key input into that capacity model, have been released to industry for consultation, and that's a key part of the process. Obviously, the results can change from consultation, but we do understand that the independent expert is progressing well on the draft model. All the information that we've received from the independent expert indicates that we very much remain on, or they remain on track, to deliver at the end of quarter one. Obviously we have the 20 days to respond to that report.
Okay, great. Just lastly, hope Mike Carter enjoys his time off. Thanks for the 10+ years of interaction. That's all I wanted to say. Thank you.
Thanks very much, Scott, on behalf of Mike, unless Mike wants to say something.
Thanks, Scott. Your questions have always been fantastic and I'm disappointed we didn't talk TrainGuard. Maybe someday we will again. It's been a great journey. Thank you.
Thank you.
I can't see his face, but it feels like there's a big smile on it. Yeah, let's stop there.
Thank you. Your next question comes from Owen Birrell from RBC. Please go ahead.
Hey, guys. Thanks for taking my questions. I just got a general question at the outset as to why the guidance was changed from EBIT guidance to EBITDA. Can you give us a bit of a sense on where D&A is likely to go into FY 2022?
George, do you want to pick that one up?
Sure, Owen. You might have seen at our Investor Day, we're focusing much more on free cash flow going forward. What we decided to do is to give guidance on both EBITDA and CapEx as a better proxy for free cash flow. In terms of the second part of your question around where D&A is going, it increased AUD 20 million from FY 2020 to FY 2021. I'd expect it to increase a little bit more from FY 2021 to FY 2022, starting to approach AUD 600 million.
Okay. Can I ask just, I guess, associated with that, are there any operating assets that you expect to move into leases over the next 12 months to obviously impact that EBITDA number?
No, Owen, there aren't.
Okay, excellent. Just a question on Network. The last couple of years, obviously, there's been a bit of a structural change in the Coal market, and I note that the realized tons have started to deviate from the forecast tons set out in the UT5. That's basically resulting in under recovery on a go forward basis. I'm just wondering, is there any facility or when is the next time that regulated forecast tons reset? Is there a trigger for that to reset?
Pam, do you want to take the question and maybe just cover a bit of the process by which the volumes are set?
Yeah. Thank you. Thank you, Owen. Basically, the forecast volumes are only applicable for a year. Each year we reset those volumes. The purpose of volumes is really to recover the agreed revenue for the year. Over recoveries, into the future, generally, it's sort of subject to the volumes that you've agreed with the regulator. They were very high for the year just gone and obviously didn't anticipate the COVID impact. The next year's volumes have been set at a lower level, so it's an annual process.
That have been reset then. Okay. Look, just one for the Above Rail business. Looking at the margins in Coal, they've gradually been slipping year-over-year as the sort of lower yields start to come through. You've done a great job of reducing your operating costs to try and hold that line on the margins, but given where you know the yields are going over the next 2 years, how confident are you that you can continue to remove operating costs to hold the line on the margins there?
Ed, I'll let you pick that one up.
Yes. Thank you. Thank you, Andrew, and thanks, Owen. Look, it's been the game for some years now, keeping ahead on the cost front to offset the revenue, the rate pressure. As I outlined at Investor Day earlier this year, the headroom or the air cover that the secure contract book gives us now really lets us focus on harvesting the investments we've made in technology. The combination of TrainGuard and the turnaround time improvements we're seeing through Precision, along with the new approaches to cost reduction and efficiency and maintenance through the ARAM project, the combination of those things gives me a high level of confidence about our ability to continue to take cost out of the business. We're seeing our employees also respond to the current operating context and high levels of annual leave. Our annual leave consumption was up 36% during the year.
Our overtime was down 16%, as our workforce also worked with us, I'm proud to say, to help pull in the costs given the volatile market.
Great. Can I just ask one final question? I did notice that in one of the small print, it said that you'd sold all the shares in Aquila. Just want to confirm that you've got no interest in Aquila anymore.
I can confirm we have no interest in Aquila.
Okay. Excellent.
Thank you. Your next question comes from Cameron McDonald from Evans and Partners. Please go ahead.
Good afternoon. Andrew, can I just go back to that last question about the rate pressure? I think you guided that with the 5% volume uplift and some cost out, you would end up with a flat Coal EBITDA number for FY 2022. That implies that the rate pressure is in excess of 5% and probably six or seven. How do we think about that rate pressure through to FY 2023 if you've only got 7% of volumes being contestable?
Okay, George, I might get you to start on that, and then Ed can add if he sees a need to.
Sure. Cameron, you're right. We're expecting broadly flat earnings in Coal despite volumes up 5%. Bear in mind, a lot of the contracts that are now flowing through on lower rates were signed two, three years ago. There's a bit of a lag between when signing contracts and when they come through. When you start to look out two or three years, that's more contracts that we're signing today. We would expect to see beyond FY 2022, depending on where volumes go, an uptick in earnings in Coal as not only volumes come back, but the benefit of our transformation programs come through. Above Rail Asset Management, Project Precision, they will start to take effect and realize cost savings beyond FY 2022 that should see those Coal earnings increase off the current base.
Ed-
I don't have anything to add.
I was going to say, he didn't leave you much left to add.
No.
Do we imply from that that from FY 2023 onwards, that the rate pressure isn't as much as what we're currently seeing at the moment?
Yes, you can.
Yeah, it's a function of whether new capacity comes into the market. If you look at where we sit today, we're not seeing a lot of new contracts over the next three or four years, and therefore, we'd expect rates to be largely set for the next three or four years.
Great. Thank you.
I'd just add to that one Oh, sorry.
Keep going, Ed.
Cameron , I was just going to add to that. The rates are always interesting, it's not an average in terms of the rate pressure, obviously. Some customers actually don't seek any rate. They're quite content as we recontract business, they're looking for different flexibility or different performance mechanisms. Others, price is very important. George is correct. There's multiple factors, it really will depend on whether competitors are prepared to invest as well. I think we're reaching an interesting inflection point in the market, I don't see a lot of downward rate pressure in the next few years, given the contestable contracts we have ahead of us in the next three to four-year period.
Okay, great. Thank you. Just a last question from me. In that Bulk market, and you've identified that area as being potentially having some opportunities with growth CapEx and obviously now no new announcement around a buyback. You've previously indicated that you would assess all growth opportunities against internal capital management and buying back your own stock. Is that still the framework that you will be assessing growth CapEx opportunities in, particularly if it's any material amount of growth CapEx?
I can confirm that the way we've described the process in the past is exactly the way we will actually conduct any evaluations that we currently have underway or would have in the future. That sets a pretty high bar for growth CapEx.
It's the way we're going to do it.
Okay, great. Thank you very much.
Thank you. Your next question comes from Ian Myles from Macquarie. Please go ahead.
Hi, guys. Sorry for probably laboring this. Just on that Coal side of the business, is the Glencore reset sort of the last of the larger sets of contracts which have now gone through repricing? From FY 2023 onwards, as we see further volume recovery, we should actually see the benefits of TrainGuard and your other initiatives starting to actually come through the bottom line.
Ed, do you want to answer that?
Yeah, the short answer is yes, Ian. Yes.
Okay.
I would add, without going into the terms of the Glencore reset or rollover of the contracts and extensions, price was not the main factor with that particular contract. It often isn't with Glencore. They're much more focused on delivery performance.
Okay. That's fair to say. From an operational point of view, are we now at a point that the Queensland and the New South Wales fleet in Coal is fully contracted? It may not be fully utilized, but you don't actually have capacity to contract more in without new capacity or bringing trains back from WA.
Yes. Sorry, Andrew, did you want to take that one?
I was just going to say, Ian, don't forget the work we're doing on Project Precision that actually-
Yep
...creates capacity from the existing fleet. Other than that, I'll leave it to Ed to.
I was going to say the same thing. Capacity release is the name of the game, Ian. Our aspiration is to improve the productivity of our assets to the point where we release capacity rather than outlay capital. If we can't onsell the business, then we cascade to Bulk.
Okay. Well, that's great. Then BHP Nickel West, you've canned that contract, and maybe I'm a bit ignorant. Can you just give us a bit of rundown why that contract couldn't be extended, renewed, or repriced, given Bulk is actually a large part of your business? I guess the extension is, you talk about metals and other opportunities out there. Just sort of maybe color on where you're seeing some of those other opportunities in the lithium or metal space.
Clay, I'll hand that one over to you.
Yeah, thanks. Thanks, Ian. As we communicated before, that Nickel West contract was a significant reform contract for us. In the end, we just could not reach commercial terms with BHP. We weren't willing and they weren't willing to, in the end, come to an agreement. We weren't able to reform that one. If you think about what we've done since then, that capacity on that impacted freight has been backfilled with new customers. Not all of it, but a significant amount of it. Additional labor or rolling stock that was utilized to support Nickel West has now found its way into supporting other customers on east-west services, and I think you see some growth there in the MRL iron ore numbers.
We've rolled out some of the higher capacity wagons that we used for Nickel West, and we've deployed those for other customers. Kind of reformed that without Nickel West. In regards to other opportunities, the brownfield and greenfield growth pipeline in Bulk remains really positive. You recall Investor Day, the slide with the 1,400 projects currently at various stages of development. Now we know all those won't come through, but the projection is a CAGR around 3% of growth. There's this really rich pipeline of short-term, medium-term, and longer-term opportunities that we're looking to prosecute. I think Andrew mentioned it, Ian, the fundamentals for next year look strong. We've had good broad rains for our agribusiness and positive commodity prices underpinning the minerals and metals business for next year.
Okay.
Ian-
I was going to say, one final question on that Nickel West. Did that actually go to rail or has it gone to truck as an alternative?
Listen, I don't entirely know what the end result of their operational solution was. You'll have to ask Nickel West that one.
Okay. Thank you.
Thank you. Your next question comes from Sam Seow from Citi. Please go ahead.
Good morning, all. Thanks for taking my question. On Bulk, it looks like it's been a fairly strong environment with elevated demand for iron ore, base metals, and ag. Just wanted to understand and get some more color around that 10%. From what you think was an uplift in volumes from existing customers versus, I guess, market share gains and contributions from acquisitions.
Clay, do you want to give a bit more color on that breakdown?
Yeah, sure. The year for us was driven by increased volumes or revenue from MRL, Rio, the port services business, and some spot grain, but offset by Mount Gibson with the closure of the Extension Hill mine, that's the planned closure, and some poor livestock volumes. Going forward, I think it's well-publicized, Mount Gibson looking to reopen Shine, but the rest of the volume increase year-on-year came, and the revenue increase came primarily from those four customers.
Sure. I guess also looking at the Bulk transformations into FY 2017, revenues largely look flat. Granted, we can't see access costs back that far, but appears that AUD 100 million turnaround, lower costs and I guess AUD 50 million reduction in D&A have been pretty key drivers. Just interested to know, I guess, if you need to accelerate your top-line growth from here to hit your double market share targets? Then in terms of margin, how should we think of costs and D&A, as I'm assuming you'll be reinvesting into the business to get that growth?
I would say, if George and Andrew have got us doubling the size of the business for the next 10 years, yes, we've absolutely got to drive that top-line growth. If you think about our investment in the port services in Townsville and Newcastle, that's all part of that positioning to support long-term increase in revenue and long-term growth. We're confident about the market. We're confident about expanding in the market, our supply chain service. Moving out of just a core rail business into port and then road that contributes to our business, expanding in that supply chain. We know that supply chain business, as far as the Bulk market goes, is currently around AUD 10 billion in revenue, moving to AUD 13 billion in revenue. We're looking to take a 20%-25% market share in that particular market.
Yes, we've got to continue to drive the top-line growth. On the cost side, since the turnaround, we've continued to be very focused on cost management and transformation. I guess it's best outlined by the fact that in the last four years, revenue is up 16%, but our real operating costs have reduced by 2%. We continue to focus on that. There's always opportunities to do more there, and that will be part of our D&A that we embed in the business going forward. On depreciation, I think we are up AUD 8 million this year from last year, so AUD 20 million to AUD 28 million, and a lot of that increase in depreciation will depend on growth opportunities. You'd expect if we're growing and we need more capital, that D&A will increase in line. Anything else I've missed there, George?
No, that's a good summary, Clay.
Thanks, guys.
Thank you. Your next question comes from Paul Butler from Credit Suisse. Please go ahead.
Hi. Just one quick question. On slide 18, where you had that comparison of free cash flow versus the Coal volumes, does the free cash flow data on there include asset sales, or is that excluded?
No, Paul, it includes both asset sales, but it also includes acquisitions during the year. Includes both of those for FY 2021 and FY 2020.
If you took out the asset sales, wouldn't that free cash flow line look a bit more similar to what's happened to volumes or is that not the case?
It would be down a little bit in 2021. Bear in mind, it would also be down in 2020, because of Rail Grinding that we sold in 2020. The cash tax for Rail Grinding was actually paid in the 2021 year rather than the 2020 year.
Right. Okay. Okay, very good. Thanks very much.
Thank you. Your next question comes from Nathan Lead from Morgans. Please go ahead.
Good day, team. Thanks for your presentation. It's just three quick questions from me. The first one, just interested in the profile for tax going forwards, obviously with the government budget allowing for that immediate expensing of CapEx and just what that may look like in terms of the franking percentage for the dividends going forward.
I think Andrew's looking at me, Nathan, so I'll take that tax question. I might start with the franking question. This dividend franked at 70%. It's been that for the last few years. Expect that to be the case going forward, and that's just driven by the difference between our cash tax rate and our accounting tax rate. In terms of the absolute quantum of tax, expect that to step down in FY 2022 and FY 2023. I won't put a quantum on that yet because we're still working through what capital in our plan is going to be able to qualify for the instant asset write-off. It will step down, but I won't give you a number just yet.
Okay. Sounds good. Second question. I'm just interested that the comments you've made about the AUD 900 million of debt capacity. I'm just interested, are the rating agencies starting to talk about tightening up the metrics you require within the rating band to do with, I suppose, the growth in Bulk, which I suppose is a lower quality earning stream than Coal and network? Also, I suppose thinking longer term, I suppose you presented some of the scenarios were negative Coal outlook scenarios at Investor Day. what's your thinking with the debt capacity when you're looking at those longer-term negative scenarios?
Nathan, the short answer is no. The rating agencies aren't having that discussion with us. If anything, I think the scenarios that we showed in June are very helpful, because I think that they show that even in more extreme volume scenarios, our free cash flow at a group level is fairly stable.
Okay. Great. Another one. If I look at slide 53, the Coal hedge contract expiries. I am just interested, I suppose, there is an assumption there that we might think that you continue to roll those contracts. Is there a risk around the mining leases themselves being extended? I suppose where this has come from is, I believe there has been some concern amongst the potential bidders for the Mount Arthur mine about whether the mining leases would actually extend. Could you make a comment on that and whether there is any risk around significant expiries there?
Ed, I might get you to cover off on that one.
Thank you, Andrew, and thank you, Nathan. There's always a risk, Nathan. It's something we certainly model in our scenario analysis that George took you through Investor Day. that is the regulatory environment. It's a broader problem, of course, for the industry. What we typically see, though, that some of our high-quality counterparts, like BHP, are adept at working through the policy and regulatory framework. Yes, it's a risk. We think it's a low one currently, but we watch it carefully.
Okay. Thanks, guys.
Thank you. Your next question comes from Scott Ryall from Rimor Equity Research. Please go ahead.
Sorry, I forgot to ask when I asked Pam about the independent expert before. What is the assumption for your guidance for this year? What's the assumption in terms of the step up in WACC, the timing at which that takes place, please?
George, I might get you to cover that.
Yeah. Scott, the timing of the IE report won't make any difference to FY 2022, because the tariffs approved by the regulator are set at effectively 6.3%. What the timing will make a difference for is the revenue cap calculation, which will be for FY 2024, so two years after 2022. That's in relation to guidance. I'm not sure, Pam, whether you wanted to add anything.
No, you've covered it, George. Thank you.
Okay. All right. Understood. Thank you. That's all I had.
Thank you. There are no further questions at this time. I will now hand back to Mr. Harding for closing remarks.
Look, I would like to thank all of you for sitting through our results with us. You can see the value creation record continuing even in a year that is fairly tough from a COVID-19 point of view, also the trade issues with China. Hopefully you can see how we're building through the Bulk business, and supported by the network and the Coal business, a strong platform for the future. Thank you very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.