Good morning, thank you for joining today's call. With me on the call this morning is Group CFO, Will McMicking, and Group Head of Strategy, Misha Mohl. Before we commence, HMC Capital would like country throughout Australia and celebrate their diverse culture and community. We pay our respects to their elders, past and present, and extend that respect to all Aboriginal and Torres Strait Islander people today. I'll start the presentation this morning on slide first half financial year 2026 results. Before we begin, I want to acknowledge the dislocation in our share price. Whilst the market has been volatile, the current share price does not reflect our view around the outlook for our business, specifically the durability of HMC's recurring earnings base, the visibility on AUM growth, nor the liquidity and resilience of our balance sheet.
Across the group, we are seeing strong operational momentum, expanding fee-earning AUM, and mission earning streams from our three newest verticals: private credit, digital, and Energy Transition. Turning to our first half financial year 2026 result, I'm pleased to report a first half that continues to demonstrate the resilience of our platform and our growing funds. During the period, assets under management increased to AUD 19.5 billion, up AUD 600 million since June, and we expect this will grow by over AUD 4 billion through active deployment opportunities. Operating EPS for the half came in at AUD 0.101 pre-tax and AUD 0.186 pre-tax if we include the capital charge generated from the recently announced capital partnership with KKR in... Our first half earnings were underpinned by recurring funds management income and investment earnings.
During the period, we did see a lower contribution from performance fees and principal investment income, which were impacted by the fact that we were cycling against a record performance and adverse mark-to-market movements in HMCCP during the first half of 2026. Inherently variable, but the underlying trajectory of our business remains firmly positive. On capital management, we maintain a net liquidity position of AUD 1.6 billion, which reflects the strength and flexibility of our balance sheet. This was strengthened over recent months in the following ways: In November, we increased and extended our corporate debt facility by two years to November 2027, and in early February, as part of the KKR transaction in our Energy Transition business, we expect to release AUD 155 million of cash proceeds at financial close, plus fully refacility in the ET platform.
As we move into the second half to return to a position whereby we aim to carry zero core debt and use our balance sheet opportunistically. Finally, the board has declared an interim dividend of AUD 0.06, partially franked, consistent with our commitment to sustainable shareholder returns, while reinvesting retained earnings into high conviction opportunities. Six, where we'll discuss our growing funds management earnings. A core strength of our business model is our ability to generate both recurring and non-recurring income from our funds management activities and principal investments. In the first half, meaningfully, this was demonstrated by a 33% growth in management fees compared to the prior corresponding period. This uplift was underpinned by strong deployment across digital, private credit, and unlisted real estate.
Today, we have more than AUD 15.9 billion of fee-earning AUM. The strategic partnership with KKR in Energy Transition will add fee-earning AUM in the second half of financial year 2026. I'd now like to move to slide seven to discuss a number of our growth initiatives in AUM. This is a really important slide in this morning's presentation and highlights that we are progressing over four verticals. Importantly, these initiatives are capital light and demonstrate the strong organic growth in each of our businesses. Starting with our real estate platform, where we are now seeing a significant level of institutional investor demand for retail assets, a sub-market leader since our IPO in 2019. Specifically, we see strong AUM growth momentum across all our unlisted funds this half.
Within HARP, we have this week exchanged on AUD 200 million of acquisitions and are in due diligence on further opportunity. Greenfield Fund, we have committed equity from institutional partners in partnership with the Coles Group to support more than AUD 800 million of new acquisitions and greenfield developments over the next 12-24 months. Our Last Mile Logistics Fund is now fully deployed with approximately AUD 1 billion of assets and has over AUD 150 million of developments underway. We continue to progress new institutional partnerships across our platform, focused around urban renewal and large format retail, which we expect to convert over the next 12 months. Between our listed HDN rate and the unlisted funds, we see 10%-15% annualized AUM growth over the mid... through asset revaluations, developments, investments, and new fund raising.
In digital infrastructure, our attention is firmly on prioritizing and accelerating the execution of the AUD 1 billion SYD1 expansion. Demand from hyperscalers and enterprise customers continues to strengthen, and we are close to handover on the 20 MW upgrade program. Importantly, demand for the SYD1 asset has far exceeded expectations at the time of IPO in 2024, and it's by many multiples. Today, we have a strong pipeline of demand for the balance of the assets capacity. executing on the SYD1 expansion with this vertical by up to AUD 1 billion, where under the leadership of Matt Lancaster and Craig Schloeffel, we have invested heavily in bringing the platform to an institutional standard. Our pipeline for commercial real estate loans is very healthy, and today stands at in excess of AUD 4 billion of loans.
Our current plan is to fund this pipeline with the following sources of capital: Our core fund, which has doubled since inception to today being AUD 550 million AUM, and is likely to move to over wholesale. Our 600 wholesale and institutional appetite for deal flow and investment in direct loans. We're looking to broaden our funding this half with a AUD 1 billion offshore note offering at 128F. Multiple institutional investors now progressing through diligence. We are planning to explore an ASX-listed note structure. This vertical is becoming a major contributor to AUM growth and recurring earnings, and should, as it scales, generate strong ROE for the group. In Energy Transition, the strategic partnership with KKR positions us exceptionally well to accelerate growth.
We're targeting 20% return on equity, we now have committed equity in place to develop the first AUD 800 million BESS final investment decision this calendar year. The remaining development pipeline is very strategic and provides significant optionality for future value creation for ourselves and our partner, KKR. Finally, in private equity, our focus remains on delivering strong performance from our existing portfolio while being selective and disciplined. Need to evaluate accretive co-investment situations, support a button AUD 40 million of cash on balance sheet within the fund. This vertical has delivered great returns over time and will continue to be managed with a high conviction value creation lens. Let's step back.
The important message here is that our future unlisted AUM growth will continue to be driven by scalable capital light strategies, supported by strong institutional demand and a balance sheet that provides meaningful investment. .. has a clear pathway to growth, and we are well positioned to. I'd now like to turn to page eight of this morning's presentation. On this slide, we'd like to talk about our high growth and self-funding platform. Stepping back from the individual priorities, this slide reinforces the strength of the HMC model and why we remain confident business. At its core, HMC is a self-funding business. Our balance sheet is deliberately structured to maximize flexibility and return on equity. We continue, which ensures we have the full capacity of our AUD 715 million corporate for new commitments.
This approach has been a critical enabler of our growth, particularly over the last two years, as we established three new verticals. We also maintain a low payout ratio, which means the majority of our excess cash flows are reinvested back into the business. On the left-hand side of this slide, continues to scale across the five verticals. We target 10% per annum growth in management fees, supported by recurring revenue across the platform. As these platforms grow, they are full. In financial year 2026, funds management and co-investment income is expected to contribute 70% of our earnings. Our principal investments, such as Energy Transition, target return on their invested capital. These investments provide us with meaningful optionality and the ability to capture outsized returns when well executed.
This combination delivers a scalable platform with strong outsized earnings and principal investments. Critically, a business where the majority of earnings are now recurring in nature. I'd like to now move to our funds management section which starts on slide 10. As you can see on this slide, HMC today manages AUD 19.5 billion across asset classes. Our strategy remains centered on high conviction sectors. Every one of our verticals is underpinned by megatrends, with the potential to deliver non-correlated inflation-protected returns. The majority of our AUM, or approximately 75%, sits in open-ended structures, which gives us a solid base. We also continue to see growing momentum in unlisted institutional capital, which now represents 35% of our AUM. We execute the deployment opportunities underway across our business, we expect this proportion to increase to 50% over the...
Turning now to slide 11 of this morning's presentation, where we focus on our real estate platform. I've already touched on our AUD 1 billion immediate growth opportunities in this business, which will sign... AUD 2.7 billion unlisted platform. The key messages I want to emphasize is the strong performance of our existing unlisted funds, which have generated a 12% weighted average IRR since inception. Through our market-leading operating and development capability in our target sectors. The HUG strategy, for example, with Coles Group and major institutional investors, is a great way that we express this leverage and our deep track record and relationships in developing institutional-grade retail assets. Accordingly, we are well positioned to harness the strong level of institutional investor demand for both core and value-add exposure to non-discretionary retail assets.... 12 of the presentation, where we'll touch on our digital vertical earlier.
As Michael Juniper and the management team discussed last week at their results, our priority in this vertical is clear: close the NAV discount through capital recycling and accelerating the execution of the highly accretive, approximately AUD 1 billion SYD1 expansion. We do not believe the current share price of DGT reflects the financial or operational results achieved since IPO. In addition, this demand from hyperscale and enterprise customers for our flagship Sydney asset has materially exceeded our previous expectations. I'm extremely confident in the outlook for the business and our strategy under the leadership of Michael. Our team are actively progressing initiatives across the Australian and U.S. platform. This, combined with DGT's existing liquidity, will enable the business to progress and accelerate the expansion of the SYD1 asset and take advantage of strong customer demand. Moving now to slide...
During the period, we delivered 13% AUM growth for the period to $2.2 billion across our private credit platform. Our liability of our private credit business since acquiring the Payton platform in May, mid-2024. Our private credit business now operates at an institutional standard of credit assessment, governance, and risk management. The business is now positioned to meaningfully scale its revenue base with more diversified capital sources. Discussion with multiple offshore institutional investors to establish a mandate and are also looking to establish an ASX-listed debt product, which would grow our existing core fund to over $1 billion in the near- term. These initiatives will deliver strong operating leverage and high ROE outcomes for the HMC Group. Turning to slide 14.
The AUD 603 million investment by KKR marks a defining quality platform we've built under the leadership of Gerard Dover. The market reaction to the announcement suggests to me that investors do not yet appreciate the significant value and growth we expect to generate from this business and our partnership with KKR. It capitalizes the platform, pays down the mezzanine facility, and includes a further AUD 250 million of committed follow-on capital from KKR to unlock the value of the platform's 5.7 GW development portfolio. It also substantially reduces HMC's balance sheet exposure to just AUD 180 million. We expect to generate private equity style returns on our invested capital of 20% or a four times money multiple over the next five years.
It is important to remember that this is a development business, and accordingly, significant value is created when projects reach final investment decision or FID. Since the acquisition of this Neoen portfolio and our investment in Stor-Energy, we have already achieved significant de-risking milestones in unlocking the value of our portfolios. The platform now has committed equity funding to develop an AUD 800 million BESS project, which we expect to go to FID this calendar year. This forms part of a 2.3 GW of projects that we expect to reach FID in the next 12-18 months. Importantly, we have the flexibility to sell FID-ready development assets to introduce new equity funding to deliver these projects and materially grow the platform. Either option will deliver positive outcomes for HMC shareholders.
We expect this business will contribute meaningfully to the group's earnings in financial year 2026 and beyond. We're looking forward to working with KKR and excited about the potential to explore additional opportunities which leverage our respective capability in the Australian market. Equity, on slide 16. HMCCP Fund 1 has recorded an annualized net return of 23.5% since inception, materially outperforming the broader market, albeit delivering a soft first significant flexibility with around 140 million of dry powder, allowing us to move quickly or compelling buy-in opportunities arise. We'll continue to focus on situations where our active ownership model can unlock meaningful value, and in parallel, we're progressing selective co-investment opportunities that can broaden the vertical over time while maintaining the fund's strong return profile. Moving to slide 17, where I'll discuss sustainability.
As the group has expanded into new verticals, we're updating our sustainability strategy to set clear emission reduction targets across relevant areas of the business. In the first half, we continued to make solid progress from advancing decarbonization initiatives in real estate and Energy Transition. We have continued strengthening our governance framework, as demonstrated in private credit recently, with the appointment of three new independent directors, and are actively continuing to support our community partners through the HMC Capital Foundation. It's an ongoing effort, but we're committed to ensuring our growth continues to deliver positive long-term impact for all stakeholders. I'll now hand over to Will McMicking to-
Thanks, David. Turning now to the earnings summary on slide 19. For the first half of FY 2026, HMC delivered operating earnings before tax of AUD 41.6 million or AUD 0.101 per share. This reflects strong growth in recurring funds management income, offset by lower investment income. Management fee revenue increased 34%, driven by fee-earning AUM growth in real estate and private credit, and a full 6-month contribution from digital infrastructure. Transaction and performance revenue reduced to AUD 4.2 million, reflecting the absence of larger transaction revenue that was recorded in the first half of FY 2025. Wages were lower year-on-year following the reversal of the FY 2025 AUD 8 million retention provision, whilst corporate expenses increased modestly as we continued to invest in platform capability. Funds management, AUD 3.7 million.
Investment income of AUD 15.9 million was primarily distributions from HDN and DGT. Interest expenses increased to AUD 8 million due to senior debt drawn to warehouse Energy Transition assets. An interim dividend of AUD 0.06 per share has also been declared. Turning now to the divisional earnings on slide 20. Starting with real estate, operating earnings before tax was AUD 38.2 million for the half, reflecting continued growth in fee-earning AUM and management fees. In private equity, operating earnings before tax was a loss of AUD 3.1 million, driven primarily by lower and modest contribution from management fees. Private credit delivered operating earnings before tax of AUD 9.6 million, supported by a 13% increase in fee-earning AUM and strong growth in management fee revenue.
All operating earnings before tax was AUD 15.8 million, reflecting the full six-month contribution to funds management earnings, stable fee-earning AUM, and investment income in the period. Corporate recorded a loss of AUD 18.9 million, reflecting central costs, platform investment, and net interest expenses associated with the Energy Transition assets. Overall, this has resulted in total operating earnings before tax of AUD 41.6 million for the first half, with earnings increasingly weighted towards funds management EBITDA across our core platforms. Turning now to slide 21. Net tag 2025 or AUD 1.3 billion or AUD 3.21 per share, 0.5% as at 31 December, which increased during the half to warehouse Energy Transition assets.
Following completion of the KKR energy transaction, HMC's investment in the energy fund will reduce from AUD 305 million as at December to approximately AUD 180 million, with the returning investment proceeds being used to repay debt. I'll now hand it back to David.
Thanks, Will. Turning to the outlook and our guidance. We continue to see strong momentum across the platform, with funds management EBITDA of AUD 85 million tracking to guidance, supported by double-digit growth in real estate and private credit, and the initial contribution from Energy Transition following the KKR partnership. Investment income is expected to be at least AUD 85 million, driven by distributions from our co-investments and valuation gains in our Energy Transition platform.
On that basis, we are pre-tax operating EPS target of at least AUD 0.40 per share. Our dividend guidance for financial year 2026 remains at AUD 0.12 per share, consistent with our commitment to provide sustainable shareholder returns while reinvesting retained earnings into value. Before closing, as I noted at the start of the current at the start of the presentation, the current price does not reflect the strength, visibility, and quality of HMC's significant recurring earnings base and the resilience of our financial position.
The fundamentals across the group remain strong, with consistent operational momentum and a clear long-term growth trajectory. As outlined today, growth within each of our platforms and our ability to continue delivering sustained value over time. Finally, I'd like to acknowledge our staff who have remained focused and committed to our mission. Our leadership teams across our verticals remain as passionate as ever about their businesses, and I would like to acknowledge and thank them and our entire HMC team joining the call this morning, and now I'll hand back to the operator for Q&A.
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 comes from David Pobucky with Macquarie Group. Please go ahead.
Good morning, David and team. Thanks for your time. Just the first question around expected farm growth going forward. I mean, this year was about consolidation, so it's good to see you still, you know, progressing AUD 4 billion plus worth of capital-like growth opportunities across the group. Would you mind just ranking those opportunities in terms of timing? Like, what, what do you have most confidence on, David?
I think importantly, David, what we wanna really highlight is the year has been, as you correctly point out, one of consolidation and setting the platforms up, and it will growth. The funding's there, it's in place. I think if you start with probably the BESS slide that summarizes it is the AUM growth slide in the deck, on page seven. You just start with real estate. We touch on it's all in place, the partnerships are there, the deployment is happening. As we said earlier, the HERF Fund has this week exchanged on AUD 200 million of new investment opportunities. HUG has AUD 800 million of dry powder and other investors wanting to come in and join that platform. The development pipeline, again, is near AUD 1 billion.
That'll take two years to deploy, but all of that is funded, partnered, and in place, and obviously, we're looking to add to some of those. To go to digital, the SYD1 asset is, in our view, hitting every marker that we set for it at IPO. Importantly, we've got, a AUD 900 million+ development project there with what? Of over 15%. Importantly, there's plenty of liquidity in the digital platform. There's over AUD 600 million of liquidity. We're actively looking at recycling. Again, organically in-built another AUD 1 billion of deployment in AUM growth. In private credit, I touched on there. Importantly there, we've had really strong growth in our core platform, and our AUM's grown by 13%.
This earlier, that we're seeing really continued strong momentum because of the performance in our core fund, and we expect to see that grow strongly this half. In addition to that, we've got an institutional note offering going off into the offshore market at the moment, which we expect to be able to generate. That has actually generated and garnered a very strong reaction from offshore institutional investors, all looking at Australia as a place that's a pretty well-understood market, rule of law, good enforcement rights for borrowers, and so forth. It's a really strong vertical for us, and again, through those two opportunities, we, we see good deployment there. In Energy Transition, I think the market has been very harsh in assessing the KKR transaction.
Importantly, we have secured development capital to roll out a BESS project of AUD 800 million. That's secured, it's in place, and it's committed this year, and that'll be another hundred, AUD 800 million of AUM. In total, you put all that together, that's AUD 4 billion of deployment, and it's all funded, and it's in place, and we're looking to deploy that later this year. We sit here today, we've consolidated the business through the course of the back half of 2025. We've got Energy Transition off the balance sheet. We've got the balance sheet back into good shape, and we're looking really positively to the future.
Thanks for the color, David. Maybe just one for Will. Just in reference to slide eight and some of the EBITDA targets that you have for FY 2026. I just wanted to confirm whether those are all post expenses. If you add them all up, is the expectation that you deliver about AUD 170 million of group EBITDA in FY 2026 versus the 50 you delivered in the first half? Is that the right way to read it?
Yeah, that's right.
Just one last one. The AUD 53 million expected from principal investments in terms of the fair value gains, would you mind just unpacking that in regard to Energy Transition, please?
Yeah. I don't think we're going to provide the details today, but, I mean, we have put out a few markers just to give you a sense. We've had some independent valuations of the portfolio. The midpoint was AUD 1.3 billion. We paid AUD 1.1. I guess we're still where value gain will be, that will be booked, but, I think that probably gives you a bit of a guide as to some of the bookends there.
All right. Thank you very much.
Thank you. Your next question comes from Missy. Please go ahead.
Yeah, hi. You, you've actually got James Drew here. David, just, just on, just wanted to understand the AUD 85 million, I think it is, you put... Hold on, let me just bring this up. Yeah, so the investment of AUD 85 million, so with the gap between the AUD 32 million of distributions is really the AUD 53 million from the revaluations from Energy Transition. Just wanted to confirm that, or is there something else in there?
Yeah, we're not giving you an exact number, but yeah, you, you could assume that, through the KKR transaction, locking in funding, development progress we've undertaken in that business, we will be realizing some gains this half. Importantly, if you go back in time and you look at the way we put that portfolio together, it was bought incredibly well. We ascribed almost negligible value in the acquisition price to the development pipeline within Neoen, and we've a very nominal amount of money. It's just been really development capital we've put in there. What we've done since that time is we've ticked a lot of boxes, we've achieved development approvals, we've got offtake agreements coming together, we've secured, OEM, supply contracts. We've made a lot of progress. There's a lot of interest in the assets in the portfolio.
A lot of boxes have been ticked. KKR saw that coming in. We significant upside in the development pipeline there. We're gonna realize some of that gain in this half.
Yeah, okay, that's clear. Then just, KKR's being consolidated in the JV. I'm just trying to understand the control that they have over the project. What rights do they have? What veto rights? Can you just provide a bit of color there? Thanks?
It's a genuine partnership. I think we haven't done a great job of explaining it, but it's a genuine long-term partnership that we've entered into across those assets.
Okay. Do they have... I mean, what rights do they have in terms of gen-
No, no, no, no. We've got joint rights, so joint control, equity accounted.
Okay, just one more for me. Just on, we, we used to talk about, some money coming from Capital Solutions, in guidance this year. Just, just how that's, shaping up?
Look, I think everyone can see the positions. You can see some of the positions, you can't see all of the positions in that, in that platform. We've basically gone to a lot of cash there, so we're just biding our time. A bit of dislocation in markets probably doesn't scare, plenty of dry powder that we've built up in that, in that vehicle. Let's assess that at the end of the financial year.
Thank you.
Thank you. Your next question comes from Tom Bodor with Jarden. Please go ahead.
Good morning, David, Will, and Misha. I just wanted to understand, with the Energy Transition, booking, revaluations beyond FY 2026 in that fund from an operating earnings perspective.
Look, I think, Tom, what we're saying is that is a dynamic platform now. We've got a great global partner that's very committed. We've got development capital locked in. So what you can expect to see is that's gonna be a dynamic moving business that we expect to generate private equity-like returns from. We'll be realizing ongoing returns from that portfolio, whether it be through asset sales, value uplift, or potentially an exit over the next three to five years. So we're feeling very optimistic about it, and we think we've, we've created something that's going to set us up for the long- term.
That's great. Thanks. Then in terms of looking at sort of the core capital demand for that product, what do we need to see before you'll be sort of unlocking some of this value by, by introducing core investors or selling assets to core investors? The assets are constructed and performing in line with expectations, or what's the constraint to them coming on board?
Basically, the way to think about that, Tom, as I said earlier, the development projects in that portfolio were secured at incredibly attractive entry levels. We have a couple of projects down in Victoria, being the Kentbruck Wind Farm, which you would have seen earlier this year, received the green light from the Victorian State Government to proceed. A 600 MW baseload wind farm in the state of Victoria is extremely valuable. We will look to unlock value from that asset. What we've done is now we've got the approval with off-takers. There's been a strong level of interest, inbound interest from multiple and varied off-takers. I'm not gonna go into that discussion on this call, but they are serious players, all looking for baseload generation capacity in that state. Remembering there's coal coming, our asset is very valuable.
Now that we've got the green light, we'll proceed to move that along. We've also got a battery storage project, being the Moorabool project that is DA approved. It is adjacent to our VBB assets, so literally, there is substation connection. There is already an existing contract in place with the Victorian State Grid. We'll probably look to expand that contract as an off-take partner there. We've ticked a lot of boxes in regard to these assets. As soon as we can get the boxes ticked, being off-take, an equipment supply agreement, and a connection agreement, they are the green lights to go to FID. That results in capital, that results in lots of upside. That's gonna be achieved in the next 12 months. We are basically sitting on some fantastic assets there.
We've been patient, we've been working hard in the background, we've been operationalizing that platform, and we're really, really looking forward to the future. It's bright. Bringing KKR in at the on the terms that we've brought them in, with the committed funding we've got, this is development, this is high-returning private equity type stuff, so we're very, very excited.
Thanks so much.
Thank you. Your next question comes from Solomon Zhang with UBS. Please go ahead.
Morning, David and the team. Just wanted a bit of an update on how the HERF fundraising process is going. I guess you would build fund size and a close in FY 2026, just an update there would be great.
I think what we'd say to you is that deployment across the real estate platform has been really good, and we've probably ended up with more deployment into HARP and HUG earlier. HERF, we're still trying to secure the right assets in order to close the fundraising, but there are plenty of interested institutions circling that, the right portfolio of assets. We think we're close now, we're, you know, we're looking forward to giving you a pretty exciting update on that in the not-too-distant future.
Thanks. And maybe just a question for Will. Could you just talk through the cost base and how that's expected to evolve over the next 12 months, given, I guess, the headcount has increased, but you're still annualizing some of those impacts throughout the expense line?
Yeah, I think what we'd say is we wouldn't expect any material change for the, the second half. We're very focused on maintaining margins, Solomon.
Right. first half run rate?
Yep.
Thanks.
From Ben Brayshaw with Barrenjoey. Please go ahead.
Hi, David. Good morning, team. I just have a couple of questions on Neoen and just wanted to clarify whether you recognize any ownership income for the last six months. Just noting that, of course, it settled on around the 1st of August.
Ben, you'll see in the income statement there's held for sale losses of approximately AUD 15 million, so that effectively reflects the five months of ownership. I guess the big things we'd call out is, you've got AUD 20 million of interest expenses, so that's the senior debt and the mezzanine loan running against that number. You've also got development spend and corporate costs of about AUD 10. The asset, EBITDA was running at about AUD 15 for the five months. On a six-month basis, it's AUD 20, and historically, there's been a skew to the second half. You know, the asset, forecast for the year is, is sitting at about AUD 62 million versus last year's AUD 64.
Okay, terrific. That, that was-
Just on that point, we obviously talked a little earlier in the year about the fact that we had some, a period where we're offline with the wind farm, so it's obviously just impacted earnings a little bit for this full year. We expect that that's all been restored, and we're coming into this year with a much stronger position.
Okay, thanks for the color.
Thank you. Your next question comes from Andy MacFarlane with Bell Potter.
Morning, guys. Just one on private credits. Just interested if you can talk about the timing of the CRA private credit mandates and potential LIP you're looking at and, and what you're kind of expecting to underpin both of those?
Yeah. I think, Andy, the thing about that platform is that we have in-house origination capability on the ground across the major capital cities of Australia. We've been investing in capability across that platform. We've got about a AUD 4 billion pipeline. Doesn't mean we'll execute a whole AUD 4 billion of that pipeline, it gets to mean that we can be a bit picky and choosy around which loans we write for our investor base. Importantly, the current investor base has still got a lot of appetite to participate in loans. Our core fund has doubled, more than doubled, since the acquisition of the business, it'll go through AUD 700 million. Be to create an opportunity for a listed note to potentially co-invest into that core fund in the future.
It's got a great track record of performance. That's a very natural opportunity to explore. In addition to that, we are looking at some offshore institutional partnerships that have been looking to find an opportunity to invest in this space in Australia, discussions around that.
Just thinking of adding that second half, 2026 or fiscal 2027?
Sorry, can you repeat the question? You didn't come through very clearly.
Sorry, just asking, was that expected to be second half 2026 or fiscal 2027?
What, what am I expecting to be? Can you clarify the question?
Yeah, just timing-wise. Yeah.
Timing which? What, timing of what? The investors or...?
For those, those two new order mandates and strategies.
Yeah, look, I think, I think we'd be optimistic that we could get those in place before 30 June this year.
Thanks, David.
Thank you, Andy.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. The next question comes from Richard Jones with JP Morgan. Please go ahead.
Hi, David. Just on your AUD 180 million balance sheet position in Energy Transition, can you step through how you expect that to move over time, and also work through the CapEx in the next six months, and I guess the funding of the first development? How I know you've outlined KKR contributing some equity, but just how AUD 800 million will be funded?
Thanks for the question, Richard. That's a great question, and just again, highlights why it's such a great R. Importantly, the platform, in terms of the operational day-to-day, the OpEx, the development spend, is all now fully funded within the platform itself. As part of the transaction with KKR, they have committed to fund 90% of that AUD 800 million BESS project. What you would assume is, let's assume a 60/40 debt equity, so your debt facilities for that development. KKR will fund 90% of the development through their AUD 250 million equity commitment, and we've committed to put in 10% of the equity in terms of that development. That's why we generate such compelling returns from those sorts of opportunities going forward. We're expecting to get hit feed later this year.
Okay. Just on a sort of more medium-term basis, how do you think about your equity investment in the platform?
We've put out, nailed our colors to the mast there, and development opportunities should run at about a 20% return on equity. Now, with the leverage that we've now got in the structure through KKR, we're hoping to do better than that. Importantly, the way we're, we're framing that is we've endeavored very hard to try and articulate that for you on slide 15 of the presentation today. What you can see there is as the as the megawatts grow, the operating megawatts grow, you'll see that the development pipeline is also growing, and we're giving you looking to unlock that.
Then what we're demonstrating is that, it's an all-in entry price of about AUD 1.1 billion, with the development upside and the value of the megawatts in the development pipeline we're putting together, we're expecting to generate around every single year on our AUD 180 million invested in that platform.... That comes from a mix of up development profit, where we go to fit on a project, as well as just getting the whole balance of projects to fit, introduce third party, new equity, or potentially exit as a platform with a deep growth pipeline. There's a lot of options that will open up to us, through the course of the next couple of years through that platform.
Okay, thanks, David. Can you maybe just touch on parties in, in the Energy Transition platform and, and if there are ongoing discussions about equity investments?
Look, I think, Richard, we've got a lot of options now. We've got one of the BESS partners in the world that's come on board. They're deeply committed to the sector, they're deeply committed to what we're doing. They wanna grow this together. We wanna look at turning this into a real business and a real platform with compounding future growth drivers and earnings. It's, it's exciting. We will look to explore together, introducing capital in the future. We'll that could be on an asset-by-asset basis, that could be at a portfolio level. We've got a number of options there. We've already had some inbounds wanting to co-invest to sell down our own equity piece further, if we so choose, release further capital in regard to that business.
It's a pretty exciting future, and we just need to keep our head down and execute, and we'll. Hopefully, you'll see that coming through in years to come.
Thanks, David.
Not very distant future, Richard, I hope.
Yep. Cheers.
Thank you. [Gerald] with Jefferies, please go ahead.
Hi there. Thanks for taking my question. Maybe just one for Will. I was just interested to know on the gross operating cash flow, Will, just, the trend there that we see from AUD 116 down to AUD 93. I'm just interested to know, you know, what the core driver of that reduction is, given that we've seen a 34% increase in the management fees?
Yeah. Sorry, can you just repeat those numbers again ?
The consolidated cash flows, the reduction in the receipts from customers and tenants from AUD 116- AUD 93. I was just wondering what the driver is on that, and just sort of trying to reconcile that with a 34% increase in the management fees, that's all.
Yeah, I mean, that's just simply a, a timing of, of a buildup of working capital. I mean, we've been upfront that we have been providing some support to some of the management funds...
Yeah
namely HCW and UHF, where we've been accruing but deferring the payment of management fees. I mean, that, that's the primary movement there. It's not necessarily a link to booked income, it's just a working capital timing.
Yeah, no, it's very clear. just one other, one other question. Are you able to provide, like, say, a pro forma in terms of where you think the debt will sit post the KKR transaction actually completing? I know that there's some, still some moving parts around in that, but, like, what, what should we be looking at?
Balance sheet investment in ET today is AUD 305 million. We've said that will go down to AUD 180 million upon completion. The difference there being AUD 125 million, will be the cash proceeds that come back.
Right
are all used to pay debt. AUD 355 applied to, to debt, so approximately AUD 230.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Di Pilla for closing remarks.
I just wanna thank everyone for joining the call today. We look forward to seeing you all, over the coming days and weeks. Thank you.