Few minutes this morning running through the results, detail released to the ASX. Following this, the audience will have the opportunity to ask questions, and there will be a choice of two options. First, research analysts can either raise their hand via Zoom should they wish to ask a verbal question of the management team, or you can also submit a written question via the Q&A function at the bottom of your team screen. We will endeavor to get to the majority of questions asked, in some cases, combining submitted questions on the same or similar topic. For analysts asking verbal questions, we would kindly ask that you please limit yourself to no more than two or three questions on today's live session. Thank you, and over to you, JD.
Thank you very much, Sam. Thank you very much for everyone who is joining us this morning. I appreciate it is always a busy time of year, so we will get straight into the story of LGI. Just very quickly starting off with who is LGI? This is always an important recap because our business model has been very positively serving us for a number of years now. Since our founding in 2009, LGI has been not only profitable each year, but also cash flow positive. We have been able to achieve this by having three key distinct earnings across the business. From renewable electricity, carbon abatement, and also through our contract and our O&M services. The business model is pretty unique in our sector because it is end-to-end.
We offer landfill owners and waste service providers a full model, from installing infrastructure in their landfill, being the pipework to recover the gas, through to the LGI team designing, building, operating flaring systems and power stations, right out through into the commodities that we create, being electricity and the carbon abatement credits that we can also create and trade to monetize and achieve really good commercial outcomes. What is also quite unique across the business is that we do have a distributed business model in that we have got sites up and down the East Coast. That gives us the ability to have geographic diversity from weather events or matters that may be happening within the energy market, but it also allows our team to be quite flexible and nimble as to which sites we go to across our portfolio to achieve even greater environmental and commercial outcomes.
With that, we will get into the story of what we have achieved over FY 2026. With the particular focus at the moment on our operational highlights, the team has done an absolutely amazing job to recover a record amount of biogas across our portfolio, and that has actually resulted in a 33% increase in the total quantum across FY 2026 compared to FY 2025. With an increase in our biogas recovery, that has allowed us to create even more Australian Carbon Credit Units or ACCUs, and that has got to a level of over 584,000 units across the year, which was an 18% increase compared to the year prior.
With more biogas, that has also allowed us to create more renewable electricity, so our overall megawatt-hour creation across this period has increased by 29%, and the team has done this with an amazing generator availability of 97%, which is just stellar results.
Now, without doubt the group was able to push hard through the year to increase the ACCU creation because we were very successful in winning a number of sites across the full 12-month period and the year prior. We have done this in a way where we have ultimately flexed our business model. We were observing some challenges in the electricity markets and the pricing we were seeing in the wholesale electricity space. Our business model allows us to then lean into or pull levers on our ACCU creation side, which has then increased the total number of ACCUs across the year up to a record level, and that has helped to mitigate or offset some of the price softening that we saw from the electricity space. Really quite a unique feature we have in our business, which allows us to exercise these levers.
But also the operating leverage of our business model was quite visible in that we have commissioned these new sites, we have brought on new assets, and it has all fit within the existing cost base of the company as well. Lastly, just on the operational excellence, the project in Canberra was recognized by the IPWEA. It is an Australian engineering group. It was recognized for its engineering excellence, in particular within the category of environment and sustainability. But that is just credit to the team in which we are designing and building and commissioning such high-class assets in our field. I touched on already some of the contract wins, but just to recap this, we secured three new long-term landfill gas rights over the 12-month period. Two of those were announced in the first half, and another one we secured in the second half of FY 2026.
We were also successful in renegotiating some of the contract terms with the Belrose site that enabled LGI to register the project for the creation of ACCUs, and that registration process went through late in the second half of FY 2026, along with the registration of our BINGO Eastern Creek site, putting it in a position where it can also be eligible to create ACCUs. Across that period of the year, the team has done a stellar job of building new flares, installing new landfill gas collection systems across six sites, and collectively, when you bring all this together, that is how our team has been able to really flex up the total creation of more ACCUs.
Just to recap that eight additional carbon abatement sites have now been added into our portfolio, and they will continue to add volume into the forward years as well. The team has been working very hard on the Canberra project, which is advancing through its final stages of commissioning. That is later than what we had forecast and later than what we had hoped, but they are working across every avenue that is possible to try and continue this advancement. But I am pleased to say that it is in the final stages as of today. Also, it is worth calling out on the financial performance that the price that we recovered or that we achieved from our electricity trading was actually at a 35% premium to the Australian Energy Market Operator average.
When you combine the Queensland and the New South Wales average Australian Energy Market Operator prices over a 12-month period, LGI achieved a 35% premium above that pricing as a function of how we hedge, how we trade our commodities operationally, and also how we use DACs and our battery assets. The full collective of these results, though, from the operational performance, from the contract wins, bringing online new sites, has resulted in an increase in our EBITDA by 26% compared to the prior year. That has allowed us to land squarely within our guidance range, which we put out into the market 12 months ago. We are really quite pleased with that result. We have also increased our EBITDA margin. It is now sitting at 55%. The team has done this because they have been very disciplined with their cost control through the year.
There has been a range of costs which have increased, from inflation, from matters happening through to the Middle East, but the team has done an amazing job to navigate some of these cost changes to our materials, and still allowed us to get this increase in the EBITDA margin. The NPAT has also increased. It is up 35% compared to the prior period. While we have achieved all these amazing financial results, the operating cash flow has come down, and Dean Wilkinson will talk to that in more detail further through the presentation. It ultimately puts the business in a position where the board has approved a fully franked dividend payment of AUD 0.0135 per share. Overall, an amazing set of numbers from the team for the financial year.
Again, it just shows the rigidity that we have and the agility in our business model, that when markets may be changing or there may be dynamics into the markets that we operate, we do have the ability to be quite agile and to pivot between two key areas, being our carbon abatement and our energy segment. I will bring you through now just, again, recapping a picture around our financial performance over the last few years. Ultimately, across all measures, it is a great story, right? Everything is moving in the right direction, albeit the operating cash Dean Wilkinson will talk to in a moment. But ultimately, we are really quite pleased with this. In particular, again, the increase to our EBITDA margin is just quite telling of the team's amazing job at being very mindful around cost control as the business is growing.
Looking across our current operating portfolio, we now have 37 operating sites across the LGI portfolio. This is an increase of three sites when we last reported back in February. We have maintained our nine power stations, and we now have 25 carbon abatement sites. As I said earlier, that is quite a nice, healthy increase, particularly what the team achieved in the second half of the financial year by plugging in those six new flaring sites and adding in those two additional sites through recontracting. But this does also help to demonstrate that we have this ability to evolve our contracting arrangements over time.
While a site may start off as a flare, we always look to see what other ways we can create value from the biogas and from that facility, or even where a site has started off, as Belrose did, as a standalone battery contracting arrangement, we were able to work with the landfill owner to explore other value that we could extract from that facility as well. This particular chart here, I like to just ensure there's a proper understanding of the challenges that sometimes can come up in the wholesale electricity market or with the price of ACCUs over the last few years. The chart on the left is showing you how across the years since FY 2022, LGI has continued to grow our overall earnings, our EBITDA.
While we've seen the ACCU price trade largely horizontally across time, there's been a minor increase over the FY 2026 period, that's largely been a sidewards trade. But if you look at the teal color or the wholesale electricity price, you can see how on average that price has been tracking down since FY 2022, and yet LGI's earnings have obviously continued to build year on year. We're really pleased, sorry, with the prices that we've been able to realize from our electricity LGCs and ACCUs. So you'll see across the 12-month period to June, the effective electricity price that LGI captured was AUD 97, and that again, was a 35% premium to the average price in the market. Cathy will talk more through our hedging strategy later in the presentation. The LGC price that we were able to capture was AUD 38.
This was substantially higher than the spot price or the averages across that year, again, through our hedging strategy. The ACCU price that we captured was AUD 38, and that's exactly in line with our strategic long-term arrangements that we have around balancing ACCU offtakes. With that, I'll hand over to Dean to talk through the financials.
Thank you, Jarryd. First of all, I'll start off looking at our revenue. So we have our revenue increasing across all our major streams of business, and as Jarryd pointed out, we have the three main streams, and so we've seen the electricity segment increase, ACCUs increase and LGCs increase. So that's been a great result for the year. I'll talk a little bit more about the infrastructure and construction side in a minute, but yes, it's had a minor decrease. There has, with the softening of that electricity price, been a bit of a skew towards the environmental certificates year on year in terms of percentage of revenue within our portfolio, and you can see that in the charts on the right. There's a couple of reasons for that.
One was the softening of the electricity price, but the other reason for that is there was this increase in number of sites that we are actually obtaining ACCUs from. As Jarryd pointed out, there are eight new sites that we are actually receiving ACCUs on. Looking at profitability, the size of that revenue increase was 17%, and the size of the EBITDA increase is actually 26%. The reason for the differential is the cost control. As Jarryd pointed out, we are very much focused on cost control. We did see some costs go up in our cost of goods sold for the year, particularly with oil. We saw oil early on in the Middle East conflict. We saw oil prices elevate up to 22% higher than what we had previously seen.
We have managed those sort of cost increases within the portfolio for the whole year to actually increase our EBITDA by 26%, which was a great result. Depreciation has also increased. We have been adding assets into our portfolio. The particular asset that has actually made a step increase in that depreciation is actually the Eastern Creek site. It was commissioned very late in FY 2025, and we have seen a full year's worth of depreciation come into that. With the equity raise that we did in October, we were able to pay down our full debt facility, and so from November onwards, there was very little interest payable on that debt facility. You can see that that improvement in our interest expense has resulted in a lowering of that cost by over 40%, which is fabulous.
That, combined with the improved EBITDA, then drops into our NPAT and our profit after tax, fabulous result with the increase of 35%, so we are really pleased about that. That then drops down into earnings per share. Earnings per share has also seen a healthy increase in the year. All in all, a great set of numbers from our P&L. Moving through each of the individual segments. The generation segment, talked about the sort of softening of prices, and so yes, we have seen that. However, the growth in the revenue there was as a result of picking up the electricity price higher than the average. Jarryd has already talked about the fact that we actually had higher electricity price than the average.
Part of the reason for that is we actually have what I am sort of saying is price certainty over a certain part of the book. Price certainty is about our hedge position. It is about the batteries that support our generation. It is about both those physical and financial hedges. As a result of having both of those in place, we managed to have an average price certainty of approximately 80% of our generation across FY 2026. That price certainty was at a much higher price than we saw the average prices play out across the 12 months. A great result from our electricity segment on the face of some softening electricity prices. With the ACCU segment, again, great results there. We have actually had quite a step change in our ACCU position. Lots of new sites coming on, as discussed, and a subtle increase in pricing.
As we're moving through time, you can see that electricity curve, sorry, the ACCU price curve just moving up slightly. We've been able to take advantage of that with both spot trades and forward trades. As a result, we're just slightly ahead of the curve in terms of our price realization, which is fabulous. I talk about there on this slide the fact that we're 100% covered in terms of our contract position. The reason for that is all of the ACCUs that were produced during the year were all subject to either contracts that were sold within this 12 months or in the next 12 months. So effectively, there's basically a fixed price for every one of the ACCUs produced during FY 2026, which is great coverage. What we're seeing with the infrastructure and construction side, and that particular segment, still good results.
We still got over AUD 2 million in terms of revenue, so we're still pleased with that as a result. Reason we're down a little bit is there was the focus on plugging in those eight new sites. When we're focused on our own sites, doing the work on our own sites, there's probably less capacity to actually do work for other landfill owners. As a result, there's a little bit of a reduction in the revenue there, but that's fine because we were actually focused on those sites and making sure we're pushing through the higher ACCUs into the future. The balance sheet's in a very strong position. With the equity raise back in October last year, we were able to pay down our complete debt position, and then we had surplus cash on top of that, which has actually gone into our cash position.
You can see quite a healthy cash balance. With that very healthy cash balance, there's still a little bit of that on term deposit, and the rest of that's available to be invested into projects into the future. So very healthy position there. You'll see that there's actually quite the buildup of value in our ACCU and LGC book, so the increase from AUD 12 million to AUD 20 million in terms of a 12-month movement. So that AUD 20 million of ACCUs on the book, I'll talk about that in a minute in terms of cash conversion, but those are easily converted into cash in terms of the market for the ACCUs. So we're very comfortable with that as a position in the six months. The debt position's already been paid down to zero, so you can see that that debt position's at zero.
Very healthy balance sheet, ready for a wave of investment into projects in the future.
Debt facility?
Sorry?
Debt facility.
Oh, thank you, Jarryd. The debt facility. The debt facility. What we've done in the 12 months is we've signed a new debt facility with our lender. That's a debt facility that takes our total facility limit from AUD 49 million to AUD 82 million. It's actually a 66% increase in our total debt facility. That debt facility puts us in a great position to actually build out the CapEx program that we've got into the future. The additional feature we built into that facility was the ability to actually increase, in addition to the AUD 82 million, we can increase another AUD 20 million, called an accordion facility. We're able to flex up that facility all the way up to AUD 100 million. That's available to the business if and when it's needed in the future.
With the cash flow, the item on the cash flow to have a look at here is the cash conversion. The cash conversion is a little softer than it was last year. A couple of reasons for that. One is we've actually been building up that cash position on our balance sheet and building up the ACCU position on the balance sheet. Those ACCUs are readily and easily converted into cash. From our perspective, that's a very comfortable position to be in, and a position where we can, as needed, and when we need to move into the future and convert them into cash. We have actually had a few ACCU transactions settle in July and August, so some of that cash has actually started to come back into the balance sheet already.
In terms of the CapEx spend for the last 12 months, you can see a fairly sizable increase in CapEx spend. Sustaining capital is about the same as it was last year. There was quite the increase in our field work expenditure. That field work expenditure really went into build-out of flares, installation of pipework, to build out those eight new sites. So those eight new sites, every one of them needed a new flare, and so there was a fair bit of CapEx that went into doing that. Then we've had quite the spend on our project capital expenditure, and the project capital expenditure was finishing off and completing the Mugga Lane Canberra facility, and it's also started to invest into the Belrose facility. We've actually put some batteries on order and we've had to pay deposits for those.
Quite a lot of expenditure going into those projects as well. With that, I'll hand back to Jarryd.
Thank you very much, Dean. Talking through in detail some of the core operational outcomes, and we always talk about chasing biogas. Well, again, this is another year that just demonstrates how well the team has done to not only chase the biogas and increase it, but to balance this mixture of biogas coming from the existing parts of our portfolio, while bringing in brand new sites that will help contribute to increasing biogas and increasing ACCUs into the future. But essentially, across a period of time between FY 2022 and FY 2026, we've achieved a 14% CAGR, across our biogas increase. So we're really quite pleased with that result there. Again, the team's done an amazing effort because it's not as though these sites are all just collectively close together.
They are all up and down the Australian East Coast, so there's an amazing job of planning logistics and moving from site to site to keep this work schedule on target. Again, with the available biogas going up and with these very strong generator availability results at 97%, we've been able to increase the overall gigawatt hours or the quantum of electricity that we've produced. So that there was a 29% increase of our electricity generation when we compare that to the year prior. A big part of that was having a full year run rate of Eastern Creek in our portfolio, and also having the 6 MW at Mugga Lane, largely running across the year at a very high level of utilization as well. So really nice contribution from those two key sites.
Ultimately having DACS as part of our planning system around how we optimize outages and the balancing act between planned maintenance and unplanned maintenance. DACS is really helping the team stay on top of getting the highest valued outcomes from these sites. I have talked through the increase in the ACCU creation for the year. Again, very pleased with an 18% increase. When you look across a longer period of time since our listing year of FY 2022, it is a 10% CAGR in ACCU creation.
Now, all those new sites that we have brought online that both myself and Dean have talked to, is fantastic because we have these long-term biogas rights across a range of sites that we should continue to yield more biogas and more ACCUs, and that is just fantastic because we obviously use the ACCUs as part of our sources of funding for our capital build-out program as well. It is great to have more sites come into the portfolio there. Then looking at it from a more projects lens, I have touched on already how we had six new flaring sites that have commenced across our portfolio across the 12-month period.
You will see that on the two sections from the far left to the center, that is the six sites between Warwick and Jandowae in Queensland, Lithgow, Taree, Tuncurry, New South Wales, and also more recently adding in a site up in Mackay. Dean touched on the fact that across all those projects there, it required the building of new flares. I believe it was actually eight flares that the team have constructed and commissioned in the past 12-month period, which in itself is another record for LGI to have that many flaring units go through fabrication, delivery to site, commissioning.
Again, it all just comes together so nicely because this slide here just shows you the full result from our business development team bringing in opportunities to the business, through to how we commercially negotiate those deals and then navigate the changes with the ACCU change in methodology, to bring on new sites and do this in such a way where it actually resulted in such a lift up of ACCUs in the second half. The other really exciting piece is the changes to some of those contracts that we already had in our portfolio, both Belrose and Eastern Creek, being that we have been able to register those sites to produce ACCUs. That commenced late in the financial year, and they will continue to contribute into our book in the forward years as well.
But really exciting having such an increase in the number of sites from an ACCU perspective. Focusing a little bit more on our larger CapEx projects, our strategic projects that build out the megawatts. I touched on how the Canberra batteries are fully installed. They've been there ready to go, and we're working through the final commissioning for that project. It is our largest project to date, and it certainly has been one that both our team has learnt a lot from, but also the network authority, and even Australian Energy Market Operator as well. That's allowed us to consider some of those lessons into how we plan and execute the other projects that we've got across the portfolio. We very much hope to see the Canberra batteries contributing to our earnings soon now that we're into the new financial year as well.
But once online, that increase in our megawatt operating capacity is quite a step-up. It's actually a 55% increase, taking us up to 33 MW of our operating capacity, and it's a key stepping stone in our bridge towards the goal of having a portfolio of more than 80 MW of operating capacity. The next key project in the mixture is our Belrose standalone battery project. When we announced this a year ago, we were pretty chuffed to talk about the prospect of LGI developing batteries not just on landfill sites, but also at strategic locations across the Australian energy market. What was unique about Belrose was the fact that the site had previously had landfill gas generation assets there for some years. That operator had decided to leave the facility, in which it left the poles and wires coming all the way into the landfill.
This was the perfect opportunity for WAMC, the landfill owner, to tender the site out. LGI has achieved exclusivity over the site. We have a lease in place with WAMC, and we're well advanced now with our construction of that battery asset. All going well, we should have the primary equipment, so the batteries, the transformers, the switch gear, all delivered to site by Christmas, and the team will be working to have the battery asset being commissioned early into the second half of FY 2027. That project there provides another key stepping stone because it's another 12 MW, 24 MWh of capacity coming into our portfolio, and that's quite a sizable step up. Then I'll just talk in some detail around our Toowoomba project as well. Toowoomba has been a site that we've had in our portfolio for some years.
We commissioned the first megawatt back in FY 2022, and as the site has continued to grow, receiving new rubbish every year, we've expanded the gas collection system, which has resulted in more biogas that we've been able to recover, to the point now where we're quite comfortable to add an extra megawatt of generating capacity. That's a really cool example of how we have this value that we can continue to capture from existing contracts. We're able to do this with relatively quick speed because the site's already constructed, the connection assets are already there and allow for that capacity. So the team's actually now in the process of just arranging for a generator to be transported to site, and they should be able to have that facility expanded into the second half of this financial year as well.
Now, across our broader strategic portfolio of projects, we have obviously our Nowra project, and we have a couple of standalone battery projects. These are advancing through both development approval, the connection process, and ultimately, this then feeds into our last internal step of obtaining final investment approval from our board. As we advance further through those steps on these projects, we will have clarity on project time frames, but we do see a pathway where those projects can contribute into the following financial year. With that, I will hand it over to Cathy to talk you through how we have gone with the electricity trading for the last financial year.
Sure. Thanks, Jarryd. These graphs really show that in the last little while, we have had a very balanced electricity market. I guess that has been driven by really high availability of the coal and the wind-fired power over the last year, as well as just a mild summer and winter, which has sort of led to softer demand and pricing. I guess if we look at the graphs on the left, we are still seeing a spread in both of those graphs in the last 12 months, which is important for, I guess, our business model to see that spread still coming through. That is quite positive. Moving to the right graph, the demand patterns, they are evolving.
We might not see the pronounced shape of the curve, but the curve is still there, and we can see that we are still seeing quite sufficient volatility there in the curve during the day, which allows us to really give us that opportunity to utilize our flexible assets, and that opportunity to build out our megawatts going forward.
Scroll.
Sorry.
That is all right.
This page really sets out our hedging strategy and our hedging results from that strategy. If we start with the left graph, just to walk through the graph. The dark green bars, they really show the Megawatt hour volumes that have been generated by LGI in the last three years. The light green bar shows the megawatt hours that were covered by a hedge or a PPA or batteries, as Dean mentioned before, that give that price certainty over those Megawatt hours that were generated. The blue dot really indicates, as Dean referred to before, that we had 78% of our generation for 2026 covered by that price certainty, which is a positive metric and something that we do aim to achieve.
If we move to the right graph, this is our actual pricing and how we've achieved compared to the actual spot price on the market. The light green bars really show the spread of the futures contract trades for each of the last three financial years. The blue dots are showing the prices that LGI has been able to achieve in that time period. The yellow dots are the Australian Energy Market Operator average spot price for each of those years. It's very pleasing to note that the blue dots, compared to the yellow dots over that time period, has seen an increase in our price compared to the spot price by 38%. Again, that's deliberate and part of our strategy, which is excellent to see. This slide is really a look forward into how we see the electricity market going forward, particularly just from market sources as well.
If we just walk through each of these graphs, the first one is indicating that coal is still the dominant source of generation, and it's still over half of all generation in the market. We move to number two. There are a number of the coal plants that are due to close in the next 10 years, particularly. That supply from the current sources is expected to come off on their current scheduling. Number three is a study that was done by the CSIRO, and it's really showing that the cost of developing long-term, large-scale generation plant is really significant, and that the developers of those projects are struggling to get large-scale generation to FID because of the cost of producing that plant, especially compared to the current electricity price.
Number four, we see that the actual consumption of electricity is increasing and is expected to increase going forward. Number five is actually the outlook for the volatility, that the volatility of the demand in the day is expected to keep increasing due to all of the factors above. We really see that LGI has a big opportunity, given all of those factors, to take advantage of our flexible asset base. Also our low cost of development. Compared to those large-scale generation plant in number three, our cost of developing new plant is significantly lower and quite at the bottom end of that scale, as well as our time to market. The large-scale generators will take six to eight years to develop a new plant, whereas we're fractions of that to get our plant up and running.
The positive outlook as far as we're concerned in terms of the dynamics that are expected to drive the market going forward.
Thank you very much, Cathy. Bringing all this together, how is it we see LGI on a forward-looking basis? Well, again, we're very positive about the two main components to our business model, which is we have a growing source of ACCUs that we will be producing into the forward years as we continue to extract more and more biogas from our existing contracted sites. And we're really excited about our progression towards building out a portfolio of greater than 80 MW of flexible capacity. When I wrap all this together, it is without doubt, it's the main focus of our team to continue to leverage the volume growth from the existing contract set to create more or capture more biogas, sorry, create more ACCUs, and also our megawatt hours.
We expect to see over the next three years the CAGR growth of our ACCU volume to increase at around 10%. This is all the while the team continues to be focused on building out the strategic pipeline of flexible assets beyond 80 MW. Exactly as Cathy described before, we're actually quite excited by the changes we're seeing and observing in the electricity market. LGI is very well-placed through that transitional period, and we're really excited about the years ahead. It's also worth just calling out that it will be Dean's last reporting with LGI as CFO. Certainly on behalf of the LGI team, I just want to say a very big thank you to working with Dean and having the pleasure of being a part of our team for the last nine, if not nearly 10 years. Thanks very much, Dean, but-
Thanks, Jarryd.
He'll be with us through our investor reporting roadshow over the next couple of weeks before he'll be in retirement, enjoying retirement life.
Terrific. Thank you very much, Jarryd . It's been absolutely fabulous, Jarryd. I've loved the last nine years. It's been a real thrill to watch the growth of this business. It's been absolutely great.
Excellent. Thank you very much, Sam. We're happy to go to Q&A.
Thanks, Jarryd and team. As a reminder, you may ask questions via the Q&A function at the bottom of your screen. Equally, covering research analysts can raise their hand, and I'll endeavor to get to you shortly. There are a couple of pre-submitted questions on electricity pricing outcomes. The first, you've included some helpful material on the market dynamics, while you've also talked about some of the performance of operating metrics as well as the realized electricity price of 35% above the average Australian Energy Market Operator price. Can you remind us exactly how you're able to achieve this, and how confident are you that it can continue into future years?
Do you want to take that one, Cathy, or Dean?
Sure.
Yeah.
Yeah. The real drivers of being able to achieve a higher electricity price, it does come down to the hedge portfolio for one, as well as the batteries. They are the key. The batteries really use that volatility within the day to achieve that higher pricing as well. Between those two portfolio tools that we have, we do manage them very actively and that is how we are able to achieve those higher prices.
Yeah, and just as a follow-up. With the low wholesale electricity prices, does this change any of your longer term plans or strategy?
No, it does not, Sam. Again, what we observe when we look through the copious amounts of information that is in the market and that is provided by various research groups and even Australian Energy Market Operator themselves, our observation would be that there is a huge opportunity for LGI. That is why we are still pressing on with our strategy. In fact, what has been observed in the last 12 months would not be reflective of how we see the longer term when it comes to average pricing and demand patterns.
Thank you. In a recent news publication, you described Belrose as the missing middle between household batteries and large-scale grid projects, suggesting there's significant opportunity for similar projects to be a bigger part of your business going forward. How large is that addressable opportunity, and what's the gating factor to moving faster on it? Is it capital, grid connections, or securing a site partner like WAMC?
Yeah, that's a really good question. Thank you, Sam. When we first looked at the opportunity of Belrose and we explored this internally, we came up with this term, the missing middle, because there is a lot of activity at a household level when it came to rooftop solar, and more recently, the household battery program being supported by the federal government. That's driven a lot of changes in household demand, and also household consumption in our electricity. But equally at the larger end of the scale with big projects and big battery projects, there's also been a lot of news and media attention there. Hence why we came up with this terminology, the missing middle.
Because realistically, the electricity network already has quite a lot of available capacity, especially in the distribution network, and that's where a lot of our existing sites are today, and we're looking actively for other opportunities to acquire or lease land, which is close to substations and power lines in the distribution network so that we can enter onto the network where there is this existing capacity. For LGI, we put out that strategy last year when we did the equity raise. That's how we see a pathway to go beyond 56 MW to beyond 80 MW, and a component of that will be a fleet of standalone batteries that LGI is looking to deploy. And Belrose is the first one of those that we're adding into our portfolio.
But we see the mixture of our portfolio being approximately 30 MW of landfill gas generation and 50 or so megawatts worth of batteries in that 80 MW pool of our capacity. So we see a great opportunity to keep growing the business and keep leveraging our understanding of the energy market to create these improving financial outcomes for the company as well.
Thank you. Next question comes live from Jared Gelsomino at Morgans. Jared, please unmute your line and go ahead. Jared, are you able to unmute your line? Apologies there. He did have a couple of submitted questions. Can you please break out the drivers behind the 10% ACCU volume growth target? How much of this is organic, like for like, new sites yet to be won and upgraded sites, i.e. BINGO?
Do you want to talk to the numbers or?
Yep.
Yep.
I can gather that off. Absolutely, there's a portion of biogas growth built into that, and that biogas growth will lead to additional ACCUs off the back of that biogas growth, and we typically see our biogas growth on our existing sites. We like to think we can achieve 5% or more every single year. Yes, the existing portfolio is absolutely built into that 10% CAGR moving forward. Yes, the BINGO site will contribute into the 10%. We are still working through the very early stages with that site. It's only actually been registered for a couple of months now. So we're working through the early stages of how that will contribute into the 10%. Certainly, an element has been built in. Can't give you exact numbers on that. We don't necessarily build into our future any new wins.
Effectively what you're seeing in that 10% CAGR growth is our existing portfolio moving forward with the BINGO and with Belrose as well. So Belrose is going to contribute to that growth as well. So it is built up basically with our existing portfolio, I'd say.
Thank you. Next question is from Ritesh Varma at Bell Potter. Ritesh, please unmute your line and go ahead.
Hi, team. Can you hear me?
Yeah.
Go ahead, Ritesh.
Yeah. What a really resilient result. First up, with the ACCU scheme methodology change in November last year, you now expect just a modest increase in ACCU creation FY 2027, but your outlook statement points to CAGR of around 10% over the next three years. Do we assume FY 2028 and 2029 will do the bulk of the heavy lifting here?
That's correct, Ritesh. The sites that the team have been able to secure as new contracts and bring online in the second half of 2026, they'll contribute through 2027, but you'll certainly see, again, as we do further upgrades to sites, further expansions to the gas collection systems, you'll see that volume come through later in 2027 and into 2028. But it's put us in this position where the overall contract portfolio that we have has got a healthy volume. As Dean said, we don't typically guide or break out individual sites as to how we expect those to perform. But across the whole portfolio, we're quite comfortable to say we expect a 10% CAGR in those forward years.
Great. Thank you. I've just got one more. Are you able to run us through your electricity hedge position for 2027 and maybe your LGC position, pricing position?
We wouldn't typically give a full breakout of prices, but certainly from a structural aim around having 80% of our volume, that has certainly been the structure we've put in place.
Definitely. I guess going into 2027, Queensland, we do have fully hedged at those levels that we've looked at before. New South Wales, we're hedged for the first quarter, and then as the batteries come on board, they kick in and take over to provide that natural hedge in the New South Wales A.C.T. region.
Right. Thank you. And LGC?
The LGCs will be benefiting partially in the starting point of FY 2027 from our trailing hedge program that we had. You will then see across the full year of 2027, the realized price will start to sort of normalize back closer to the spot market that we have had. There will be a partial benefit of our hedge program start of FY 2027.
Yeah.
But certainly into the second half of 2027, it will start to normalize back towards spot.
No problem. Thanks for that. I will pass it on.
Thanks, Ritesh.
Thanks, Ritesh. Next question comes from Tim Elder at Ord. Tim, please unmute your line and go ahead.
Yeah. Thanks, Jarryd, Dean, and Cathy, for taking my question. Just on the strategic M&A piece, I would be interested to understand what kind of assets you would be looking at. Is it like wind and solar farm development projects, or are there competitor landfills that you will be looking at?
Thanks, Tim. It is a really good question. While certainly LGI is probably best known for contracting with landfill owners and working with biogas, across these years, we have really formed a pretty deep understanding of the energy market, the Australian electricity market as a whole. In fact, we have historically developed large scale solar projects that we have then decided to sell off to other developers. We have even got as far as obtaining all the necessary approvals to develop some smaller solar projects on landfills. The reason why we have done this is that we do have our own internal view, is that the consumption of electricity will change through time.
And we believe that while there has been this lull in the daytime pricing of electricity, that that will likely change into the forward years, where the daytime energy will actually be worth something higher than what it is today. So with that in mind, we are attracted to looking at other sources of renewable generation, particularly solar, because it is very low cost to either install or if you acquire an existing solar asset, it's relatively low cost to operate. It's actually very simple from how it operates as well. It's pretty low risk. But it could potentially come into our portfolio and complement the overall electricity that we generate while we then have these tools from the hedges that we've got from a financial perspective through to the batteries as an asset as well. So we do have an attraction to assets like solar. Less so wind.
It's quite complicated and heavy CapEx. But certainly solar and how we may be able to firm solar to again be well-positioned while the dynamics in the energy market play out over the coming years.
Thanks. That's useful. And then just on the Toowoomba expansion, just interested to understand some of the trade-offs you've looked at between expanding the generation versus installing the battery.
Yeah, sure. So all part of the assessment we work through, Tim. It's as simple as we have a finite amount of capital available, how can we deploy it and put it to best use? When we have a site like Toowoomba where the biogas itself has been increasing. That would lead us to then be in a position where we have more fuel available, so we naturally look to add more generation because it would allow us to create more ACCUs, more Megawatt hours. And yes, initially, we were looking at the prospect of putting a battery on the site as well, but at this point in time, the connection upgrades were prohibitive to add a battery also, whereas the connection upgrades to add one more MW of generation incrementally was quite low.
The choice was made to proceed with that project because it would come online with relative speed. It is something that we can do within this financial year. If we were wedded to putting a battery on all of our sites, cost is one component to manage, but it also just adds complexity with the battery from a lead time perspective. We will look to advance our standalone battery projects that we have nominated in Queensland, and they can happen in parallel or concurrently while the team is looking at the work out at Toowoomba. We do not necessarily have to land the battery assets at our sources of where we generate. That is the beauty of the energy market.
We can deploy these assets across various locations in Queensland, and it will probably work out at a lower cost to put a battery closer to the network where the land cost is either minimal or free even. We are really excited about the idea of being able to upgrade Toowoomba because it just shows, again, the flexibility we have in the existing contracts to grow value from those as well.
Finally on the carbon abatement contracts, have they all rolled off?
The CACs, I believe we have one final tranche of delivery.
Yep.
But we've largely repositioned the volume so that we're well-placed to expose that to the spot price or to engage in longer term off takes at current spot prices or greater.
Yep. Great. Thank you.
Thank you, Tim. Next question. With regards to forward electricity hedging, are you currently 80% forward hedged at approximately the forward curve levels, or are you being more opportunistic this year given where prices are at?
Do you want to take that?
Yeah, I'll go over that one. Yes, we are approximately 80% hedged, particularly in Queensland for the full financial year. We're not planning to put any additional batteries in in Queensland, so yes, we're covering the bulk of Queensland with financial hedges. In New South Wales, because we are switching on the Mugga Lane battery and the Belrose battery within the current financial year, it makes sense for us to hedge the portion leading up to the commissioning of those batteries, which we have done. It's at existing current hedge levels, and then the financial hedge then tails away as we introduce the physical hedge of the batteries in New South Wales. Yes, from what I'm calling a price certainty perspective, yes, we are covered for the full financial year with either the financial or the physical hedge.
In terms of the financial hedges, I'm not going to actually say a specific price, but while we do enter into those hedges, in the leading 12 months, we actually have a leading 24 months to enter into those hedges. What we do is we are pretty active in the market, and as we see market movements, we sort of opportunistically take advantage of those market movements. We have a pretty good hedge price across the next 12 months, particularly in Queensland. Taking into account the fact that we didn't sort of do all those hedges right at the end of the last FY. We've been doing them through the year. We average in, so we've got a pretty good price, and we're comfortable with the price we've got.
I think just one extension of that point that Dean made is that, when you look or you observe the ASX future prices as of today, they are certainly not the prices that are part of our book per se of what we have got for FY 2027. It is this building in over a 12, 24-month period in advance. You actually see the effect of that with the chart on the right, given the spread of the light green color. That is a reflection of the war in Ukraine when it kicked off in FY 2022, and how that started to feed into the forward contract pricing in the energy market two years in advance.
As the years have gone on since, it has somewhat normalized closer to the 10-year average, but there is still a spread there because every time there is either a supply shock or there is a change in demand patterns, that immediately has an effect on those forward contract prices, and the team are very alive to those changes. That is the activeness in which they look at building the hedge program in future years as well. It is never just a static pickup of trading the forward curve at one point in time for all of our volume. It is done incrementally across the course of a year or two in advance.
Thank you. There were two follow-up questions. I think you have partially answered the one in relation to Mugga Lane. How does Mugga online for most of FY 2027 influence that hedge position going into the next 12 months? Secondly, can you also confirm the expected realized prices for LGCs in FY 2027 will come down to spot levels?
Do you want to talk to.
Oh, I will cover the LGC one. No. In terms of realized price, it will be higher than the current spot prices. The reason for that is we still actually have some legacy pricing from our previous contract position, so that is still persisting partially into this financial year. So there will be a slightly higher realized price on LGCs than what I am observing as the current spot price. That is the LGC position.
Yeah, on Mugga. I think as Dean and I mentioned before, we have financial hedged up for the first quarter or so, recognizing the fact that Mugga Lane is expected to come on anytime soon. Then that will take over as the physical hedge for the rest of the year.
Thank you, and sticking with major projects, any further news on likely timing of Mugga Lane commissioning? Secondly, is the reason for the slight delay to Nowra driven by network approval times as opposed to delays in build-out?
Thanks very much, Sam. The answer to both of those is yes, it's largely due to the complexity from the network side. Coming back to Mugga Lane, the batteries, the site, the equipment's all been built and ready for some months now. But realizing the challenge that not just LGI has, but the network operators, as they juggle with developers wanting to bring on capacity, whether it's generation, batteries, or data centers, they do have a very tight set of resources that are really quite resource-strapped right now, put simply. While we've been in a position for some months, the network authority themselves has been struggling to understand the ways in which to think about to assess our project. We've been working with them very constructively. We've been trying to bring in external resources to obviously bring our assets online.
Quite pleasingly though, all of our commissioning checks, all the tests that we can do from our side have all gone very well and gone to plan. We're simply now at a point now that we're waiting for the network authority to give the final clearance to AEMO, which would allow us to bring the batteries on. So, we're well advanced into this commissioning work, but it is just the reality of larger projects that have the interaction with AEMO are exposed to a lot more scrutiny and a lot more checks and balances. That lesson, or those lessons I should say, is what we've fed into our Belrose, our Nowra project time frames, and that's why we're changing our level of clarity of which we're guiding the market as to the timing when they're going to come online.
Belrose is actually a very simple project, with it being just batteries. It doesn't have the complexity of generation and batteries. The team have already submitted all of the application packs to AEMO for the Belrose battery project many, many, many months in advance to where we were with Mugga Lane, and that's why we're also quite comfortable with the overall project time frames. With Nowra, though, we are still working through with the network authority on the connection design, the nature of how we're proposing to operate the site, and that needs to be finalized in order for us to be comfortable with the overall project costs, but also as to how the information pack is structured and put together before you submit to AEMO. Any project that has the hybridization is a lot more complicated than just generation or just batteries.
But we still believe that these projects are in a very good position when you look at the challenges that the larger transmission-connected projects face. As Cathy touched on, not only from a cost base that those projects are at a much higher development cost per MW, but they typically have a six to eight-year development horizon, and we're very comfortable that our projects can be developed typically in a two to three-year window of time.
Thank you. You referenced your ability to flex ACCU creation volume. Can you just discuss this further, and is this something you can do constantly or something that you can just do this year?
Yeah, this is a really good question, Sam. For those that have followed us for a number of years, we sometimes describe landfills like a sponge, especially on a 24-hour period, where we could choose to extract more biogas during parts of the day and less biogas in other parts of the day, in order to really get more value from those sites commercially. To take the same analogy across the ACCU book for the full year, what we've been able to do really is both increase the gas recovery from existing sites and then therefore the ACCU creation, but also bring on all of these sites that we signed up as new contracts, really over late FY 2025, early FY 2026, and bring them all into our portfolio through the second half of the financial year so they add to our volume.
Now, the fact that we have an entire part of our business which goes out to sites to install new gas collection systems, we have a part of our business which designs and builds flares. This is what allows us to be in this position where we can redirect those resources to get the maximum or the best commercial outcomes, which is an overall increase in ACCUs. Had we not done that and had we not been able to pivot and be agile in that way, clearly we would have had some challenges in getting to our guidance numbers while we were observing the energy market be very benign and be very, very, very flat.
While we were alive to what was happening in the electricity market, we strategically decided some months ago to accelerate our rollout of these ACCU projects to ensure that that volume came in, it contributed, and it's done a fantastic job. Now, can you do that year on year? No, because there is still the reality of where a landfill is producing gas directly as a byproduct of the organic material that's in the landfill site. If you take Recover too much gas, you do put at risk that particular microbial balance, so we're very mindful of that. We can do it for periods of time, we can do it for a quarter or two across the year, but there needs to be a more balanced level of which you achieve of gas recovery to commodity or volume production on the output side.
Really happy with what the team did last year. It's put us in a strong position for FY 2027, and as I explained to Ritesh's question, we see that volume contributing late in 2027, but in particular into 2028 as well.
Thanks. With the high level of price certainty within generation, does that structure limit potential upside if wholesale electricity prices rise?
No, that's where the batteries come in.
That's the advantage of having the batteries as much a physical asset in our portfolio, but it really becomes its own financial contributor or financial tool as well. This was a key strategic item that we identified some years ago. That while we could continue to lean on the financial tools and the hedging and the derivatives to achieve improving financial outcomes, once you're contracted and locked into that, your position is effectively set. But a battery is actually a lot more nimble, and it's a lot more flexible in how we use that within our portfolio. We see the two working together. And while we don't have batteries coming into our portfolio in Queensland, that's why we're leaning more onto the financial tools to assist our portfolio there.
But as we bring on batteries in the New South Wales part of our portfolio, they will certainly be a very useful tool in how we achieve a premium price above the average.
Great, thank you. Any update on the search for the new chairman, please?
Yeah. I mean, we have been going through a fairly extensive search here for some months, and like we did with the CFO search process, we certainly made sure that we took our time to find a candidate that was aligned to the LGI values and certainly fitting for our forward years. We are pretty advanced with that search process, and we will certainly have an update for the market once we land on a candidate.
Okay, great. Thank you. Can you confirm the realized battery premium achieved at Bunya and how this has been influenced by increase in batteries coming online? Secondarily to that, when modeling the Mugga Lane, would you model a similar battery realized price premium? Has this premium changed in your mind versus when the project was green-lit?
There is a couple of questions within that there.
Yeah.
I do not know that we provided a carve-out for Bunya in this round, did we?
Not in this particular round.
It has been a lower price uplift recovery at Bunya than six months ago, before, and that is largely due to a lowering in the price spread in Queensland. We do not see that that would be consistent with how we look at and think about the New South Wales market. Queensland has certainly been very well-serviced by, as Cathy said before, there has been a lot more output from coal generators in Queensland. And so there has been a bit more of a flattening of price in the Queensland region. We are actually seeing the spread in New South Wales still remain. We have that up on the chart here, on the left bottom chart. And because there is more older coal plants in New South Wales, we expect to see the volatility in New South Wales become more prevalent as the market returns to more normal conditions.
I believe we've been guiding the market generally that we expect to see our projects achieve about a 50% uplift on the realized price when we put a battery into our portfolio. That should be more reflective of what we expect from the New South Wales battery assets.
Thank you. Just in relation to the batteries, what advantages do you think LGI has over some of the larger energy companies that would likely have a lower cost of debt in delivering batteries?
Look, LGI is looking at it from a range of reasons. We have generation assets in the market, and we have a growing desire to increase the generation assets in the market. But we also would like to have a level of price certainty or downside price protection of those generation assets. For LGI, batteries achieve that. What is then different to some of the larger companies in the market, say AGL Energy and Origin Energy, is they have a generation component to their business, but they also have a retail component of their business. And from a retailing perspective, you typically want to try and achieve, if not 100% price certainty on your exposed retail book, both from the household level and the business level.
Our observation of some of these large projects coming into the market, large battery projects, sorry, that are either developed by those energy gentailers or contracted by them, is that they don't typically operate within the wholesale electricity market. They seem to be more there as a financial insurance product for their retail division. And while there is a growing capacity of batteries coming in, and we're up to some 8 or 9 GW of battery capacity in the NEM, we typically only observe somewhere in the range of 3.5 GW to 4 GW of that capacity trading into the NEM within the spot market. And that's just an important point to understand, is that developers of batteries have different motivations. For LGI, it's to provide a level of price certainty for our generation fleet and provide the ability to have some upside price capture.
Whereas it would appear for some of the gentailers or other developers, they actually contract out that capacity over so many years, and the battery itself may not be very active within the wholesale spot market itself.
Great. Thank you. I think that's all the time we have for questions today. If there are any follow-ups, please feel free to send them through to myself or the team, and we'll endeavor to get back to you. Maybe with that, Jarryd, I'll just pass it back to you for some closing comments.
Thanks very much, Sam. Again, just to recap here, what an amazing result that the team's been able to achieve for the past 12 months, for the FY 2026 period. I couldn't thank them more enough for everything that we've actually talked you through from operational and financial outcomes, which are fantastic. Again, a big congratulations to Dean on his time with LGI and reaching retirement, and a warm welcome to Cathy in joining the team. We're really excited about how this positions LGI for FY 2027 and beyond. Thank you very much for your support and your time this morning.
Thank you very much for joining today's LGI full year 2026 results call. Enjoy the rest of your day. Thank you and goodbye.