[audio distortion] . I'm Jason Boyes, the Chief Executive of Infratil. Welcome to our presentation of our half-year results this year. I'm here with Andrew Carroll, our CFO, and Matt Ross, our Deputy CFO. There's a presentation that's been uploaded to the NZX and ASX, as usual, that we'll run through now, and as usual, there'll be time for questions. So let's kick into it. First of all, key developments in the half. Seven points here, looking back at the half. So first of all, pretty good operating performance across the portfolio that we're pleased with, despite a testing environment. Andrew will talk about that a bit more in a minute. Next, CDC, our biggest investment, saw and continues to see significant demand growth, advancing customer negotiations and driving continued investment into construction and securing power and new land for future projects.
The AirTrunk transaction, much reported on, underscored why the sector is so attractive as an investment. Third, 1NZ has performed well, in line with guidance, and made good project progress on its strategic priorities, underpinning our investment case there. Talk more about that later, too. Thirdly, in the kind of bigger assets in the portfolio, Long Road, its large growth program continued well, with construction on track and good progress on next year's projects. No doubt, though, uncertainty from the US election results and what that means for tariffs and green policies like the Inflation Reduction Act as a headwind until that uncertainty is resolved, and I'll talk more about that later. Next, in September, we announced the merger of Manawa Energy and Contact Energy at a significant premium to where Manawa Energy had traded for some time, with strong benefits for both companies and the sector.
We're waiting on Commerce Commission approval for that, which we hope and expect to be granted. Next, recently, we announced that our investment in Console Connect would not proceed, which was disappointing, actually, as we remain positive about global next-generation connectivity platforms like that one, and we will continue to investigate that space. And then finally, in the half, we completed an equity raise in June and are very grateful for the support we received for that. As a result, we have strong balance sheet flexibility to support our growth and continue our proud track record of shareholder value creation over the long term, which you can see on the right there. I'll hand you over to Andrew for the next ones.
Thanks, Jason, and good morning, everyone. Financial performance, quick summary here. We've got another good set of results and future opportunities to talk through today. We've delivered proportionate EBITDA of NZD 506 million for the half, and that is in line with expectations. On a like-for-like basis, operating EBITDA increased 7% on the comparable period in 2024. The largest contributors to that uplift have been CDC, 1NZ, and Wellington Airport, which we'll cover in more detail shortly. Proportionate development EBITDA was a loss of NZD 28 million. You'll remember that we split that out when we issued guidance at the full year to acknowledge the different dynamic that relates to this spend.
Proportionate CapEx increased by 50% on the PCP, up to NZD 1.2 billion, and we've also talked about that in the past in terms of its increasing importance in driving future shareholder value from within the portfolio, and increased development expenditure in the period is consistent with that trend. We move to dividends. We are declaring an unimputed interim dividend of NZD 7.25 per share, and that continues the recent trend of modest dividend growth through time. We continue to operate the DRP with a 2% discount, and the details are noted on this slide. Back to you, Jason.
Awesome. Thanks, Andrew. Sustainability, just to check in, is a very busy half year for us and our team there, with more disclosure enhancements from us and our portfolio companies and progress on their sustainability initiatives, as we've outlined there. You can see that progress in our first mandatory climate-related disclosures and our sustainability report, both of which are significant pieces of work. And our portfolio companies themselves continue to enhance their own disclosures, with a number releasing their own reports too. Key metrics like our GRESB scores and WACI, Weighted Average Carbon Intensity, improved, reflecting progress by the portfolio as well. Think of these as really good foundations for the work to come, continuing that progress in the portfolio and on achieving our SBTi targets that we've set at the Infratil level. So let's talk about the key portfolio companies and start with the big one, CDC.
So here you can see that EBITDA is on track, we feel, reflecting growth from the first Melbourne Data Centre, which went operational in the period, and other customer contracts coming online. As I mentioned earlier, we've seen strong growth in demand for CDC's Data Centres continue, which is giving us the confidence to continue to invest in our pipeline of land and access to power, which increased by over a gigawatt in the period. That's right, a gigawatt. That's alongside the 388 megawatts we're already constructing today, which continued to track well. That strong growth in demand was also the main reason for our equity raise in June, particularly rapidly advancing customer negotiations for over 400 megawatts of capacity that we mentioned then.
Since then, CDC has been working with those customers as their timing and technical requirements for those significant new workloads have been developed and continue to evolve. What we've seen over that period is that more capacity has shifted towards liquid cooling sooner than we had originally envisaged, involving a number of firsts for our customers that take time to land. Today, advanced negotiations for around 300 megawatts of capacity are largely complete, and we expect and are confident that we will sign most of these pre-Christmas. What does that look like to get that across the line? It means essentially daily contact between multiple levels of CDC and our customers to get these contracts across the line. We expect to progress a further 100 megawatts in the new year on the same basis.
We still expect that capacity to come online over the next four to five years, now a little less, obviously, as we announced in June. Moving along, just to the bottom of the slide, two other things to mention. Debt market support has remained strong, enabling CDC to raise the debt it needed to support its CapEx program. And CDC achieved the NVIDIA DGX Ready certification, reflecting the power and cooling advantages that we've talked about before that are inherent in its existing designs. If we look ahead, our guidance for CDC is maintained here, although we're tracking towards the lower end as some workloads have shifted into the first half of FY26. Our CapEx guidance has also moderated, as we've shown here, as we've continued to refine our program and our estimates and align that program with our customers' development requirements. So that is just timing, we think.
The buildings currently under construction are on track to be completed by the end of FY26, with 150 megawatts expected to begin operations in Q1 FY26. And we continue to expect to commence construction of 200 megawatts plus of new capacity over the next eight months, as we announced in June, including at Marsden Park. So everything on track there versus June. Zooming out a little bit, like as I said earlier, we continue to see strong broad-based demand for significant capacity over and above that 400 megawatts plus that I've just talked about. That's across multiple customers and sites. And we continue to believe that CDC is very well placed with its significant land and power pipeline and advantages in liquid cooling.
As a result, we expect to inject around NZD 450 million of equity into CDC in December, alongside our other partner shareholders who put in the same amount between them, to support our existing growth. We're also earmarking another NZD 250 million—that's our share—to inject over the next couple of years to support future growth as well. In summary, for us, very positive progress on our biggest investment. I'll hand you to Andrew.
Thanks, Jason. One New Zealand. Performance, financial performance is in line with expectations, and strategic priorities are on track. So we've noted there that EBITDA for the period is NZD 304 million, and that's a 9% increase on the prior period. In summary, the growth in EBITDA largely reflects the growth in wholesale and consumer mobile revenues, combined with a reduction in costs relative to the prior period.
That EBITDA margin equates to 32%, which is up on 30% on the full year FY24. While that reflects continued progress, it is somewhat inflated on a relative basis, as there were fewer lower-margin handset sales in the period, reflecting general economic conditions. If I touch on revenue trends in a bit more detail, overall revenues are down relative to the prior period, largely reflecting that reduction in low-margin handset sale revenues, which again talks to that subdued economic environment. Consumer mobile revenues are up around NZD 19 million on the prior comparable period, or 5.3%, with customer growth through strategic investments in stores and channel partners, the effectiveness of the rebrand, pricing increases from customers moving to high-value plans, as well as discount removal. Wholesale revenue has grown NZD 3.1 million year on year due to continued momentum in MVNO and roaming revenue growth.
There has been industry-wide commentary regarding the enterprise segment, so I will touch on it briefly. 1NZ has been less impacted than others, and we are seeing some stabilization despite pressure from competitors pricing aggressively to grow share. On to operating free cash flows. They were NZD 117 million for the half, up NZD 21 million on the comparable period. In terms of specific initiatives in the period, One Wallet, that was launched in April. That is our loyalty program, and it's playing multiple roles. One of the key roles is to facilitate simplification of product lineup, including with the removal of legacy discounts, which are repurposed into wallet balances to help fund the purchase of the next new phone. That simplification is an important input into the IT transformation project I'll touch on again shortly.
EonFibre went live in October, and as a reminder, that is our dedicated wholesale Barrenjoey business, and we have talked previously about the strategic drivers for this, including improving asset utilization and growing third-party revenues. Go Live is an important milestone, and we think there are some good market opportunities for this business. Starlink, this is a really interesting initiative as we look to significantly enhance mobile coverage in New Zealand. Testing is in train following FCC approval, and we expect to launch with a text-only service in FY25, with voice and data following. Moving on to One Outlook. There is no change in either of our EBITDA or CapEx guidance. FY25 EBITDA guidance remains at NZD 580 million-NZD 620 million, with second half EBITDA to be expected to be broadly flat, with similar revenue trends expected to play out. CapEx is well managed, supporting our top-rated network.
The disciplined rollout of 5G continues, and we note here that we will close our 2G and 3G networks in December next year. In terms of cash flow outcomes, we're expecting similar outcomes to FY24, but after absorbing a range of incremental strategic investment as well as increased interest costs. We note our ambition to continue to grow EBITDA margins to the mid-30s in the medium term, and there's a few ingredients that we've noted to that, including continued ARPA growth supported by annual price increases to realize appropriate returns on our network and service investment. The team is very focused on providing high-quality and differentiated offerings supported by rational pricing to deliver sustainable and appropriate long-term shareholder returns. Our IT transformation program is progressing well, and we expect that to progressively deliver operational efficiencies and better customer outcomes.
That work will drive higher levels of automation and efficiencies, as well as improved experience for our customers and agents. And as you'd expect, AI tools are being progressively deployed, and we are already seeing some early productivity benefits. Thanks, Jason. Back to you. Thanks, Andrew. Right, plenty to absorb there. Let's keep it coming. Long Road. Interesting times in the US, but first, let's look back at the half. EBITDA is actually down compared to the same half last year, but that's because two projects outperformed significantly in that period last year due to historic high prices. Across the portfolio, the projects themselves performed in line with expectations overall. As I mentioned, Long Road's strong growth program, outlined on the right-hand side of the slide here, continued well. Construction is on track with 600-odd MW completed and 1.1 GW currently under construction and expected to complete early in FY26.
Demand for new projects has continued to be actually very strong, particularly for new data centers and new manufacturing being built in the U.S., supporting demand and prices for new renewable power if we look ahead. So off the back of that, Long Road expects to close 700 megawatts of projects in FY25 and has signed revenue arrangements for another 1.1 gigawatts of projects expected to close in FY26, with negotiations ongoing for a further 200 megawatts of FY26 projects. That's two gigawatts in total over the two years. That's a big number, but you'll recall we've been targeting actually even more, 1.5 gigawatts per annum on average over this period. We've had a number of unexpected development delays across the portfolio in the last year or so, like our Hawaii projects, for example, being delayed while the power utility there deals with the aftermath of their fires.
And that just really reinforces the need for a deep pipeline and the value of the projects we've been able to acquire to supplement our pipeline at attractive returns. And although we're below our 1.5 gigawatt per annum target build rate, yield per megawatt has actually been higher through this period. So we're actually broadly on track with the run rate Opco EBITDA target we've been talked about in the past, which we've shown on the next slide, which I'll go to now. You could see that there on the right. And that brings us to the outlook. For this year, we've reduced our EBITDA guidance range modestly for the reasons outlined here at the top.
But the big news is really, of course, the U.S. election outcomes, with Trump and Republicans threatening to roll back the Inflation Reduction Act, which has supercharged the U.S. renewable energy sector recently by increasing tax credits for renewable energy projects. And they say to introduce tariffs, which would also affect steel and other imported elements of, among many things, renewable energy projects in the U.S. Now, most analysts, and there's a lot of ink being written on this, do not think the IRA will be rolled back completely or know how broad any tariffs may be. But it's fair to say that there will be increased uncertainty for the sector until it's clear what will happen. Looking at what this means for Long Road, we've had a go at this here, even though it's early days.
In general, we currently expect modest exposure for Long Road across those FY25 and FY26 projects I mentioned earlier, that two gigawatts, and we explain here why. Our FY25 projects and 500 megawatts of our FY26 projects are safe harbored already by commencing in construction, so tax credits should be unaffected. Long Road plans to move quickly to safe harbor the other 800 megawatts of that two gigawatts, the FY25-26 projects, early in the new year, ahead of any law changes. You'll hear about safe harboring a lot in relation to this industry over the next period, and you'll see the whole industry doing this, and it's essentially what used to happen every three years when the tax credits used to run out on that sort of a timeframe in the past, so it's a very familiar process.
That brings us to the tariffs, which could be more meaningful over that period. There is also potential exposure to that because you're importing steel, as I said before, and using a 15% tariff, flat tariff, as we've done here, we get to about 5% or 6% of the value of those FY26-25-26 projects being potentially affected, or a modest 1.5% of our current independent valuation, just to give you a sense of what we're talking about there. You'd expect beyond these two years that PPA prices, etc., will adjust to accommodate wherever the tariffs land. We'll continue to monitor all of this, but Long Road is very experienced in navigating these kinds of disruptions and finding opportunity from them.
As I said before, behind all this, the fundamentals for renewable energy in the U.S. remain extremely strong, with historic levels of growth and demand, and solar in particular being cheap and fast to deploy relative to alternatives. So we remain fundamentally positive, with good prospects for this and next year, that we continue to expect to support with the further equity we announced in July. It's fair to say, though, as I said, the uncertainty will remain elevated, and a cautious approach will be needed until the regime's new plans become clear. So hopefully that helps. We've got a lot of questions on that. Plenty to digest in those, but turning to some of the other key portfolio companies, we've called out two of the new businesses here as approaching key potentially transformational development decisions that could see them really scaling within the portfolio.
For Gurin Energy, that's its $2.5 billion project to deliver renewable energy into Singapore from Indonesia. Good progress on that project in the half, still tracking towards financial close towards the end of next year, and we're ramping our resources in the region, as in Fritilla Morrison, to support that. Meanwhile, the business has continued to make good progress on smaller projects across the region too at attractive returns, and then we also call out Kao Data here, which is actively chasing large hyperscale contracts with its high-performance compute sort of history and credentials ideal for these next-generation liquid-cooled and generative AI workloads, and it's continued to invest in its pipeline of land and access to power, so we think these are two to watch over the next year or so.
Turning to our diagnostic imaging businesses in New Zealand and Australia, both have grown well over the half, actually, and are on track to deliver around double-digit earnings growth this year. That's no mean feat given the cost and inflation pressures still facing the sector, but the teams have managed their costs, pricing, and productivity particularly well, with their investments in more complex PET CT scanning in particular growing strongly. In New Zealand, RHCNZ is working well with all of its funders, including the public sector, to address their needs. And in Australia, there's been M&A activity supporting our view of the attractiveness of that sector. And then last but not least in this section, the airport and Retire Australia.
Both have performed strongly, with price increases at both coming through in their results in the half, and both have active construction programs in place to drive future growth as well. At the airport, that's despite passenger volumes being down, and at Retire Australia, despite fewer new units to sell in the half, although village occupancy remains steady at high levels seen at the full year, and they remain on track to match the total sales seen last year. Both are going pretty well. With all the discussions in Wellington, it was interesting to see two recent airport transactions in Australia at levels well above our independent valuation for the airport and, I think, market consensus. So that's it on the portfolio companies. I want to hand back to you, Andrew, for a bit.
Thank you. Let's talk some more numbers. So we're narrowing our proportional operational EBITDA guidance at the top end, as noted on the slide, with the component parts set out below. You'll recall that we mathematically updated our guidance range partway through this period to reflect the change in Manawa's guidance. In narrowing this range, we've reflected on the following. CDC is trending toward the lower end of their range, as Jason spoke to earlier. Jason also spoke to the dynamics that are relevant to the Long Road and RHC modest revisions. Our view of corporate costs has increased by NZD 10 million-NZD 15 million, and that reflects expected increases in management fees post the equity raise and obviously the strong share price performance through this period. So that's a mathematical consequence of a good news story for shareholders.
Then the last piece of the puzzle is, while we haven't specifically provided guidance for Retire Australia, that business is performing strongly, as Jason has mentioned, and that outperformance relative to expectations is reflected in our overall guidance range. The development businesses are performing well, and development expenditure is being managed tightly, and we are reducing the size of that expected proportionate expenditure by NZD 15 million to produce a revised loss range of NZD 65-NZD 75 million. In aggregate, the sum of changes in proportional operational and development EBITDA guidance is broadly neutral in mathematical terms. If we keep going, CapEx, there's one change on this slide, and Jason has spoken to that. At the half-year, I've mentioned we've spent NZD 1.2 billion so far, and you'll see the revised guidance range here of NZD 2.4-NZD 2.8 billion. Last but not least, let's move to debt.
This slide provides an update on our debt facilities and liquidity position. There's obviously one key change, and that reflects the improved financial flexibility following the June equity raise. Finally, before I head back to Jason, I just wanted to quickly touch on a couple of elements of additional disclosure that we included in the half-year results, and that's building on the additional information we provided at the full year. You'll see in the appendices that we have included the returns track record for each of the individual businesses Infratil currently holds, and we will also be publishing some simplified renewables and data center valuation models to assist investors form their own valuation views of those elements of our portfolio. Back to you. Thanks, Jason.
Thanks, Andrew. Let me give some concluding remarks and we can go to questions. So overall, we feel pleasing operating performance across our key assets, actually across the portfolio broadly, with a positive outlook as the current investment program is on track to deliver meaningful earnings growth in the short to medium term. Confident of ongoing shareholder value creation with the strong portfolio of investment options that we have and supported by good recent comparable transactions. We and the board appreciate the strong support from shareholders at the June equity raise and the balance sheet flexibility that gives us to support these growth options. And we'll continue to scan for new opportunities across the current portfolio thematics and potential new ideas that matter, but with the normal discipline that you would expect from us.
There are key capital allocation decisions coming across the portfolio over the medium term for some of the businesses transformational, as I've talked about today. So why don't I stop there, and we can take some questions, Operator.
Thank you. If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Eric Choi with Barrenjoey. Please go ahead.
Oh, hey, good morning, guys. Thanks very much for the questions. Do you mind if I just ask a couple, maybe one by one? The first one just on CDC. It obviously looks like some projects have shifted from second half 2025 to first half 2026, but just wondering, has that previous 388 megawatts online by end of FY 2026 changed? And I don't think it has. So if it hasn't changed, I'm just wondering will EBITDA with that outlook remain unchanged as well? And if that's the case, does that imply the FY 2026 growth rate could even be a bit better than the 40% that you previously talked to? Sorry, that's a long-winded first question.
Yeah, I know. I understand the question. You cut out a little bit for me on the EBITDA guidance, but I think I caught it at the end. So on the 388, you're right, there has been some shifting around. There's actually some shift forwards in parts of that four to five-year kind of outlook we talked to in June, but we do still expect the 388 to complete in the same time period we've talked about before, so by the end of FY26. And we do still expect to see strong EBITDA growth in FY26 as a result, which is sort of why we added in being very clear about how many megawatts come on early in that year with the 150 we talked about in the presentation. Hopefully, that helps.
Thanks, Jason. And you probably don't want to comment on that because you've previously talked to close to 40%. Probably don't want to touch on that number.
Okay, that feels fine, I think, given what we're looking at today.
Gotcha. Can I do a follow-up just on CDC? And obviously, at the moment, there's probably a lot of focus on contracted EBITDA given a lot of transaction comps and the like. So I'm just wondCamerong, theoretically, once you sign, or if you sign that 300 megawatts pre-Christmas, if you can help us what CDC's contracted EBITDA might look like versus that 320 that you're guiding to FY25. So obviously, within that 300, I think people are wondCamerong if there's any rights and reservations that your lenders would exclude in their leverage calcs. And I think people are also wondCamerong if your existing $2 million of EBITDA per megawatt is a good guide or whether we should assume a bit lower given just the amount of capacity that you're signing. Thanks.
Yeah. So I think there's sort of two questions in there. It might be the makeup of the 300 or 400 and the EBITDA per megawatt. And so the makeup of the 300 or 400, there will be some modest reservation there. But as I said before, that's in the context of some workloads moving forward over the time period. And in the presentation, we talk about how customer requirements, technical, and timing have evolved, and that's really what that means. But what we're trying to say is the net of that all is we still expect all of that to come on stream in that time period we talked about in June.
On the debt covenants, we talk about so we've forecasted all that in, and that's resulting in the equity injection profile that I talked about at the end of the CDC section, which is probably slightly higher and earlier than we were signaling in June and than we felt in June. So you should expect that, and then some more reserved over the time period we talked about in June. So you should expect that that should cater for whatever's going on under the water and the kind of puts and takes that are happening in the contracting. We think that that 2 million plus we talked about of EBITDA per megawatt, remember that's across the whole portfolio, and we have sort of said that large incremental capacity, we would expect that to be contracted at lower rates than the average.
I think what you'd see across the next three or four years is that that will dip down maybe slightly below the two, and then trend back up would be our expectation if that gives you a feel for how the shape of it should roll out. Hopefully, I've covered everything there, Eric.
There you have. Thanks very much. I'll give everyone else a go, but thank you.
Okay, cheers, Eric.
Your next question comes from Wade Gardiner with Craigs Investment Partners. Please go ahead.
Hi there. I've got a few questions here. First of all, the partial sale process for CDC at the moment, can you clarify, do you have any sort of participation rights? If the price came in really high, can you actually tip some of yours in, or is it you totally out of it?
We don't have any rights to, no, but we're watching it closely.
Right, okay. The Console Connect process, can you outline the regulatory issues that meant that you ended that?
Oh, yeah. It wasn't all regulatory at all. It was a combination of things. I would call out the complexity in the end of the transaction that ended up taking quite a lot longer than we had hoped, and some of that was regulatory, some of that was operational, and some of them were related, so the things you needed to do to get the approvals ended up being quite a lot more complex than we expected, and then over that time period, markets sort of shifted away from, and we've seen this in New Zealand, right, and it's the same everywhere in the world, enterprise buying of connectivity, particularly traditional connectivity, has been much more subdued. Actually, the next generational side of the business was very attractive.
In the end, the combination of the time and the complexity and the shifts in the way the market moved meant that for both of us, actually continuing with the form of the transaction we announced a couple of years ago didn't make sense. But as I said, we quite like that next generation side of the business, and we're continuing to look at whether there's ways of getting exposure to that, which we'd report back on if there were.
Okay. Can you comment on the Commerce Commission charges against One NZ that got announced today? Any thoughts around sort of the outcome and potential consequences there?
Andrew, maybe I'll hand it to you.
I'm not going to comment for obvious reasons, but I'll just restate. We disagree with them, and the team intends to vigorously challenge the charges.
Okay.
Okay, and finally, any update on the Wellington Airport process or the Retire Australia process?
Yeah, Wellington Airport process, I think you mean the council's considerations. I don't have more than what was in the news yesterday, so nothing there. On Retire Australia, no, nothing to update on there yet. The team's working away, though.
Okay, thank you.
Thanks, Wade.
Your next question comes from Cameron Watson with Forsyth Barr. Please go ahead.
Hi there. Good morning, and thanks for taking my questions. My first question is just on this sort of run rate EBITDA on Long Road. We've got this $600 million by 2027, and I understand that it includes sort of some under construction. I get the sense I'm getting is the gap between what I think most people initially thought that the run rate referred to and how you define it has widened a little bit. So I'm just curious if you could give us an idea of what sort of reported operating company EBITDA run rate rather than including the under construction, where you expect that to be, either at the same timeframe or some other timeframe?
No, I don't have that at my fingertips, but we can add that in the future to that graph. So that graph and that definition is what was used to underlie that original presentation. Obviously, accounting EBITDA will be different. I'll tell you why we use that one, though. I appreciate the question. But we use it because when we see assets like this trade in the private markets in the U.S., that is the metric that tends to be the one that's used the most, and we've seen that over the last year as well. So it is relevant, we think.
And then I think the other thing Andrew mentioned was these simple models we've loaded up, which should hopefully help people get to whatever version of cutting that cash flow or EBITDA they want to, including taking into account the tax equity, which I think has been a challenge for people before. So we'll take that feedback away, and we can add that to the graph in the future or get it out to people if they want it sooner.
Okay, thank you. And then just on One, I'm curious to know if there's some seasonality or if I look at mobile connections, you seem to have dropped 70,000 or so since the year-end. Year over year, it's less, but it's still 30,000 or so. So I wondered if you could comment, you, Andrew, a bit on what's happening there. Do you feel that it's pricing, or is this just sort of cheap tourists disappearing or something like that? It seems to be quite material in the context of gaining in previous years.
Yes, sure. So there is often some seasonality in the mix. So if you look through those mobile connection numbers through time, often you'll see H2 bump up a bit, which tends to reflect those roaming customers that you touched on, Cameron. So yes, there is some seasonality, and we've talked to the sort of broader competitive and economic trends. But yes, the key one, I think, is that seasonality point that you've touched on.
If you look at the one sort of year over year, you gained the last couple of years quite meaningfully, and then you lost the last year. So do you think that what type? Is it postpaid or prepaid, or is it any specific category? Is it corporate versus consumer? Or can you elaborate a little bit to where you think you're losing share?
I mean, we've talked about the migration of prepaid to postpaid, and that's contributed to that uplift in ARPU. There's probably been. I mean, we know that there's been some competition, particularly in the prepaid segment. Yeah, I think in terms of the others that you've touched on, they've probably been pretty flat in relative terms.
Okay. And in fixed, sort of you continue to lose relatively meaningful number of connections there. Is that primarily old copper connections that you're not retaining, or would you say it's specifically fibre or fixed wireless where you think you're losing share or anything specific that you could want to sort of single out there as a key driver of this?
Yeah. I mean, I think there's—I mean, there'll be a very modest amount of copper in the mix there. So I think an element of a chunk of that is going to be fiber-related fixed. And I think everyone in the industry is familiar with the competitive dynamic, particularly from energy retailers.
Okay. And more broadly then, you've had a very successful sort of pricing strategy, I think it's fair to say, within mobile in particular. I assume that you're sort of waiting or hoping that the challenger will price less aggressively, but is there a point where you will start to protect market share, or do you think basically the industry has to come to you rather than the other way around in order to defend your returns, as you alluded to in the commentary?
Yeah, I don't think there's any intention to follow the market down from a pricing perspective. We think we have a very good offering, and we've got a long-term focus. So those are all considerations that go into competitive response, Cameron.
Okay. Final question, also on One. Just on the Starlink offering that seems to be coming closer, is there any chance you can share with us a little bit of what your expectation is with regards to how you will go to market? Is that something I assume you will be paying Starlink something for this? So is this something you expect to be a special service that people will have to pay extra for, or how do you see the dynamic play out when you sort of load up ability to text indefinitely 100% of New Zealand or whatever it was?
Yeah, no, it's a good question, and it's not free and we haven't explained yet how we intend to monetize it, but there's a lot of thought that's going into that. I think it'll be a fantastic service, so yeah, we absolutely intend to monetize it and quite what that's going to look like, we haven't revealed yet, but watch the space. It'll be a terrific service.
Okay, thank you. That was it from me.
Thanks, Cameron. Thanks, Andrew.
Your next question comes from Roger Samuel with Jefferies. Please go ahead.
Good morning, guys, and well done on a good result. I've got a few questions. The first one on Long Road Energy. It looks like you're still targeting 9.5 gigawatts in capacity by the end of 2027. Given the delays that we're seeing for the current projects in FY25 and FY26, and also the uncertainty post the U.S. election, is there any risk that 9.5 gigawatts may be delayed as well?
Yeah, I think 9.5 from here looks unnecessarily high given the yield on the projects has been quite good. We definitely have the pipeline, and all things going well, we could hit it. But I think our focus is more turning to that kind of value add per year given the yields out of whack. We left it on there just to be consistent. We haven't actually recut it to what if you extrapolated the current yield, the new megawatt target would be, but maybe we could take that away to give people a better sense of that. I think in general that the fear would be through this uncertainty that there is a delay. And we're hoping that this year's projects and next year's projects can be got away.
Assuming that we Safe Harbor those and the market gets happy that Safe Harboring is solid, the real delay focus should become the following year, right, FY27 or year 26. That's the area where if you look at some of the forecasts that people are putting out, they're putting big dips in what the market will put out in that year. Just because if you want to develop for that year, you basically have to be talking PPAs middle of next year and later. If legislation is still grinding its way through, you could see the market freeze up there. Yeah, that's sort of how we see the delay coming in. What implications that has for our value creation targets is uncertain beyond the next two years for sure.
Right, okay. And my second question is on CDC. So I just want to clarify on your capacity that is under advanced negotiation with the customers. Because in October, it was around 400 megawatts, and today you mentioned about 300 megawatts, but you've got about 100 megawatts that you are ready to sign very soon. Are we comparing like for like here? That's a sort of 400 plus, sorry, the 400 and the 300 megawatts?
Yeah, yeah, it is. So what we were saying was 300 soon and then 100 next year. So that adds up to the 400, Roger, just if that was unclear.
Oh, okay, got it.
Yeah.
Gotcha. Yep, yep, okay. And my last question is on Wellington Airport. And I appreciate that you mentioned about the multiple that was reported for the other airports versus what you have currently. So what are the steps to realize that high valuation multiple? I mean, are you perhaps thinking about selling your own stake, or perhaps are you talking to your valuer and trying to revise up the valuation? Yeah.
Yeah, I assume that the valuer conversation will happen, and we generally see the independent valuers look at the market comp. So it was really just to point that out. I think people have been not looking at selling the airport, just to be clear, but the council was looking at it. So that was something people were interested in, what sort of valuation market would be. But also historically with that business, people have tended to market down relative to market comps. But I think what's really interesting about the transactions that happened in Australia were not Sydney Airport or something like that. There are airports with quite interesting different exposures, whether it's the tourism or what have you in those different markets and yet still came in on top of each other more or less, right, in terms of the multiple that's happening.
So I guess sort of looks to me like puts and takes everywhere, but the market seems to land in more or less the same place when it comes to a good airport, and we think ours is good.
Okay, great. Thanks a lot.
Cheers, Roger.
Your next question comes from Stephen Hudson with Macquarie Securities. Please go ahead.
Oh, morning, gents. Just a couple of quick ones from me. Just firstly, CDC, you mentioned that you might be releasing a simplified sort of model to help us think about that asset. Can you give us an idea of when you're thinking about doing that? And sort of associated with that, I think your IV assumes something like 85% EBITDA margin medium term. I think for the last four years, you've been a bit lower than that, and you seem to be signaling that it might sort of remain at that subdued level. Can you give us a feel for what we have to believe to get that extra 10 percentage points? Is it sort of mixed stabilizing, hyperscale share stabilizing, and indexation kicking in? And I suppose DevEx stabilizing as well, or if you can give us some steers on how to bridge that gap.
Yeah, understand. On the models, I think they're going to get loaded up later today. I'm looking across at Matt. He's avoiding my gaze. Yes, and then on the EBITDA margin, yes, so that is definitely what you see when we're in a big ramping up for a big build phase. You get a lot of OpEx loaded in early on, and then as the development cadence stabilized, that's where you should start seeing the operating leverage come in, and then exactly as you correctly point out, the indexation is happening at the same time as well. So those are the two big contributors to that operating leverage over time, and the model still assumes 85% in the assumptions that we've released today, so we're not saying that that's attenuating, I think.
Thanks, Jason. That makes sense. And just a boring accounting one. Your recurring incentive fee payable as at September. Can you give us the up-to-date number there?
Do that, Andrew.
No, don't. Sorry, we'll come back to you on that.
Come back to you on that.
No, no problem. And just last one, you mentioned, I think, to a prior question that the team was still continuing to work on Retire Australia. I may have missed an announcement, but the process of looking at a sale of that asset is still ongoing. Is that correct?
We don't have a formal process, but the work is mainly within the asset with the result that you've seen in there. That's what I meant. Sorry.
Yep, no problem.
That's all from me. Thanks, James.
Thank you.
Your next question comes from Phil Campbell with UBS. Please go ahead.
Yeah, morning, guys. Just a couple from me. Just on CDC first, Jason. I'll just be interested in your view. It seems as though what we're seeing from some of the hyperscalers is some different views in terms of temperature SLAs. So I'd just be curious as to kind of your views on that and what kind of implications that has for the CapEx for CDC or the return on capital.
Yeah. Yeah, that's the sort of thing I was referring to when I was talking about evolving customer kind of requirements. And as you've pointed out, because in our contracts we're dealing with multiple customers, we're dealing with multiple views on how they roll out their infrastructure at the same time, and they are quite different. If I zoom out to your question, what that kind of means for us, I mean, a few things is it's just been a lot of work to get to where we are today, which has been great work, and I think puts CDC in a great spot as being near the front of the queue to resolve with their customers what these things look like for the future.
When we look at our kind of return on capital, once you take into account all the puts and takes on all of that, we feel good about the estimates we put out in June around that kind of high single-digit unlevered return for these large businesses, which then translates into mid-teens plus levered equity returns at the shareholder level, so that's all tracking pretty stably from what we can see today. Phil, that helps?
Yeah, maybe just a quick follow-on. So obviously in the past, when we were building data centers, you could have multiple use data centers. Half of it could be for a hyperscaler, half of it could be for larger customers. But I suppose if you've got different hyperscalers with different views on these SLAs, do you have to almost have dedicated facilities for one customer, or can you get away with still having multi-use?
It would be cheaper to do it dedicated. We think we can create a pretty fungible space, which Greg talked about in June, and I think our view on that still remains the same. But there are some key elements of some people's architecture, like whether using batteries or not, that would just be more efficient if you could do it for one. We're still continuing to build as fungible as we can to make our spec as flexible as we can. That helps.
And just another one on that, just in terms of the kind of impact of AI on CDC, my understanding is there's not really been a lot of training of these LLM models in APAC so far. Obviously, if we do start seeing training of some of the models in this region, obviously that's going to boost the capacity even more, isn't it? Is that how we should think about it?
Yeah, that would be my impression as well, everything I see. I don't see everything, but yeah, I don't disagree with that based on what I know.
Right. And then maybe just a couple on 1NZ. I'm just curious on this result. Is there any in the past we have seen kind of some one-offs or positives and negatives in the one result? I'm just wondCamerong if this time around there's anything in there that's a little bit unusual that might be helping to boost the number a little bit, or?
No, we note there that there's some EON-related costs that we don't include in that NZD 304 million, but that's in the low numbers of millions, Phil.
Okay. All right. And then you talked a little bit about stabilization of enterprise and government. Can you just give us a little bit of color on what you're seeing there?
I think it's similar to some of the other commentary that, and we talked a little bit about that at the full year, that some of those customers were looking to re-sign early for longer dated contracts, which might then mean that you've got lower APUs being realized earlier, but yeah, the trade-off is that you're getting longer-term contracts. So it's that sort of thing, Phil.
Okay, gotcha. Awesome. Thanks.
Thanks, Phil.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Neville Gluyas with Jarden. Please go ahead.
Good morning, team. Several from me. The first one just on Console Connect, I guess 2.0. You're still keen on that space, and I know you're working with Console Connect for maybe four to five years before that deal was inked. Are you in talks with anyone yet? And if not, should we expect it to take several years before another suitable kind of entry point emerges?
So we are continuing to talk with a few people, yes. I don't think it'll take several years because I think the space will move quite quickly. But I don't know if we're going to find something that will work for us. Just, yeah, maybe I'll leave it at that. That's probably where we're at.
Okay, thanks. That's useful. Next question is on diagnostic imaging. Obviously, you pointed out sort of looking more like the 10% growth rate than the 15% for this year. But it sounds like sort of there's movement in the space. And I mean, you called out the RFP here in New Zealand for national provision of services. Should we expect that to turn up sometime soon as a potential bonus for the New Zealand operations? And sort of the other part of the question is, is 10% per annum sort of the EBITDA target beyond this year that we should think about?
Yeah, that's a great question. Thank you on that. On the national procurement here, most of that ends up being outside our control, right, in terms of the timing, and everybody who lives here and reads the news and has kids who go to the doctors know that the system is under quite a lot of stress and transitioning to where it needs to go to after many years, particularly through and post-COVID, so I would like to see that progress quickly. We feel like our business is really well placed given its broad network, but I think I'd be cautious about whether or not it happens quickly. We'll do our bit, Neville. In terms of that 10% growth, that is actually in the zone we were looking for when we underwrote our investment cases.
I don't know if you remember back to the announcement, but it sort of looked like, yeah, 8%-ish volume growth, a couple of percent indexation, and then you could get a little bit more from that mix shift if you invested in things like PET-CT, those advanced technologies. So I think it is in that sort of 8 to 12 type zone is where you'd want to lurk to achieve these kind of mid-teens IRRs that we're always looking for this type of capital. So yeah, it is actually coming back, right? I mean, clearly through COVID and out the back, we and our management teams had to work hard through that inflationary period to get it back on track. But I'm quite pleased to see both businesses getting back close to that now through quite a lot of discipline and hard work.
Great, thanks. Question for you on 1NZ, a little bit. I'm not asking you to pin a number down, but I guess the sense is that we would have regarded Spark as a very efficient operator. Obviously, with the pressures it's seeing, it's finding cost reductions again. You've gone through a process post-separation from PLC to bring efficiencies to 1NZ. But can we perhaps think that there is potential for further rounds of further efficiencies at 1NZ in its current state?
I think that's reasonable. I mean, we've talked about IT transformation and efficiencies and mid-30% EBITDA margins, and that's going to be a mix of revenue and cost that gets you there.
Right. Okay. That's good. Thank you. And the last one then is just a relatively detailed question, some more kind of interest. Kao Data Centers, obviously started off as sort of health-focused, new campus. And you mentioned AI and HPC sort of in the same sentence, in the description. I'm wondCamerong if it's differentiating itself in some way. Is it perhaps not pursuing AI as much as HPC, sort of when you get down to it, those kind of divergent focus points? What distinguishes Kao Data Centers?
So the whole ethos when Kao was established, which we quite liked when we invested, was that it was designed as high-performance compute for hyperscale was actually the idea. Now, it doesn't do liquid cooling in the same way CDC does, but that's essentially its design ethos. And that's why the NVIDIA supercomputer is there and the types of workloads we've had in the past are there. We think that differentiates it from the straight wholesale colo type operator who's competing now for workloads that look a lot like high-performance compute, but it's kind of almost the next generation, isn't it, right now with this shift to liquid that I've talked about.
So it's a nice calling card to have, nice set of reference ability with we've had DGX certification there for a long time, and the types of clients are there that you can show your customers are already operating at a high-performance level in our environment. And then I think it's just a sensible way for the business to shift given where the market has gone. I think our original investment case would have been more like a CDC mix of cloud and corporate customers focused probably in the HPC area. Through this part of the cycle, it feels very sensible for it to try and position itself given that history, its sort of DNA for those hyperscale contracts. And so what that really means actually is then investing in your land and your access to power to make yourself relevant in that conversation.
And that's, as we talked about in the past, not 10, 20 megawatts. We're talking you've got to have 100 online by a certain date to even be able to be relevant in those conversations. So that's where the business has become focused in the meantime, and that's where we think it has the most chance of coming to one of these kind of transformational, if you like, capital allocation decisions I've mentioned that we see coming across the portfolio. That's why we've done it.
That's great. Thank you. Good color. All from me.
Thank you.
There are no further questions at this time, and I'll hand it back to Jason for closing remarks.
Thank you, everybody. Good to talk to you all. Hope the presentation was helpful, and we're looking forward to a good second half and catching up with a few of you over the next few days. Thanks very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.