Dalrymple Bay Infrastructure Limited (DBI) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Dalrymple Bay Infrastructure Limited 2024 Financial Results Call [Operator Instructions]. I would now like to hand the conference over to Mr. Michael Riches. Please go ahead, sir.

Thank you, and good morning, and welcome to Dalrymple Bay Infrastructure's results for the 12 months ended 31 December, 2024, our financial year-end. I'm Michael Riches, the CEO; and with me today is Stephanie Commons, our CFO. Today, we will be providing an update on our financial performance for FY '24, detailing our organic growth opportunities as well as detailing some of our key strategic priorities for 2025. If I can firstly take you to Slide 5 of the investor presentation and our financial year '24 highlights. We continue to improve our financial performance and grow distributions to shareholders. EBITDA rose 7.1% year-on-year to $279.8 million, and our funds from operations increased by 11.1% to $156.7 million. We delivered an increase on our Terminal Infrastructure Charge to $3.59 per tonne, a lift of 4.4% versus the prior corresponding period. We continue to invest back into the growth of our business with approximately $394 million of capital projects underway via the non-expansionary CapEx or NECAP program. We generated a return of and on our NECAP investment, which will be seen by a higher Terminal Infrastructure Charge in future years. The strong financial performance resulted in $0.22 per security being returned to securityholders during financial year '24, in line with guidance and up 0.8% (sic) [ 5.8% ] on financial year '23. Importantly, we continue to operate in a safe and environmentally responsible manner with 0 incidents for the DBI Group that caused serious injury and 0 environmental incidents. If I can take you to Slide 6, start to detail some of the highlights at the terminal. As a reminder, our capacity is fully contracted by 84.2 million tonnes under 100% take-or-pay contracts. So there is no volume risk or exposure to coal price in our business. However, I thought it would provide an overview on the market serviced by exports from the terminal. Total exports for FY '24 totaled 63 million tonnes, up 3% on financial year '23. Key export destinations serviced by the terminal include Japan, South Korea, India, Taiwan and China, accounting for approximately 71% of total exports. 81% of our revenue was generated from predominantly met coal mines, which is in line with FY '23. Slide 7 provides details on our total securityholder returns and distributions. DBI has announced a Q4 '24 distribution of $0.05625 per security, taking total financial year '24 distributions to $0.22 per security, up 5.8% on financial year '23. Today, we have updated our distribution guidance for TIC year '24-'25, so that's 1 July, '24 to 30 June, '25 to $0.23 per security, a $0.05 per security uplift on previous guidance. The increased distributions reflect higher revenue and disciplined cost management that has translated to strong operational cash flow. The updated guidance reflects a 7% uplift on the prior TIC year. DBI's distribution policy remains unchanged and targets a 3% to 7% uplift in distributions per security and a payout ratio of 60% to 80% of FFO, subject to business developments and market conditions. Slide 8 sets out some of the key elements of our business model that creates the low-risk environment in which we operate. I'd like to take a moment to highlight the key components of our business model that delivers the predictable revenue and cash flow stream that we have. Firstly, under the light-handed regulatory framework, the base TIC increases annually by inflation to 2031. Light-handed regulation has removed the 5-year heavy-handed building blocks approach to pricing that previously applied, allowing longer-term revenue certainty and the ability in 2031 to renegotiate pricing directly with customers. Our operating costs are passed through. All costs of operating and maintaining the terminal are passed through to customers and DBI takes no operational performance risk. As I mentioned, we have 100% take-or-pay contracts so that regardless of the amount of coal shipped through the terminal or the coal price, DBI receives revenue across the contracted capacity with the terminal's current capacity of 84.2 million tonnes per annum being fully contracted to at least 2028. We operate under a socialization mechanism that protects DBI revenue if terminal capacity were not fully contracted. For example, either due to a non-renewal of a contract at the end of mine life or for a customer default, the socialization would apply by increasing the TIC for continuing customers to offset the lost revenue from capacity that is uncontracted. We maintain further revenue growth through the significant NECAP program that is approved by customers upfront to remove any risk on recovery of capital spend. And finally, we have force majeure protection that ensures we have no loss of revenue from terminal disruptions associated with weather, operational performance and almost all other circumstances. These core components in our business model deliver a highly predictable cash flow, which underpins our commitment to return capital and distribution growth to our securityholders. I can then take you to Slide 10 to discuss the organic revenue growth opportunities we see within the DBI business. DBI has a range of organic growth opportunities with varying degrees of capital intensity that are anticipated to underpin a continued uplift in revenue, ultimately driving improved funds from operations to support growing distributions. Optimization is -- will be generated through an enhanced FFO in FY '24 compared to FY '23 from a combination of the TIC increase and internal initiatives that improve revenue together with cost efficiencies. This enhanced FFO was a key factor in the upgraded distribution guidance. Further initiatives focused on optimizing the use of terminal capacity, including the potential for capacity pooling mechanism to be applied at DBT, and those initiatives are being progressed. We have an active NECAP investment program of $394 million of committed CapEx, which is anticipated to deliver an uplift in TIC of approximately $0.62 per tonne by 1 July, 2027. Our larger expansion projects provide the option for a staged expansion of capacity to meet additional demand for coal exports that are currently not contracted through our existing 84.2 million tonnes of capacity. The 8X Project can be undertaken in stages to meet capacity requirements as they evolve. DBI will, however, explore all options to meet the demand for capacity through measures that are less capital intensive prior to embarking on the 8X Project. Slide 11 sets out some of our organic growth opportunities through our NECAP. Our NECAP program has been and will continue to be a source of organic growth and uplift in our Terminal Infrastructure Charge. It is important to remember that DBI earns a return on and of NECAP expenditure with the Terminal Infrastructure Charge adjusted each 1 July to account for NECAP projects commissioned during the previous 12 months. NECAP also includes an interest during construction component, ensuring a return on capital expended whilst projects are being undertaken. The NECAP program will be funded by a combination of debt and internal cash flows, and DBI has facilities in place to ensure that all of the currently committed NECAP projects are able to be funded from existing available debt facilities. We have successfully delivered over $400 million of NECAP projects since 2008 and have never had any capital spend not approved for inclusion in the NECAP asset base. DBI's capital allocation, operational expertise and relationship management has ensured a smooth facilitation of the NECAP program, adding meaningful value to customers and securityholders. With $394 million of committed projects underway today and based on current asset management plans, a similar amount of capital spend projected into the future, but is yet uncommitted, NECAP remains a significant growth driver for our business. Slide 12 sets out our stable and growing revenue profile. The chart on this slide illustrates the positive impact of having long-term locked-in pricing adjusted for inflation on our base Terminal Infrastructure Charge and how our investment in NECAP will lead to future revenue growth. To place the base TIC uplift and NECAP contribution into perspective, every $0.50 uplift in the TIC adds approximately $42 million to our revenue base. Slide 13 sets out the organic growth opportunity that can be delivered through the 8X Project. The terminal retains significant expansion optionality to accommodate metallurgical coal exports from the Bowen Basin. The 8X Project is expected to deliver up to 14.9 million tonnes per annum of additional capacity with the option of delivering that capacity incrementally via a phased approach. With over 30 million tonnes of demand in the queue for capacity at the terminal, we believe there is potential demand for this project. The timing of that demand is subject to a variety of factors associated with current mine expansions and new mine developments. The development of 8X will involve a cost per tonne of capacity that is more than previous expansions. DBI will therefore likely require, subject to the structure of the financing, a Terminal Infrastructure Charge per tonne that is higher than the existing TIC. A range of alternative financing options in addition to traditional debt and equity financing are being explored. We continue to explore opportunities to optimize the utilization of existing capacity in parallel with the 8x expansion. Ultimately, the provision of capacity in the most efficient manner available will deliver the best long-term outcome for DBI and its customers. On Slide 14, we talk about our external growth opportunities. Our competitive advantages will frame the external growth opportunities that we assess to drive securityholder value beyond DBT. We have a range of growth filters that guide what diversification opportunities we assess. Ultimately, we are looking for assets with the following characteristics: high barriers to entry with outsourced operations, assets that sit in the fossil fuel supply chain, opportunities within those assets for organic growth and/or the deployment of capital to existing assets to improve asset efficiency and customer outcomes and a quality customer base. These filters are designed to result in growth in our business whilst retaining the key attributes of DBI, being long-term contracted revenue, stable and predictable cash flows, high credit quality to support debt funding and limited operational risk. We are incredibly conscious of the unique investment proposition of DBI at present with our strong yield and low risk, and we will ensure that any growth opportunity we assess will be done against the backdrop of increasing securityholder value. I'll now hand over to Stephanie to talk through our financial results in more detail.

Thanks very much, Michael, and good morning, everyone. Turning now to Slide 16, which is our profit and loss and cash flow statements. Financial year '24 revenue, EBITDA and net profit are all up on the prior year, demonstrating the resilience of DBI's business model and our disciplined focus on costs. Our TIC revenue increased by $17.3 million to $296 million, driving an uplift in EBITDA by $18.5 million to $279.8 million. As a reminder, the handling costs in our P&L represent the amount invoiced by DBI -- to DBI by the third-party operator of the terminal, noting that the operator is owned by a subset of the terminal customers. Handling costs represent the operating and maintenance costs at the terminal, and these costs are fully recharged to customers of the terminal as can be seen in the matching handling revenue line. Accordingly, these costs have no impact on DBI's EBITDA. Our general and admin expenses reduced over the year, which in conjunction with the uplift in revenue, delivered a $15.6 million uplift in funds from operation to $156.7 million, up 11.1%. Our cash net interest costs increased $9 million year-on-year following the maturity in September 2024 of our cheaper 2012 USPP debt and the carry costs associated with the higher rate 2023 USPP notes that were raised to repay that maturity. For FY '24, DBI reported net profit after tax of $81.8 million, which was $10.6 million up on the prior comparative period. And DBI ended the year with $89.9 million in cash and cash equivalents. Moving now to Slide 17 to the balance sheet and our credit profile. DBI maintained an investment-grade balance sheet and has ratings with S&P and Fitch, who both reaffirmed their rating during the year at BBB and BBB-, respectively. Both ratings are stable. We have $2.33 billion in total debt facilities, of which $1.82 billion was drawn at year-end, leaving $510 million undrawn. Of this $510 million, $410 million is unrestricted revolving bank facilities and $40 million is a liquidity facility. The remaining $60 million is held as a debt service facility in compliance with our debt documents. Our drawn debt has a weighted average tenor of 7.9 years, and DBI's next refinancing task will be the extension of our bank facilities that currently mature in Q3 '26 and Q3 '27. With the $410 million in unrestricted revolving facilities currently undrawn, we maintain sufficient headroom to fund the substantial pipeline of NECAP growth projects. Moving on to Slide 18, where we cover interest rate and our hedge book profile. 100% of all foreign currency debt raised by DBI is swapped back to AUD. DBI has no FX risk for either interest or principal payments. DBI manages interest rate risk via a mix of fixed rate debt issuance and interest rate swaps, and we are continuing to implement a longer-term hedging strategy to align with the transition to the light-handed regulatory framework. Post the change to a light-handed framework and the 10-year pricing agreement to 2031, DBI has introduced a hedging policy to target 90% of its drawn contracted debt to be fixed, either via fixed rate issuance or via interest rate swaps. The chart at the top of Slide 18 shows the profile of the hedge position, and this is based on the USPP notes that are currently on issue at 31 December, '24. So it does not include any assumptions around refinancing. And at present, DBI is around 90% hedged to mid-2029. DBI's weighted average all-in interest rate for its drawn debt, including the overlay of the swaps, is currently around 5.6%, which will remain approximately the case until mid-2026. This is when swaps put in place in mid-2021 roll off. And at this point, the weighted average all-in interest rate will increase closer to around 8%, noting that, that rate is currently for the debt on issue today. I will now hand back to Michael.

Thanks very much, Steph. So I'd now like to take some time to talk you through DBI's growth initiatives and how we are thinking about leveraging our core competitive advantages to drive further securityholder returns. On Slide 20, talk a bit more detail through our core competitive advantages. As we focus on generating total securityholder value, we will naturally explore opportunities to grow our business in alignment with our current risk profile. Our competitive advantages will be key guides in the opportunities we consider. Those competitive advantages include: our regulatory expertise, where we have demonstrated an ability to navigate complex regulatory situations to deliver substantive value. Our capital deployment capability has been demonstrated through a strong track record of successful execution of multiple major projects. Our operational expertise, where through our substantial oversight of terminal operations, we have been able to create positive operational benefits. Particularly, we're balancing the interest of multiple stakeholders in the supply chain. Our funding capacity, through our successful execution of numerous debt programs has created access to multiple debt capital funding opportunities and sources. And finally, our key relationships, which have been developed with customers and key stakeholders, including the government, over many years, allowing constructive and positive negotiations that have delivered win-win outcomes. Applying those skills and capabilities to enhance and/or unlock the value in other businesses or assets will be the lens through which we assess growth opportunities. In doing so, we remain mindful of the key attributes of our existing business and any opportunities pursued will take into account those factors. On Slide 21, we set out some of the strategic priorities we have within the business over the next 12 months. With our take-or-pay contracts and future earnings profile, DBI is well positioned to continue to deliver growth in total securityholder returns. Our priorities over the next 12 months include: delivering on the organic revenue growth opportunities through new revenue initiatives and the implementation of our approved NECAP projects. We will be progressing opportunities to capture long-term Bowen Basin metallurgical coal production via our continued review of the use of terminal capacity, including the optimization of existing capacity and our economic assessments of the 8X Project. We will focus on identifying opportunities for diversification through acquisition, as I've just discussed. We will seek to retain an investment-grade credit rating through optimization of the debt capital structure at DBI, including across tenor, pricing and diversity of funding source. We will explore and assess opportunities for future alternative uses of DBT. And finally, we will deliver whole-of-terminal ESG and sustainability initiatives. Thank you very much for your attendance. And I'd now like to hand back to the operator to take questions and answers.

[Operator Instructions] The first question today comes from Anthony Moulder with Jefferies.

If I can start with the optimizing the terminal capacity. I appreciate it's a longer-term project, but has there been any delivery of that in the second half of fiscal '24, please?

Thanks, Anthony. We certainly have a model that we are now progressed on looking at putting 2 customers over the first half of this year. So it's fair to say probably, last time we spoke, it was a concept and idea. We've now developed that into a clear model, which we think is workable and one that we think will deliver value to both existing access holders at the terminal and access seekers. And over the course of the first half of this year, we will start those discussions with those key stakeholders to implement that model. I suspect if they are supportive of it, it would be in the second half of this calendar year, possibly be even into the first half of 2026.

And just for those 2 customers, so still more because, I guess, the optimizing -- there is a reasonable level of capacity that can be optimized through that terminal, right?

Yes, that's right. So it's trying to -- we're working with the current customers who have contracted the full capacity. But as we said today, last year, 63 million tonnes of throughput through the terminal, 84 million tonnes of capacity. So there was 21 million tonnes of capacity that wasn't utilized. Yes, it's probably fair to say there's elements of capacity that won't get utilized for a variety of reasons, weather being one of them. Obviously, we had a very wet February in Mackay with the cyclones. But also generally, the operations of particular mines shift and vary over time in terms of their throughput. But we certainly feel there's a significant amount of capacity that can be unlocked and utilized by customers that are seeking more capacity at the terminal, being those customers that sit in our 30 million tonne queue as access seekers. So across those 2 categories of stakeholders, we think there should be strong support for the model that we're proposing.

So how do you then think about 8X because you're going to have to start thinking about getting a plan for 8X as you're trying to optimize the terminal and the level of optimization then, obviously, impacts the number of projects and the tonnage that you need from 8X. How do you worked both of those concurrently?

Yes. So we're absolutely working those in parallel. And you're quite right, to the extent we can unlock capacity at the terminal for access seekers, that will be demand out of the queue and therefore, potentially less demand for 8X. Although, as you'll see, there's 30 million tonnes of capacity in the queue, 8X only delivers 15 million tonnes. So we think there's certainly the potential for both optimization of capacity and potentially a full 8X Project. I think what we have the benefit of is 8X can be done in stages. So if we do have customers who are seeking capacity and want confirmation of that before we have a capacity pooling or other mechanism in place, we can actually commit to a portion of the 8X Project and deliver on that for that particular customer if they have a requirement, a new mine development, for example. And then we can continue with the process of optimizing capacity, which may mean that later stages of 8X may or may not be required. So we have a significant amount of flexibility that ensures we can run these 2 programs of work in parallel and make sure we optimize the capital that is utilized within the business.

A couple of quick ones for Steph, if I could. The NECAP total within the committed CapEx level, that's less than half of -- or the committed CapEx level is less than half of what you've identified for the remaining NECAP. How do you think about -- or how should we think about the commitment of that NECAP in the CapEx profile, please?

So the CapEx that's in the profile we've got at the moment is the $394 million, and we've spent about $92 million of that to-date. If you look at our accounts, we do -- there's a couple of places you can source sort of the CapEx that's been spent for the year. In our profit and loss, we do report on our capital works revenue and capital works costs. And similarly, in our cash flow statement, we also have a growth CapEx number, which is the cash spend on NECAP. So they're the 2 sources. In terms of the amounts that will be going into the asset base this year, because it's only on completed projects, it will be substantially less than the project spend underway. Obviously, the project spend underway is on some of those bigger projects that won't complete for another couple of years.

Yes. So Note 26 shows CapEx commitments being a lot less than that. Is that just because they haven't been signed at this point?

Yes, yes, exactly. Yes. Sorry. So in the financial statements, CapEx commitments is actual signed contracts, whereas the $394 million is all of the approved -- the projects that we have approved that are underway. So for example, on your Shiploader, we have the project for the construction of the Shiploader has been signed. But things like the contract for dismantling the existing Shiploader and removing that, that hasn't been signed. But the overall project has been approved and we're committed to completing that. So yes, it's more a terminology again, Anthony.

And lastly, if I could, tax losses now fully utilized, the tax rate that you expect to go forward, please? Is it -- will it approximate corporate tax from here?

Yes. So the -- obviously, the effective tax rate sits a bit above the 30% mark, so sort of closer to the sort of 34%, 35% going forward. And that's really just in the differential between some of the way we're doing the amortization and sort of unwind of other costs associated with the IPO. But yes, it will track closer to 30% over time, but it's sitting just above that at the moment.

And cash tax is similar?

Yes, yes.

The next question comes from Cameron McDonald with E&P.

Just wanted to touch on the internal initiatives that you've mentioned around the improved revenue. And you've got -- you've said that, obviously, the optimizing of the terminal capacity is one thing which will be focused on in the future. But what were the other initiatives that you undertook during the year, please? And sort of how much did you achieve out of that? And what do you think you can achieve out of that on a roll-forward basis?

Yes. So for this financial year '24, and obviously, we only earned some of this revenue in the last quarter, it was generated through discussions with customers around their bank guarantee requirements. So we typically hold from non-investment-grade customers, bank guarantees anywhere between sort of 6 to 12 months of the expected charges under their contracts, which includes not just the TIC, but also the handling charges as well. That has typically been done because the way the contracts work and socialization works, until such time as we've terminated the contracts, we can't actually socialize the uncontracted capacity that arises from termination. And so the bank guarantees were put in place to protect us for 6 to 12 months of potential time that it might take to terminate those contracts. We have with a number of our customers, and we're still discussing this with a couple of other customers, implemented changes to our contract terms that reduce the amount of initial bank guarantees that are required to be provided, but require if we seek to terminate their contract, customers, if they dispute that termination to put more bank guarantees in place to cover us for potentially more than 12 months. And in those circumstances, if they don't put those bank guarantees in place, we can terminate the contract immediately. So we have a lesser amount of initial bank guarantees, but protection for a longer potential dispute of termination. And by reducing those guarantees that we hold, we have actually agreed with customers that we will share in the cost benefit they have in not providing those guarantees. So I think FY '24, that was around $500,000, $600,000. On a run rate basis, we see it being up over $1 million. So that will be one of the initiatives, and we think there's potential for it to be beyond that going forward. We're also -- one of the things we'll be doing in FY '25 is, as we are doing our NECAP program of work, we will be doing work for the operator of the terminal whilst we have access to a variety of locations at the terminal, which would typically be all operations and maintenance work and paid for by the operator. Now we'll do that work because we have the access because we're doing NECAP programs. And in doing that work, we'll, obviously, charge the operator for that work. Previously, we've only just charged it on a cost basis. We now -- we'll be charging, particularly as the volume of work is higher, we'll be charging that with a margin as well. So there will be additional revenue through that. And there are a couple of other revenue opportunities that we're exploring with individual customers to unlock some value for them and for us going forward. So we certainly see the potential for the additional revenue to be significantly more than what it was this year.

And then just in terms of the new volumes that you're seeking through the Bowen Basin, what's the timing associated with that? And when do they -- when do those customers have to contract with you ahead of actually shipment?

Yes. I think it varies customer to customer, Cameron. So there's probably -- I can talk about 3 or 4 customers, it's all very public. Whitehaven with their Winchester South project, it's probably being delayed through land and environment court proceedings. And their FID is not expected until probably early 2026. We expect that they will start wanting to have discussions around capacity towards the middle -- to the end of this year, depending on how their court proceedings progress. If that capacity were delivered through 8X, it's probably 2 to 3 years before we would have the capacity available. Their mine development is expected to be at least 2 to 3 years. So there, they would effectively align commitment to us and therefore, our commitment to 8X, if it happened to be 8X, in the next 12 to 18 months, we would hope if they progress and then that will align within their first shipping once the mine is developed. Other customers like Pembroke and Olive Downs, many will have seen that they just raised USD 550 million to expand the mine from its current 6 million tonne throughput to 12 million tonnes. That expansion is over a period of time, and we will be discussing with Pembroke over the course of the immediate term, what that progression -- stage progression of their capacity requirements will be at the terminal and how we might satisfy that. So that's why I said to the response to Anthony's question that we have flexibility in the timing as to how we can utilize or optimize the unutilized capacity at the terminal and do 8X in parallel. They're not binary, and we have to work with our customers to make sure that we're delivering them the capacity when they need it and obviously doing that in the most capital-effective way.

And then just a quick question for Stephanie, if I can. With the step-up of the interest rate to 8%, is there any things you can do to mitigate that impact, particularly in a declining interest rate environment?

Yes. So we've recently undertaken a review to see if there were any opportunities to refinance some of the notes a little bit earlier, which currently isn't the case. But we do have a hedging program in place, which means that the hedges as they step up have a rolling period out through the '29 and beyond. But the other thing I will say is that is on our current debt book. So as we are raising -- drawing on bank debt or as some of those notes mature, which one of them does in 2027, we will be refinancing that in a different environment. So this is all kind of part of the transition from sort of where we were under heavy-handed into light-handed. And probably the main step-up was really, as I said, the swaps we put in place in '21 were set sub-1% and as they roll off, and most of the swaps we put in place from '26 have got a base rate of around 4%. So we've been quite keen to make sure that we're not sort of fixing any rates above that. So there's probably not a lot of scope on the existing debt book to do that, but we are looking at introducing more flexibility going forward. And as those notes do come up for refinance, we will be looking at those.

The next question comes from Nathan Lead with Morgans.

First question for you. The capacity pooling mechanism, can you talk through whether that will have any impact on the risk mitigants of DBI, which are a pretty important part of the investment case. How significant is that revenue opportunity? And for those that have been following it for a long time, the terminal, like for a long time be exposed to excess capacity at the terminal. So why can this be done now and not historically? And I suppose finally, will it cannibalize any existing revenues?

So perhaps the answer to the last bit of the question first. No, it won't cannibalize any existing revenues. It's not intended in any way, and we wouldn't introduce a mechanism that impacts the risk profile of the business. So it will still be all take-or-pay. It won't -- we won't be in a position through this -- the model we're proposing that would reduce the contracted capacity at the terminal. And I think to your answer as to why it is an opportunity now and it hasn't been in the past. I think it's derived from the change to the light-handed regulatory framework. Under heavy-handed, with a RAB and a WACC, basically, you got your revenue based on those 2 factors and the amount of capacity that was sold or utilized didn't have any bearing or impact on the revenue you could achieve. So there was no real incentive or requirement to innovate. I think under the light-handed regulatory framework where we have the opportunity to negotiate with customers and to put forward different ways of utilizing capacity at the terminal, there's both a greater willingness within our customer base to look at new initiatives. And particularly as we have significant demand for capacity, customers are looking at, well, the cost of 8X compared to other alternatives, particularly at other terminals as well, which are even higher than 8X and saying, Can you do something that will give me capacity in a manner that is at a lower rate? Whilst for us, it would be obviously a rate that delivers additional revenue to DBI. So I think those -- the timing is a function, I think, of the change to the light-handed framework. The mechanism is one that is intended to operate to maintain full contracted capacity and unlock some of the underutilized capacity that customers that are fully contracted have.

And can you put like a range around in terms of just ballpark revenue opportunity for you?

Look, I couldn't give you an upper range or a range at all, Nathan. What I'll say is it will definitely be above 0. And we're doing a lot of this internally, because as I said, one of our key competitive advantages is our regulatory expertise and how we manage that with customers. But we're also looking at models and getting external assistance at different models that may have been applied elsewhere in the world. I think, as I mentioned, although we have for FY '24, 21 million tonnes of underutilized capacity, there is always going to be some capacity at the terminal that is underutilized. And I suspect there might be in the range of 5 million to 10 million tonnes, maybe 3 million to 8 million tonnes of underutilized capacity that we can develop through this model. And then it's about how you charge for that. And I think that will be a discussion we will have with customers as we move forward.

Sounds good. Second one, I mean, you hinted also at the opportunity to do with doing some works on behalf of the operator while you've got access to the terminal. What size of opportunity is that? And obviously, these are the NECAP works do go on for some time. So how long an opportunity is that for you?

Look, I think it depends on the nature of the programs of NECAP we're doing. So for this year, for example, we're doing a lot of work on Berth 1 in preparation for the replacement of Shiploader 1. As we have access to Berth 1 to do the NECAP work in readiness for Shiploader 1, we'll obviously be doing a significant amount of maintenance style work on that berth. And that enables us to then do work for the operator. And at a much -- it is much cheaper for the operator to get us to be doing the work while we have access than doing it itself or engaging other contractors. So this year, there's a reasonable amount of work. I would say in the vicinity of $5 million of work. Going forward, I think that opportunity will continue to present itself. It will vary, I think, year-on-year depending on the nature of the NECAP programs we have and the access we're taking. I mean, this work is driven by creating efficiencies rather than any particular desire for DBI to be doing operations and maintenance work. It's more the efficiencies that is created by virtue of the access we have through our NECAP programs. So I think it will vary year-on-year, but we think it's something that will continue to deliver revenue for the business over the long term.

It's probably is worth clarifying that $5 million is the total amount of works, not the $5 million project charge that will be.

Yes. So we'll have a separate charge on that amount or whatever the amount of NECAP works happens to be.

So you'll earn a margin on that work. That's not your actual margin of the $5 million.

No. Unfortunately, not.

Just clarifying.

Thanks for clarifying that, Steph. Yes. No, we will earn a margin on that work, which will be in the vicinity of $5 million we anticipate this year.

500 -- yes, on the work being…

Yes.

So like 10% on margin?

Yes, that's a discussion we'll have with the operator. Yes.

Steph, the G&A expenses were pretty good this year. They came down a bit. Can you give us a bit of a budget of what you're looking at over the next 12 months?

We do expect it to be similar. So part of the reason it came down was some of the -- there was -- we managed to keep some costs fairly even in terms of things like insurances, which was good. There were some other things that we were looking at undertaking on the debt side in preparation for debt raise, which we didn't undertake. But probably also, there's a lot more work happening now on the project side. So there is an element of our costs that do get recharged to the projects, and that can vary depending on how much project work is underway. I think if you've got a NECAP spend of around $15 million, clearly, a lot of the corporate team is not working on NECAP works. You've got to spend closer to sort of $80 million, $90 million a year, then a lot more of the corporate team is refocused on supporting that project team. So some of the costs are recharges. So given the continued increase in NECAP works over the next 3, 4, 5, 6 years, I think we'll see that sort of level the same. So from a year-on-year perspective, I don't expect it to change materially. And really, the only thing that could change it is any significant spend on any of the acquisition or M&A growth projects that we're looking at. But that's probably the only thing I can think of that would be anything significant. But to-date, that has not been -- we're doing it all internally, Nathan.

[Operator Instructions] The next question comes from Sam Seow with Citi.

Just a quick one there on Slide 16 on the cash. Good FFO up 11%, but couldn't help notice some of the cash tax going backwards, I guess, helping your operating leverage. Just wondering if you could provide any color there and any outlook for that line?

Let me put my other glasses on.

Sam, you're talking about the tax increasing from $37.5 million to $42.1 million. That's what you're looking at?

No, on the other side on the cash flow.

On the cash flow. Okay.

That's -- and I'm not a tax expert, but that is to do with the unwind of some of the IPO costs, to be honest. So when we IPO-ed, there were certain tax -- I want to call it valuations, and I know our tax director is going to tell me I've got the wrong term. But there were certain fair value amounts placed on the debt at IPO for tax reasons. And as that debt is repaid, some of those do come off. So there's a little bit of lumpiness in our cash tax line in the year where we do have debt being repaid that was on foot at IPO, which is what we had this year. And we also had it last year where we did repay a USPP in March, and we had another in 2023. And then we had a USPP being repaid this year in September. So you'll probably find that number will come down again next year.

And then I guess just to further down a question on franking. Just any color on how you split the distribution between divi and repayment? And then yes, anything on the franking associated with that on the outlook, too.

So the main approach we've got on distributions is to frank to the maximum amount possible on our dividends, and that's based on what our franking account is. Our view with the loan notes is to try to introduce a more even repayment profile on those loan notes to remove a lot of the variability that was happening. So we've spent some time making sure that those loan notes can be repaid on a more even basis. It's not straight line, but on a more even basis between now and 2030. So the dividend payment effectively becomes not a balancing number, but the dividend payment we do look to balance out between the dividends and distributions and then frank the dividends to the maximum that we can.

So to keep the repayment flat and then the dividend -- the balancing adjustment essentially and you came…

Yes, roughly. It's not exactly flat. So as I said, it's not a straight line, but there is a formula that we're working towards to try and make sure that there's a bit more predictability on how we're paying down those loan notes.

And then with cash tax coming down, so that franking should come down next year that I assume just start increasing again after that. Is that the way to think about it?

Yes. So the franking at the moment is just under 100%. But going forward, it will be sitting sort of just below 100%. But yes, as the -- depending on where the cash tax sits, then it will come down slightly.

There are no further questions at this time. I'll now hand the call back to Mr. Riches for closing remarks.

Well, thank you all very much for your attendance. I hope it's been helpful and useful. We certainly appreciate all the support that we get from our investors and obviously, analysts. And we look forward to delivering a very positive FY '25 in continuation of the positive FY '24 result. Thanks very much.

That does conclude our conference for today. Thank you for participating. You may now disconnect.