Deterra Royalties Limited (DRR) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Deterra Royalties FY 2022 Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Mr. Julian Andrews, Managing Director and Chief Executive Officer of Deterra Royalties. Please go ahead, sir.

Thank you. Good morning, and welcome to Deterra Royalties' Financial Year '22 Results Call. I'm Julian Andrews, MD and CEO of Deterra. And I'm joined today by Brendon Ryan, our Chief Financial Officer; and Matthew Schembri, who heads our Investor Relations. I'll begin with some introductory remarks, and then Brendon will provide a review of our financial results. Following that, I'll provide some comments on our approach to growth and the outlook in that regard, and then we'll hand back to the operator and open the line for questions. I'll start with an overview of the business highlights. FY '22 has truly been a year of organic growth for Deterra. We reported record revenues of $265 million, up 83% on prior comparable period on the strength of the royalties we hold over BHP's Mining Area C mine or MAC. MAC had an outstanding year, producing 111 million wet metric tonnes, an increase of 80% on the prior year as the South Flank expansion continued its ramp up to full production. The expansion is now ahead of schedule, and BHP is to be commended for its impressive execution of this USD 3.6 billion capital project, which will grow Mining Area C into the world's largest iron ore operation. We benefit from this volume growth, both from our exposure to top line revenue. Our royalty revenue increased 54% to $219 million, notwithstanding some softening in the pricing on the prior period and from a capacity payment, which this year was $46 million. We have also been positioning the business for further growth through opportunities to add to our portfolio. We've evaluated a large number of potential acquisitions and investments, although value has been difficult to identify in the market conditions that prevail for much of the year. However, we do believe the markets are shifting in a direction that will create more opportunities for our business as miners and developers look beyond traditional debt and equity markets for additional sources of capital and the liquidity we have from the $350 million facility we put in place earlier this year provides the flexibility and capacity to act opportunistically. In keeping with our approach to prioritizing shareholder returns, the directors have declared a fully franked dividend of $0.2208 per share, which combined with the $0.1168 per share interim dividend paid in March, brings the total dividend for FY '22 to $0.3376 per share, fully franked, which is equal to 100% of net profit after tax. When we listed in 2020, I spoke about bringing a new investment proposition and way to invest in the resources sector to the ASX, one that offers high margins and strong visibility on earnings, cash flow and dividends without the same exposure to operational margins and capital risk as traditional mines. This remains the case and is very much evident in our results today. We have what we believe to be one of the highest quality public royalties globally that provides top line exposure to a world-class iron ore operation. The business model is scalable and can generate very high margins as revenues increase on a fixed cost base, which is illustrated in the EBITDA margins we have reported. We have a focus on returning earnings to shareholders, again evident in the dividend we've announced today. We have substantial organic growth and a focus on value-accretive investment. And we have a focus on ESG, both in our investment processes and our everyday operations, as demonstrated by our achievement of our commitment for net zero direct emissions. Another important element of the model that is becoming more and more relevant is this inflation protection. We've seen increasing commentary on cost pressures in the mining sector, be they in labor or other supply chains. And more recently, we've seen these being factored into cost guidance. It's worth making the point, and it's one that I think bears repeating that our revenue royalty payments are not impacted by any changes in operating margins driven by cost inflation. In fact, to the extent they're reflected in pricing, we leverage to those factors as any increase will be reflected in our royalty receipts. With that, I'll hand over to Brendon, who will take you through the financial results in more detail.

Thanks, Julian. Good morning, everyone. My task is fairly easy given the clean and simple nature of these results. If you can turn to Slide 8, so I can address the financial highlights for FY '22. As you can see, total group revenue for the period amounts to $265 million. This includes MAC royalty revenue of $219 million, MAC capacity payment of $46 million plus circa $400,000 in revenues from our 2 smaller Western Australian mineral sands royalties. This $265 million of revenue delivered a healthy $257 million in earnings for the period. This represents an EBITDA margin of 97%, driven by the small team and low overhead cost structure and royalty of the royalty business model as discussed by Julian. Finally, this resulted in both record NPAT and dividends for financial year '22 of $178 million. Based on this result, the Board declared a fully franked final dividend of $0.2208 per share. In combination with the interim dividend, this equates to a full year dividend of $0.3376 per share, which is equal to 100% of net profit after tax. Moving to Slide 9. I'd quickly like to take -- to discuss the performance of Mining Area C. Overall, you can see from the yellow line on the chart, the significant ramp-up at MAC, the ramp-up over the past 6 months resulted in record sales volumes delivered by MAC in FY '22, including setting 4 consecutive quarterly sales records. Accordingly, BHP recently announced the South Flank ramp up to a full capacity of 80 million wet metric tonnes per annum is ahead of schedule with an average rate of 67 million wet metric tonnes per annum achieved in the June '22 quarter. Based primarily on these record sales volumes, total MAC royalty revenue for financial year '22 was $219 million, and this was supplemented with a $46 million annual one-off capacity payment, which has now been rebased from 59 million tonnes to 105 million tonnes. On Slide 10, we've tried to reflect a simplified illustration of the P&L. What this slide demonstrates is the lean cost structure and transparency of cash flows distributed to shareholders. On the revenue side, as discussed earlier, we show the 3 sources of cash that contributed to the $265 million being MAC royalty revenue, MAC capacity payment plus smaller amounts of -- from the Wonnerup and Yoongarillup operations. On the right-hand side of the chart, we show the distribution of these cash flows. Total cost for FY '22 were $8.8 million. Of this, $7.6 million relates to the normal ongoing operating expenses with a further $0.4 million in D&A. And we've also specifically called out in our accounts of $0.7 million in one-off BD costs for the period. Net tax of $77.1 million shows an effective tax rate of close to 30%, and this results in net profit after tax as $178.5 million for the year. Now turning to Slide 11. The objective of this slide is to show the organic growth in shareholder returns. As you'll see from the chart, in H2, the Board have declared a final dividend of $116.7 million, equal to $0.2208 per share. This builds on the H1 interim dividend of $61 million -- $61.7 million, giving a full year dividend payout of $0.3376 per share, which represents a payout of 100% of NPAT of $178.5 million. In terms of capital management framework, you will note that we continue to prioritize shareholder returns, although recognize the intent to invest in growth. We intend to optimize the use of debt for future acquisitions, specifically, cash flow from these new royalties will at least in part be utilized to pay down debt. We also intend to maintain target leverage within the range of 0% to 15% of enterprise value over time. On Slide 12, we describe the capital management framework with respect to funding new acquisitions. You'll remember, in February, we announced the refinancing of $350 million in bilateral credit facilities, which increased our total credit limits from $40 million to $350 million, extended existing maturities for 3, 4 and 5 years, and we're designed to build blending relationships with 5 major banking groups. We're very pleased with the outcome and timing of these new increased facilities, and these facilities now provide Deterra with the increased flexibility to act on growth opportunities as the market changes. The framework also aims to demonstrate the intent not to cross subsidized new growth opportunities with MAC revenues. The expectation being that new investments are capable of providing returns greater than their own cost of capital. Hopefully, you'll recognize from these slides, we are working hard to deliver upon our commitments. In terms of corporate structure, we continue to run a small and lean team designed to maximize returns. In terms of capital structure, we retain a conservative balance sheet with $350 million in liquidity to build flexibility for value-accretive opportunities. And in terms of returns, this result continues our record of maximizing the return of surplus cash flow to shareholders. The simplicity and scalability of the Deterra business model is unique on the ASX, and our small team -- small and focused team will continue to work hard to deliver maximum value to our shareholders. With that, Julian, I'll pass it back to you.

Thank you, Brendon. In terms of strategy and outlook, on Slide 14, we've provided an overview of the royalty and streaming sector to provide some context. As we've said before, we're pursuing a well-established business model that has some very successful exponents. But there are some [ big ] important differences in our approach. In particular, many of our peers are focused on precious metals. We are not, which is an important differentiator and enables us to focus on a less well-served niche, one in which we have significant scale. On Slide 15, we've set out our approach to inorganic growth. We've been consistent in talking about our focus on bulk space and battery metals in well-developed jurisdictions that are in production or have clear line of sight to production and a broad investment range of $100 million to $300 million. This remains the case. We've seen a steady flow of opportunities in the past year, largely in the secondary area as royalty shareholders look to monetize assets held in broader portfolios. Many of those have been outside of our target range, but we have maintained our focus on commodities where we believe we can compete effectively. In particular, bulk commodities such as iron ore and fertilizers and base metals, including copper and nickel, in geographies with well-developed mining infrastructures, primarily Australia and the Americas. To date, we've not seen any opportunities that we felt able to execute at a price that would deliver value to our shareholders, though we have a meaningful pipeline of opportunities and remain active in this space. Turning to primary opportunities. I mentioned earlier that we believe markets are shifting in a direction that will create more opportunities in this space as miners and developers look beyond traditional debt and equity markets for funding as we've started to see some of these sources tighten up. That has become more expensive and more difficult to access and equity markets are less supportive in recent times. With the liquidity we have in place, we are well positioned in these markets to step in and provide the long-term capital that will fund the projects that are needed to make the substantial growth in supply that many believe is required for some of these commodities. So also worth noting that royalties or strengths can be used for other purposes than developing projects. And in fact, historically, approximately half of this type of capital has been applied to other uses such as M&A or deleveraging balance sheets. On the ESG front, we've made solid progress on our framework in FY '22, having conducted a materiality assessment, which is an important step in framing our ESG governance and reporting going forward, having implemented and refined our ESG investment policy. And importantly, we've reported on our direct emissions and met our net zero commitment for the year. We will continue to build on this framework, particularly in the area of our social investment and engagement, and we'll continue to refine our approach to ESG risk management and investment policy. In closing, FY '22 has been a year of substantial organic growth for the business. It's driven significant investments in -- sorry, increases in revenue, earnings and dividends, and we're optimistic about the opportunities FY '23 will bring. It's a simple business model with a compelling investment thesis. We provide investors with the unique exposure to one of the core assets of one of the world's best operations in one of the world's best iron ore provinces. Our revenue-based royalties offer shareholders a distinctly lower risk profile when compared to a mining company and provide significant protection against cost inflation. By prioritizing returns to shareholders, we provide investors with a unique exposure to income from a high-margin investment business with a world-class cornerstone asset. And we have growth options, both from the continued ramp-up of the South Flank expansion of Mining Area C and from value-focused M&A. With that, we'll close the comments and be happy to take any questions. Thank you.

[Operator Instructions] Our first question comes from the line of Rahul Anand from Morgan Stanley.

Look, first one is around volumes at South Flank. So obviously, you're ramping-up really well and ahead of schedule. I was wondering whether you can provide any color on whether in your knowledge or understanding there is potential to push the system beyond nameplates, if perhaps you've had any conversations with BHP. And then in terms of Slide 21, I mean, the west part of the South Flank and North Flank area, which is Mudlark and Tandanya seems to be underexplored. Any sort of idea on what type of iron ore that is, whether it's similar and continuous to South Flank?

Yes, sure. Thanks, Rahul. Thanks for the question. So on the first, look, we -- as you say, we're certainly very pleased with the ramp-up profile at Mining Area C. The -- I think there's still some further to go there. South Flank is ramping up quickly, but there's still some substantial followings to come. Obviously, we saw as everybody else did some of the commentary that BHP had earlier this week around potential growth options in their border iron ore system in the Pilbara. Look, we haven't had any -- sort of any discussions with BHP beyond what has been said in the public domain. And it's worth just reiterating the point, I know we make it every time, but we don't have access to any nonpublic information on BHP's plans in that regard. But certainly, I think you mentioned the slide -- the chart on Slide 21. What that does show is that we hold a royalty over an area, not over a particular deposit. So to the extent there are other deposits in the -- in that royalty area that the BHP chooses to develop at some point in the future, we would benefit from that to the extent it falls within the royalty area. In terms of options to extend further beyond the 100 -- the 80 South Flank and the original North Flank operation at Mining Area C. Look, it's a new operation. This -- I noticed that BHP did talk about opportunities to debottleneck some of it. They've got a range of those opportunities. They'll look at it from a system-wide perspective, I'm sure.

Yes. Listen, we do talk to the BHP and sort of try to find out as much as we can. In this case, the company line is that they are investigating -- they have studies in place to get to that 330 million tonnes. They have not divulged how they will get there, whether South Flank goes beyond 95 capacity is not known at this point in time. They're the ones would think there's potential for that. But there's also obviously using up the existing [ Yandi, Newman crusher ] capacity as well as potentially some more from the western range in sort of development of [ everything down south ]. So we know the area pretty well. We've worked closely with people who know the assets very well and have a good feel for what might happen, but we can't go beyond what's in the public because we can't say that for sure, we're not in control of that.

Yes. No, that makes sense. Look, second question, just around opportunities. Rising interest rates, obviously, perhaps a better environment in terms of availability of opportunities, and we've seen that in terms of M&A activity from some of the majors. But for you guys, I mean, have you seen a rise in terms of the number of, I guess, opportunities that are hitting your desk at the moment? And are you seeing any sort of trend in terms of where they're coming from, whether it's bulk base? Anything you can provide there?

Yes. Look, as I sort of alluded to in some of the comments, I think we're starting to see and we're expecting to see as going forward, but there is a bit of a shift in the nature of the opportunities we're seeing. So over much of the past year, we saw a lot of secondary opportunities where we had people looking to sell existing royalties or strengths. We're now seeing and expecting to see even further more of those opportunities to be a source of funding. As you said, as those debt markets become more difficult, we believe that our offer becomes even more compelling. We -- in particular, we're able to provide sort of patient and long-term view on some of these projects and look through sort of short-term -- some short-term issues. So we certainly expect to see more of those. We have started to see more of those. And I think the other point to make in that regard is that it's not just about funding projects, it's also about supporting M&A activity, as you say, in which we've certainly seen an uptick in that as well as potential addressing balance sheet issues.

I think opportunities across bulks and base. There's a lot of projects out there that were getting close to FID and now -- where the equity markets were abundantly available in recent times but now it's a little bit harder to access. So we think that we form part of that debt, equity and royalty funding package. And we think that we are a lot more competitive and a lot more sort of compelling offer for the market at the moment.

And also, it's not just about interest rates either. It's cost inflation on -- capital cost is also a factor that we expect is going to start to drive opportunities for us as well as the cost of these projects increases. Developers may be looking for additional capital. There may be projects out there that were potentially funded, but are now looking at increases in CapEx and looking for a bit of top-up funding, which is where we think a royalty or strength can be particularly powerful.

[Operator Instructions] Our next question comes from the line of Glyn Lawcock from Barrenjoey.

Julian, a couple of questions. Just if you look back at the opportunities you've missed, I wonder if you've taken the opportunity to say, should we maybe have been less conservative in your assumptions? Have you spent any time looking back at what you -- what maybe you've missed? And just curious if you sort of tried to benchmark anything against what you all test anything -- back tested.

Yes, Glyn, thanks for the question. Absolutely, we do. As you'd expect of anybody, we do a bit of a -- we do look back and look at opportunities and think are we comfortable with where we ended up knowing the outcome. And I think when we look back at the opportunities that we've seen in the, give or take, 18 months that we've been looking at these, yes, I think there's probably a couple of points to make in that regard. The first one is there haven't -- the focus has been very much in that secondary space. And although we've seen quite a number of opportunities, many of them have actually been in the precious space. So there haven't been as many in the outside of precious as they have been in precious and there have been a number that we've seen that haven't transacted, and there have obviously been some that have. So when we look back to the sort of the core of your question, yes, I think we're comfortable with where we ended up in terms of our evaluation of those opportunities. I don't think there's any regret in terms of having missed opportunities. It would be nice to -- obviously, it would be nice to find some opportunities, but I don't think there's a real sense that we were being too conservative.

Okay. When you -- all the opportunities so far been maybe Australia based. Would you -- have you been thinking in opportunities maybe across the rest of the globe? And would you look at something like iron ore in Sweden?

Yes. Look, we certainly have been looking at opportunities in other parts of the world. As I alluded to, we've certainly seeing opportunities in Australia. But we've seen opportunities in the Americas as well, both North and South America, and we've taken a very close look at some of those. I think that to your specific question, I mean, where our focus is on jurisdictions that have sort of a well-established mining infrastructure, well-established sort of legal framework because as you appreciate, our interest is ultimately a contractual interest rather than operating interest. But yes, certainly, we do look globally at opportunities.

Yes. So Glyn, for context, there's only been half a dozen royalty assets for sale in the non-precious space over the period that we have been a public company, of which -- as Julian said, we have no regrets in terms of what -- where we were at is some of those processes and where the assets have traded at. So overall, we do look back. We keep a close eye. We're making sure that we're sort of both not too conservative nor too aggressive. We try to be very balanced in the way we think about these things. But yes, no regrets at this point in time. The [indiscernible], some of the assets have not closed that we've been looking at, and that's because the [indiscernible] spread is just too high. And that maintains now the world is changing a little bit. But during that period, from November 2020 when we demerged from Iluka, the market went -- almost doubled from the time that we sort of demerged and it's finally coming back to somewhere that's sort of more normal where we think that we can be more competitive.

Okay. And just a quick final one. Have you received the money now from BHP to be able to pay the dividend?

Yes, we received the money 30 days after the year-end. So we received it and rang our bell in our office on the 30th of -- or 29th -- Friday, 29th of July.

Our next question comes from the line of Robert Stein from CLSA.

Just one, just on commodity exposure. There's a whole host of sort of iron ore royalties in private hands up in the Pilbara. So Hancock, [ Right Roads ] royalties and the like. Are you averse to trying to sort of centralize all those up into one vehicle, so investors can get exposure to that lower operational leverage iron ore exposure?

Yes, absolutely. I mean, we -- clearly, we have the iron ore exposure. We like the iron ore exposure, which certainly if we still got a good opportunities to add to that, certainly, we would do so.

Yes, we're a natural vehicle for that. That requires multiple parties and require sort of a simplification of some of the structures out there as well already [ built ].

So given that's the case and given that $350 million is the undrawn facility in the investment side that you guys are looking to target, that would obviously require a significant amount, more capital. What would be the mechanism by which you would employ to try to enact that? Is it a -- would you go back in capital markets? Would it be debt raised? Like how would you -- just conceptually, how would you go about executing something like that?

Yes. It's difficult to sort of give a specific answer to a hypothetical. But further, we have some debt capacity in place at $350 million, which was really sized I think, relative to our targets. To be clear, we believe that the business has additional debt service capacity if it's needed, particularly if we were to bring in new assets that were cash generating, that also provides a couple of extra degrees of freedom in terms of how they could be funded. But look, it would depend very much on the size and where the markets are at the time. But large investments, equity is always an option. Additional debt is an option. It may be that for those type of opportunities, it may be that the scripts an unattractive currency for the vendor. It's really -- it's difficult to say.

There's almost too many variables to sort of to give you a hypothetical answer, but yes, but all options are open, I suppose.

And then just the last one on the sort of the M&A front. $350 million is quite, I guess, limiting in the respect of the types of sizes royalty transactions that are out there given some of the recent data points that are out there in the market. Are you flexible on that sort of $350 million size? And if you saw something -- I'm just trying to get a figure -- I'm just trying to get a conceptualization around scale and capacity of potential additional royalties, given the MAC royalty is so big and it's the prime vehicle why investors invest in your stock, the prime reason why investors invest in your stock. If you guys add or dilute that exposure in some respects, what sort of size in investment should people be sort of conceptualizing that would take?

Yes. Look, there's probably a couple of elements to that, Rob. The first one, the $100 million to $300 million target range that we've spoken about for a while now is -- it is exactly that. It's a sweet spot of our target range. It's indicative. And to be clear, we would certainly and have looked at opportunities below that. I think there's naturally a lower limit to that in terms of wanting to be sure we're getting something meaningful with the investment and time and effort. And we would certainly go beyond that as well. But there are, notwithstanding, a couple of recent data points, as you point out, there aren't a lot of opportunities that are much larger than that. But clearly, we would pursue those if we thought that they could be value accretive. In terms of the $350 million facility. To be clear, we saw an opportunity early this year to extend the credit facilities we had in place and to do it on terms that lowered our overall margin and pushed out the tenor. And we're very pleased we took that opportunity. In terms of sizing that, as I said, we certainly -- we landed on the $350 million as being a number that would give us, we thought, sufficient liquidity to act on opportunities. And at the same time, balance the -- obviously, the investment that goes into holding that facility. But to be clear, that $350 million is not a limiting factor on our activity.

We were materially oversubscribed and we picked 5 banks. We had more than that available to pick from on the basis that we wanted to sort of build those relationships to be able to expand those with -- build those relationships to be able to expand those quickly and easily, if necessary. So it depends on the opportunity and it depends on the sort of the structure that we think is optimal for the organization at the time of acquisitions. But yes, we believe we have more available should we need it at a short notice. But the intent was delivered in February, sort of an opportune time to be raising debt as well as sort of building those longer-term relationships.

That's great color. And congrats on the great results. I appreciate it.

[Operator Instructions] Our next question comes from Chen Jiang from Bank of America.

Just a follow-up question to that secondary royalty space. Given the competitiveness of that space, I know you can't tell us your hurdle rate, your internal rate of return, but are you willing to pay a premium to compete with your peers if the asset is very attractive? And I have another one after this.

I think we have seen -- there's no question, we're seeing some transactions that have priced at fairly aggressive pricing levels, the ones that we didn't feel we could support in a way that it delivers value. Yes, it is a competitive space. But to be clear, we've, I think, right from the beginning, talked about discipline and to us that discipline means we need to stay focused on that value. So we won't be overpaying for assets simply to get a deal done.

I think the other thing, Chen, to think about, though, is that a lot of the difference in valuation can sometimes be the technical side of conversion of reserves to resources or how that impacts value and depending on how you're -- if you're just including reserves or a conversion factor for reserves or resources or even beyond that. So valuation is based on the sort of the underlying asset, the optionality of the underlying asset. And whilst some assets may have lower cost of capital may also be a fact that people are factoring in greater expansion potential or extension potential from those assets just as a -- it may not always just be the cost of capital.

Right. Right. You mentioned value and variables, what are the key variables when you are assessing opportunities in the secondary market? You mentioned the resources and the reserves. And I guess every company will have their own commodity price assumptions. I am just trying to understand what are the key variables that drive your valuation that you think the value is for versus paying a premium to acquire the asset? Thanks.

Yes, you think the main 3. Cost of capital, commodity price and reserves and resources are the main 3 on a top line revenue type royalty. They are the key variables. But...

And to Brendon's point, I think of those 3, probably the one in which you'd see the greatest variation is around the view of the deposits and that conversion and the potential for extension and expansion, that's probably the greatest variable when you look across or when you look across different views on value.

And there might also be people with different commodity views as well, somebody who'd take in position on commodity prices as well. But yes, they're definitely the sort of the 3 big variables in a revenue type royalty.

I have a last one, if that's okay. So secondary space is very competitive, how about primary royalty? Are you -- how open are you to talk to or approach any junior miners in the early stage and to create primary royalties if secondary is more competitive?

Yes, exactly. I think to be clear, we certainly see that opportunity to create new royalties and streams as being a really key part of the growth story. As I mentioned in sort of the prepared remarks, we're seeing that market shift a bit in a way that we think is going to drive more opportunities for us and particularly our ability to provide patient long-term capital will become more and more compelling, I think, plus or minus. And that's right across the sort of the spectrum from juniors who are looking for developing capital early on in the phase right through to larger, more established companies that might be looking for additional funding. It may be to support M&A, it may be to just address some balance sheet issues or it may be just to provide some additional capital for the projects that are a bit more advanced. In terms of where our focus is, we have talked about focusing on production or projects that have a clear line of site to production. That is still our focus. However, we do -- that we do look across the spectrum a bit further, and we are aware that there may be opportunities earlier in the phase. And over time, it may be that we look to act on some of those. I think at the moment, much of our focus is on somewhat more advanced projects.

Right. Right. So more focused on the advanced project. Okay. Just the last one, just a follow-up. You mentioned the opportunity has shift. Do you mean shift to the secondary? Or you think more opportunities in the primary space?

I think we are beginning to see and we expect to see more opportunities in the primary space. I think that when you look back, certainly since late '20 when we were first established, debt markets have been pretty strong as has equity support for the resources sector. So it's been very competitive from a source of capital perspective.

And during that period over the last couple of years, we've seen a lot of people bring projects sort of through the natural phase of drilling through sort of early [ pre-feed fees DFS ] stages that now are approaching their FID sort of decision. And the good news for us, look, in terms of we think that we form a natural part of the debt equity and royalty sort of financing package, particularly now that debt is a little bit more expensive, equity is a little bit harder to access than it has been over the last sort of 24 months. And we think that we form a natural part of that sort of hybrid of debt-equity, that fundamental part of that financing package and quite compelling for operators because yes, we are very aligned with the operator in terms of they only pay us when their project goes well, and we're only very expensive if they go very, very well.

Our next question comes from the line of Peter O'Connor from Shaw and Partners.