For personal use only

Transcription

1 Dominic D Smith Vice President & Company Secretary Aurizon Holdings Limited ABN T F E CompanySecretary@aurizon.com.au W aurizon.com.au Level 17, 175 Eagle Street Brisbane QLD 4000 GPO Box 456 Brisbane QLD 4001 ASX Market Announcements ASX Limited 20 Bridge Street Sydney NSW February 2014 BY ELECTRONIC LODGEMENT Aurizon Half Year Report Analysts Presentation Please find attached for immediate release to the market the Half Year Report analysts presentation. The presentation will be delivered to an analyst briefing which will commence at 10.30am (AEDST). This briefing will be webcast and accessible via the Company s website: Yours faithfully Dominic D Smith VP & Company Secretary

2 Interim Results 2014 Lance Hockridge Managing Director & CEO Keith Neate Executive Vice President & CFO 17 February 2014

3 Important notice For personal use only No Reliance on this document This document was prepared by Aurizon Holdings Limited (ACN ) (referred to as Aurizon which includes its related bodies corporate). Whilst Aurizon has endeavoured to ensure the accuracy of the information contained in this document at the date of publication, it may contain information that has not been independently verified. Aurizon makes no representation or warranty as to the accuracy, completeness or reliability of any of the information contained in this document. Document is a summary only This document contains information in a summary form only and does not purport to be complete and is qualified in its entirety by, and should be read in conjunction with, all of the information which Aurizon files with the Australian Securities Exchange. Any information or opinions expressed in this document are subject to change without notice. Aurizon is not under any obligation to update or keep current the information contained within this document. Information contained in this document may have changed since its date of publication. No investment advice This document is not intended to be, and should not be considered to be, investment advice by Aurizon nor a recommendation to invest in Aurizon. The information provided in this document has been prepared for general informational purposes only without taking into account the recipient s investment objectives, financial circumstances, taxation position or particular needs. Each recipient to whom this document is made available must make its own independent assessment of Aurizon after making such investigations and taking such advice as it deems necessary. If the recipient is in any doubts about any of the information contained in this document, the recipient should obtain independent professional advice. No offer of securities Nothing in this presentation should be construed as a recommendation of or an offer to sell or a solicitation of an offer to buy or sell securities in Aurizon in any jurisdiction (including in the United States). This document is not a prospectus and it has not been reviewed or authorised by any regulatory authority in any jurisdiction. This document does not constitute an advertisement, invitation or document which contains an invitation to the public in any jurisdiction to enter into or offer to enter into an agreement to acquire, dispose of, subscribe for or underwrite securities in Aurizon. Forward-looking statements This document may include forward-looking statements which are not historical facts. Forward-looking statements are based on the current beliefs, assumptions, expectations, estimates and projections of Aurizon. These statements are not guarantees or predictions of future performance, and involve both known and unknown risks, uncertainties and other factors, many of which are beyond Aurizon s control. As a result, actual results or developments may differ materially from those expressed in the forward-looking statements contained in this document. Aurizon is not under any obligation to update these forward-looking statements to reflect events or circumstances that arise after publication. Past performance is not an indication of future performance. No liability To the maximum extent permitted by law in each relevant jurisdiction, Aurizon and its directors, officers, employees, agents, contractors, advisers and any other person associated with the preparation of this document, each expressly disclaims any liability, including without limitation any liability arising from fault or negligence, for any errors or misstatements in, or omissions from, this document or any direct, indirect or consequential loss howsoever arising from the use or reliance upon the whole or any part of this document or otherwise arising in connection with it. 2

4 Half year in review Lance Hockridge - MD & CEO

5 Key highlights 1H FY2014 For personal use only Safety 56% improvement in LTIFR from FY % improvement in MTIFR from FY2013 Earnings Underlying EBIT up 19% Dividends Underlying Operating ratio Growth Statutory EBIT down 25%, includes $197m asset impairment Interim dividend declared 8.0cps Franking 80%, payout ratio 65% based on underlying NPAT 78.4%, 2.6ppt improvement from 1H FY2013 On track for 75% in FY2015 Record Coal and Iron Ore haulage volumes in month of December; 2Q FY2014 and 1H FY2014 WIRP balloon loop completed with other stages on time and on budget Outlook FY2014 coal volumes increased to mt (vs. previous guidance of mt). Subject to no further material disruptions from the wet season (outside normal expectations), nor disruptions from industrial action 4

6 Safety performance, our target is Lost Time Injury Frequency Rate (LTIFR) 1 Medically Treated Injury Frequency Rate (MTIFR) 1 Lost time injuries per million person-hours worked Medically treated injuries per million person-hours worked For personal use only % improvement % % improvement % 3.63 FY2009 FY2010 FY2011 FY2012 FY2013 1H FY2014 FY2009 FY2010 FY2011 FY2012 FY2013 1H FY LTIFR& MTIFR includes employees only and does not include contractors 5

7 Financial highlights For personal use only $m FY2014 1H FY2013 Variance Total revenue 1,965 1,879 5% Coal volume uplift 13% EBITDA - Statutory (12%) - Underlying % EBIT - Statutory (25%) - Underlying % NPAT - Statutory (39%) - Underlying % EPS 2 (cps) - Statutory (32%) - Underlying % Interim dividend (cps) % ROIC 3 8.6% 7.5% 1.1ppt Gearing % 27.8% (0.1ppt) Iron Ore volume uplift 42% $222m of impairments and VRP 5 costs Opex/NTK 11% improvement Transformation benefits $59m Lower access revenue due to transitional tariffs Dividend payout ratio 65% underlying NPAT on 1. Underlying adjusts for one off items. Please refer to slide 12 for details 2. EPS calculated on weighted average number of shares on issue of 2,137,284,503 vs. 2,375,255,921 in 1H FY13 3. ROIC = Rolling Underlying EBIT / (Net Working Capital + Net PP&E + Assets Under Construction + Gross Intangible Assets) 4. Gearing = Net debt / (Net debt + equity) 5. VRP = voluntary redundancy program 6

8 Operating highlights Delivered 12% volume growth on essentially flat cost base 4 1H 1H 2H FY2014 FY2013 Variance fav/(adv) FY2013 Revenue / NTK 1 (A$/000 NTK) (8%) 55.5 Labour Costs / Revenue 26.9% 30.0% 3.1ppt 28% NTK/Employee (FTE) % 8.5 Opex/ NTK (A$/000 NTK) % 43.6 EBITDA Margin (Underlying) 34.4% 32.1% 2.3ppt 35% Underlying Operating Ratio % 81.0% 2.6ppt 78.6% NTK (bn) % 33.5 Tonnes (m) % People (FTE) 2 7,601 7,940 4% 7,851 Increasing contract utilisation and haul length Lower fixed transitional tariffs Lower Deficit Tonnage Charges Changed customer mix VRP benefits, 262 employees accepted VR in 1H FY14 VRP and Integrated Operating Plan (IOP) implementation delivering strong NTK growth more efficiently Diesel fuel rebate to be included as revenue in operating ratio calculation for the purposes of REM targets 5 1. NTK = Net Tonne Kilometre 2. FTE = The number of unique employee positions filled by all Aurizon employees (excluding contractors/consultants) as at period end. The NTK/Employee metric for the half year is annualised for comparative purposes and uses period-end FTE 3. Operating Ratio = 1 EBIT margin. Operating ratio and EBITDA and EBIT margins calculated using underlying revenue which excludes interest income ($1,959m in 1H FY2014 and $1,878m in 1H FY2013) 4. Cost base 1H FY2014 $1.29bn vs. 1H FY2013 $1.28bn (price escalation in 1H FY2014 $18m) 5. Operating ratio including diesel fuel rebate in revenue would be 78.9% (1H FY2014) and 81.5% for (1H FY2013) 7

9 We remain on track to deliver an Operating Ratio of 75% in respect of FY2015: For personal use only 75% Operating Ratio update 1H Operating Ratio % 1H FY2014 achieved $59m savings against FY2014 target of $90m: 1. Centralised Support costs target $100m by FY2015 Direct cost-outs of $17m for 1H FY people have accepted VR. Full year benefit, $18m, majority to be realised in 2H FY Operations productivity improvement target $130m+ by FY2015 Direct cost-outs of $42m for 1H FY2014 ~14% improvement of c/ntk for 1H FY people have accepted VR. Full year benefit, $10m, majority to be realised in 2H FY VR cost estimated to be $25m, with further $5m spent in respect of other initiatives 2H Operating Ratio % H FY2011 1H FY2012 1H FY2013 1H FY ppt -2.6ppt 4. FY2015 VR benefit expected to be $42m 2H FY2011 2H FY2012 2H FY2013 8

10 Operations transformation programs delivering a strong 1H FY2014 performance Metric Production People 1 For personal use only Operating expenses (c/ntk) 4 have improved by ~14% Transformation programs Integrated Operating Plan (IOP) Longer/denser trains Energy consumption Rollingstock maintenance Operations technology Fleet 2 Productivity & efficiency 1H FY2014 1H FY2013 1H Variance 2H FY2013 Net tonne kilometres (bn) % 33.5 Tonnes (m) % Full time equivalents 2 5,464 5, % 5,520 NTK/Employee (FTE) 1, % NTK/Active loco % 8.16 NTK/Active wagon % 0.35 Average Payload Coal (tonnes) 2 7,921 7, % 7,769 Turnaround time - CQCN 3 (hrs) % Fuel consumption (l/dgtk) % The NTK/Employee metric for the half year is annualised for operational purposes and uses monthly average FTE 2. Monthly average 3. CQCN = Central Queensland Coal Network 4. Operations costs base includes Coal, Iron Ore and Freight cost s (unless otherwise noted) but excludes Access, Electricity and Intermodal road solutions costs 9

11 For personal use only Network optimisation has supported record volumes in 1H FY2014 Network Operations Initiatives supporting throughput optimisation: Capital Renewals Program replacing life expired infrastructure supporting increased tonnages and velocity Speed restriction management through stronger supply chain collaboration - improving cycle time CY2013 was the best calendar year on record for CQCN delivering 6% more tonnes with 2% fewer trains than the last record year in CY2010 Highest tonnes ever for Newlands, Goonyella and Blackwater corridors Focus on payloads and DIFOT 1 (Delivered in Full On Time) Increased use of trackside performance monitoring equipment to improve performance and decrease faults that impact traffic e.g. 95 sets of points monitors installed in 2013 on key sets of points in the Network 1H FY2014 vs. 1H FY2013 Speed Restriction 2 Favourable/(adverse) Delays (>=15mins) 3 Favourable/(adverse) Day of Operations Losses (No. of train cancellations) Newlands 64% (66%) 4 (33%) 4 Goonyella 59% 25% 21% Blackwater 41% 40% 18% Moura (119%) 5 60% 4% 1. DIFOT - A combined measure of OTP (at the 3 main nodes, depot, mine, port), payload and sequencing (actual order of port arrival vs. scheduled order). Helps to provide an overall view of system performance (running, loading, performance to schedule), with the ability to drill down into focus areas that would increase performance 2. Speed restriction = is the weighted additional time to complete a scheduled path due to Network enforced speed restrictions. Speed restrictions are showing benefits from targeted maintenance and renewals. This is reflected in improved cycle times. 3. Delays = the difference between the scheduled time and the actual run time 4. Newlands performance metrics reflect an increase in the services traversing the GAPE 908 in 1H FY2014 vs. 253 in 1H FY2013 as well as an 83% increase in kilometres travelled. Delay minutes 1H FY2014 (67,841 mins) vs. 1H FY2013 (40,956mins) 5. Increase in speed restrictions in Moura following flooding in Feb/March of 2013 impacting 1H FY2014 performance. Metric demonstrates less than 2 minute increase in speed restrictions from 1H FY Please note: Metrics are for all operators on the Central Queensland Coal Network 10

12 Results analysis Keith Neate - EVP & CFO

13 Reconciliation Consolidated Underlying vs. Statutory earnings 1H 2H FY2014 FY2013 FY2013 Underlying EBIT Significant items Voluntary redundancy program (25) (88) (8) Stamp duty 27 Asset impairment (197) Statutory EBIT Net finance costs (53) (42) (61) Statutory profit before tax Income tax expense (41) (50) (85) Statutory NPAT Further VRP was carried out during the half, with 262 employees accepting the offer For Asset Impairment details see following slide 12

14 For personal use only Asset impairment - update Impairment of $197m (pre-tax), $138m (post-tax), covers two major areas: 1. Integrated Operating Plan - Rollingstock review Impairment of $147m (pre-tax), in respect of excess rollingstock Impact represents approximately 4% of $3.3b rollingstock value as at 31 December 2013 Fleet disposal program progressing Reduced maintenance spend and depreciation expense average benefit of some $20m per annum over the next 5 years 2. Strategic Projects Review Impairment of $50m (pre-tax) covering mainly: Surat Basin Rail (SBR) Joint Venture costs given announcement of termination of the Joint Venture in November 2013 following recent announcement by Glencore that its Wandoan Project is being put on hold Costs for alternative Galilee Basin rail developments expensed following submission of revised corridor proposal and Environment Impact Study (EIS) in August 2013 by alternative developers, together with consolidation of our own corridor with GVK Hancock, announced 25 November Management remuneration will be based on profit outcomes after inclusion of costs in respect of the VRP and the asset impairments (both rollingstock and strategic projects) 13

15 For personal use only 1H FY2014 vs. 1H FY2013 underlying EBIT bridge GAPE contracted tonnes ramp-up - $44m Volume growth: o Iron Ore - $23m o Coal - $13m o Intermodal - $20m o Bulk ($11m) All increases are net of access and fuel 89 Decrease in access revenue ($24m) Increase in maintenance costs to improve network efficiency ($13m) Coal Revenue Quality: o $35m improved rates o $11m lower ToP 1 expense Freight lower contracted TSC 2 payments 59 Incremental volume related costs (ex access and fuel) for Intermodal & Iron Ore ($27m) Labour CPI escalation ($18m) Increase in project costs ($13m) Fuel price - ($10m) 5 67 VRP benefit - $43m Lower support costs (excluding labour) - $11m Reduced fuel consumption - $5m H FY2013 Revenue Growth Revenue Quality Network Transitional Tariffs Transformation Benefits Transformation Costs Other 1H FY ToP Take-or Pay 2. TSC Transport Services Contracts 14

16 For personal use only 1H FY2014 vs. 2H FY2013 underlying EBIT bridge GAPE contracted tonnes ramp-up - $38m Volume growth: Intermodal new contracts - $39m Coal - $18m All variances are net of access and fuel 92 Increase in access revenue (ex. GAPE) $1m Increase in maintenance costs to improve network efficiency ($14m) Coal Revenue Quality: o$34m improved rates o($10m) higher ToP 1 expense Freight contracted TSC 2 payments $3m 32 Major items include: Incremental volume related costs (ex access and fuel) ($38m) Increase in project costs ($18m) Labour - CPI escalation ($15m) Underlying diesel fuel price ($11m) Asset sales decrease ($11m) Rollingstock maintenance ($10m) VRP benefit - $23m Lower support costs (excluding labour) - $7m Reduced fuel consumption - $2m H FY2013 Revenue Growth Revenue Quality Network Transitional Tariffs Transformation Benefits Transformation Costs Other 1H FY ToP Take-or Pay 2. TSC Transport Services Contracts 15

17 Underlying EBIT by segment 1H 1H 2H Variance $m FY2014 FY fav/(adv) FY2013 Network (2%) 196 Coal % 178 Iron Ore % 52 Freight % 18 Unallocated 2 (51) (57) 11% (46) Key drivers of Group performance: o Fixed transitional revenue for CQCN with increased network maintenance costs to support record volume throughput o Coal volume uplift and productivity improvements o Iron ore contract utilisation increased, nearing full contractual capacity o Freight cost reductions offsetting volume decline, start-up costs on new Intermodal contracts Group % 398 o Unallocated reflects lower corporate services spend 1. Historical financials have been re-stated to reflect the internal restructure of Aurizon Network refer ASX release 13 January Unallocated includes costs which cannot be directly allocated to the business functions or distinguished between each of the segments and as such are reported as Unallocated e.g. Finance, Strategy, Business Development, Human Resources and Enterprise Services costs 16

18 Network 1H 1H 2H FY2014 FY Variance fav/(adv) FY2013 EBIT - Underlying ($m) (2%) 196 Tonnes (m) % 92.3 NTK (bn) % 22.6 Access revenue 1 /NTK ($/000 NTK) (15%) 19.9 Maintenance 2 /NTK ($/000 NTK) % 2.5 Opex 3 /NTK ($/000 NTK) % 12.7 Goonyella and Blackwater systems railing at record levels & GAPE ramp-up Fixed transitional revenue for the CQCN with increased maintenance costs to improve network efficiency Full year impact of fixed transitional revenue for the CQCN will be ($60m) vs. FY2013 Underlying Operating Ratio 58.3% 55.6% (2.7ppt) 59.3% 1. Amount received for access to the Network infrastructure under the Access Agreement (inclusive of GAPE) 2. Maintenance costs exclude flood repairs, mechanised ballast undercutting, derailment repairs and electric traction maintenance 3. Operating expenses plus depreciation and amortisation 4. Historical financials have been re-stated to reflect the internal restructure of Aurizon Network refer ASX release 13 January

19 Coal 1H 1H Variance 2H FY2014 FY2013 fav/(adv) FY2013 EBIT Underlying ($m) % 178 Tonnes hauled (m) - QLD % NSW % Total % 96.4 NTK (bn) - QLD % NSW % Total % 21.7 Opex 1 /NTK ($/000 NTK) % 34.8 Strong production and export demand for both metallurgical and thermal coal Record December, Q2 FY2014 and 1H FY2014 volumes NTK growth of 16% reflects volume growth from customers with a longer average haul in both QLD and NSW Opex/NTK decreased 16% due to significant improvement in productivity Underlying Operating Ratio 80.5% 84.7% 4.2ppt 80.9% 1. Operating expenses plus depreciation and amortisation 18

20 Coal (continued) 1H 1H Variance 2H FY2014 FY2013 fav/(adv) FY2013 Above Rail Revenue/NTK ($/000 NTK) (5%) 24.8 Below Rail Revenue/NTK ($/000 NTK) (20%) 18.0 Volumes under New Form Contracts 52% 41% 11ppt 43% Above Rail Revenue/Gross Contracted NTK % 19.7 Contract utilisation 2 94% 79% 15ppt 79% Average haul length (Km) % 225 Above Rail Revenue/NTK: o $26m decrease in DTC o Volume mix - ~50% of volume growth from a major customer operating under a lower yielding legacy contract o Average haul length increased 3% to 232km o Increasing utilisation of new form contracts o Below Rail Revenue/NTK decreased due to fixed revenue under transitional tariffs 1. Revenue/Gross Contracted NTKs - gross contracted tonnages multiplied by the loaded distances (calculated on a contract by contract basis) 2. Contract utilisation = Total volumes hauled as a percentage of total volumes contracted 3. DTC Deficit Tonnage Charges 1H FY2014 $6.9m vs. 1H FY2013 $33.2m 19

21 Iron Ore 1H 1H Variance 2H FY2014 FY2013 fav/(adv) FY2013 EBIT - Underlying ($m) % 52 Tonnes hauled (m) % 14.1 Contract Utilisation 2 100% 84% 16ppt 95% NTK (bn) % 5.5 Revenue/NTK ($/000 NTK) (11%) 34.4 Opex 1 /NTK ($/000 NTK) % 24.9 Underlying Operating Ratio 73.7% 73.2% (0.5ppt) 72.5% Contract utilisation increased, at full contractual capacity and driving reduction in unit costs As previously noted, Mt Gibson s 3mtpa Tallering Peak contract to end 31 July 2014 (end of mine life) which will see contractual capacity decline to ~27mtpa in FY2015 Volumes may decline further with Mineral Resources likely deciding to manage its own rail haulage for ~4mtpa from 1 September 2014 Average haul length (Km) (10%) Operating expenses plus depreciation and amortisation 2. Volumes hauled as a percentage of volumes contracted. Based on contractual level of 25mt in 1H FY2013 and 30mt in 2H FY2013 and 1H FY

22 Freight (Freight includes Other Bulk and Intermodal businesses) 1H 1H Variance 2H FY2014 FY2013 fav/(adv) FY2013 EBIT - Underlying ($m) % 18 Tonnes hauled (m) (5%) 23.4 NTK (bn) (3%) 6.4 Revenue/NTK ($/000 NTK) % 80.6 Opex 1 /NTK ($/000 NTK) % 77.8 Bulk volumes down 7% Intermodal volumes up 14% Significant start-up costs incurred to service new customer contracts in Intermodal Cascading of Integrated Operating Plan initiatives from coal, more benefits to flow in 2H FY2014 Underlying Operating Ratio 96.4% 99.1% 2.7ppt 96.5% 1. Operating expense plus depreciation and amortisation 21

23 Balance sheet strength continues As at ($m) 31 December June 2013 Total current assets Property, plant & equipment 9,460 9,473 Other non-current assets Total non current assets 9,571 9,586 Total assets 10,439 10,519 Total current liabilities (664) (791) Total borrowings (2,569) (2,479) Reduction in trade and other receivables 1H FY2014 Capex spend offset by $197m asset impairment and depreciation $525m Medium Term Notes issued October 2013 Other non-current liabilities (802) (753) Total liabilities (4,035) (4,023) Net assets 6,404 6,496 22

24 Debt summary For personal use only $3.625bn unsecured Group facilities Aurizon Group $325m debt maturity profile ($m) as at 31 December 2013 $0.6bn at Aurizon Group level $0.325bn drawn as at 31 December 2013 $2.5bn at Aurizon Network level $1.750bn drawn as at 31 December 2013 Aurizon Network issued debut 7 year A$525 million Medium Term Note in October 2013 coupon of 5.75% per annum proceeds used to repay existing bank debt $0.25bn working capital facility split between both levels No change to stable credit rating BBB+/Baa1 at both Group and Network Liquidity at 31 December 2013 $1.35bn (undrawn facility + cash) ,500 1, FY14 FY FY16 Aurizon Network $2.275bn debt maturity profile ($m) as at 31 December ,200 FY17 25 FY18 1, FY19 FY20 FY FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Bank Debt Facility Drawn-down Debt A$MTN 23

25 Cash flow summary $m 1H FY2014 1H FY2013 EBITDA - statutory Decrease in trade receivables due to tighter credit control Working capital & Other movement 200 (130) Cash from operations Net finance costs (47) (39) Income taxes paid (84) (17) Net operating cash flows Net cash (outflow) from investing activities (418) (472) Net proceeds from borrowings 82 1,235 Payment for share buyback and share based payments (26) (1,061) Dividends paid to Company shareholders (175) (112) Net cash inflow from financing activities (119) 62 Net (decrease) increase in cash (16) (83) Non-cash impairments of $197m Increase in taxes paid reflects increased profitability Principally, Wiggins Island Rail Project Increased dividend payout ratio from 50% to 65% Free cash inflow 1 in 1H FY2014 of $103m vs. cash outflow of ($144m) 1H FY2013 Closing cash position Free cash flow = Cash flow from operations less investing cash flow 24

26 Current committed capital expenditure profile materially reduced by FY2016 Committed growth vs. sustaining capex 1,2 ($m) 1,370 1, FY2011 Growth 1, FY2012 FY2013 Sustaining Capex ~900 ~550 ~350 FY2014(f) ~1,000 ~600 ~400 FY2015(f) ~500 ~150 ~350 FY2016(f) 1H FY2014 capex $417m (Growth $215m, Sustaining $202m) Growth capex expected to decline in FY2016 following the completion of WIRP 3, Rolleston Electrification, Hay Point and Whitehaven rollingstock Future sustaining capex: o o Expected to be approximately $350m p.a. over the next three years (excluding capitalised interest) Includes one-off purchases of new high capacity Specialised Track Services rail grinding and ballast cleaning equipment over the next two years 1. Includes capitalised interest (1H FY2014: $15.1m, 2H FY2013: $12.6m, 1H FY2013: $10.6m) 2. FY2011 adjusted to include the ballast capitalisation of $31m in sustaining capex 3. WIRP = Wiggins Island Rail Project 25

27 Other business update Lance Hockridge - MD & CEO

28 Enterprise Agreements renegotiation update New South Wales Current enterprise agreements (EAs) expired 31 st October 2013 (representing c. 200 coal staff in NSW) The unions have commenced the process for protected industrial action given no resolution on key issues The unions have received approval from Fair Work Australia for a ballot, the unions are now approaching their members for a ballot on whether a strike is to take place Require 50% plus one to proceed, timing expected mid-february; unions are required to provide 72 hours notification prior to any industrial action Queensland Bargaining continues to progress slowly. Fair Work Australia is assisting negotiations Have agreed with unions to a bargaining timetable of 3 days/week to conclude end of March 2014 Unions seek maintenance of status quo. Aurizon is seeking major reform Aurizon will continue to transform and restructure the business irrespective of EA timeline 27

29 Network Regulation update UT4 Transitional T iff For personal use only SUFA 2 Aurizon Network will continue to work with stakeholders and the QCA to support the regulatory process and timeline. A draft determination on UT4 is expected to be published by the QCA in June 2014 and a final determination is expected in December 2014 The scheduled commencement date for the UT4 document is expected to be 1 January 2015, with the pricing arrangements to be backdated to 1 July 2013 The QCA expected to publish a draft position paper on pricing and revenue matters in March 2014 As UT4 is unlikely to be finalised before the end of the FY2014 financial year, Aurizon Network will develop a Draft Amended Access Undertaking (DAAU) to further extend UT3 to the earlier of 30 June 2015 or the QCA s final determination on UT4. This will confirm final Reference Tariffs for FY2014 and apply transitional Reference Tariffs for FY2015 The transitional Reference Tariffs recover a total Maximum Allowable Revenue (MAR) for FY2014 of $739m, inclusive of the FY2012 revenue cap (including interest) of circa $17m, with forecast volumes of 186mt. Both the MAR and volumes are exclusive of the Goonyella to Abbot Point Expansion System (GAPE) 1 Submissions on the DAAU were provided by 30 August 2013 with a further update by 13 December 2013 The QCA has considered both Aurizon Network s proposed SUFA and stakeholder submissions as well as obtained separate commercial and legal advice, yet several issues remain to be resolved In order to further progress the QCA s assessment of the SUFA the QCA has requested further discussion on possible solutions AT5 T iff 3 On 21 November 2013 the QCA published a draft decision proposing to not approve the DAAU Aurizon Network elected to withdraw the DAAU on 13 January 2014, to focus, along with customers, on a UT4 resolution 1. GAPE has different contractual obligations; a DAAU confirming a separate transitional MAR and volume for FY2014 was approved in September SUFA Standard User Funding Agreement would provide customers with an alternative funding mechanism for CQCN expansions 3. AT5 Tariffs electrification tariffs - 24 April 2013 Aurizon Network submitted the 2013 Blackwater (AT5) Draft Amending Access Undertaking to the QCA 28

30 China s long-term commodity demand fundamentals remain strong China s economic growth GDP growth rate (%) and additional activity generated GDP growth rate % IMF forecast Incremental GDP growth (USD 2012$) China s current growth rate of 7-8% is more sustainable yet will deliver around as much or more new activity each year as when the growth rate was at its double-digit peaks (>10%) a few years ago Put another way, if China s economy were to grow 7%pa by 2022 it will have doubled in size compared with 2012 China s economic growth continues to underpin increased dependence on imported raw materials to meet its growing needs reflected in record high exports of Australian metallurgical and thermal coal (88mt) and iron ore (441mt) to China in calendar Real GDP growth % (left axis) Additional economic activity, USD 2012$ (right axis) Source: CEIC, IMF, ABS, Aurizon analysis 29 29

31 For personal use only Consumption from emerging economies to underpin global energy demand growth Electricity consumption per capita, kwh per capita Should China s per capita consumption reach Germany s current level, China s national electricity consumption would be more than 2.5 times greater than at present 684 India Population, million people 1,221m 3,298 China 1,344m 7,080 Germany 7,847 Japan 13,246 United States 82m 128m 312m India China Germany Japan United States Source: World Bank

32 Coal is the most cost-effective source of energy and remains a core component of the energy mix Electricity Generating Costs in 2020 (International Energy Agency New Policy Scenario) For personal use only $ per MWh ($2010) $ per MWh ($2010) China Coal (1) India Gas (2) Nuclear Wind onshore Relative coal cost Relative coal cost 0 Coal (1) Gas (2) Nuclear Wind onshore Carbon price Fuel Operation and maintenance Capital 1. Supercritical coal-fired it is forecast that the most common coal technology used for new power plants will be super-critical coal-fired out to Called Supercritical as steam is generated at a pressure above the critical point of water 2. Combined Cycle Gas Turbine most common form of gas-fired power plant 3. Source: IEA World Energy Outlook

33 Asia's ongoing urbanisation and income growth will drive increased electricity demand, underpinning coal volume growth 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Non-OECD Asia Coal Demand (Million tonnes of standard coal equivalent 1 ) 3,356 3,974 4, % % share of total population Drivers of Demand Increased access to electricity in developing countries. Example: 306 million people do not have access to electricity in India (25% of population) Rising incomes driving increased per capita energy consumption Urban residents as % of total population f 2050f India China Japan US 1. A tonne of coal equivalent is defined as 7 million kilocalories. 1 Mt coal equivalent = 0.7 Mt oil equivalent Source: International Energy Agency World Energy Outlook 2013 (New Policy Scenario) 32 32

34 Strategy Delivering improved shareholder value in two ways: For personal use only 1. Reforming the business to achieve the 75% Operating Ratio target (or 25% EBIT margin) in respect of FY2015, and thereafter targeting further improvements to achieve world class levels; and 2. Securing further growth opportunities to enhance longer term earnings 33

35 Investment criteria Strategic growth initiatives For personal use only Alignment and fit to enterprise strategy, objectives and capabilities - Providing appropriate portfolio exposure, momentum and opportunity Return risk vs. reward/internal hurdles and timing - Providing appropriate and timely support to our value creation efforts Risk strategic, operational, financial, legal and regulatory - Providing appropriate and manageable exposures 34

36 For personal use only Opportunities unfold post completion of current committed capital projects in FY2016 1,370 1, ~900 ~1,000 ~ Growth Capital Management Combination PLUS Richer revenue mix 1 Continued drive to reduce OR AND Not growth constrained Sustaining capex of ~$350m/pa and other capex to be advised FY2011 FY2012 FY2013 FY2014f FY2015f FY2016f FY2017f FY2018f FY2019f FY2020f Capital Expenditure 1. Based on duration of FY2013 coal contract renewals 35

37 Outlook & summary Lance Hockridge MD & CEO

38 FY2014 Outlook Our view on the medium to long term macroeconomic environment remains positive and we will continue to maintain the momentum from our transformation and reform initiatives The strong coal haulage volumes seen in 1H FY2014 have continued in January and early February, therefore our expectations for FY2014 have increased to mt (vs. previous guidance of mt). This includes recent weather events in Queensland which impacted coal haulage by 1.5mt, an estimated loss of $5m in revenue (as of 11 February 2014) The revised guidance is subject to no further material disruptions from the wet season (outside normal expectations), nor disruptions from industrial action 37

39 Summary Strong underlying result driven by: Volume growth; and Transformation benefits 75% Operating Ratio in respect of FY2015 on track Integrated Operating Plan implementation delivering productivity and efficiency improvements Network optimisation initiatives supporting the delivery of record CQCN volumes Trajectory also remains on track for 73% Operating Ratio in respect of FY2016 Enterprise Agreements renegotiations Remain outstanding We will however continue to transform and restructure our business I would like to thank all our employees for their continued efforts and support in driving change in our company 38

40 Questions & Answers

41 Interim Results 2014 Lance Hockridge Managing Director & CEO Keith Neate Executive Vice President & CFO 17 February 2014

42 Definitions Metric Access Revenue DOOL Free Cash Flow GAPE Gearing Gross Contracted NTKs Ktpa Loaded Distance Mtpa NTK On Time Performance Operating Ratio Opex Planning alterations Description Amount received for access to the Network infrastructure under the Access Agreement Difference between planned runs vs. actual runs on a 48hr schedule Cash flow from operations less investing cash flow Goonyella to Abbot Point Expansion Net debt/net debt + equity Gross contracted tonnages multiplied by the loaded distances (calculated on a contract by contract basis) Thousand tonnes per annum The distance from the customer s mine load out to the unload facility (being either an export port terminal or domestic customer facility e.g. Power station Million tonnes per annum Net Tonnages x Kilometres Departure/arrival within +/-15 mins of scheduled time Operating ratio defined as (1 - EBIT margin) Operating expense including depreciation and amortisation Capture cancellations and diversions made to scheduled services from 48hrs prior to running, up to and including the Day of Operation ROIC WACC WIRP WSRT Rolling 12-month underlying EBIT/Net working capital + Net PP&E + AUC + Gross Intangible Assets Weighted average cost of capital Wiggins Island Rail Project Speed Restriction delay based on the Section Run Time and weighted by the percentage of the total traffic for a system travelling over the Speed Restriction 41

43 Additional interim results financial information

44 For personal use only Accounting changes included in 1H FY2014 Financial Statements Comparison to 1H FY2013 Financial Statements Consolidated Income Statement Interest income was disclosed as a separate line item in the 1H FY2013 half-year accounts. In the 1H FY2014 half year accounts it is reported in Other Income which is consistent with the FY2013 and FY2012 Financial Statements. Please note: interest income is excluded from the operating ratio calculation in all cases Comparison to FY2013 Financial Statements Network Segment has been adjusted to reflect the internal restructure of Aurizon Network that occurred on 1 July 2013 (linked to the refinancing of the syndicated debt facilities that occurred on 27 June 2013) Two divisions (previously included within the Network segment) were transferred to Aurizon Operations: Specialised Track Services (STS) and Engineering & Project Delivery (E&PD) The comparative segment note disclosures (HY2012/FY2012) and (HY2013/FY2013) for the Aurizon Network segment have been restated in accordance with the accounting standards to exclude these two divisions An adjustment was made to reclassify Enterprise Real Estate costs as a cost transfer from the central support function and not classified as internal other revenue to be consistent with all other internal cost transfers. This has no impact on Group Revenue, Group EBIT or the Group Operating Ratio as eliminated on consolidation Refer ASX Announcement 13 January

45 Queensland 1H FY2014 Take-or-Pay 1 Network and Coal $m Coal Network Consolidated Income Coal Customers Network Customers Prior Year Adjustments (0.6) (0.6) Expense Aurizon Network (3.7) (3.7) Queensland Rail (1.3) (1.3) Prior Year Adjustments (2.2) (2.2) EBIT increase/(decrease) (1.3) Revenue Protection mechanisms exist where volumes hauled are less than regulatory volumes used to set reference tariffs Where actual Network revenues earned are less than the levels used in setting the relevant Reference Tariff, the shortfall is predominantly recovered either through Take-or-Pay charges or the Revenue Cap mechanism Take-or-Pay charges are levied on the access holders, with charges based on contracted train service entitlements set out in the Access Agreements New form contracts enable the above rail operator to pass this charge through to the customer The weaker contractual protection under old form contracts exposes Aurizon s above rail business in situations where Take-or- Pay charges levied by Aurizon Network cannot be passed through to the end customer Refer slide 50 for the 1H FY2013 and 2H FY2013 comparison 1. Take-or-pay charge is levied by Aurizon Network to above rail operators (Aurizon and Pacific National) and GAPE access holders 2. Generally, GAPE access entitlements are contracted directly with the GAPE access holders NOT the above rail operator i.e. Aurizon Network charges the miners directly for GAPE access tariffs 44

46 Network profit & loss - underlying 1H 1H 2H $m FY2014 FY Variance fav/(adv) FY2013 Tonnes (mt) % 92.3 Revenue - Access % Services 8 12 (33%) 14 - Other % 17 Total Revenue % 482 Operating costs (206) (183) (13%) (192) EBITDA % 290 EBITDA margin 60.5% 63.3% (2.8ppt) 60.2% Depreciation and amortisation (98) (94) (4%) (94) EBIT (2%) 196 Underlying Operating ratio 58.3% 55.6% (2.7ppt) 59.3% EBIT decrease reflects the following: o Revenue - Increased Access Revenue from GAPE ramp-up offsetting reduction in regulated revenues for the CQCN o Operating Costs - materially increased volumes resulted in higher Energy Costs and higher maintenance consumables spend to enable improvements in Network performance and reliability o With access revenues for the CQCN fixed for the year, the increased maintenance costs will not be recovered until UT4 tariffs are in place o Depreciation increased due to accelerated Asset Maintenance Renewals and Ballast undercutting 1. Historical financials have been re-stated to reflect the internal restructure of Aurizon Network refer ASX release 13 January

47 Network revenue cap adjustments For personal use only Year AT 2-4 (diesel tariff) $m AT 5 (electric tariff) $m Total (1) $m (7.4) (0.2) A further revenue protection mechanism is the revenue cap adjustment. Actual Network revenue is compared to the regulatory determination, and under/over recoveries are adjusted in the Reference Tariffs in the second financial year subsequent The FY2013 revenue cap submission was submitted to the QCA for consideration in September 2013 and has not as yet been approved by the QCA The FY2013 submission included GAPE (regulated component only) for FY2012 +$0.7m which was not included in the FY2012 Revenue Cap figure at the time due to GAPE tariffs not being approved Take or Pay charges, where applicable are included within Total Actual Revenue under the Revenue Cap Mechanism Note: AT = Access Tariff Revenue Adjustment Amount 1. Revenue cap recovery (including interest) subject to volumes railed 2. Return to access holders. Please note that these numbers were adjusted to include the UT3 cost of capital uplift 3. FY2013 does not include a cost of capital until approved by the QCA 4. Revenue Cap for FY13 does not include a cost of capital adjustment or the Revenue Cap for GAPE FY12 $0.7m included within the FY13 submission 46

48 Network coal tonnages by system in Central Queensland Coal Network (CQCN) 1H 1H 2H mt FY2014 FY2013 Variance FY2013 Newlands (13%) 7.5 Goonyella % 49.9 Blackwater % 27.5 Moura % 4.6 GAPE % 2.8 Total % Note: table represents tonnes hauled on the CQCN by all operators 2. Total does not add due to rounding 47

49 Coal profit & loss - underlying 1H 1H Variance 2H FY2014 FY2013 fav/(adv) FY2013 $m EBIT improvement reflects the following: Revenue - Above Rail % 539 o $29m (3%) increase in revenue - Below Rail (6%) 391 driven from 13% volume growth, however margins were impacted - Other 1 4 (75%) 4 by: Total Revenue % 934 Operating costs (683) (701) 3% (668) EBITDA % 266 EBITDA margin 28.7% 24.6% 4.1ppt 28.5% Depreciation and amortisation (88) (86) (2%) (88) EBIT % 178 Underlying Operating ratio 80.5% 84.7% 4.2ppt 80.9% $26m decrease in DTC 1 A major customer operating under a lower yielding legacy contract contributing to ~50% of volume growth Average haul length increased 3% to 232km longer hauls earning lower revenue per NTK Increased levels of contract utilisation for customers operating under new form contracts 1. DTC Deficit Tonnage Charges 48

50 Coal haulage tonnages by system 1H 1H Variance 2H mt FY2014 FY2013 (%) FY2013 Queensland Newlands (1%) 8.7 Goonyella % 34.7 Blackwater % 25.1 Moura % 4.6 West Moreton % 4.3 Total Qld % 77.4 New South Wales Hunter Valley % 19.0 Total Coal %

51 Coal Take-or-Pay accrual $m 1H 2H FY2014 FY2013 FY2013 Take-or-pay charge 1 (Expense) (5.0) (19.0) 3.0 Take-or Pay passed through to customers (Revenue) Adjustments 2 relating to earlier years (2.2) 0.0 (1.8) Net EBIT impact (1.3) (12.5) 8.6 Lower take-or-pay charges due to increased volumes Higher pass through given move to new form contracts Resulting non pass-through take-or-pay improved by $11m 1. Principally from Aurizon Network, however some relates to QR for the West-Moreton system and ARTC in the Hunter Valley (prior to FY2012) 2. Adjustments occur as the take-or-pay accruals are based on estimates, which are trued up in the following period 50

52 Queensland coal - Deficit tonnage charges (DTC) For personal use only $m 1H 1 2H 1 FY A form of protection for the above rail coal business when actual tonnages are less than contracted Usually seen in old form or legacy contracts Annual charge to the customer after the contract year has finished (i.e. contracts ending 30 June will have DTC levied in the first half of the subsequent financial year) Only levied if haulage is below a pre-determined level for at least five of the twelve months for the contract year Generally set at a low proportion of the haulage freight rate (i.e %) 1. Refers to the period in which the income was earned, not the period to which it related which is the previous financial year 51

53 Iron Ore profit & loss - underlying 1H 1H Variance 2H $m FY2014 FY2013 fav/(adv) FY2013 Revenue % 189 Operating costs (120) (105) (14%) (118) EBITDA % 71 EBITDA margin 36.8% 37.5% (0.7ppt) 37.6% Depreciation and amortisation (20) (18) (11%) (19) EBIT % 52 Underlying Operating ratio 73.7% 73.2% (0.5ppt) 72.5% EBIT improvement reflects the following: o $22m (13%) increase in revenue on 42% increase in volumes; reflects the impact of capacity charges arising in 1H FY2013 for volumes contracted but not railed o $15m (14%) incremental increase in operating costs to support volumes o $2m (11%) increase in depreciation expense reflects asset growth associated with higher volumes 52

54 Freight profit & loss underlying (Freight includes Other Bulk and Intermodal businesses) 1H 1H Variance 2H ($m) FY2014 FY2013 fav/(adv) FY2013 Revenue (3%) 516 Operating costs (501) (534) 6% (468) EBITDA % 48 EBITDA margin 8.9% 5.6% 3.3ppt 9.3% Depreciation and amortisation (29) (27) (7%) (30) EBIT % 18 Underlying Operating ratio 96.4% 99.1% 2.7ppt 96.5% EBIT improvement reflects the following: o A $16m (3%) decrease in revenue largely due to $18m decreased TSC 1 revenue and CBH 2 contract loss impact of $12m in 1H FY2013. This was partially offset by new contracts and increased volumes in Intermodal - $20m increase o Decreased operating costs more than offset decreased revenue, driven by bulk volume reduction, VRP and lower maintenance spend o Increased Intermodal costs principally to support start-up of new contracts 1. TSC = Transport Services Contract 2. CBH = Consolidated Bulk Handling 53

55 Dividend history Payment Date Amount per share Franking FY2014 Interim 28 March c 80% FY2013 Final 23 September c 90% FY2013 Interim 27 March c 70% FY2012 Final 28 September c 0% FY2012 Interim 30 April c 0% FY2011 Final 30 September c 0% 54

56 Key operations performance metrics are showing continuous improvement Throughput net tonnes ( 000) 1, 2 Turnaround Time hrs (CQCN) 2 24,000 23,000 1H FY2014 record coal volumes H FY2014 record average TAT 22, , ,000 0 H1 F20Y13 H2 FY2013 H1 FY2014 H1 FY2013 H2 FY2013 H1 FY Payload Coal South tonnes/train (CQ Coal) 2 Payload Coal North tonnes/train (CQ Coal) 2 7,600 7,500 7,400 7,300 7,200 9,300 9,200 9,100 9,000 8,900 8,800 8, H1 FY2013 H2 FY2013 H1 FY2014 H1 FY2013 H2 FY2013 H1 FY2014 1H FY2014 record average payloads 1. Represents Coal and Bulk (including Iron Ore), excluding overheads and Intermodal 2. Indicators for Operations are calculated as rolling 12 month averages, percentages calculated from end of H1 FY13 to H1 FY14 (using rolling 12 month average) 55

57 Key operations performance metrics are showing continuous improvement (continued) Fuel consumption Litres/dGTK1,4 FTE productivity NTK/FTE 2, H FY2014 record fuel consumption H FY2014 record FTE productivity 0.00 H1 FY2013 H2 FY2013 H1 FY H1 FY2013 H2 FY2013 H1 FY2014 Wagon utilisation NTK/wagon 3,4 ( 000) Loco utilisation NTK/loco 3,4 ( 000) 400 9,000 8, ,000 7, , H1 FY2013 H2 FY2013 H1 FY2014 H1 FY2013 H2 FY2013 H1 FY2014 1H FY2014 record asset utilisation 1. Represents Coal, Bulk (including Iron ore) and Intermodal 2. Represents Coal, Bulk (including Iron ore) and Intermodal, excluding Engineering & Project Delivery (E&PD) 3. Includes all Aurizon owned fleet (e.g. Coal, Bulk, Intermodal and Iron Ore), excluding stored assets 4. Indicators for Operations are calculated as rolling 12 month averages, percentages calculated from end of 1H FY2013 to 1H FY2014 (using rolling 12 month average) 56

58 Operations transformation programs continuing in 2H FY2014 Area Example Fuel efficiency Asset efficiency (mobile) Driver Advice System (DAS) Regenerative braking North Coast Line long trains Train service consolidation Rollingstock maintenance standards AZJ has driven significant fixed and variable cost improvement with further improvements to come, e.g. - Fleet changes - Reducing system variability - FMT 1 Asset efficiency (fixed) Wayside condition monitoring On train maintenance Track maintenance efficiency Corridor optimisation Mt Isa efficiency improvements (NW Qld) Fleet plan Rollingstock disposal program 1. FMT = Freight Management Transformation program 57

59 contracts in FY2013 onlycoal For personal use Aurizon s secured circa 120mtpa in New Form Customer Tonnes (p.a.) Date Announced Ensham Up to 5.5 mtpa March 2013 Glencore 14.6 mtpa March 2013 BMA/BMC Up to 65 mtpa March 2013 Contract Duration 11 years 9 months to 31 December years - Earliest of Dec 2014 or WICET commencement Up to 12 years July 2016 (Goonyella) July 2015 (Blackwater) Whitehaven Up to 16 mtpa Dec years from July 2014 (approx) Rio Tinto (QLD Coal) Cockatoo Coal Jellinbah Group Up to 12 mtpa Dec 2012 Up to 3.5 mtpa July 2012 Up to 4 mtpa July years July 2013 to June years from WICET commencement 10 years from July 2012 to June 2022 Description Renewal of contract for the transport of coal from Ensham mine Renewal and expansion of tonnes from Rolleston mine Renewed 100% of tendered tonnes in Blackwater and Goonyella systems New contract to expand Aurizon s footprint in NSW and Gunnedah basin Renewal of Clermont to Dalrymple Bay Coal Terminal contract New long-term haulage contract for the transport of coal from Baralaba and Wonbindi mines to the Wiggins Island Coal Export Terminal (WICET) New long-term haulage contract for the transport of coal from Lake Vermont mine 58

60 For personal use only Coal Contracts Old Form vs. New Form Old form legacy haulage coal contracts Characteristics of new form coal contracts Typically reflect a specified volume of product of even railings in each year Contracts are typically medium to long term (five to 10 years) The majority of old form contracts included limited ability to pass through Take-or-Pay levied by Aurizon Network, with varying application thresholds and varying rates Above rail protection through Deficit Tonnage Charges (DTC) paid annually at 30-40% of freight rate if customer order target missed for at least 5 months Tailored service offers are provided to allow customers choice to best meet volume fluctuations Performance based contracts with KPIs such as on time delivery, consist configuration and train cancellations. Gain / pain share for Aurizon s performance with penalties for under performance and upside for exceeding performance targets Sharing risks with customers through pricing: Monthly capacity charge protection at 60-80% Third party supply chain performance Volume risk 59

61 Coal operations Major rail haulage operators State/Region Aurizon Annualised Above Rail Contract Volumes (Million tonnes per annum) 1 Aurizon Asciano (Pacific National) X-Rail (Glencore Xstrata/Freightliner) Southern Short Haul (SSR) Major Aurizon Coal Customers QLD, NSW NSW, QLD NSW NSW Changes from FY2013 results: Closure of Peabody s Wilkie Creek Temporary shut down of Glencore s Collinsville Delay to Whitehaven s Maules Creek ramp-up Anglo BHP Billiton BHP Billiton Mitsubishi Alliance (BMA) New Hope Peabody Rio Tinto Notes: The existing Aurizon contracted tonnes include nominations, options or other uncertainty that have the potential to cause variance in our 'contracted' tonnes Transfers are often not 1 for 1 and this will influence Aurizon total contract tonnes Ensham Wesfarmers Contracted tonnages (excludes any potential wins) Glencore Xstrata Yancoal FY2014 FY2015 FY2016 Jellinbah Vale Queensland New South Wales 60

62 Revenue protection and commercial returns enhanced through New Form contracts Coal above rail revenue breakdown Old Form vs. New Form coal volumes 1 100% 6% 3% 100% Actual fixed revenue for 1H FY2014 is 47% which is lower than the 49% previously forecast due to greater railings 53% 46% 39% 31% 30% 48% 38% 29% 94% 97% 47% 54% 61% 69% 70% 52% 62% 71% 44% HY % FY2015f 50% FY2016f 57% 65% FY2017f 66% FY2018f HY2014 FY2015f FY2016f FY2017f FY2018f 2 Forecast variable coal revenue 3 Forecast fixed coal revenue Old Form New Form 1. Old Form/New Form coal volumes are based on forecast contracted volumes 2. Variable Coal revenue = Above Rail Variable Usage Charges/tonne including performance bonuses, incentives and fuel charges 3. Fixed coal revenue = includes capacity charges and other revenue (i.e. deficit tonnage charges) 4. Railed volume is actual throughput and may be more or less than contracted volumes (primarily less) 61

63 Group and segment capital expenditure ($m) For personal use only 1H FY2014 capex and segment breakdown (1),(2) H FY2014 Network Coal Iron ore Freight Other Growth Sustaining 1. Includes capitalised interest. 2. 1H FY2014 excludes strategic projects asset impairment (growth capex) 62

64 Major committed Network growth projects Network - QLD For personal use only Wiggins Island Rail Project (WIRP) Hay Point Rail Expansion Rolleston Electrification WIRP is the staged development of new rail lines and upgrading of existing lines to service the new Wiggins Island Coal Export Terminal at the Port of Gladstone. Stage 1 will deliver six rail infrastructure projects, of which construction on five of these projects is currently underway Commenced: FY2012 Spend to date: $425m of $867m budgeted costs Further detail on slide 64 Expansion of Goonyella system to support Hay Point port upgrade adding a further 11mtpa below rail capacity, lifting the Goonyella system capacity to 140mtpa Commenced: late 2011 Spend to date: $115m of ~$130m (1) revised costs project on time and on budget Project expected to be completed by June 2014 Scope of work includes 5km of additional electrification (Kinrola line), 107km of electrification (Rolleston Line), Feeder Station and associated power systems infrastructure. Purpose is to harness the operational and cost benefits by enabling new high capacity electric trains to operate Commenced: FY2013 Total cost $170m Completion scheduled by December ) Targets and approved amounts exclude capitalised interest 63

65 Major committed Coal growth projects Coal - NSW For personal use only Hexham Train Support Facility Hunter Valley Whitehaven Stage one of the Hexham Train Support Facility (TSF) will service Aurizon s growing Hunter Valley coal freight business and alleviate capacity pressures in the coal supply chain The TSF will provide for statutory and routine maintenance inspections as well as provisioning with fuel, water and other supplies Commenced: FY2013 Spend to date: $17m of total expected $150m Commissioning expected in November 2014 Up to $280m 1 approved for investment in locomotives and wagons Aurizon is working closely with Whitehaven and ARTC for the latter to expand the capacity of the network infrastructure in the Gunnedah Basin through heavier track axle load capability Aurizon started hauling tonnage in August 2013 for Whitehaven on an interim basis as part of a better than anticipated increase in production output Expect full ramp up of tonnages by third year after project commencement 1) Targets and approved amounts exclude capitalised interest 64

66 For personal use only Wiggins Island Rail Project Aurizon Network and the WIRP Customers have agreed to revised delivery timeframes to align with the delayed Wiggins Island Coal Export Terminal (WICET) commissioning date All WIRP infrastructure to be commissioned by December 2015 which aligns with the tonnage ramp up profile Will increase total capacity of the Blackwater and Moura systems by 27mtpa, or approx. 30% at full production WIRP construction works are progressing on time and on budget The total capital spend for WIRP is now estimated to be $867M (excluding Moura West works) below original budget Subject to QCA approval the WIRP capital expenditure claim will be submitted for inclusion in the Regulated Asset Base in FY2016 Earnings expected to commence in FY2015 with the WIRP Fee to take effect from FY2016 WIRP railings expected to commence in the last quarter of FY2015 with full ramp up of volumes expected by FY