Earnings Transcript for SSE.L - Q2 Fiscal Year 2022

Alistair Phillips-Davies: Good morning, everyone. I'm joined today by Gregor in person and Martin digitally. Today, we plan to cover two things

Gregor Alexander: Thanks, Alistair, and good morning, everyone. While Renewables output was significantly lower than planned due to the weather conditions, our other businesses have delivered a solid performance during the first 6 months as recovery fall in coronavirus continues. Adjusted operating profit increasing by 15% to £377 million. Adjusted profit before tax increasing by 30% to £174 million and adjusted EPS increasing by 44% to 10.5p, above the expected range provided. And the second half of the year has started well. as average wind speeds have returned towards planned levels and with thermal and hydro plant, in particular, achieving strong prices in the market. Subject to normal weather, plant availability and similar levels of commodity prices over the coming winter months, we would expect to report full year adjusted earnings per share at a level, which is at least in line with the current Bloomberg consensus of 83p adjusted earnings per share. We'll provide further guidance later in the financial year. Market volatility has, however, impacted the reported metrics, which included £1.4 billion of positive mark-to-market movements and operating derivatives held at the half year-end. And as I've said before, the movements of these derivatives demonstrate the volatility that can arise on revaluation from period to period, which is unrelated to current operating performance and, therefore, excluded from SSE's adjusted profit measures. As you will be aware, the last few months have seen significant volatility in both power and gas prices in the market. An extended period of calm weather over the summer months coincided with a substantial increase in gas prices across Europe and has led to some significant movements in the wholesale market prices. However, I'm pleased to say that the group has managed any direct exposure to these short-term fluctuations well during the first 6 months of the year due to a combination of factors. Firstly, our balanced portfolio means our regulated networks businesses are insulated from power price movements while thermal and gas storage have improved results by providing balance against lower renewables output. Secondly, disciplined application of clearly defined hedging policy has limited any short-term exposure to power price movements. In addition, low trading limits, which are closely monitored, reduced any potential exposure from liquidity or shape positions. Performance across the regulated networks businesses has been strong. In Transmission, adjusted operating profit was 58% higher than the comparative period, as the newly commenced T2 regulatory period resulted in earlier phasing of allowed revenues. And in Distribution, a combination of higher allowed revenue and volume recovery following coronavirus lockdowns in the period -- prior period meant that operating profit increased by 34%. And in line with the wider market, Renewables have seen a significant decrease in adjusted operating profit to £25 million in the current period. A prolonged period of high pressure across Northern Europe over the summer resulted in one of the least windy periods across most of the U.K. and Ireland. And one of the driest in SSE's Hydro catchment area in the past 70 years. This shortfall, which was around 30% or 1.2 terawatt hours below plan, was compounded by the need to buy back hedges in the volatile markets. Despite the Renewables results, together, these core businesses contributed over 95% of group adjusted EBIT in the year. Elsewhere in our complementary businesses, Thermal demonstrated its value with strong balancing market performance and achieving higher market prices despite lower year-on-year availability due to phasing of planned maintenance to respond to system needs and unplanned outages. Merchant operation of the Gas Storage facility enabled that business to capture the spread in the gas price markets. Business Energy showed continued recovery following coronavirus lockdowns. Our Airtricity's recovery was impacted by net adjustment to historic accruals in the period. The Distributed Energy result is adversely impacted by the inclusion of operating losses from the Contracting and Rail business up to its disposal in June. Following disposal, it is expected that this business will return to a small operating profit as it continues to develop battery, solar and heat network-related opportunities. And the corporate unallocated costs increased as transitional service agreements from past disposals unwind. The group through the EPM and Gas Storage businesses is exposed to price movements on net unsettled commodity contracts and physical gas inventory held. At 30 September, the total net remeasurement under IFRS 9 of these unsettled contracts and inventory totaled over £1.4 billion. However, these do not include the remeasurement of around £1.3 billion of own use derivatives, which are excluded from recognition under IFRS 9. Taking these derivatives into account, the group does not expect to realize significant gains upon settlement of those contracts. The volatility in these revaluations and the exclusion of certain contracts under IFRS 9 demonstrate why these remeasurements are unrelated to current operating performance and, therefore, continue to be excluded from SSE's adjusted profit measures. In addition to these remeasurements, the higher power prices have led to £182 million reversal of historic impairment charges being recognized on the SSE Thermal operating assets. This reversal, which does not impact on cash, evidences the strategic importance and value of flexible generation in a period of volatility. Finally, a number of other adjustments, including disposals and true-up adjustments on prior year exceptional transactions, have been recorded as exceptional in the period. Like Alistair, I will save discussion of the capital investment required for our Net Zero Acceleration Programme until later. However, our existing capital investment plan for this financial year continues at pace. Alistair has referenced the progress we have made on delivery of our projects this year, which have seen over £1 billion investment to date. In many ways, we are already accelerating our investment in net zero. Even excluding project development expenditure refunds, this represents a more than 50% increase on prior year spend and demonstrates our continued delivery. We now expect capital investment expenditure to be in excess of £2 billion for the full year. We've also progressed at pace to simplify the group to predominantly focus on our renewables and networks core. Since the start of '21, '22, we've completed the disposal of our Contracting and Rail business as well as completing the disposal of Gas Production assets in October. And we have also agreed to dispose our equity stake in SGN for over £1.2 billion. Disposal is conditional on receipt of certain regulatory approvals and is expected to complete by 31 March 2022. Following completion of SGN, we will have achieved headline consideration of over £2.8 billion, significantly in excess of the £2 billion target. And including the expected SGN gain on disposal, which we expect will be in excess of £570 million, we've achieved over £1.4 billion in exceptional gains on sale. The cash generated and gains recognized in disposal demonstrate the value SSE can create. Following the completion of the triennial valuation during the period, it was agreed that the contribution holidays received in respect of the SHEPS scheme will continue. And changes in financial assumptions and experience adjustments have meant that the combined net surplus for both schemes has increased by £81 million during the period. SSE's strong balance sheet continues to be underpinned by high-quality assets and following continued capital investment in long-term generation and infrastructure assets. Adjusted net debt and hybrid capital has increased by over £700 million to £9.6 billion. And in line with the accelerated net-zero investment program, we're targeting 4.5x debt-to-EBITDA ratio at the end of this financial year. Our S&P credit rating remains a BBB+ stable outlook, and our Moody's rating remained at Baa1 but has been updated to stable outlook earlier this morning following the strategic update announcement. These compare favorably to peers and reflects the group's business mix, funding plans and future dividends. SSE remains fully committed to 2023 dividend plan and continues to target dividend increases in line with RPI for both this year and next. As such, we're declaring an interim '21/'22 dividend of 25.5p. This will take the total dividends declared to over £15 per share since SSE's formation in 1998. Our post-2023 plans will be covered in more detail shortly. But looking ahead, we're clearly in a strong position to create lasting value for shareholders and to remunerate their investment with dividends going forward. In closing, our first half has demonstrated yet again the resilience of an optimal business model that drives both economically regulated and market-based earnings from assets and operations that are critical to decarbonization. I'll now hand you back to Alistair for his introduction to the strategic update that you've all been waiting for.

Alistair Phillips-Davies: Thanks, Gregor. We've been spending the past 2 years moving our strategy forward, reshaping the group through strategic disposals and focusing it on the electricity infrastructure needed for net zero. As a result, we've been creating a wealth of opportunities right across our businesses, both domestically and internationally. As we said in May, this led to us taking a comprehensive evaluation of our CapEx plans and the sources of funding that will underpin them with the aim of maximizing our potential over the decade ahead. With that evaluation now complete, SSE is today setting out its resulting Net Zero Acceleration Programme, which represents the optimal pathway for the group. And as you will see, the plan is transformative for the SSE group, ambitious for accelerated growth, focused on unlocking value from the transition to net zero, paced to deliver long-term shareholder return and aligned with a 1.5-degree pathway. Our Net Zero Acceleration Programme will accelerate clean growth, lead the energy transition and maximize value for all stakeholders. It includes enhanced fully funded £12.5 billion strategic capital investment plans to 2026 alongside ambitious targets to 2031, all aligned with net zero. The plan represents the optimal pathway for SSE to build on its position as the U.K.'s clean energy champion, enabling delivery of over 25% of the U.K.'s 40 gigawatt offshore wind target and over 20% of U.K.'s electricity networks investment while deploying flexibility solutions and exporting renewables capabilities overseas. It is an ambitious but deliverable road map for how we will allocate capital and seize the fantastic opportunities we've created over the next decade. Importantly, it contains the investment needed to meet a 1.5 degrees pathway, and it will maximize both earnings and asset value growth while remunerating shareholders with a new growth-enabling dividend plan. In this strategic update, we will set out how the reshaped SSE Group provides the right blend of businesses to create sustained value on the journey to net zero, provide details on the £12.5 billion CapEx plan, which is a 65% step-up with £1 billion a year additional investment and our plans for funding it, outline what this bold investment plan will deliver by 2026 in terms of capacity, regulated asset value and, critically, shareholder returns and set a clear ambition for where this trajectory will take us into the 2030s. The energy transition is gathering pace, and the opportunities in front of us are crystallizing rapidly. Today, we're giving shareholders a comprehensive strategy for creating long-term value. It is no accident that we are ready to seize the wealth of opportunities that are emerging in the transition to net zero. Following a highly successful disposals program, the reshaped SSE Group is now firmly focused on renewables and regulated electricity networks. We've talked about the net zero-aligned growth potential already, but they share common capabilities in the development, construction, financing and operation of world-class, highly technical electricity assets. The other businesses SSE retains are highly complementary, providing customers with additional green power solutions and routes to market. With significant synergies running through the group together, the SSE businesses provide an ESG-aligned growth investment opportunity and attractive mix of regulated and market-based income streams and valuable linkages with each other, which support efficient financing. SSE has been transforming into the optimal combination of electricity infrastructure businesses. Our business mix allows specialization in electricity assets, such as in renewables, networks and low-carbon power stations, alongside the ability to create value right across the electricity value chain as new opportunities emerge in hydrogen, batteries and distributed energy. This reshaping into electricity infrastructure has already demonstrated its value in terms of total shareholder returns since the retail transaction. So in summary, SSE's business mix is very deliberate, highly effective, fully focused and set to deliver long-term shareholder returns on a journey to net zero in both domestic and international markets. At COP26, I was encouraged by the collaborative efforts taken by counties across the world to tackle the climate crisis. The challenge of limiting global warming to 1.5 degrees C will require significant actions from individual countries to commit to cut emissions over the next decade. This presents exciting options for SSE in its traditional home markets as well overseas where we are actively pursuing opportunities to export our renewables capability. Here in the U.K., the government's net zero strategy sets a globally leading ambition for net-zero electricity in the U.K. by 2035. This strategy demands a quadrupling of wind generation, which in turn requires network capacity to more than double over the same period, and to achieve this, it's estimated that over £250 billion of investment will be needed in the U.K. alone. And as the U.K.'s national clean energy champion, SSE is central to delivery of these opportunities right across the low-carbon energy value chain. As I mentioned earlier, we're delivering a substantial proportion of the Networks and Renewables investment needed by the U.K. government. We also have consent for the U.K.'s largest pumped storage project. We're developing options for gigawatt-scale distributed energy solutions, and we're developing critical, flexible, first-of-a-kind carbon capture and hydrogen projects. We are accelerating investment in low-carbon electricity infrastructure that will support the U.K. targets, and this provides a platform for sustainable future growth abroad in activities where SSE is globally competitive and proving capabilities. So now for the highlights. This is what I like to call a plan on a page. We'll be investing £12.5 billion over 5 years in high-growth, low-carbon assets split approximately 40-40-20 across Networks, Renewables, in our flexible generation and other complementary businesses, respectively. The plan is fully funded and well balanced, providing an attractive mix of regulated and market-based earnings. This is a huge acceleration of investment that we'll see an additional £1 billion spent annually on high-quality options and projects. To help deliver this accelerated growth, this morning, we're outlining our baseline plan to sell down minority stakes of around 25% in Transmission and Distribution. They'll still be core to SSE's businesses, but the proceeds will help realize value and unlock further growth, both in electricity networks and elsewhere in the group. This type of partnering has already proven successful for us in Renewables, where we'll continue to deploy that approach to realize developer premiums and fund further pipeline and capacity growth, both at home and abroad. And our new growth-enabling dividend plan will enable us to offer an attractive growth profile while providing shareholders with strong income. The plan rebases the dividend to 60p in '23/'24 before targeting at least 5% dividend increases in '24/'25 and '25/'26. And we expect the dividend to total more than £3.50 per share over this 5-year period. We believe this represents a highly attractive combination of dividend and capital appreciation. This investment will drive serious growth. By 2026, we expect to add over 4 gigawatts of net renewables to double our capacity, increase underlying networks RAV by around 10% per annum and achieve a compound annual growth rate of between 5% and 7% in adjusted EPS over the course of the 5-year plan. We plan to maintain a strong investment grade credit rating, too. We're targeting a net debt-to-EBITDA ratio of 4.5x. This will enable the SSE Group to continue delivering projects at record-breaking scale, such as Dogger Bank and Berwick Bank. And finally, there's the longer-term vision. Fast forward to 2026, and delivering this plan will have given us a fantastic platform from which to grow further, but this is just the foundation. We're looking further ahead, and we are thinking bigger. By 2031, we're targeting over 13 gigawatts of net installed renewable capacity, building on our existing ambition to add 1 gigawatt a year of the net new renewable capacity by the second half of the decade. Our renewables pipeline of at least 15 gigawatts maintaining the 2026 level. Another 3-gigawatt net of low-carbon flexible technologies, including carbon capture and storage, hydrogen and batteries, and a networks RAV of between £11 billion and £13 billion net of minority interest. These targets will, in turn, mean we can set and meet 1.5 degree alliance science-based carbon targets. In a world in which decarbonization ambition continues to expand exponentially, we're positioning ourselves to take more opportunities as they emerge. These are exciting times for the SSE Group as it delivers for shareholders and society. It will consolidate the work we've done over the past few years to transform the business while building a foundation to achieve a significant international footprint into the 2030s. The strategic review, carried out by the Board, was robust. Our resulting plan reflects the immediacy of the net zero opportunities ahead, the views of all stakeholders, including some quite vocal but constructive public opinions, and the considerations we've given to all possible routes to value creation. Ultimately, the routes sought -- the review sought to identify the best way to drive sustainable long-term value for all stakeholders

Gregor Alexander: Thanks, Alistair. I've always said I'd much rather face questions about how we're going to fund the extraordinary investment opportunities available to us than questions about where the growth is going to come from. And today, we're not only setting out an ambitious growth plan to 2026. We're also clear that this plan is fully fundable and deliverable. Our track record of creating value for shareholders is clearly strong. For the next 5 years, we'll see a significant acceleration, investing 65% more than existing plans. Our renewables capacity will double and will grow and sustain our secured pipeline to more than 15 gigawatts. Be no doubt that as part of the SSE Group, the Renewables business will grow and thrive with our credit rating, diversified earnings and financial strength, giving us the ability to build some of the world's biggest projects. Networks RAV will increase by almost £1.5 billion, even accounting for our sell-down plans, indicating the huge levels of investment being created in Transmission and Distribution. These are now growth businesses requiring substantial CapEx investment and offering index-linked growth, and our plan will enable us to harness more of this. Over the 5 years, we're targeting 5% to 7% per annum adjusted EPS CAGR, maintaining a 4.5x net debt-to-EBITDA ratio and, of course, aligning ourselves to the 1.5-degree science-based targets, as outlined by Alistair earlier. We think these targets are impressive given competitive markets and demanding regulation. And they'll allow us to provide shareholders with attractive, growth-aligned returns from a dividend targeting at least 5% annual increases to 2026 after rebasing at 60p in '23/'24. We have exceptionally attractive growth options right across the group. This plan will see us significantly increase the rate at which we are investing, adding £1 billion a year of additional CapEx onto existing plants. But it also reallocates CapEx across regulated and nonregulated businesses, providing the right balance of risk and returns. In short, the plans will deliver enhanced investment and a balanced mix of low-carbon infrastructure across our core Networks and Renewables businesses and our complementary businesses as well while retaining a strong investment-grade credit rating. Within that, we're dialing up SSE's Renewables share of CapEx by over 2.5x the previous plan. That increase equates to around £3 billion of additional investment over the 5 years and reflects the scale of the opportunity and the strength of our renewables pipeline. Networks will account for a smaller proportion of CapEx as we rebalance, but this is net of our anticipated stake sales. And we still expect to invest more in absolute terms into Networks during the period as we capitalize on the high-growth opportunities on offer. SSE's 40-40-20 CapEx allocation strikes an optimal balance of risk and return across an attractive blend of investments. While we'll talk a lot about the Renewables and Networks investments, much of that last 20% will be investments in flexibility, which will likely yield higher returns given the less mature nature of the technologies involved. Overall, this is a plan that offers balanced risk and returns based on the optimum mix of regulated and unregulated assets. Not only is this a comprehensive and fully funded plan but it's also a plan that offers a great deal of clarity since around 60% or £7.5 billion is already committed. The bulk of uncommitted spend is in Renewables, Transmission and Thermal, where we see the significant additional growth opportunities Alistair outlined earlier. Here, we have good visibility and confidence in our potential investments. These remain subject to government and regulatory processes in which we have a great deal of experience. Well chosen partnering has been a key part of SSE's financial strategy for many years. SSE is well placed to manage development risk and can create value from selling down stakes to retain typically 40% of a project and working with equity partners for construction or operation. This established approach brings benefits, including securing developer premiums, reducing single project exposures, containing nonearning debt and bringing in partners with different risk appetites at their preferred stage of the project cycle. We've also previously been clear that we would consider extending a partnering approach through sales of minority interest stakes in our Electricity Transmission and Distribution businesses. Partnering would release capital to facilitate growth opportunities in the Networks businesses and elsewhere in the group. The exact timing and scale of any sale are yet to be decided. But in order to realize all of this growth potential, while maintaining the most attractive balance of risk and returns across the group, today's plans assume a 25% stake disposal in both Transmission and Distribution modeled early in the financial year '23/'24. This would mean our net share of RAV would grow from around £7.5 billion currently to almost £9 billion in 2026 and between £11 million and £13 billion in 2031, representing RAV growth in excess of 50% over the decade even after the 25% divestment. We've recycled capital in SSE Renewables to grow, and we've also seen this potential as a key enabler in Networks, too. Transmission and Distribution have huge CapEx requirements and bringing in financial partners will crystallize value and enable further growth in both Networks and SSE's other businesses. It will allow SSE to optimize growth plans, and we'll maintain the substantial synergies the group offers, enabling SSE to have enviable positions across the low-carbon energy value chain. In 2018, we made a clear commitment to shareholders in the form of a 5-year dividend plan to 2023. We will deliver on this and continue to target dividend increases in line with RPI in the remaining 2 financial years to 31 March 2023. However, with 18 months of that dividend plan remaining, the Board has considered what the right dividend policy should be thereafter. We assessed and balanced a range of factors, including financial and sector market trends, credit metrics and cash flow profiles, total shareholder returns, growth opportunities and different funding options, including Networks' stake sales. Based on the favorable conditions for growth Alistair outlined earlier and SSE's unique opportunity to create value in the transition to net zero, the Board concluded that in order to maximize value creation, the future dividend policy should be aligned to the company's growth ambitions. And so after fulfillment of our existing commitments to 2023, we will rebase our dividend to 60p in '23/'24 before targeting at least 5% dividend increases in '24/'25 and '25/'26. We also intend to retain a scrip dividend option for shareholders but to restrict earnings dilution by capping take up at 25% from this year onwards. This will amount to total dividend of at least £3.50 a share over the 5 years to March 2026. Following this dividend certainty over the 5-year plan, the aim is to set SSE's businesses up to support a similar level of annual dividend growth in the longer term. This rebased dividend with attractive growth balances income to shareholders with an accelerated growth plan based on high-quality assets. It represents a unique opportunity to invest in a balanced business with a clear dividend outlook to 2026 and beyond, with a strong growth story facing into the transition to net zero. We've always been clear about our commitment to maintain a strong investment grade credit rating. This investment plan is designed to maintain credit ratios comfortably above those required for an investment grade. This will be supported by a rebased dividend and is aligned with a net debt-to-EBITDA target ratio of 4.5x. Ultimately, this will help underpin our ability to invest in large-scale projects that are needed to deliver net zero. And in line with this, today, Moody's have published an update confirming SSE's rating and removing it from negative outlook, which is indicative of the robust nature of this plan. With so many opportunities available to us, every investment we make has to create value, and we only allocate capital where we see returns comfortably above our WACC. In offshore wind, we target equity returns in excess of 10%. In competitive markets, that target remains possible from the best sites and with strong project delivery. In onshore wind, we aim for spread to WACC on unlevered projects of 100 to 400 basis points, with the higher end of the range reflecting assets with higher levels of merchant risk. When evaluating carbon capture and hydrogen investments, we'd expect higher returns of 300 to 500 basis points spread to WACC given that these are earlier stage first-of-a-kind technologies dependent on the nature of support mechanisms available. In Networks, we expect to achieve a return on equity of between 7% and 9%, with some outperformance assumed as we build a highly valued regulated asset base that provides financial stability. In short, we take a disciplined approach to our investment decisions on a technology and project basis. And while the options in front of us are immense, we'll only take them forward where we are clear that they are accretive. The 5-year investment plan announced today optimizes CapEx allocation. It balances risk and financial exposure between large-scale projects, different technologies and index-linked earnings. Indeed, around 60% of EBITDA is underpinned by index-linked revenue streams. With an expected CAGR to 2026 for EPS of between 5% and 7% after dilution from minority stake sales, it provides a stable platform for long-term earnings and progressive shareholder return. As you can see, this is a fully funded plan that optimizes SSE's options. 90% of the spending is earmarked for net zero-focused assets and businesses. And with our baseline dividend commitment of at least £3.50 per share and interest and tax, we forecast the group will require around £18 billion to deliver this plan. Operational cash flows, including developer profits, which are treated as operational activities, will fund around 65% of the investment plan. Asset disposals, which will comprise the £1.2 billion disposal of SGN expected to complete this financial year, alongside the minority Transmission and Distribution stake sales and other residual noncore asset disposals, will provide another 25% of funding. The remaining 10%, we expect to be funded through incremental debt issuance, ensuring the credit ratios I outlined earlier are maintained and balance sheet strength has not sacrificed. By setting out our sources and uses of cash in this way highlights two things. First, the importance of continued capital discipline. We've shown time and time again that with effective CapEx allocation, raising debt and capital recycling, we can unlock accretive opportunities in a decarbonizing energy sector. Second, the value partnering to maximize growth in Renewables, we're able to realize significant developer premiums through our joint venture partnering approach, selling down stakes at the right point in the development cycle to realize value and fund further pipeline growth. As we've highlighted already today, we believe extending our partnering approach to our Networks businesses can have a similar effect. As Alistair said earlier, this is not a restrictive plan, and we'll be well positioned to capitalize on any further favorable opportunities that might arise. And our track record shows we are highly effective at generating such opportunities. I'll now hand you over to Martin, who will take us through his business units.

Martin Pibworth: Thanks, Gregor. At the risk of over repeating ourselves, SSE is building more offshore wind than any company in the world right now. And that's a stunning statement and testament to our capabilities in delivering projects that will provide strong growth in terms of both long-term earnings and asset values. And our updated CapEx plan will see us invest £5 billion in Renewables over the 5 years. Around 50% of this Renewables CapEx is on assets currently under construction, 30% of this is forecast spend on projects currently under development and 15% on future pipeline. By 2026, we will have constructed Seagreen, Dogger Bank A and B and Viking, adding 2.6 gigawatts of new renewables capacity to the portfolio, and these will likely be complemented by Dogger Bank C and Seagreen 1A as well as Arklow in Ireland, assuming progress is as SSE would expect. That all leads to an overall doubling of our renewables capacity, and we are on track to enable delivery of over 1/4 of the U.K. government's offshore wind targets to 2030. We have the track record and capabilities to deliver these world-class projects, and they will create value. We expect to see a CAGR of 11% to 12% in adjusted EBITDA over the period. Looking further ahead, the range and scale of opportunities targeted will amount to significant growth potential for SSE Renewables during the course of the decade. We have clear line of sight to a trebling of our renewables capacity by 2031 to more than 13 gigawatts, reflecting our targeted run rate to add over 1 gigawatts of new renewables capacity per year. This would see us increase renewables output fivefold over the next 10 years to hit 50 terawatt hours, and driving this growth is our superior existing secured pipeline. SSE Renewables already boast an enviable secured pipeline of around 10 gigawatts, and 3.6 gigawatts of this pipeline is already under construction, which includes the world's largest offshore wind farm at Dogger Bank. The remaining 1.4 gigawatts required to reach our 2026 targets will be supplied by our existing options. But pipeline is the lifeblood of a development business, and that is why under plan set out today by 2026, we would expect to reach and sustain a secured pipeline of over 15 gigawatts for at least the second half of the decade. Within our existing secured pipeline, the breadth and quality of named options is evident by the table shown as well as SSC's flagship construction projects. Offshore options include Berwick Bank, which would have a potential capacity of 4.1 gigawatts. And we have Coire Glas, which could be the U.K.'s largest pumped storage projects, but I will come onto that later. However, our future secured pipeline depends on us establishing and maturing our early-stage development areas today. And to that end, we have over 10 gigawatts of future prospects that we are working on building into the secured pipeline. These future prospects will drive the continued growth of the group in the second half of the decade and beyond. And these exclude near-term opportunities for further growth, including the ScotWind auction, where we have submitted compelling bids with our partners CIP and Marubeni as well as other options we are opening up internationally. In Seagreen 1A, Berwick Bank, North Falls and Arklow Bank, we have a range of extremely high-quality projects with seabed already secured. And if recent developments tell us anything is that seabed is an increasingly valuable commodity. These projects are at different stages but are highly deliverable within a decade and will all be needed if government targets in the U.K. and Ireland are to be met. And as you can see, our early steps towards carefully selected international expansion are already adding options to our future pipeline. As the U.K. national clean energy champion, we will always have a strong foundation in these domestic markets, but a more internationally diverse pipeline can unlock far greater Renewables growth. We are primarily interested in offshore and onshore wind, where we are well placed to export our capabilities, working with local partners to enter fast-growing market. To that end, we recently announced our entry into the Japanese offshore wind market by acquiring a majority stake in a joint ownership company formed with Pacifico Energy. The deal saw us acquire 10 gigawatts growth of early-stage development opportunities with potential to enter bid rounds around the mid-2020s. Meanwhile, earlier this year, we announced our partnership with Acciona, a leading Spanish renewable energy company to form a 50-50 joint venture to enter the emerging Iberian offshore wind markets. And we subsequently expanded the JV scope to include Poland as well. These markets will not reach the size as North Sea, but over the longer term, they will create opportunities. Elsewhere in Europe, we are also partnering with CIP once again, a Danish energy company and our holding on the tender process in Denmark to develop the 800- to 1,000-megawatt Thor wind farm off the country's West Coast. We continue to look at the East Coast of the U.S., both organically and via partnerships and have looked at onshore platforms now as well. And having recently incorporated SSE Renewables in North America, we've submitted a prequalification application to the Bureau of Ocean Energy Management to participate in the New York Bight Auction. Our imminent move into Japan's growing offshore wind market represents an exciting step for SSE. It will help support the further expansion and diversification of SSE Renewables' longer-term growth pipeline in a country in which offshore wind growth is a key policy aim. Japan already has clear offshore wind targets of 10 gigawatts by 2030 and up to 45 gigawatts by 2040 as the country seeks to decarbonize. The new company contains a talented local development team of 10 gigawatts of existing early-stage offshore wind development projects spread across Japanese waters. The existing early-stage projects are expected to use a mixture of fixed and floating technology and the two most advanced projects have secured grid access, and advanced local stakeholder engagement has been undertaken. In Pacifico, we have been fortunate to find a partner with not only local knowledge but developer capabilities that match our own. And these are initial steps, but there will be more to come. And while we see plenty of opportunity as ever, a measured approach with capital discipline will guide our decisions. We will only execute on the most accretive options. Back in more familiar claims, our hydro fleet continue to provide critical flexibility services to the system. It is a well-established technology, but its role in a renewables-led energy system in the future will only grow in value, and recent market volatility has highlighted its importance in balancing the system and enabling wind. And our secured pipeline also includes Coire Glas. This would be the U.K.'s largest pumped hydro storage projects and the first to be developed in over 30 years. Construction would take around 5 years at an estimated £1.2 billion to £1.5 billion, and its life would far exceed 40 years. Located in the Highlands, the consented 1.5 gigawatt projects would have 30 gigawatt hours of storage, more than doubling existing U.K. capacity, and it can power 3 million homes for 24 hours. The system benefits the significance, and they include reducing wind curtailment and helping accommodate more wind onto the system, maintaining grid stability and displacing fossil fuels. Engagement with government and Ofgem on the need for a revenue stabilization mechanism has been positive. Over the summer, BEIS highlighted the importance of long-duration storage in its Smart Systems and Flexibility Plan, with a separate consultation launched, and recent events have clearly served to underline the case for the project as the value of flexibility and storage has come to the fore. We anticipate that there will be clarity on policy direction for pumped storage next year and stand ready to build in the second half of the decade. As we enable capacity on the system increases, so, too, does the value not only of storage and flexibility but also of lower carbon thermal generation. All credible net zero pathways show that lower-carbon thermal generation has an important transitional balancing role to play in ensuring security supply while the U.K. and Ireland decarbonize. However, we are in no doubt about the need to decarbonize and repurpose our fleet for the net-zero world, and we are making progress. Our new highly efficient Keadby 2 CCGT will displace less efficient generating plant on the system and has the potential for hydrogen blending in the future. And in terms of SSE's older plant, we continue to envisage the closure of more than 50% of the existing fleet by 2030. Despite year-to-year variability, we expect to meet our updated absolute emissions and carbon intensity targets by 2030 at the latest. And meanwhile, our partnership with Equinor to develop plants for a number of first-of-a-kind low-carbon power stations in the U.K.'s Humber region as well as at Peterhead opens the way to the U.K.'s first power station with CCS and the world's first 100% hydrogen-fueled power station. With government support, well-located existing assets, a strong carbon pricing backdrop and the value of flexibility becoming clearer by the day, there are real tailwinds for our future low-carbon thermal portfolio. Our plans to 2026 include £600 million of CapEx in this area, but we expect this to ramp up in the latter half of the decade, in line with delivery timetables for the U.K.'s CCS program. And as Gregor mentioned earlier, the higher returns available from these first-of-a-kind technologies will help optimize the balance of risk and returns across the group. Flexible and renewable energy are at the heart of SSE, which creates a strong platform for our distributed energy and our customer businesses. The distributed energy business is primarily interested in batteries, solar, electric vehicle infrastructure and heat networks, all from a growth perspective, and is developing a combined battery and solar pipeline of over 1 gigawatt, of which 350 megawatts is currently secured. On batteries, we acquired a 50-megawatt project in Salisbury and have surfaced a number of interesting projects with partners externally as well as internally on the SSE's stakes. Options exist at Ferrybridge and Fidlers Ferry for 150-megawatt batteries, for example. Solar is at an earlier stage but offers potential given SSE's capabilities, and together, SSE sees these technologies as offering a multi-gigawatt opportunity. The business also has ambitions to develop hundreds of superfast charge points around the country, and the heat business continues to expand. And these businesses all align with the group's net zero-focused strategy and offer interesting platforms for growth. SSE Business Energy offers a route to market for renewable power, and with the advance in corporate PPAs and corporate decarbonization, the potential for growth is clear and the synergies are evident. In Ireland, this is particularly the case with data center growth. And while the group does not see itself as a domestic retailer in the price cap GB market, SSE Airtricity is a great business that works alongside generation in the more integrated Irish market structure. Customer businesses are our green shop front and part of the SSE story. And SSE has the market and electricity asset skills to enable these businesses to prosper, and they are highly complementary to the other businesses within the group. I'll now hand back to Alistair, who will cover our Networks businesses and conclude.

Alistair Phillips-Davies: [Audio Gap] But today, thanks to net zero and the related increase in electricity demand described earlier, I would characterize them with a very different word, growth. Across the two network businesses, we expect to deliver between 8% and 9% CAGR in combined gross RAV over the next 10 years, hitting nearly £12 billion in 2026 and potentially up to £18 billion in 2031, with almost £7 billion of CapEx by 2026 or in excess of £5 billion net of stake sales. And these businesses, with our regulatory asset base, provide two clear benefits within the group. First, they provide index-linked returns, which are scarce commodity in today's environment. And second, they provide the group with the capital strength it needs to deliver and develop large-scale capital projects, such as the biggest offshore wind farm in the world. These businesses are fundamentally growth engines, growing themselves while enabling net zero delivery across the group. Transmission's RIIO-T2 business plan, a network for net zero, reached a final settlement of nearly £2.2 billion of approved investments to make the network fit for the future. Add to this, the Shetland HVDC project and a certain view of total expenditure across T2 becomes around £2.8 billion. We said in May that this would be the Transmission -- this would take the Transmission route to above £5 billion by financial year '26. However, we also said that growing a network to meet net zero would require use of Ofgem's uncertainty mechanisms. While the extent of the additional projects approved by Ofgem remains to be seen, we are progressing the proposed East Coast HVDC link from Peterhead to the Northeast of England to meet the 2029 energization date seeking to reinforce the network in Argyll to 275 kV and looking to replace the Fort Augustus to Skye line. Initial needs cases for all these projects have either been or will shortly be submitted. The further investments to connect new renewable generation through the volume driver uncertainty mechanism are also likely. While these remain subject to a range of factors, including generated commitment, planning and, of course, Ofgem, the direction is clear. Ambitious government renewables targets suggest these projects will be sorely needed. So taken together, we could see an overall business gross RAV reaching around £6 billion by 2026, which will be a growth CAGR of around 12%. Once the stake sale is factored in, net CapEx is expected to be in excess of £3 billion, a greater than 10% increase on the previous plan. It's also likely that there will be further investment needed through T3 although this growth is less visible. ScotWind is expected to unlock up to 10 gigawatts of new offshore wind, meaning further system upgrades and the likely second HVDC link from Peterhead to England. We'd expect gross RAV to reach between £8 billion and £10 billion by 2031, representing a CAGR of 9% to 11%, and if the timing of the reinforcement required to facilitate the ScotWind rollout were to be accelerated, we could see a path for gross transmission RAV to grow to as much as £12 billion by 2031. Based on the system operators' own forecast, connected generation in the north of Scotland could increase from around 8 gigawatts today to nearly 25 gigawatts by 2030 and almost 50 gigawatts by 2050, depending on the scenario chosen. And these forecasts are only going in one direction. SSEN Distribution has submitted an ambitious stakeholder-led draft ED2 business plan, which proposes around £4 billion in gross baseline investment, an increase of around 1/3 on an equivalent ED1 period. Translating that into the 5-year plan to 2026, we expect to see around £2 billion of CapEx as we move into the ED2 price control period from 2023. This equates to an increase on annual investment of more than 15% and incorporates just part of the ambitious distribution investment plans out to 2028. The ED2 business plan is subject to final submission next month, but we expect it to achieve £5.5 billion gross RAV by 2026, representing a CAGR of around 8% across the 5 years. I've already mentioned the value that electricity networks bring the group in terms of portfolio diversity. Within this, our business has a unique geographic spread offering operational resilience and growth opportunities at both ends of the U.K. The Climate Change Committee has forecasted a shift in low-carbon technologies could almost treble the demand on electricity networks by 2050. In our network areas alone, electric vehicle charging and heat pump capacity, you could see exponential growth by 2030. And it is the likely load expenditure required to keep pace with this expansion, which has informed the thinking behind our draft ED2 business plan. Looking beyond ED2 out towards the end of the decade, depending on Ofgem determinations and the level of uncertainty mechanisms then required, we expect the gross RAV of the Distribution business to reach £7 billion to £8 billion, representing a CAGR of 7% to 8%. We have provided a lot of detail this morning, so I'll pause to summarize. This investment plan will not only drive growth for the period to 2026 but also pave the way for SSE's businesses to grow substantially through the second half of the decade. The SSE of the early 2030s will be bigger, bolder and better. We will have cemented our leadership position in the sector and established a significant international footprint. To put some specifics around that, we have today set a number of targets for 2031

Alistair Phillips-Davies: Thank you. Right, that's probably been quite a long session. So what we thought we'd do now is just take a few minutes for a break, so people can grab a coffee or whatever they need, and then we'll be back to answer all of your questions. So we'll see you very shortly.

Operator: Ladies and gentlemen, thank you for standing by. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from the line of Ajay Patel from Goldman Sachs.

Ajay Patel: I have a few questions, if I may. So firstly, I was wondering on the stake disposal of the transmission and distribution assets, will be keeping the gearing broadly in line with the regulatory assumptions or could it have a giving structure that is more similar to SGN, that is somewhat closer to 88.5% gearing. Then on in terms of the plan, you've highlighted, I think in previous presentations, you had a funding model where you sold down to a matter a 40% ownership stake in your offshore wind projects. And then clearly, the asset rotates, I'm just wondering how many gigawatts of asset rotation have you assumed in your plan? And what type of rotation valuations that in the maybe NPV to invested capital be quite helpful here. So growth and net gigawatts on the renewable side, that would be helpful. And then in terms of the plan, how much is allocated to securing pipeline for renewables over the plan? That would be really helpful.

Alistair Phillips-Davies: Okay, thanks, Ajay. Gregor, do you want to take the disposal? And I'll do a bit on the plan, you can come back as well.

Gregor Alexander: Yes, that's fine. Yes, look, Ajay, it's good to speak to you this morning. Yes. Our assumptions are -- will be around the Ofgem gearing levels around 60% to 65%. That's the planning assumption that we've got in our modeling at the moment.

Alistair Phillips-Davies: Yes, look, and on the gigawatts and asset rotation, Ajay, obviously, we're targeting over 1 gigawatt net, and we talked about over 2 gigawatts gross basically, so in terms of particularly the offshore or some of the assets where we would rather project finance, I think we'd be looking to retain between 40% and 50%, but doing it on the basis that we can that we can still -- we can still get the project financing that we need. And then on allocation stuff to that pipeline, Gregor?

Gregor Alexander: Yes. Well, look, we said in the statement and you've got the detail in the statement that there's about 35% of the spend in renewables that's on the existing pipeline and 15% on the new pipeline. That's what we're kind of expecting. So that's kind of proportion of the £5 billion. So -- that's what I would say at the moment, that's flexible. It depends partly on how quickly we move forward with some of our projects.

Ajay Patel: And then just -- sorry, if you can mind one final follow-up. It's just why 25% of the network? And then is that just how you see the world in terms of your investment opportunities? and that can change over time? Just a justification would be really helpful.

Gregor Alexander: Yes, I think we're looking to bring in a minority partner that has limited operational and strategic influence. We think 25% is a good fit for probably a financial investor. And bear in mind, the transmission business is a lot of new assets, which are ideally very good for pension funds on an annuity basis. Distribution business gives a bit of -- at the heart of Net Zero, really attractive assets. So 25% was kind of the right level and also met some of the requirements that we need for capital, but recycled in the business. Bear in mind, we're looking at balancing our overall CapEx more kind of in a 40, 40, 20 basis, whereas networks at the moment is accounting for 55% of our CapEx and renewables 25%. So it's a combination of those factors.

Operator: And the next question comes from the line of Deepa Venkateswaran from Bernstein.

Deepa Venkateswaran: That's Deepa Venkateswaran from Bernstein. So I have a few questions. Firstly, on the disposal. So in the waterfall of that £18 billion. Could you just help understand what all goes in the disposals in there of roughly £4.5 billion with the SGN stake sale, the 25% network sale. Is there anything else substantial like asset rotation of offshore wind or anything? Just because that number, the residual number after SGN is £3.3 billion. That seems quite high for a 25% stake sale. I think my own estimate was maybe close to half or maybe £1.8 billion or something. So maybe -- that's the first one. Secondly, on the option to kind of stay integrated and not do a renewable spin-off, I think in the statement you've talked about 2 things. One is that as a stand-alone company, you think large projects like Berwick Bank or Dogger Bank can't be funded and that there would be dis-synergies of, I think, £95 million on an annual basis. So I just wanted to check the basis for that because GE has announced it's a very large company splitting into 3 and they come to, I don't know, £150 million to £200 million of dis-synergies. So I just wonder how a small renewable spin-off could have such high dis-synergies. And secondly, you've got all state building really large projects across the world, and they are a stand-alone company. And many of their debt issuances trade at lower yield than yours, although they have the same credit rating. So I just wanted to understand what was the advice that was given to you. And how do you substantiate these differences versus Orsted and GE?

Alistair Phillips-Davies: Okay. Fine. Do you want to the disposals and then we'll do the separation chart.

Gregor Alexander: So look, the disposals are -- the 25% minority interest SGN, which will come through in the period to £1.2 billion of proceeds. Also some noncore assets, which will include our telecom stake, our 50% telecom stake and [indiscernible] energy joint venture that we're doing slow, they will come through in the period. The developer profits in terms of offshore wind disposals and sell down, that will come through the profit line, the 65% that will be included in there.

Alistair Phillips-Davies: Yes. Look, on the separation, we are a company that's together at the moment. So obviously, whatever we went through in terms of dis-synergies, they are whatever happens when you separate them and Gregor will talk about the detail of that. There are obviously issues, a number of issues with that separation plan. One is the scale of businesses that you can take on. There are financing issues as well, but it's a less attractive financing structure, plus you've got just some of the core dis-synergies around duplicated central and other costs. So overall, we were very clear that we've got the optimal plan we need for now. And as we said at the time, we've done an exercise to go through the detail of what some of those numbers were, and we obviously put those out there for those that want them. But Gregor, you might want to comment in more detail.

Gregor Alexander: Yes. We've got the plc costs that you need to be duplicated. Actually, IT costs are pretty significant in this day and age. You get good synergies across the group. Procurement, HR, finance, all the usual costs we get. In addition, you've got EPM because you need to do kind of energy portfolio management functions in this market. It's a volatile market, you need that sophistication. And then you've got additional financing costs that you would have coming through on an annual basis, just the weaker nature of the credit of the businesses. I mean you talked about Orsted, but remember Orsted is majority state-owned. And I think people forget that when you look at their analysis. And then on the kind of one-off costs, those are costs that we would have in terms of dealing with some of our debt that would require some kind of payments, it's because of splitting the group. So that's kind of where we are on those costs. We've obviously done a lot of work on that internally, and we've had some professional work on helping us with that as well.

Operator: And the next question comes from the line of Martin Young from Investec.

Martin Young: I hope everybody's well. And I've got 3 questions, if I can, please. The first run is around the big strategic picture that you've painted this morning. I think we all agree that there is huge, huge opportunity, both nationally and globally. And obviously, you set out your ambition to be a global player in offshore wind. You set out your national ambitions in networks. But given the scale of that global opportunity in offshore wind and given the fact that you're kind of opening the door with a 25% sale in the networks, is this not just a halfway hike to full separation? And in a number of years, when you secured some projects in other jurisdictions on the offshore wind side of things where you're going to be coming back and having a discussion about a full demerger of networks and renewables. So interested in your views there. The second question is around the presentation of net CapEx when you talk about network. Is that you basically just taking 75% of gross CapEx? Or is that growth CapEx less what you believe you are going to get in for the 25% disposals you've outlined this morning? And then the third question, which is hopefully an easy one. I did note that the interest rate has moved up very slightly. You have very low index-linked debt in your portfolio. So I just wondered what was behind that increase in the average rate in the first half of this year relative to the first half of last year and indeed relative to the full year FY '21?

Alistair Phillips-Davies: Thank, yes. Okay. Thanks, Martin. Yes, I understand exactly the issue. I think on global offshore, I don't think there's a global renewables company out there today, the biggest one in the world based in America and only as far as I can tell, it really focuses on solar and onshore wind. The global renewables market is vast. So we will be looking to enter selective geographies and do that on that basis. We've set out a very clear plan for how we want to do that. Martin and his team are obviously working away in Denmark currently and other locations. But we've got a fully fundable plan that we believe in. We see networks as being core to the future of the business. We see huge opportunities coming from the growth of those networks as well. And as Gregor said, as and when we do that disposal, we'll be looking more at financial players and we'll be looking to maintain control and participate in the huge upside that we see coming out of networks. So we are absolutely focused on the plan that we've got, and we don't see it as a halfway house to full separation.

Gregor Alexander: On your point on CapEx, it's 75% of gross CapEx. On interest, it's kind of marginally up. It partly reflects some of refinancing that we did and over a period of time, that we'd expect it to slightly go up. The one point I'd make is on the index-linked side of things. The SEC only has 3% of index-linked bonds, probably the lowest of all the utilities. We are highly levered to benefit from inflation and where inflation is at the moment, I think that is beneficial. So I think we're in a pretty good position in terms of our portfolio.

Operator: And the next question comes from the line of Chris Laybutt from Morgan Stanley.

Chris Laybutt: My question is, first of all, just on your funding package. You've announced today a package that includes an expanded asset rotation program, a reduction in the payout to equity, which is a slightly different approach to National Grid, in that you decided not to gear up the balance sheet. Did you give consideration to increasing gearing as part of the package? And I guess with a view on credit rating, just some comments around how you arrived at the final package would be helpful. And I guess the second question, just some general comments on your EBITDA growth, which looks very strong in renewables. EPS growth is slightly lower at 5% to 7%. If you could give us just maybe a guide to where the stronger and weaker contributors are within the segments, that would be useful. And then just a very quick one on storage, which was very strong first half. If you could give us some sense as to what you're looking at for the full year for that segment, that would be quite helpful. And I guess, a difficult question to answer, but is there any sense for some sustainability in the contribution from that asset going forward?

Alistair Phillips-Davies: Okay. Great. Well, current volatility, I suspect so, but we'll let Martin comment on the storage stuff. Just quickly before Gregor dives into funding and any other comments he's got on the EPS growth. Obviously, we've got very substantial growth in the RAV of the Networks business as well in there. So what you've got here is a balance, Chris, of you'll have stronger earnings growth in generation or renewables, specifically generation and renewables than you will get because we've got strong growth in the RAV base of those networks businesses. So they won't be generated or throwing off quite as much cash. We're generating quite as much profit as you might expect. And I think simplistically, that's how I'd look at it, and that's why we talk about the balance of good strong earnings growth, but also very strong asset growth as well. Gregor, look funding out...

Gregor Alexander: So just to add to that, I mean, it's something that we've been seeing for a number of years now that returns are coming down in networks, and you can see that equity -- return on equity is coming down almost half in terms of the price control. That has an impact, but we've got brilliant -- absolute brilliant RAV growth, which is creating a lot of value, and so that is really positive. In terms of the funding package, it's a balance. When we've talked to our shareholders, they wanted us to have a balance and reasonable levels of debt. They want us to have a strong investment-grade credit rating that allows us to have the flexibility to deal with the volatility that we have in the markets. And we've worked through that. I think this -- the package that we put together gives a positive position. And clearly, we have to balance the dividend with growth, and we've got substantial growth coming through the business. And the final thing I would say is that having given the rating indices clear indication of our plans, it's good today to see Moody's affirmed our rating as stable from negative outlook. And that's a really positive thing for our business. So I think we got the balance right. We can see in a couple of years' time, how we progress with our plans and where we are to consider whether we want to gear up, but gearing up has consequences. And I don't think that's the right thing for us to do at the moment.

Alistair Phillips-Davies: I echo Gregor's comments on volatility and Martin and all the businesses that he's got, one operate in volatile markets. But secondly, the scale of some of the individual projects we do means that we would prefer to have a strong balance sheet. We need the scale of the business, and we need a strong solid balance sheet. And we're obviously delighted that we've been able to deliver that as part of the package today. But anyway, volatility in storage, Martin.

Martin Pibworth: Chris, yes, I mean, essentially storage, we kind of follow a relatively standard kind of hedging method where we just basically hedged the kind of summer winter spread. And there's obviously been a lot of spot volatility through the summer. So that created an opportunity for the assets in the first half. But that will involve a reprofiling of some of the hedges in the second half. So effectively, a bit of values essentially move forward. But clearly, if in the history the winter, we see a whole bunch of high spot volatility, that will clearly be a very big positive for the assets and for the business. And I mean now, obviously, we'll set an engineer to respond to those conditions. And not only does it create quite a good revenue opportunity, I guess, it provides very good defensive hedge qualities to the rest of the book, including the intermittent wind risk, we obviously have. So it clearly has its place in the portfolio. I think the second part of your system was -- sorry, the question was whether we expected that to repeat going forward. Don't know, but it strikes me that the market logically, there's less storage clearly in the market, and it goes back to decision on RAF, which has received some commentary, obviously, over the last few months, given what's happened on prices but LNG competition seems a little bit more aggressive internationally that moves effectively a bit of storage from the systems. And obviously, end of coal removes another bunch of energy storage at a point when the market is, by definition, a little bit more intermittent. And you would have thought that these assets would have a role to play. It is noticeable that gas price has been moving around a little bit on wind speeds and indeed CCGT demand, the devices from those wind speed variations. And so clearly, Gas Storage has a role to play in our integrated energy system. We're very pleased that we've got those assets.

Alistair Phillips-Davies: Yes, and I think even longer term as well, Martin, the possibilities for hydrogen storage and things like that, well, I think, will play into those assets having an enduring value.

Operator: And the next question comes from the line of Jenny Ping from Citi.

Jenny Ping: Just two clarification questions, please. Just on your 5% to 7% earnings increase cargo over the period. Can you clarify if that is post the minority sell-down plus the farm down expected of offshore as well as the farm-down gains. And then secondly, just going back to the 4.5x net debt-to-EBITDA target, can I also just clarify this is effectively excluding all of the offshore wind assets, which you expect to farm down to 40% as they will be or project financing of balance sheet? And how do you treat the minorities of the ET and ED businesses here?

Alistair Phillips-Davies: Okay. Yes. Thank you. Gregor, Quite technical. I'll leave it to you.

Gregor Alexander: Yes. So the CAGR assumes that we've sold down the minority interest and also farm downs. Any gains on the offshore wind development projects will come through the profit lines. So that will be included in our EPS number. On your net debt to EBITDA, we will take the proportion of the debt. We've got, as you know, a detailed schedule on our website, the details how we calculate that debt -- adjusted debt to EBITDA ratio, and it takes the prudent position in taking into account our kind of earnings on an equity basis. So that's how we would do it. And we do the same for the networks businesses as well.

Alistair Phillips-Davies: I think it was only maybe about the accounting for the 25% -- is it -- Jenny, is that okay? Or any follow-ups?

Jenny Ping: Sorry, I'm not clear on the net debt to EBITDA. I haven't seen what's on your website. So can you just walk me through that, if you don't mind?

Gregor Alexander: Well, it's quite technical. Basically, the debt, the minority interests have, we wouldn't include an adjusted net debt number, and we take our share of the EBITDA number.

Jenny Ping: And then just on the offshore wind because they're all going to be project financed, presumably, that's all off balance sheet?

Gregor Alexander: That's right, yes.

Operator: And the next question comes from the line of James Brand from Deutsche Bank.

James Brand: I've got 3 questions. Firstly, on the guidance, power prices, obviously, near term, but also medium-term power prices increased a lot in this month and also inflation expectations have increased a lot. Maybe you could just comment on your 2026 guidance, whether that reflects the current fraud curve for both power and I guess, less importantly, inflation or whether it reflects prices as they were a few months ago or earlier. That's the first question. Secondly, on the networks, the 7% to 9% equity return you're saying you're expecting from your networks, just being keen on understanding that a bit better. So does that include totex, ODIs and financing? Or is it just totex because sometimes companies show these metrics in different ways. And maybe you could just help us understand a bit whether you expect to outperform much on totex and ODI because I think you already have some outperformance on that on the financing side and having some sense on simply that much structure for totex and ODIs. And then the third question as you mentioned gas storages being an area of investment potential for the future. A lot of people of are talking about new sort of caverns being needed for hydrogen. How soon could the future be because it seems like -- when the time it takes to build new storage that, that might have to come into the agenda pretty quickly and probably the full 2026 given the ambitions around that for hydrogen?

Gregor Alexander: Sure, okay, great. I think that there are 2 [indiscernible] questions. And Martin, do you want to do gas storage?

Martin Pibworth: Yes. Do you want me to address on power prices first?

Gregor Alexander: So I'll give it in the guidance and then you can comment on that as well. I mean clearly, as we've had -- we've seen prices move up, not quite as much at the back end of the curve, but we will have some value benefit coming through there, and there could be some inflation value. So we take a point in time. I think we're reasonably prudent in our view. So if the markets did move up a bit, and we have clearly higher inflation over a prolonged period of time, we will benefit. And on the return on equity for the Networks businesses, that's a target, remember, and it is a target that is post tax nominal. So you have to inflate the cost of equity and then look at our performance. And we're not getting into specific numbers because it will be different for distribution, transmission, distribution. Clearly, we're putting our business plan into Ofgem on the 1st of December. So we want to kind of be user views on that. But we would expect some totex outperformance. We'd expect to kind of get some incentive outperformance as well. And over a period of time, we've managed to get some debt outperformance. So it is a target, and it is a range. And we'd want to work towards the top end of our range we can, but that will be challenging.

Alistair Phillips-Davies: And then, Martin, any -- well, comment, I'm not sure the power curve goes out to '26. I've not seen too much trade in that period, but...

Martin Pibworth: It's probably what I was going to say power prices obviously probably half to winter '22 and then probably move is another roughly 1/3 on paper to winter '23 and there's nothing much beyond that, and it's actually reasonably illiquid beyond, let's say, 203. Although positively, I mean, clearly, gas prices have been pretty constructive, but actually positively for our exposures on power and carbon prices have obviously been very robust and are being driven by policy ambitions that perhaps if we're discussing this a year ago, we may have had a bit less conviction, but they seem pretty robust and pretty strong. And it's not just kind of U.K. policy, kind of post Brexit. It's a U.K. emissions trading scheme is what's happening in Europe with its own carbon ambitions and C bands, et cetera. So that's going to be important for power prices going forward. In terms of hydrogen, I mean, I guess -- I mean, for me, this is a real kind of big policy story movement over the last year. I mean, hydro has been talked about a year ago and is now being talked about real conviction. And obviously, the governor has made various announcements about its own ambitions to its Net Zero strategy, including kind of setting kind of 5 gigawatts of hydrogen provision by 2030 and production targets as well. At the moment, it's a bit difficult to know exactly how all of that coordinates itself through. But I mean it's clearly coming. And as you rightly pointed out, our assets are well placed to response requirements of that transition and we stand ready to do so. At the moment, we're probably a little bit more focused on the carbon capture story, which is obviously also going through same policy frameworks and actually having to report is sticking to time lines, which I think is a real positive.

Alistair Phillips-Davies: And from a physical sense, Martin, obviously, our gas storage assets are sat right in the middle of the Humber cluster in terms of between Humber and Teesside.

Operator: And the next question comes from the line of John Musk from RBC.

John Musk: Three questions, I think, for me. One clarification just going back to Deepa's question, which was looking at the £4.5 billion of disposal proceeds. And then you tell us we have to take out £1.2 billion for SGN. But that would still leave the 3 billion plus on the other disposals. Yes, I would assume that the RAV at the time you're going to sell those assets is going to be in the £9 billion level and the £3 billion would imply somewhere else. £3 billion plus would imply somewhere around £13 billion in proceeds. That looks like quite a hefty premium to RCV that you're assuming on those disposals. And I just wanted to clarify if there's quite a chunky other disposal that we should be thinking about in there, you mentioned some items but not sure how many millions of pounds we should ascribe to those. Secondly, and sort of bigger picture, obviously, the calls for a full separation have been quite vocal from some shareholders. I assume we've discussed these new plans with all shareholders. So have you convinced some of those more vocal people that this is now the right way forward. Is there any discussions you can share from those? And slightly linked to that and only a small thrown I want at the end. Did you consider cutting the dividend now? Why wait to 2023? Obviously, you had a previous plan. But if it's something you need to do, should you be doing it sooner rather than later?

Alistair Phillips-Davies: Do you want to do the disposals? You start with Gregor. I'll do the other 2.

Gregor Alexander: Yes. Look, John, the -- I'm not going to give you precise details that you guys are big enough and old enough to work out the numbers, but look we've got telecom's business and you can go back and refer to what we sold that for, for the previous 50%. We've got a waste-to-energy business, joint venture that we're building at the moment and then we'll sell out, and you can get the relative multiples from our previous transaction. These will be a few hundred million. I'm not going into detail of that. And I think in your -- in most analysts kind of some of the parts, you tend to underestimate the premium to RAV of these businesses. Our transmission business is the fastest-growing transmission business in Europe. And we can see a lot of opportunity there at the heart of the -- not my words, but previous politicians words in Saudi Arabia of renewables. There are huge opportunities there, which financial and infrastructure investors are always keen to invest in. And our distribution business is the heart net zero. So maybe your assumptions there. The one thing I'd say on disposals, our record speaks for itself. We've outperformed in our disposal programs, and I expect to do that in this one as well.

Alistair Phillips-Davies: Okay. And in terms of our plan, as we said earlier, we announced in May that we were going to have a significant update to the CapEx review. We trialed a number of things over the summer, success of the disposals program and significant growth, more opportunities such as the acquisition of the business in Japan. We've seen a lot more ambition, now the government probably capped off for the 2035 target. Martin referred to a lot of policy that's come out, including the policy that came out around comp, which in a more micro basis, rather than a 1.5-degree global basis is drop -- driving forward the U.K.'s agenda. And on the back of that, we need scale, we need a strong balance sheet. We don't need to be distracted. The opportunities in front of us are enormous now. And as we've talked about, we need reasonable financing, and we've given you that. And any sort of separation of the business would give significant financing issues. So we also obviously had a lot of discussions with shareholders post the May results and all the way through the autumn as well to discuss all the things that we were doing to understand their views. We did get a range of views. We continue to transform and pivot the business strongly into the net zero world and have done -- I think we have done that very well since we separated the retail business. So today, obviously, we treat all shareholders the same. And today, we've announced all of those numbers and all those plans, and we obviously look forward to future engagement with all our shareholders over the coming weeks and expect that to be positive, and we'll take their comments positively as well. In terms of the dividend As Gregor said, we had a package. We had a lot of things to achieve. We had to take advantage of the opportunities in front of us. We have to deliver for society. We also have to deliver strong growth for shareholders over the long term. We wanted to maintain a strong credit rating, a strong balance sheet. So we could take advantage of the colossal opportunities like Berwick Bank that we have in front of us. And this package, I think, delivers on all of those fronts strongly. We have no reason to change a dividend promise that we've made previously. And so we'll maintain that promise, but we also wanted to reflect going forward the opportunities for the group and the strong growth potential of the group. So we've set a dividend at a level that we think is sensible. We've underpinned it with a growth promise, which is aligned to the strong earnings potential of the group later on in the decade, and we've given people a very clear 5-year view, which I think is far more of a view then you'll get from most companies about where that dividend is going, and we've set clear and ambitious targets out to 2031 to demonstrate what we're also looking to target on a longer-term basis. And I think on that basis, the dividend has been maintained and then set on a basis that's entirely consistent with hitting all the things we need to deliver value for shareholders and wider stakeholders as well.

Operator: And the next question comes from the line of Ahmed Farman from Jefferies.

Ahmed Farman: Just a few from my side. I just think if you could share with us a little bit more about the underlying assumptions for CapEx via technology behind us of the new business plan and how do they compare with your sort of previous sort of business plan assumptions. And if there are any sort of measures specifically you have taken to lock in the CapEx on future projects given the commodity price assumptions are today. So that would be my first question. My second question is, I think you show a chart -- in one of the charts and at least 10% return expectation for renewable investments. Could you talk a little bit about how that sort of evolved that -- how does that compare with some of the projects you have delivered in the past and sort of the underlying leverage assumptions behind that return calculation.

Alistair Phillips-Davies: Okay. That's great. The line wasn't that clear, but I think you were asking about technology and the underlying assumptions of the business plan and particularly how they may be impacted by either probably commodity and/or inflation generally. So we're obviously driving forward with technology, Dogger Bank is installing the largest wind turbines in the world. When we get to Berwick Bank, we'll probably be looking at bigger and more innovative turbine technology again. In terms of that business plan, as we've said, around 60% of it is already committed in terms of CapEx. So we've still got more to go. I think generally, on those investments, we'll obviously have to price them up based on the commodity price at the time. This may be a short-term bubble. It may be a long-term bull run in terms of underlying commodity and wage price inflation. But I think we're going to be in no different position from anybody else there. I think the only difference that we have as a company is that we've got an amazing set of options already baked in, in terms of seabed, planning and land options and things of that nature, which support those developments, whether that be offshore wind, portfolio of onshore wind, things like cory glass, et cetera. So I think we can definitely be competitive. We've proven that we can win auctions before, and we can do so on an accretive basis, looking at something like Dogger and/or Seagreen. We've obviously sold on those assets post the auction wins at significant premiums and generated value for shareholders on the back of that. So 60% of it is kind of locked in, and we know what we're doing. The other 40%, we're very confident in the quality of the underlying options that we have, and we're also confident that the market will be able to bear the prices from that inflation. But I think Martin, you want a quick comment as well before we hit Gregor on the returns.

Martin Pibworth: Yes, thanks, I mean, obviously, the projects have ups and downs all the time. So yes, in case of metal price is up, other wage costs may be up, but obviously, indexation is probably higher and FX probably looks better from the U.K. perspective. We've also got very strong relationships with OEMs really good kind of history with but also obviously a very ambitious plan going forward, which helps us create an economy of scale there. And ultimately, if you think about offshore wind, even with some of these commodity price movements, it still looks very competitively cheap. And so there is scope clearly for that to be passed through kind of auction processes.

Gregor Alexander: Okay. I think on your 10%, I think you were referring to offshore wind. So that's a levered return. And we would assume for the generation aspect of it is 60%, 65% levered, clear transmission element as well, which tends to be geared about 90% of that then gets sold off, and if you look at returns for our existing projects and what we're building at the moment, Beatrice obviously is well above that, significantly above that. I'm not going to quote your number, but it's very attractive in terms of the returns we made there. And that's partly because of the way we structured that and how we've taken that forward. But also that's been a very good project, what are the earlier projects. In terms of Dogger Bank, we've said we expect to be in excess of 10% and Dogger Bank AB, and we'll announce financial closure of sea later this year, we would expect them all to be well above 10%. Seagreen, because it doesn't have a CfD contract is getting towards 10%. It depends on assumptions on power price done the per curve. You'd probably see today for per curve, it is where it is and stays where it is, it probably just gets over that 10%. But it is a target, but you know the discipline that SSE has. We tend to kind of outachieve and outperform our targets.

Operator: And the next question comes from the line of Dominic Nash from Barclays.

Dominic Nash: A couple of questions from me, please. Firstly, just following up from an earlier question on capital structure and your position as to whether or not you're going to do a potential split or not, as 1 or 2 of your shareholders might be agitating for. Can you just confirm that your decision today is your final decision is unequivocal out to 2026, and we should see from the work today that there's going to be no option for you to sort of change your mind in the next sort of years? And the second question is on the 60p dividend. Could you give us some color on why 60p? Is there a risk that neither satisfies the income investors and neither satisfies the growth investors? Or do you think that, that is the optimum number and right? And the final question, I think, is probably following up from, I think, Jenny's question earlier on your sale of your 25% stake. Can you just tell us how will you be accounting for that post the sale? Will that be fully consolidated or proportionally consolidated? And if fully consolidated, the CapEx and the net debt numbers, will they be the whole numbers? And how do they get reflected in your net debt EBITDA calculation? Would it be consistent with your other JVs? And finally, what's the scale for EPS dilution, which I think was probably what Jenny was questioning on the growth rate, which I believe you said would be a 5% to 7% growth rate after the disposal of the 25%. Is that correct?

Alistair Phillips-Davies: Okay. I'll let Gregor confirm all the things you've asked at the end, but I think you are correct. Just yes, the plan today is absolutely the optimal plan. The Board are very, very clear that, that's what we want to do, and that's what we're going to go forward with. There is no other plan out there. We're committed to that, and that's what we're going to go and deliver. And I think in delivering that, that will give us the base that we need to deliver even more going forward. And I think that's important as well.

Gregor Alexander: Yes, Dominic. I mean the dividend, I think we've answered the dividend is a balancing act, and we've got to look at the significant growth. I mean we've got -- we are bringing in £1 billion additional a year into our CapEx plan. So I mean we've talked to shareholders. Our shareholders understand there's a balance there. And we think what we've provided today is a good balance for moving forward and growing the dividend. You can put numbers into a model and play around with them. And you can get a number around that. I think this is a number that we've worked on for a number of months with the CapEx program and looking at the sensitivities around the business, and that's what we come out with, I wont get into too much more detail there. On the Networks business, we will proportionally consolidate that will come out as a minority interest line in the numbers. We will take out on our adjusted debt number, the debt associated with the minority interest, as you would expect, but we didn't recognize the earnings either, which is consistent with what we do with other joint ventures. And then on EPS, yes, is after the disposal of the 25% stake. The EPS dilution from that stake, I think from memory is around 6p or 7p. So that's the kind of the relativity of that.

Operator: And the next question comes from the line of Mark Freshney from Crédit Suisse.

Mark Freshney: So firstly, on the £12.5 billion, just to be clear, that doesn't include the partner share of CapEx and networks, right? The 25% that you'll divest, that share of the CapEx and RAV growth, it doesn't -- it's not reflected in that £12.5 billion. Secondly, on the use of off-balance sheet debt, I think clearly, we've got the numbers for Seagreen and Dogger and Beatrice, but in terms of the quantum of off-balance debt that you'll be using which we would need to add to the CapEx to get a true picture of what you're investing, could you give us some color on that. And finally, just on the 25% script cap. How are you intending to exercise that? Would that be undertaking an on-market share buyback? Or would it be through other means?

Alistair Phillips-Davies: Okay. Well, even confirm the £12.5 billion excludes the 25% that is being paid for by the assumed new owner on the assumed sale or potential sale of the business. So obviously, the overall CapEx would be higher if we did not sell those businesses down, so I'll confirm that. And then the off-balance sheet, Martin -- I think about that -- or Gregor.

Gregor Alexander: Yes. So I think your question of balance sheet, is it kind of impacting on the ratings and how does all that play out. You've got to remember with the disposal of SGN and it's actually quite a lot of off-balance sheet, finance that comes off. So our percentage of our balance sheet funding comes down. And if you look at those projects and add the gross spend, clearly we will get significant additional CapEx, but we're talking about net approved to SSE, the offshore wind projects are 40%. So we picked up 40% of that through our investment. We treated investment an equity investment, not a CapEx investment, and that's how we account for it. So I don't think -- I don't want to get into gross and then detailed numbers, but we can take that offline if you need a bit more detail.

Mark Freshney: And the script?

Gregor Alexander: The script? We'll just -- we'll manage that through a buyback to keep it at a certain level. I think that's probably the easiest way, but that's what we're proposing to do.

Mark Freshney: Okay. So when would you do the buyback after the final? So if you'd look at what it's been for the full year because I think there's some...

Gregor Alexander: Yes, we did it after final because interim is it's a smaller proportion of the overall dividend. So we did it after final.

Operator: The next question comes from the line of Sam Arie from UBS.

Sam Arie: So a great presentation, and very helpful question today. I've got one more question on sort of the big picture and then maybe one on detail that we haven't touched on yet. But on the big picture, you used to phrase a few times that this is a fully funded plan. And when I heard that, I sort of understood you to be saying, there wouldn't be any questions through the plan period of needing to raise additional equity. So I just wanted to give you a chance to confirm to me that, that's right. And then also, I suppose just help us understand how you thought about the trade-off between funding this very, very strong growth plan that you have by selling down stakes in the networks versus maybe by raising equity because that could have been an option and others have perceived that route. So I don't know to challenge that as anything out today. Just wondering how you thought about that trade-off. And then that's my big picture question then if there's time for a little detail. Just to pick up, what are your chance that shows a decent contribution from the abated gas generation just in a few short years' time. I guess that might be a question from Martin, but I wondered if you're able to share any of the economics around abated gas and kind of how that works in terms of carbon. Do you have to pay? Do you get the carbon [indiscernible] on abated gas? Or what's the economics of the abated gas business that you look to be getting into very quickly from me? So those are my questions.

Alistair Phillips-Davies: Okay. Big picture, it is fully funded. I come to the slide in there that Gregor showed, but with the £18 billion, basically in the breakdown. So we just felt it was important given other presentations, other companies have made, there were some questions emerged after about how that was funded, so we thought that was important. And ultimately, I think in trying to balance our CapEx and what we do with our balance with our balance sheet, we decided a disposal of networks and doing things that were in our control, where we're not at the behest of the market to do anything was the right way to go. It's always, I think, good to have strong organic plans. So that's why we went through the disposal rather than anything else.

Gregor Alexander: Yes, and also to probably rebalance on that CapEx makeup because the network spend is increasing significantly, and therefore, we're going to be noticing between renewables and networks. So there's a balance of that and taking value at a point in time where premiums are high. So why wouldn't you take some value there?

Alistair Phillips-Davies: And Gregor, obviously, has got a slide there generally on returns of what we'd expect overall on returns. But Martin may want to comment more on the structures. Obviously, we're working through the details with government at the moment.

Gregor Alexander: Yes, just -- I would just say on the EBITDA, there isn't a significant amount of EBITDA coming through from any of the kind of carbon capture, hydrogen kind of generation because the CapEx starts later in the kind of the period, so you don't get the earnings coming through until later in the next period. But Martin will comment on the kind of mechanics of the contractual arrangements with government.

Martin Pibworth: I mean, essentially, I mean, this is all kind of go-through consultations at the moment. I mean the government is obviously in its process with the clusters, of which the use case cost and high net one, the Acorn cluster at the moment is reserved. The Acorn cluster contains Peterhead. The Coast cluster contains [indiscernible]. So the notion that they're discussing with players at the moment is effectively a spatial power agreement. And as I said, this isn't all confirmed, but we think the direction of travel it's probably a private contract. There's probably a payment for availability and performance, and there will be a mechanism to ensure priority dispatch for abated plants over unabated plants probably through some top-up payments, which compensates for any short run marginal cost and disadvantage. And then the TSV will be just passed through. And again, discussion as well in term of that, but 15 years is a number with hard to abate is obviously consistent with other contracts in by the LCCC. And I guess, critically, if all of that comes together, then these assets will operate in the market, just in the normal way in the merit order. But the process is that the clusters are in their own discussions, negotiations. Once that completes, then the power stations available will also get in their own discussions. So this is a long way from being finalized and what I've just outlined is a direction of travel and understanding rather than a comprehensive. This is the final answer.

Alistair Phillips-Davies: Probably down to the last 1 or 2 questionnaires if we can because we're starting to run out of time, but if there are any more, we'll try to take them quickly.

Operator: And we have a next question from Bartlomiej Kubicki from Societe Generale.

Bartlomiej Kubicki: It's Bartlomiej Kubicki. My questions, actually 3 issues I would like to discuss. The first one is a follow-up on whatever we discussed before, i.e., your asset disposal. You are disposing of premium assets. So I guess you are expecting premium valuation. What if the premium valuation does not realize? Meaning what is your alternative plan for that CapEx -- capital increase gearing up whatever you can imagine. So what's your alterative plan? Secondly, on this 4 gigs of renewables addition in the next 4.5 years. Obviously, this is Dogger Bank, Seagreen and then Viking. Could you actually repeat or elaborate again what are the other projects you are including in the plan? And whether they are conditional on CFDs or you are willing to go merchants, for instance, given the fact where the power prices are right now? And lastly, on the above 10% return on equity return on your offshore wind, if we can actually compare apples with apples and if you can give us a spread over your WACC you are assuming in those calculations?

Alistair Phillips-Davies: Okay, look, on the disposals, I don't think anybody recently has struggled to dispose of any U.K. regulated assets. And that probably has persisted for 20 years plus. So I think we remain pretty confident that's the case. If we have to come up with a Plan B, then we'll do so. But we probably haven't spent a lot of time on it, and I would want to have idle speculation about something that I don't think is going to be needed at this point in time. So we remain confident that we'll dispose of those businesses as and when we want to. On the renewables bit , as we've said, 60% of the CapEx is committed. There are a variety of projects you've got there. Martin went through them in detail, so I'll -- you'll probably end up slightly repeating himself, but he can run through some of the things that we've got. There may be some substitution depending on exact timing, an exact cutoff. If you wanted to cut things off in 5 years' time, we might have bought slightly more or slightly less of certain assets. But Martin, maybe you do that, and then, Gregor, if you can go to the WACC calculation or spread.

Martin Pibworth: Yes. I mean so we acted through this a bit, but obviously you got to talk about Keadby, Seagreen. Then you've got Seagreen 1A, Arklow and Viking. And then on top of that, there's options on the onshore pipeline. We talked about our bid in terms of thaw in Denmark, obviously don't have the outcome of that. And then there's other things that we are kind of looking at from a development angle as well. So we're pretty confident about that number. Is that what you're looking for?

Alistair Phillips-Davies: I think so, Martin, yes.

Bartlomiej Kubicki: Yes, renewable [Technical Difficulty] CfD as [Technical Difficulty]...

Alistair Phillips-Davies: Sorry, we didn't quite catch it the extension and we've got Seagreen 1A, which is extension of the [indiscernible] 1, and then we've got Berwick Bank, which some people may view as the Seagreen extension because it's kind of next door.

Bartlomiej Kubicki: I mean -- sorry, my question is here, whether you are -- I would like to see your risk appetite right now and whether you will be willing to go merchant with those projects as well? I mean Seagreen extension or onshore wind over -- this is conditional or -- and CfD options?

Alistair Phillips-Davies: We'll make that decision at the right time. We've obviously -- we're merging the 58% of Seagreen at the moment. And I think we've got a range of options as to how we try and mitigate risk on it. But Martin, you may want to comment on the detailed work you and your team to do?

Martin Pibworth: There's an auction process next year. Obviously, we are looking to see whether we can complete successfully in that, and then we'll review at the end of that process whatever we need to do. I mean just in terms of merchant exposures for wind, probably I'd keep myself if I didn't put out that the flexibility of the rest of our portfolio gives us some cover against some of the risks that other people might face, which is an advantage to our overall portfolio.

Gregor Alexander: Okay. On returns, I mean, I'll give you a kind of post-tax nominal type return. I think it's easier just to give you that because you can work it back and do the math, so 7% to 8%, that type of range that we'd be looking at post tax nominal for offshore wind.

Bartlomiej Kubicki: And in terms of IRR spreads?

Gregor Alexander: I'm not going to give you a spread because you know you've fit your models for WACC, everyone's got different WACC numbers.

Alistair Phillips-Davies: Yes, you can all tell us your WACCs and we can all tell you whether we think we're materially different from your consensus or not.

Gregor Alexander: A bit easier for you, Bart, I give you the number, yes?

Alistair Phillips-Davies: Nothing easier than that. Right, last question I'm afraid because I think we will be running out of steam, otherwise.

Operator: And the last question comes the line of Verity Mitchell from HSBC.

Verity Mitchell: I got the last question. A question just back to dividend. You've explained a lot about your dividend policy, but you're the only company renew with regulated assets that's not on the inflation-linked dividend. If you could just talk through why you decided to go for absolute 5% growth rather than what you've done before, which is inflation linked?

Alistair Phillips-Davies: Well, we're confidently expecting for that dividend of at least 5% will be higher than inflation. And as we've said, it's going to be at least -- and that's just the benefit of owning SSE and having an attractive mix of regulated and market-related businesses, which you've tucked into areas of such high growth at the moment. I think also with our businesses, they are fairly unique in the sense that they've got so much growth in them compared to many other businesses at the moment. But Gregor?

Gregor Alexander: Yes. No, I think you've answered it. I think it's also the mix of the business, the 40% renewables, the 40% networks and 20% other technology including thermal. So it takes our balance and it gives a bit more certainty to shareholders in terms of where that growth profile would look like, at least 5% growth, which I think will then be able to cover map out in their model is a bit more firmer than maybe an inflation-based model, which is becoming a bit less kind of the focus. As I said earlier, we have less index-linked debt as well. So that gives us a bit more flexibility as well, over and above inflation.

Alistair Phillips-Davies: Okay. Look, thank you. Apologies if there are more people with questions. If you come through the IR team, we'll definitely be looking to arrange calls. We'll have an extensive shareholder engagement and indeed analyst engagement program going on over the next couple of weeks. And we'll obviously look forward to seeing you and hearing from you. And if there are any specific questions well. Obviously, the team can try and answer some of those on e-mail as well. Really appreciate you all giving us your time this morning. I know it's been a long one, and there's a lot to digest. So we look forward to continuing to set out the benefits of our new and bold net acceleration plan for Net Zero. Thank you very much, and look forward to seeing and speaking to you over the coming couple of weeks.

Gregor Alexander: Thank you.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now all disconnect.