Centrica plc (CNA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Centrica's 2021 Preliminary Results Q&A Call. My name is Nielsen, I will be the operator for your call this morning. [Operator Instructions] I will now hand you over to Chris O’Shea, Group CEO. Please go ahead.

Thanks very much. Good morning, everyone. Thank you very much for joining us for our 2021 annual results presentation and Q&A session. I'm joined by Kate Ringrose, our Group CFO. And we also were lucky enough to have our Chairman, Scott Wheway with us. And so Scott will be delighted to take the most difficult questions that you may have. But just in summary, hopefully also in the presentation, 2021 was a hugely eventful year, both in terms of the external environment also in terms of the progress that we made in Centrica. I am delighted by the resilience of the results and the strength of the balance sheet. So eliminating the group's net debt and ended the year with around GBP 700 million in net cash is something that I'm very pleased with, as we said about the turnaround of Centrica. And we mentioned that there were a number of phases. The key thing was to make sure that we got the portfolio in the right place that we derisk the portfolio, that we strengthened the balance sheet, which would allow us to grow our very good underlying businesses. So the completion of the disposal of Direct Energy, the agreement of the sale of Spirit Energy in Norway, in addition to lots of other smaller noncore asset disposals weaved us at the portfolio and I think you can see we're all very comfortable with. Obviously, we've seen turmoil in our main energy market, and that shows you, however, the strength of our business model. I thankful that it didn't -- it didn't cause us some -- I can't say that it didn't hurt us, but it's something that we managed to get to support our customers and actually take on 700,000 customers from other field energy suppliers. Now with that, I'll probably stop the intro rather than do another presentation, and hopefully, we can go to your Q&A. It's always good to hear what's on your mind. And when you ask the question, would be good, if you could lay out something if you have multi-faceted questions, if you could lay out each of the parts, so that so we can consider who best to answer that. So I'll pause now and ask the operator to get us the first question. Operator, are you there?

[Operator Instructions] The first question comes from the line of Dominic with Barclays.

It's Dominic Nash from Barclays here. A couple of questions from me, please. Clearly, the first one is the probably after you recorded your presentation in Russia, obviously, it has embedded Ukraine. And I suspect it's going to lead to a number of uncertainties and potential dislocation in the energy markets going forward. So the first question here is what are your views on the short-term impacts and sort of the measures that Centrica has got in place to weather it and potentially even benefit from it? And secondly, do you think that this will lead to a longer-term change in energy policy and less reliance on Russian, how the comps going forward? And kind of linked to this, the second question is looking at your LNG numbers, you've seen your results that you're hedging now beyond 2 years out on LNG. On a mark-to-market basis, I'm getting like really -- like GBP 500 million plus EBIT on your LNG contracts on the forward market curves. Could you just give us some color as to what your exposure of merchant exposure is on your LNG contracts going out and what sort of the mark-to-market profitability of this if you were to secure this, say, 3 years out, please?

Dominic, thank you very much. Good morning. I'll take the first couple of questions, I'll touch on LNG and then ask Kate to come in with anything at the end. You're right, the events in Ukraine but after the recording video I think that in some ways, I mean, I went into depression when I woke up this morning, and in some ways, it was very much expected and some of this is pretty much unexpected, but this is unprecedented, I think, definitely in my lifetime. And I'm not sure that it's helpful to speculate, what I would say is that, as you saw last year when the prices moved materially in the last quarter, we were -- we weren't immune to market changes, but we were well prepared and well hedged. And that's not because we saw it coming, that's because that's how we run our business. And so obviously, that we are appropriately hedged at the moment in terms of our buying, but also in terms of our sales from our Russian businesses. So we watch what's going on there and look and see what is the impact on our customers. But I think it's really quite early to, especially, but clearly Russia is a large oil and gas supplier. And it allowed the oil and gas supplier, any country, any supplier goes down length of time and you'd obviously expect it to be some impact on the market. So we've seen some volatility this morning. I think with anything like a share price, look at commodity place, you've got to be settled and then the markets will find a renewable and we'll manage. In terms of the energy policy change, again, I think it's very early. We've got to -- you got to make sure the energy policy for the long term. You can't make it on this. So this is, I think, another bit of information that I'm sure the policymakers will take into account. On LNG, I would say that one of the things got, the investors, the main contract or the contract that goes out to September 2039 I mean that's an index for 115% of Henry Hub plus a $3 liquefaction fee. And the estimate, the deployment cost for that just now, if you were to go and buy the same in the Gulf of Mexico is somewhere between $2 and $2.50 liquefaction fees and in Henry it is not necessarily in the money. However, it's not Easington's going to build a big LNG plant overnight. So there's obviously a premium to that liquefaction fee at the moment in the market. The question is how long that premium last. I think so supply and demand in the commodity markets, as you well know, it changes over time. You can't just split things. You can just spin things up. If the price is at the moment, then you've got to expect there's going to be more gas exports from the United States. You've got to then expected Henry Hub would go up. You've got to expected the premium to come down. So -- and on a contract, we still got 17 years to go. I'd love it if it was in the money for the rest of the time that is really, really especially when you've got liquidity in the curve of 2 to 3 years. And then you've got some that will take more of a midterm, maybe up to 5-year deal beyond that. Nobody really knows. So I feel more comfortable with LNG today than I did last year, but next year, who knows where it's going to be. So obviously, it's kind of the positive moves. But Kate, I don't know if there's anything you want to add to that?

Yes I mean there's probably a couple of things. I mean one of the things just to remember with -- from a short-term perspective on commodity prices, is that went long on a short-term perspective. So in terms of our, how we manage our cash and collateral position and depend by our credit rating position that puts us in an in a better situation, clearly one that we monitor and manage actively. From an LNG perspective, I think we've said before that we do tend to hedge this contract a couple of years out just based on the sideways and the liquidity that presents itself. So we don't expect to benefit materially in 2022 and the benefits in 2023 will also be reduced by hedges that we put in place some time ago. However, we're actively looking at our hedge positions for the residual balance in '23 and beyond to ensure that we are benefiting where we can and from the improved profitability dynamics that we see in the market. The only other thing Dominic that I'll just add on energy, that it's a very bespoken bilateral market, which is constrained by availability of shipping and the like. So it's not a fully liquid market where you can catch up the opportunities immediately.

And just sort of just to get some clarity there. Could you just describe what is your open positions as a percent on LNG 3 years out?

Dominic, I think that is really commercially sensitive. So we would absolutely not want to give you that.

The next question is from the line of Jenny Ping with Citi.

A couple of questions from me. Just firstly, to start, you've made it very clear that there is the intention to resume dividends, but you haven't given us any sense of the financial framework in which you will come to the conclusion of what the dividend number could be. Kate obviously talked in the presentation about the maintenance CapEx element of it. And you alluded to earnings and cash flow. But can you just elaborate a little bit more in terms of how you would look to think about dividends come first half results? Secondly, just on home services as some of these COVID issues unwind, presumably, although it's 2022, you're unlikely to see the profits go up, but presumably, there's nothing structural in there and it should unwind if we look beyond 2022? And then lastly, just on bad debt provisions, can you give us an update on where you are there? And as we look forward to the bill increases coming through, what your expectations are? And I presume Ofgem in the price cap, they will allow a higher allowance if bad debt starts to go through the roof.

Jenny, thanks very much for the questions. Let me touch on the services and then let me touch on dividends and then let me ask Kate to come in at the end of that and talk about bad debt. So in services, you're right, that these are tend to be suitable we expect to see into 2022. There are also some self-inflicted wins in there. We -- I'm a bit upset at the fact that our planning and our dispatch is probably not where I wanted it to be we're taking steps to fix that. But you're right. I mean in terms of the boiler shortage, will fix itself at some point. I just don't know when. The illness, the absence rates, I would expect to go down. And I think I've got a question from somebody earlier on, which is with the change in U.K. government policy, does that mean you said you have something to go down quickly. I would say that we've always taken and given our engineers in and out of homes, even see COVID, if they got the cold, if they got the flu, we don't want them to go in and infection of our customers. Our customers don't really want them and so whilst it's good that we're learning how to live with COVID, the moment they need to self isolate, I wouldn't expect to have a material impact on our absence rates because we've got to make sure that people are actually not feeling -- sick, they are feeling sick, they shouldn't come to work. So it will unwind, but let's see how it goes. I mean, I also say the only reason at homes only represent is that probably 9, 10 months ago, it looked like we come out of COVID and then it came back as like a wrecking ball in September as a society. So we've just got to wait and see and how much under control this is apples-to-apples after 2 years. We know where we are, the scientists there seem to be a bit more comfortable. So that would be on services. On the dividend, I think it's -- we did talk about should we lay out a financial prework, but the big key missing part at the moment is what is the settlement of the pension scheme. So we've got to make sure that we've got that. And what we'd like to do, one of the first things I did when I became Chief Executive is canceled the dividend, canceled the dividend that already declared, and that was something I didn't enjoy doing at all. And I'm very mindful of the fact that when I did that, I said that we wanted to get back a dividend. We wanted to make sure we're in a strong position. In the last few years, we have, I think, materially repositioned the company so that the balance sheet is incredibly robust. And so we've done a lot of the things that we wanted to do. There's just 1 or 2 things that we want to get right before we restart, and the rest assured, we are very disciplined and we're very focused on shareholder return. This is the shareholders' company. This is their money we manage it on their behalf. So if you could just give us a little bit more time than we would hope to be able to lead this hopefully looking for the pension with you around the middle of the year, and we can maybe lay out there. So I know that I'm testing people's patience, but if I could just ask you to just extend a little bit more for another few months and then hopefully we'll be in a position to reveal also. Maybe with that, I could ask Kate to talk a little bit about bad debts and what we're seeing.

Thanks, Chris. I think on the dividend question, Chris has sort of covered all of the uncertainty that we see in 2021. So as to same as we were at 8% in 2020, and we're on 1:10 for 2021. And it's not appropriate, we think, for the end of the year. Now bear in mind though, as I look forward into the year in energy build we expected to go up materially, the pressure of the cost of living crisis it's not knowing what impact that's going to have on customers. So that is something that we have learnt through 2022. If you work on expectation that our revenues and energy are going to grow up materially from where they are now to you could assume circa sort of GBP 10 billion-odd in 2022, then a 0.5% increase on bad debt, so that number is a decent size figure.

Sorry, just a follow-on, Chris. So does that mean we should be reflecting a Capital Markets Day or some sort of update to the overall strategy of the business in a couple of months as per your words?

So hopefully, Jenny, you'll see that in what we put out today, there's a bit more in terms of how we're thinking of the company going forward. I can't prefer to do that when we do the annual results or when we do the interims. So we've got no plans to hold us up at Capital Market Day. We hope to be able to get people more information. But hopefully, you saw that today, as a bit more color about how we're thinking about the shape of the business, how we're thinking about the things we need to do, how we see thinking that sitting in our overall portfolio. So we take up enough of your time with that 2 sessions a year to Capital Markets and is probably more than required at the moment.

The next question is from the line of Mark Freshney with CS.

Just to follow up, Chris, on the cost on services. I mean, the cost base went up. The cost per customer went up pretty substantially. And the actual number of customers went down and there wasn't a revenue increase, much of what you describe, boiler part shortages. These are short-term issues unlikely to occur. But in terms of higher cost of subcontractors that's a lead indicator for your own wage base rent. So you need to put through a pay rise and presumably revenues need to go up as well. So how much of this margin squeeze is more medium term and how much is short term? And I have a second question for Kate. You alluded on the presentation to GBP 113 million of cost that you've incurred under solar. There's a lot of adjustment sitting on top of one another, right? There's the solar costs, there's the GBP 59 mainly for unintended standard variable demand. There's big -- as I see it as big receivables building up within British Gas residential. Can you talk about those regulatory receivables and the profile of them? Because presumably, you're going to have a pretty substantial recovery of them in 2023. And finally, just on the higher performance in energy in upstream, so the upstream business has done very well. How much of that is cash that's locked up within the Norwegian assets that effectively belongs to the new owners.

Mark, thank you very much. Great, that we took your questions. Second question, which I think Kate is able to take. So let me take the services one and then ask Kate to talk about the and then I know there's a slide in the back up to the presentation since you look at which details and the Norway the cash as come in and what goes to this, and essentially that we having from the Norwegian assets in the first of -- from 1st of January 2021 is for the current of the new owners. In the services, bear in mind that you're right. I mean if we see inflation in wages, we have to pay the going rate. So there's no point in paying and that's not the case. Bear in mind that when you see a substantial increase in absent rates like we've seen, we pay our people, we have a good paid policy. We treat our people, so they get paid. And therefore, we have to have excess contract capacity to actually go to the customers. And in addition, if we can't go and see the customer or if we cause them too much and will also -- we either repay the cost of an annual services at GBP 65 in the policy, anybody that we can do our new services, if we repay that's a cost. Probably there's about GBP 0.5 million of those last year. And so that's not an insubstantial cost because we're paying the labor and they're not at work. And we're paying the customers, the refunding cost of their under service, but we're not taking enough revenue given that the cost we put in the system. We also will pace customer compensation. So I think that the question on wages is one that we still got to answer because we've got to go through our union negotiations, and I wouldn't like to reach out to that, but we've -- look the thing is we're not immune to COVID. We're not immune from the pressure on our colleagues, we're not immune to the increase in cost of living people have got a fair wage. But in terms of the absence, that's very much a shorter-term thing. The responsible employer will take seriously the responsibility to both their customers and to their colleagues. We're always going to see that causing a squeeze on margins, but it's not permanent that we'll come back there. We're now seeing a little bit lower than it was, but is still at the rate. So hopefully, that helps. Norway, maybe I don't know if you want to talk Kate about the Norway, about the recoverables in terms of the solar impacts, which are not immaterial.

Yes. Thank you very much, Chris. So in terms of the solar impact, so the costs that you've talked about in terms of that more basically the cost predominantly purchasing the gas and power that we need to customers as well as our credit balance. So there's a confirmation that we could make a prudent process that we were incurring if we submitted and got approved and then in terms as well for a bill that we'll make later on in the year. We broadly expect to recover sort of around 2/3 of that in 2022 and 1/3 of that in 2023. So I think what I called out on the GBP 113 million was a working capital drag that we had in 2021, that will be sort of broadly flattish in 2022 and then recover all of that in 2023 is the broad expectation. Just looking forward to the recovery in terms of the cap adjustments, we think the cap adjustment has been made by Ofgem is fair in relation to the cost that we've seen that we incurred. So -- and expect to incur in Q1. So as a reminder, the sort of churn dynamic that I spoke about in Q4 of 2021 is likely to get bigger in Q1 as those customers are more often and they stay longer through the year. So we think that's a broadly fair dynamics. What that will mean in terms of overall 2022, so we're not giving guidance on that because, as Chris has said, the dynamics outcomes are still very wide with whether commodity price, the current situation that we're in at the moment, but also the bad debt that I talked to Jenny about the question just a while ago.

And also, so just to follow up also, presumably, together energy will be a pretty high costing Q1, Q2 and the solar costs will not come through until April next year. So that presumably is a further -- together Energy is a further near-term drag on cash flows for stability, but potentially something that is reversed in 2023.

On cash flow, I would say, in our profitability to same degree because part of -- this is a -- with the similar dynamic, it's a cash flow implication in terms of us purchasing the commodity making good credit balances and then waiting for that to come back through this earlier process.

Yes. Remember, Mark, we take -- customers that we take on through solar we take on, we see no gain, no loss, no profit basis. There is a small cost in terms of the operational impact of taking them on. But the excess cost of the commodity we claim back through the regulatory settlements with Ofgem.

So you're creating -- to be clear, you're creating accruals and also prepayments, you're crediting P&L for expected solely in the future once you take the customers on. Is that correct?

Yes. We create basically -- it's full covered sort of an accounting, it's how we do it. So because effectively, it's covered by that stat, that allows us to accrue for that.

Understood. And can we see those in the results statement, the actual receivables pertaining to solar costs that you had a bit.

Yes, there's no disclosure in. Yes, there's no disclosure on that. Okay. So thank you, Mark. I think on your last question, Chris, do you want me to take the cash on Norway question. I appreciate that the sale of the Spirit Energy business in Norway. It was complicated in around and it continues to be complicated in that we accrue the profit and the cash in the business up until the point at which we sell it, and which we're expecting to happen as we indicated in Q2 of this year. There is an appendix slide on Slide 40, which just gives you sort of a real indication of our cash flows in '21 and '22, which I would point to, but you'll see from that effectively, we from a cash perspective, received the benefit that we're going to get from the disposal in our 2021 results already.

Thanks, Kate. Yes, you see that. I mean the great thing is we have been prepaid for the disposal. Yes. And so you got focus on cash. So we've already got the money in the bank for all the things.

The next question is from the line of Martin Young with Investec.

A couple of questions, please, which I guess are more longer-term/bigger picture. And the first is around the energy supply market in the U.K. And I would say, given the demise of the suppliers, we what clearly unsustainable business models, the competitive landscape for yourself and the other remainder has clearly improved. Ofgem has brought forward a raft of measures, I would say that those are broadly positive for the supply industry. But quite clearly, we've got a big, big challenge to get to net 0. So I think it would be wrong for any large supplier to take a view that things have got easier with reduced levels of switching and seeking to benefit from customer stickiness and the industry really does need to drive change and innovation. And against that backdrop, I guess I've got a couple of questions for Centrica. One, where is Centrica innovating to help deliver net 0. And what engagement have you got with Ofgem and the government to get regulatory change coming through. And in particular, new issues on whether the wholesale market should be reformed and whether we should see reform of network charging. And then the second question is around what Chris was alluding to in the presentation earlier today on the Centrica Business Solutions and flexibility, et cetera. You've got 229 megawatts of derated capacity in the T-4 Auction 2025/2026, obviously a GBP 30 per kilowatt per year on that. But over and above that capacity market payments, can you sort of shed some light on how you're going to monetize these assets and what type of returns you will get from these because I'm cognizant of the fact that CBS is still in negative territory at this juncture?

Martin, thanks very much. It's also over 20 questions within that. So let me try. In the market, the -- so you're right, there's a whole ramp for changes that are required. But we have to step back and say, what's the first thing we need to do. Fundamentally, supplies need to stop financing that operations with customers' cash. So all of the stuff about how you change regulation, how you drive innovation, how you get to net 0, I think that's putting the cart before the horse. We voluntarily didn't spend our customers' cash. And you can see, we think the GBP 294 million we announced, at peak is about GBP 300-ish million with 7.5 million customers, bolted under GBP 254 million of customer deposits with 1.5 million customers. If we had the same approach to customer deposits as we had GBP 1.25 billion. They had their deposit for our customer is 4x ours. And one of the things I've seen from customer conversations with customers where companies have got under is customers saying, I've got a big credit balances, they kept increasing my direct debit before they went out of business. So the thing we've got, and I'm hopeful the used analysts and you can talk to investors is we need to be responsible, we need to have a robust energy supply market. All of the companies are here today need to stop funding themselves and customer deposits we need to do. We have to wait for regulation. We're frustrated by the slow pace of changes that we've done ourselves. A good question why ever done. Let me say how would you drive the innovation? You've got to have an appropriate return. You know this as well or better than most that we have an industry which has been collectively loss making for the past 3 years. That industry cannot drive innovation unless it spending somebody else's money and then it's not sustainable. So what you've got to see as an appropriate level of return. And I think all are focused on what is an appropriate return on sales. But as we saw last year and as we're seeing just now, the capital that you have to deploy in order to manage the risks associated with this business is not insubstantial. You've probably also got to look at what is the right level of return on capital. And some of the representations we've made the government and Ofgem without saying this is the return that you need to put in place. Well I encourage to do is to look at all the markets haven't collapsed in the face of rising prices and just understand that some of them are maybe not ones that you'd like to emulate like what happened to EDF in France, but some of them have been quite robust. None of those have target margins of 1.9% return on sales. So I think that we've got to have a reasonable level of the turn in order to drive the required innovation. And what are we doing for this? We've obviously, we are the largest installer of the smart meters in the U.K. You've got to be able to install smart meters before you can get into the quote changes that are required, particularly for the DNOs to drive more flexibility within the distributed networks. You've got to have smart meters. At the moment, having penetration 50%. So we've got to make sure that this is transition the net 0 transition is one that doesn't leave anyone behind them. Though we've got 100% penetration of smart meters to we're going to leave people behind. We also launched our electric vehicle charger proposition last year, and we've got a high charge out there, obviously, with most things that are bumped in the road, if you look use the customer experience, but I'm delighted that out there, and that's working off the high platform. I see as we go forward that we're going to have an integrated home energy management system, which will require network code changes, it would require more investment in innovation. It would require companies to provide more than just plain vanilla energy on a single or a dual weight. We're going to have electricity settling every half hour. This is why we are investing in the new platform in our energy supply business because we need to change our systems not only to give the customer's have better experience, but also to ensure that we can give this more flexible billing possibilities to our customers and ultimately help them to serve the demand response to operate a virtual power plant. So I think the opportunities are quite substantial for us. But we have to see a stable market. We have to see stable participants. We have to see proper prudential regulation. And then we have to see -- we have a term profile that encourages responsible businesses to invest and it discourages advance companies that are investing not in substantial amounts of money, but it's not their money. They're putting other people's capital at risk. So that's how I look at that. And for CBS, I think it's distributed energy. I think it's got a large part to play in our portfolio to go forward. And we've been quite open that we'd like to grow that more now in terms of how do you monetize that, I'd rather not give all of our seats away. But it's obviously you can get capacity, you can get -- we get some frequency response services, you can also decide to have some rapid response generation on a purely melting basis. The trick is to make sure that you've got a balanced portfolio to make sure that you've got the right to make sure that you've got the right technology to make sure that you can respond whether the has got to be up in 30 seconds or it's got to be up in 15 minutes. Having that right balance is, I think, very important. And it's not just in terms of helping the build-out of renewables by having something that can deal with the intermittency that we're going to see in the system. It's also something that helps us manage the peaks and troughs that we're going to see in the pricing for our customers as we go forward. And with more intermittency we saw this last year, you get far higher balancing charges and the things that maybe you could hedge in the past through purely financial contracts. I think it's going to be harder to hedge that going forward. So you're going to get a bit more of a balance to portfolios. But we got to have the right firms. So we said last year, we would look to build out solar and battery terms are more available. If the terms are not available, what we wouldn't do is maybe what we've done in the past, which is we'll lay out a large strategic vision and come what may, we'll look to implement that. We are laser focused on returns. And so whether the terms are there, you'll find out that we've got expertise, we've got the required to be in the market, you'll definitely find the other one to say we want a return X or Y percent. I would say that we are focused on the fact that we manage our shareholders' money. And therefore, in order to create value, we've got to get a return above our cost of capital across our balanced portfolio. So you'll hopefully see that as we go forward. If I disclose our terms on the other side in anything that we're bidding on, we know what's acceptable to us, and I'd really rather not give out our negotiating position in advance.

The next question is from line of Chris Laybutt with Morgan Stanley.

In terms of, I guess, a way to start, in the retail market, if we could just maybe follow up on some of the previous questions. By the end of this quarter, where do you think your mix of customers will be, i.e., how many SVT customers do you think you'll have and how many fixed customers you'll have at that point, just to give us an idea of where the portfolio will be positioned going into next quarter? And secondly, just on the balance sheet, clearly there's a lot of strength there. There's also a big unknown with the triennial review. Given the risk profile of the group, though, what level of net debt do you think would be the efficient level once you get through all of the sort of the moving parts over the next couple of quarters?

Excellent. So let me take the customer question first, and then Kate will -- if I could predict your answer, probably tell you, I'm not telling you right now because I need to -- I can't tell you what the right level of net debt is. But look in terms, I think Ofgem recently, I think in terms of Select Committee in Parliament noted that over 75% of customers are on standard variable tariffs, so 22 million out of 28 million households on standard variable tariffs. I think that we have gone somewhere and I'm looking across the scheme, I think that we look at it is now in terms of customer numbers, in terms of our customer because obviously we've got single fuel and dual fuel customer. But I think that we have on something not dissimilar to that 75% on SVTs. It has certainly gone up for us over the past. So I think how we would look at it is -- in the past, we have probably had more SVT customers than other companies and the average in the market. And I think now that we are more in line with the market. So we've -- the market has kind of moved. Our SVT book has gone up as well, but the market's kind of moved. You've got to remember, we've also got 700,000 customers that came on to the supply to last thought process and they've all effectively gone on to the SVT. So probably -- we're probably a bit north of the 75% that Ofgem disclosed that were put in line with the rest of the market. I'm telling you what I think it's going to be the end of Q1 because I just don't know, but some -- not everyone rolling onto the SVT. Some people take a different view they want to fix their contracts and that's okay. Some people roll off fixed term contract into the SVT will certainly wait and see. You would have to expect that with the prices -- the higher prices are in the market, the more likely people have to roll on to SVTs because the fixed term contracts that you offer to someone, you make it a price on a monthly basis. So people are rolling off in fair bit of prices and a fair bit basis. And then obviously, if the market moves upwards, then that needs attractive. So anything higher prices you'd expect to see an uptick in people rolling under SVT contracts. And then I'll to Kate to tell you that she's not going to tell you what appropriate level on net debt will be. Thank you.

So with regard to -- so Chris has told you what the answer is, but just to give you a little bit more context, it's worth to remember that when you look at that GBP 700 million cash, there's a lot of margin cash in there. So that's really a function of the kind of markets that we've been operating in a real conscious move to manage our credit versus cash risk in these very volatile market environment, which means that because we're not -- we have GBP 0.5 billion of margin cash that really belongs to our accounts part and that will although clearly today, a different question would have flown out the business. I would normally our balance expected to be on a margin out perspective because of the exchange trading that we do in the initial margins that go with that. The other thing as well to record is just with regards to the movements in cash on Spirit, we talked about tax that we need to pay and also the dividend that we'll need to be paid on this Spirit cash when we get to a settlement of the Norwegian sale. And the fundamental way that I look at the appropriate amount of net debt and relationship to our sustainable cash flows is around the credit rating. So where we are in terms of investment grade, it's quite a complex in terms of how S&P and Moody's look at it a different and quite specific in this of analyzing our balance sheet relative to the cash flows and the business risk that we carry, but ultimately ensuring that and not having to manage the working capital dynamics, manage the commitments that we've made with regards to our credit balances and also any stress testing that we would do on a normal course of business basis for our regulatory position and gives us the headroom we need to hold that credit rating as one intact and safety.

The next question is from the line of John Musk with Royal Bank of Canada.

Three, hopefully, quick questions from me. Firstly, on the new technology platform, I think you said 300,000 customers so far. Can you just outline the speed of migration from here and how long it will take to get all customers on there, if indeed you are planning on moving all customers across. Secondly, you mentioned some growth opportunities around heat pumps and hydrogen pumps or hydrogen boilers, sorry. And I think you said you're targeting 20,000 in your first pilot project. Now that's a pretty small number in the overall market context. And I just wonder how quickly that can scale up and how you think around affordability for customers who are trying to make those changes. It's obviously a big investment for the average household to put in a heat pump. So are you thinking around how to help customers with that or the pricing mechanisms you may put in place to put those heat pumps in. And then finally, and I may not get an answer to this, but in terms of distributed energy, opportunities. You mentioned that in Ireland, but Drax is looking to sell its because call it acquisitions or option for you there? Or are you looking to develop assets from scratch?

Thanks, John. So let's take the middle one first on the growth heat pumps is having. What we said that I think by 2025, we want to install 20,000 heat pumps per annum. And a small part of the market, but would actually be -- I would represent a big part of the market, I think we estimated that there might be 100,000 a year within that trend in the market. You're right, with 28 million homes, 28 million heating systems that need to be replaced. And what we're trying to do is to -- as we talk to regulated governments, et cetera, is to make sure that we do the right things to the customer. All too often, you got companies that are trying to do the right thing for them and trying to do to the customer. And we think we could do it with the customer. And so you're right, heat pumps are very expensive. And we've not commented on that because I also said they were going to bring the heat pumps down by 50%, 60%, 70%. And I would be delighted if they can manage to do that. You've got to remember the heat pumps technology, heat pumps have been around for 30, 40, 50 years. France sold 600,000 heat pumps a year. While the U.K. certainly decided to install heat pumps would cause a reduction in the price is beyond some people have said it because it's new technology, it's just not. So I don't know what the cost of heat pumps will go. If they come down substantially, I'll be delighted and I'm a very happy buyer of heat pumps some of our competitors. However, I'm not so sure that they're going to be able to get the prices down. And so then you've got to say what is the right thing to customers, the right thing for consumers and the right thing for the country, and the right thing to the planet is a mix of hydrogen system and heat pumps are pleased to do both. So we're installing hydrogen-ready boilers just now. The boilers that we installed at the moment take 20% hydrogen and there are boilers that have been developed that can take 100% hydrogen. The way that I look at it, we are an installer and service of heating systems. And we'll try and influence what those heating systems are with our customers. And on the U.K. customers are in the right place. But the reality is whether the heat pumps and boiler wherever we are well placed to install this, and you have the data in the presentation, if you can install a boiler, you can install heat pump. Our boiler because something like there's some in install in a boiler, but the installation actually of heat pumps is heavier. It's a bit more difficult to get into place. You can just have 1 person lift it. If you do that, give it a go, try and lift heat pump, then make it a point to because it will end up putting you back out. So it's a bit more awkward. But the physical requirements of the heat pump or the same is a bit easier than a boiler. But you're right, it's expensive. So we've got to get the right thing for consumer to finance the customer just now when the installed boilers, and we'd like to extend that for heat pumps. What we can do is extend the heat pump cost GBP 10,000 can be installed for the boiler at the same time the boiler cost is down. That's why you got to have a mix of technologies. Otherwise, this will be an energy transition that rich can take part in the majority of people in the U.K. are not rich. So I think there's got to be a mix. And rest assured that we installed 90,000 boilers last year. 20,000 heat pumps is not going to replace 90,000 boilers, we expect to be installing a lot of boilers as well. So we'd like to grow more in that grow our market share, which is why we're recruiting heavily into the business. On the tech platform, will go over 300 -- over 350,000 customers now. The challenge with this is the temptation gets everybody on it really, really quickly. That would be great if it is seamless, but that would be terrible if it customer issues and costs have, the COVID concerns to the customers. We got the balance, the speed of migration with a desire to get a right mix we design a new better customer experience. So I wouldn't want to speculate as to the anticipated. We want to tell you what we've done. And the reason for that is that we often have seen in the past where companies that I've probably going to individually. We're going to have done this by then and you become a bit because hospice to fortune, which you want -- I always want to do what I say I'm going to do but I want to make sure that I give the team the time to do this properly. It won't be done at the end of this year. It won't be done at the end of next year because 7.5 million customers. Our intention is to migrate all of our customers onto this new platform. We know that it works. We know that requires development as well, but we'll get -- and we'll give you an update each time that we report. And then on question on distributed energy, you're right. I wouldn't comment on things that were for sale. So I'll tell you what we've done rather than tell what we're going to do. But we are -- we got to recognize where we at Centrica, we have not covered ourselves in glory in the past some investments that we've made. So you'll see some of the things, the stuff in Ireland, we have those sites. We have those good connections. We have wanted them and we've built them into the capacity market. And if we can get a to the right place, we'll be delightful to build those things. We have other assets that we're looking at in terms of how can we in the energy transition. I think you've got the to walk before you run. So maybe some day will be interested in that. But right now, I'm not spending any time focused on acquisitions. We've got enough on our plate. And I think that if we consider to deliver what we've got today, you'll all be very happy. We'll be very happy, our shareholders will be very happy.

The next question is from the line of Deepa Venkateswaran.

So I had 2 questions. One was on the portfolio restructuring. So you've said that now there's no active process for nuclear that's going to be part. And is it right to also then conclude that the U.K. business will basically be run for cash and meeting decommissioning liabilities, but there's no active process going on for either the remaining U.K. upstream assets or LNG. So that's on restructuring? And what might be the other small cleanup that you've sort of indicated maybe some real idea of what kind of assets. And secondly, just looking at the issue of absenteeism in the Services division and High Courts and so on. I mean, is this mostly down to COVID quarantining, whether that's the employee themselves or their family? Or is there anything deeper in terms of employee morale or lack of training or anything else I mean -- and should this automatically sort of resolve once, for example, do you think the government is already now relaxing the quarantining requirement. So maybe just to get an idea of how much is driven by the pandemic versus anything endemic.

Thanks, Deepa. On the portfolio, we will run -- so we won't explore any more in Spirit Energy U.K. and Netherlands. So we're going to run the assets, I'd like to say run it for cash. We're going to run them safely, and we're going to decommission them responsibly. So to run in for cash sometimes means that certain things. These are very critical industry. We'll run them appropriately. And the great thing about our new shareholder agreement is we can benefit cash for the decommission Spirit, the decommission and so on cash flows. What we'll also do, however, is the same thing we're doing for that we'll have a look and see if there are opportunities for these assets to become carbon-negative assets and to help the U.K. in the past net 0. If that's possible and the return is acceptable, then we'll certainly at least consider that whether we do ourselves, we can do with partners or we prepare and let somebody else do it. But I'm very comfortable with the portfolio at the moment. In terms of the services, a number of things. So you can see we recruited 1,500 people into that business. So we also lost about 1,500 people. So the headcount stay roughly the same. The productivity issue when you -- if you lose 600 qualified experienced engineers, you bring in 600 apprentices you would have a productivity if you not only on from the apprentices, not in the qualified engineers for doing. But they also have to be worried, they have to be mentored, they have to be taught. And so they can impact on the productivity of the workforce that you go. However, a business like ours in is interesting, is dying, I think, or is transforming itself into something that's going to be purely done with interest. So you can see -- you saw in the chart actually I think we recruited double digits into that business in each of the years, '16, '17, '18, '19, '20. And then the 1,500 last year that we remember, the first quarter of last year was a substantial industrial dispute. We don't really tipping that point. We were managing to that dispute. So we went from almost 0 to 1,500 in this space in 9 months. It was an amazing achievement. So it gives confidence that we can continue to do that. As we can replenish this workforce, but people take time to learn. And even some of the qualified engineers are really qualified, straight out of college, they've done their qualifications, putting resumes on the job training. And again, they're not as productive as an engineer deliver 10, 20 years. So what it does helps is to be engage with the workforce. Because in the workforce, it's all we do is reduce and replace it with contractors. It becomes less dynamic. And so bringing these new people in, bringing these new apprentices and some straight from school, some late career changes, I think there are most senior apprentices if somebody in the mid-50s. And so people bring in experience and different walks of life of people coming with enthusiasm and people even come with, we've also increased our recruitment of ex service personnel. They come in with a very different mindset. So we're seeing a reinvigoration there. The engagement in the company has now gone back to the level I think, since 2017, but we've got to recognize that we went to a tough time with our engineers. So the engagement there is not where I would like it to be. But it is higher than it was last year. And I'm hoping that this year will make it higher even further. So we'll keep pushing on that. So the morale is not where I would like it to be, but it an upward trajectory, and we'll continue to build and we'll continue to recruit. And it's just -- I find it very energizing to be around the new apprentices when they come in and they tell you how you look from the outside, how you look at a new joiner rather than somebody has been here for a few years, so they give you a different perspective. But this -- these are the engineers that are going to deliver the future for the U.K. So I'm delighted to do this and we'll do 1 year for apprenticeship every day of this decade at a minimum, and I'm hopeful that we'll exceed that.

The next question is from the line of Ajay Patel with Goldman Sachs.

I've got a couple of questions, please. I just wanted to understand the British Gas Services and Solutions comments in the outlook as -- if I try to piece it together, you delivered like GBP 191 million of profit in 2020 and then a GBP 121 million in 2021. And yes, you lost some customers but you had a GBP 50 million negative impact from the industrial action, GBP 25 million from the inflation of costs. And then obviously, there will be some extra cost to carry from the loss of the customers. I'm start thinking that into '22, on thinking about you wouldn't have the full annualized effect of the cost cutting that you put through over 2021. The GBP 50 million on the industrial action should rebound. And so I'm trying to sort of wonder what's -- and also Home Solution was loss making last year and that should begin to ease because I remember historically, you talked about bringing that back to breakeven. So I'm just wondering, what am I missing in terms of the driver? Is it just the GBP 25 million on the COVID related absence costs are going to sizably increase or it feels that, that picture is a little unclear to me. So any kind of color there would be really helpful. And then the second question is on contract. Clearly, there's a nice improvement from previous guidance. I just wondered to what degree can you lock that in? Or is it still going to be fluctuating between now and it's expiring? I'm just trying to understand how much volatility is left?

Thank you. Let me take the services thing and then great pleasure asking Kate to explain the contract, quite complex. As you know, it's priced oil and in heavy fuel and little bit of coal and then you sell it in a gas index. So you've got the spread has changed, the volume changes, but it's a good question. So Kate will be delighted to take. On the services, bear in mind, in the first -- so when you talk about cost cutting, the majority of the restructuring that we did, we did in 2020. So that was actually in the 2021 number. . The terms and conditions in services was never about cost. So it was about productivity. I was always very clear. I actually expected to go up. We did not cut wages. So you've got to see -- remember, when you see comments on what happened, you got to think about who is making the comments. So the cause -- the scheme to end it was actually went up. What we said was we wanted to have a full working day. And we increased the working week from 37 to 40 that we paid for that. So there is no -- there was no expected massive cost reduction from the industrial action an expected improvement in productivity. So cost per job is expected to improve. So there's not -- I can still you coming through there in 2022. The GBP 50 million in the first half, remember that if we had no industrial action, but we've seen the absence ratio in COVID during the strike period, it's the same as we saw in the fourth quarter. The impact wouldn't have been ideally different. The question is, can you get your workforce into your customers' houses to do their work. And when somebody is going to strike, whether somebody is sick, the answer there's no, then we take our commitments to customers seriously. So we do whatever we can to get some of to the customer's house. And so that's where you've got maybe this slight confusion, which is if you don't have an industrial action to see that bounce back. The question is when the absence rate come back more to normal, and I think it's very difficult to predict. What's going to happen is that I hope that we're going to see this come down. I hope you see it coming down in the summer. We saw that last year. The question, I think, we've got to be very, very mindful of is what happens when we get this coming winter. What happens we get to September, October time. Because as I said earlier on, last summer, I think we all talked COVID was behind us, and then it came back and hit us, not as a company, but other than quite hard. So that's why this confusion. So we're -- we continue to recruit. We continue to train. We're managing our absence. We're hopeful that we don't see some other new variant of COVID that causes us to have to go back to restrictions later in the year. If you see all of that, then we should see some improved productivity. But it just takes time and you can go from having, probably have a sense or something in that business less than 12 months ago. Now we've got over 600. And that does have an impact on productivity, but you've got to do this for the long term. We have to confirm the issues that we had in that business. And the workforce is down 7,000 engineers over the past few years and we want to rebuild that. We want to have our own colleagues, I would see it in the customer. So we're going to continue to do this, and it's going to be time to work through, but there's no hidden message. There's nothing going to work, there's just a few kind of compensating moving part. But with that, compensating moving parts, Kate will explain it.

Sure. With regards to -- you know we made the contract that was signed in the late '80s, we have expired in 2025. So it is a function that we are getting to sort of the last and final year of the contract. With regard to how long in there are, I mean, we actively hedged this contract within the liquid period. So there is a fair amount of that hedged. Having said that, the indices against which the oil pricing takes place, our indices -- and coal indices as well could talked about that, in some cases, are any calculated for the benefit of this contract. So we don't have visibility of them until they're published. So there's always risk in that number that we probably hedged with all our price and with gas. So there's an element of variability around it. I think when we are talking about and how we do it, I would say that the message we're trying to give to the market is that given more positive outlook now than it was when you were talking about 6 months, 12 months ago based on our parts moved and how we capture that as we have the intent.

The next question is from the line of Bartek Kubicki with Societe Generale.

Two things I would like to discuss. Firstly, on the energy supply market, if you can actually share with us your view on sort of midterm development, especially in terms of margins because I would -- one could argue that given the fact that there is much less suppliers right now, everyone is starting on costs and the regulator may be much harsher on actually introducing new suppliers to the market. Basically, you will have a bigger chunk of the cake and potentially higher margins. So I wonder if this could actually materialize in the future or not? And then if you also look at the sort of short-term measures autumn is intending to introduce until autumn, do you think this could somehow help to stabilize the market? So that will be the first thing. And actually, sorry, following on this one, I just wonder what do you think could happen if energy prices start declining? Because in the past, we actually saw -- so the small suppliers being more aggressive, getting more customers, you're losing more customers, margins actually not expanding, maybe the time it could be different? And secondly, on your pension deficit. Just to know your preference, do you think -- or what do you prefer? Do you prefer to actually sort of repay a bigger chunk of the pension deficit at once and then sort of derisk that part of the business? Or do you think or you would prefer to do something like sort of, I don't know, repaid the deficit in a couple of years so spread the cost over time, but still bear the risk of the pension deficit changes on your -- in your business?

Thanks very much for the question. Let me take the question on the margins and the energy market, then Kate will talk about it better than me on the pension. Look, I think that I wouldn't see if you've got less competition, you're going to have higher margins in this business. Remember, the margins are regulated and have been regulated for the last couple of years and even very well run companies haven't been able to make a profit. So I think that we've got to get the situation where we as an industry with the input from the regulator and government agree what we want the industry to look like. I've been quite clear that it had to be prudential regulation, which requires companies to have proper financial substance and staff with the customer money that has to end the recognition from option that you have to be able to make an acceptable return on capital on that. So we've got to require people to hold proper capital and then we have to make sure that people get an adequate return on that capital, that they want to see. So I think it's very difficult to see where margins should go. But if we want to have properly functional energy market in the U.K., we want to invest in net 0 margins, will have to go up. That's quite clear. It's just not -- I think it's not conceivable that you can leave margins where you aren't and you can expect the market function properly invest net 0. It's just what happened. At the moment, companies are doing that by spending the customer deposits. That means it is a bump in the road than what we've seen in the past, actually be smaller what we see in the future. So that's why we keep coming back to regulation. And what happened to the energy prices decline, it is in the regulation is very important because if you have a response to the energy supply, you're hedged or hedge your customers and then you see quite a substantial decline in prices. That is a risk, quite a big risk actually. Because if you allow less responsible parties into the market and they're not fully hedged, then they could go back to what did in the past, which is they could undercut with unsustainable pricing because they have it for the short period. And then those ones will come in to the launch over the money hedges. Now question is what would customer behavior would be like in that case. So I don't think you see anybody switching, but it is a real risk, it is a risk that other companies have been with Ofgem, that have risk with Ofgem actually recognized. But I'm hopeful that if you require shareholders to capital at risk, then we responsible. Why do we manage our business responsibly other than the fact that we are hopefully very responsible individuals from the Board right down to the customer services. But the other thing is that we manage shareholder money, and we take that very, very, very seriously. Our call for potential regulations to make it to everyone else use it the same way, that you have to have shareholders money at risk and you require serious people to these serious businesses. That's why we continue to focus on that. As you get out of that, that fixes most of the issues. Responsible business people tend to behave in a responsible way. Until we get that, there's still very much heightened risk in this market. That's why we've taken the lead and do some of the things that we have to regulate to do if a reason they're not able to do at the moment. So hard to see where it's going to go, but it's market until we get the right regulation in place. Kate, handle the pension question.

Thank you. Thanks for the question, Bartek. I mean, I only kind of refer to what I said earlier. It's a context negotiation for the pension trustees. They are incentivized by the regulator to conservative and they have a high degree of prudence, which is part of the reason why you see quite a big difference between what I called out in the technical deficit and the IAS 19, the other balance that we have on our balance sheet at the moment. And part of the payment profile is all part of that negotiation sector. So I have got my review to my presence is, again, I think we just need to allow the negotiation to take of course.

The next question is from the line of Verity Mitchell with HSBC.

And also the explanation which have been very helpful. I've just got a very broad question. Your priority is about reengaging your colleagues, and we've talked a lot about services in the Q&A. But is there a wider issue of needing to reengage colleagues in other parts of the group upstream energy retail, not just services? And how are you going about doing that? You've explained quite a lot about these services already.

Verity, thank you so much for the question. We've got engaged everyone in the organization, we have made massive steps in the past year. So as I said, we measured that, I mean, definitely we measure is that we may the percentage sort of engagement. We -- last year, in 2020, so I think it was low 40s, it's been low 40s since I joined the company, hopefully not because I joined the company, but since I joined the company. And we measured it at the end of Q1 last year because we wanted to set a baseline, we decided we would do these things more regularly. So we monitor colleague engagement on a quarterly basis now. And we take action every quarter when we get our -- the results are certainties, we take that, we tell people what the results are. We tell them what we are, we tell them what we're doing. And at the end of the first quarter, it's 39% actually went down. And that's not surprising if you think of all the issues that we had in the first quarter of 2021. We ended the year at 65%, which is an incredible increase, and it's testimony to what all of my colleagues have done, in terms of how you engage with our workforce. It's one of the biggest increases I think others that are longer in colleague engagement has seen. So farther to go to a high-performance organization to start to -- so we still got further to go. But we have parts of our organization, which are already beyond the benchmark for a high-performing organization. The reason to focus on services is that, that's a place where the engagement is lowest. I mean you can do more to build it, but you never stop on engaging. You never sit and say that's if we're done, then it drops. It's something that you do on a daily basis. It's something that is one of the reasons it's how I look and I select team that I have working directly for me and how can people engage with colleagues. If you don't care the people, you can't really work with company with 20,000 people and 10 million customers, which is not the place for you. You have to get people. So actually, we're very, very passionate about this, but it is absolutely across the board. And I'm encouraged to see from my colleagues in how they engage. One of things we're going to do, we're going to ramp up in the not too distant future is we've got 2 of the colleague. So everybody with now our customer-facing people, they've been taking off the tools at our performance, so that we can to them to explain the results and engage with them. So this is something that we spend an awful lot of time on and our Chief People Officer leads our internal they've done an absolutely amazing job, they have transformed this in the past year. So we're never finished. I'm never satisfied. I'm always looking to do more, and I'm want to do it yesterday, but we did the way last year on this, and we'll do hopefully well in 2022 and beyond. I'm conscious of time as I think you guys have another. I'm sure this is your favorite call of the day, but I think you've got another call in about 5 minutes, so we've probably got a couple more time to take a couple of more questions that you probably want to get off to the track result to show.

The next question is from the line of Sam Arie with UBS.

Very helpful. Listen, I hear your comment, Chris, about running short on time, and I'm at the end of the line here, I guess, in question. It's quite an important sort of devil's advocate question that I want to have to put to you guys. And so I hope you'll let me do that. And in the Spirit of kind of giving you an opportunity to kind of tell me why this is the wrong way to think about things. But of course before I do it, I also just want to say, I think it's worth acknowledging actually fantastic work you guys have done already on cost simplification disposals in terms of condition stuff. I mean, I think our view is out there published in January that what you've achieved Chris and the team is very, very good and the strong performance of the shares is absolutely justified. But if I turn to my devil's advocate question, I think it's kind of more about the past -- the future than the past. And I thought with maybe your comments on the dividend. And you've got this interesting comment today that there's a clear path to restarting the dividend. But if I'm on it, I kind of come through the document and I look for when the dividend might restart at what level, with what kind of payout policy dependent on what milestones or criteria, is there any special element. I don't see any of the information. So if I'm a little bit picky, I say actually, it's not a clear part to restarting the kind of take for definition of an unclear path to restart positively. I've got my devil's advocate. But that's my first part. And then the second part is, if I think about earnings, you gave actually quite a lot of information, as you mentioned about the outlook. You said broadly positive. And there are several pages of comment, but I can't find any kind of guidance on the group level metrics that really wants to follow over the next 2 years, to earnings, cash flow, balance sheet and so on. And of course, there's lots of hints and points. And some of them are very positive and interesting. But I've got to say the experience of recent years, there's always quite a few hints and points. I remember a lot of times when Jeff told us about the U.S. margin under contract, which was going to expand in the coming years, but kind of really rise. And just one of the comments today is a little bit similar on expanding margin in the U.K. might have me of that sort of previous experience. And I think what I found this is often a lot of things to get excited about, but then they come, but something else comes that we didn't know about before that offset it. So I think my devil's advocate question if I try and sort of summarize it. You've had a very good and honest focus, I'm not overpromising and underdelivering. I think that was a very good and welcome message. But I just feel like isn't it time to find a way to put some guidance sign post to now about where the business is going next. And if it's not possible to put any guidance in time per se, is it ever to be possible? And in that case, is it really viable to see Centrica still as a standalone business based on energy supply and services at a core and with its own credit rating or is that whole sort of concept in question? So it's not a short question, Chris, but I just love if you could to tell me why the whole line of thinking if wrong headed. And I'll hand back to you.

No worries. You wouldn't I think you're absolutely spot on. There's a couple of things in there. Firstly, I think it's quite clear, big stakeholder in the pension fund. But doesn't pension settlement before we start the dividend. So if you forgive me for just because you may not have the math doesn't mean it is a clear part. That is not clear path. So obviously, I mean, I think I've been really open in the 3.5 years I've been here. And for those of you that have covered previous companies, have always been in this case, I'd like to let you know what we're doing. I'd like to let you know what I think key drivers are, but I wouldn't presume to tell you what the number is going to be, that's your job. . Your job is to take all of these points to figure out. I have real confidence that we are covered by some amazing analysts. But there's a deeper rooted reason for that. So then this is a very personal to everybody finds their own style. I worked in companies before that have with the best of intentions given our targets. And the targets are always proxies because what we don't want to do is to say there are 54 things in the business in the year, 54 things are going to move. And you give a target, which is a good proxy, and you get a bit of better intentions. And then something happens and what you become focused on is not driving the business. What you become focused on this delivering on that proxy. I think we got into that with adjusted operating cash flow. So to be fair, when you see we used to get -- we didn't be used to give you the number. And then other things that happen, this is like many other businesses, a very complex business. And it was a straightforward to say there are 1 or 2 things, and I'm going to -- I'll give you the business in we don't need all the people. We've got running the business. This is a complicated business. There are always things that are going to happen. And what we're trying to tell you the big things and trying to tell you how these could impact, but they are all interrelated. There are -- Kate talking about big contract. So gas spreads going up. That should be good for that contract, but if it goes out less quickly than the oil price, not so good. What is clearly the coal price when it goes? All of these things, and that's just in 1 contract. And so I think that what you'll get back to the date, I think where we're seeing, we're going to be, when I joined the middle we're going to make GBP 6.3 billion AOCF over a 3-year period. And I promise you that trying to focus on AOCF. I think the focus is on running a good business and cash flow output from that. So I don't think one of the first things we said because we will do some of the Direct Energy. Scott personally negotiated the with the breakfree with the buyer and then said you go and negotiate the clear delineation of responsibility, really great support. We did a with a bigger team than just the 2 of us that we got after that we focused on it and delivered that, I think we got an amazing close for our business. And we closed that even just before the Texas market went absolutely haywire, which would have cost us hundreds of millions of dollars. That demonstrated that it was the right thing for us this is not only to strengthen the balance sheet, but we also reduced the volatility in our business. We're focusing on what are very, very, very good businesses. And we're managing in a way, we have a clear picture of what we want to do, but it has to be agile. So this time, actually might we want to sell the whole list. So I'm really happy that you keep in the U.K. parts. We got best to buy the whole list last year. We decided jointly as an executive and as the Board that those bids were not at a level that we thought was attractive. But even if we just want the exit, they want some capacity that will stand behind the commitments. That's already to be true. One of the counterparts that wanted to buy the offering has already defaulted on a North Sea purchase that the launch. So the 1 thing I would say that we are absolutely focused on getting the maximum value from everything that we've got for our shareholders. I can't still into 2 or 3 things. But you will have a financial you just have to give it a little bit more time relative to the pension negotiation, let us restart the dividend. So hopefully, that's a slightly shorter we're saying. I completely disagree with you position, you are completely wrong, but I'm really grateful to the question.

Well, Chris, I'm really grateful for the answer and now the answer is much better than the question. So I'm glad I got your explanation. So thanks for taking even though I know as you say, we're out of time now. So thanks and congratulations.

Thanks very much Sam. Thank you.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Chris O’Shea for any closing remarks. Thank you.

Thank you very much. Look, I won't take any of your time. I suspect most of you already on the blacks call. So thanks very much for dialing in. It's been a good session. Always good to hear what was on your mind. And we'll see any of you over the next few weeks and we're on the road, we'll speak to you. Hopefully, we may face to face live in the interim results. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect. Goodbye.