Foresight Environmental Infrastructure Limited (FGEN) Earnings Call Transcript & Summary

Most of you know me by now, but I'm Charlie Wright, one of the investment managers to FGEN, and I'm joined today by Edward Mountney, Director at Foresight and also one of the investment managers to the company. I've worked with FGEN since 2024 (sic) [ 2014 ], following close to 20 years across infrastructure and renewables investment and advisory. Just a couple of minor housekeeping points before we get started. There's no fire alarms planned today, and this is a hybrid event. So at the end, we'll start with any questions from within the room, and then we'll open it up online. And we'll keep the format familiar. I'll begin with a short overview of FGEN's investment proposition and the progress made against the refocused strategy set out last year and the performance review, and then Ed will take you through the portfolio valuation and portfolio overview before concluding with our summary and outlook, including how we think about our longer-term strategy and the objective to continue delivering a progressive dividend alongside organic NAV growth, and we'll then be happy to take questions. And the key message today is that FGEN continues to offer a differentiated environmental infrastructure proposition, a diversified operational portfolio generating resilient income alongside growth potential within the portfolio and a diversified mandate that we think puts us in a really strong position to continue delivering value to shareholders. So firstly, moving to FGEN's mission statement. At its simplest, FGEN is designed to deliver long-term predictable income and opportunities for capital growth from private environmental infrastructure. It remains an infrastructure-based proposition, so we continue to prioritize the characteristics that investors should expect from high-quality infrastructure assets, including diversification, contracted revenues, inflation linkage, performance resilience and the delivery of essential services. And the way we do that is through 3 pillars. The first is renewable energy generation, which remains a bedrock of the portfolio. That includes wind, solar, anaerobic digestion, biomass, energy from waste and hydro. And the important point is that even within this pillar, the portfolio is deliberately diversified across technologies, resource profiles and revenue frameworks. So we are not dependent on one generation source or one subsidy regime. The second pillar is other energy infrastructure. These are assets that support the energy transition, but do not necessarily generate power themselves. That includes storage and cleaner transport, most notably CNG fuels. And the third pillar is sustainable resource management, which includes waste collection and processing, water management and controlled environment assets such as Rjukan and The Glasshouse. So these pillars are not just thematic labels. They are how FGEN reduces exposure to any single risk factor, whether that is weather resource, power prices, subsidy regimes, feedstock risk or a single customer market. And that is a real differentiator versus funds more narrowly exposed to power generation. And this slide sets out that differentiation more clearly. So FGEN is not simply a conventional renewables fund. It is an environmental infrastructure company made up of projects, operating businesses and growth assets diversified across energy generation, enabling infrastructure, waste and sustainable industries. And that matters because the revenue stack is different. Power prices remain relevant, but they are not the only driver. The portfolio also has exposure to gas, multiple subsidy and certificate frameworks, fuel volumes, waste and water revenues, fish sales and medicinal cannabis pricing. And that gives us more operational levers and less reliance on one market assumption. The same is true for risk. Diversification does not remove risk, but it changes the nature of the portfolio. We are diversified by technology, regulatory framework, counterparty and end market, and that differentiates FGEN from single technology peers and supports the active management and capital allocation strategy that we are pursuing. So turning to progress against the refocused strategy. So June 2025 was an important moment for the company. The Board and investment manager set out a clearer approach focused on proactive management of the existing portfolio, a refocused investment strategy centered on environmental infrastructure and continuation of the progressive dividend alongside delivery of capital growth. And as you can see on the right, the relative performance chart tracking FGEN against the peer group is encouraging. Now we should not overstate a 1-year share price chart, but we do think investors are beginning to recognize that FGEN is different from a core renewables fund. The operational portfolio continues to support the dividend and the growth assets have made tangible progress. And that combination is what gives FGEN a route to organic value creation in a market where new equity issuance is not realistic. And here, we have our track record. So FGEN has delivered uninterrupted dividend growth since IPO. The target dividend for FY '27 is 8.04p per share, and that represents the 12th consecutive increase since IPO, subject, of course, to the usual caveat that it is a target and not a guarantee. The dividend for FY '26 has been once again well covered at 1.25x, and we're guiding towards a similar level of cover for the year ahead, which we think puts us in a strong position and speaks to the highly cash-generative nature of the portfolio, particularly given the fact that nearly 20% of the portfolio, i.e., the growth assets are not contributing to that div cover. At the same time, FGEN continues to display a comparatively high weighted average discount rate alongside low gearing. And those 2 points are important together. We are not using excessive leverage to manufacture returns. The portfolio is valued using a high return profile relative to many peers while maintaining balance sheet discipline. And that combination, progressive dividends, covered income, low gearing and embedded growth potential is what we want to be taken away from this opening section. So now I will move on to the performance summary and a quick snapshot for the year ended 31st of March 2026. And the overall message is one of resilience and continued delivery against the strategy. The NAV per share was 105.2p compared to 106.5p last year. After taking account of the dividend, that translates into a positive NAV total return of 6.2% for the year with annualized NAV total return since IPO now at 7.2%. Portfolio value was GBP 759.1 million compared with GBP 765.7 million at March 2025, and net asset value was GBP 655.5 million. Dividend cover was 1.25x, as I've said, post project debt amortization, and the Board has increased the FY '27 target dividend by 1% to 8.04p per share. And something we'll cover in more detail later, part of what has enabled that positive return has been the value accretive follow-on investments during the year, primarily across Clean Transport and our AD portfolio, and that is evidence of that organic NAV progression that our portfolio can generate. So at a headline level, we have a positive NAV total return, a covered dividend, a further increase in the dividend target, value-accretive follow-on investment, low gearing and continued operational progress. As I've said, the company continues to operate with a prudent balance sheet. So project level gearing is around 18% -- sorry, 16% and overall gearing, including the RCF remains below 30% on the final year-end basis, which continues to compare very favorably with the peer group and is a key part of our risk management approach. At the project level, long-term project debt amortizes within subsidy lives with no refinancing risk and all interest rates are fully fixed. At a fund level, the RCF continues to provide flexibility, and we took the decision to extend the accordion facility up to GBP 165 million a few months ago to provide greater headroom to ensure the company can continue to fund existing commitments and the continued development of the portfolio, and the value enhancement opportunities within it. But that was a prudent step, and we remain drawn well below that level. So gearing remains a source of liquidity and resilience rather than a way of manufacturing returns, and that discipline remains one of FGEN's advantages. So here, we look at asset financial performance, so looking at project distributions and financial performance against budget. So cash receipts during the year were GBP 78.6 million, which is 2.9% below budget on a reported basis. However, including expected contractual recoveries of around GBP 4.2 million, the portfolio was 2.3% ahead of budget. Renewable energy generation assets were GBP 66.7 million, which is 4.7% below budget, primarily reflecting lower wind and solar resource, partly offset by strong AD and biomass performance. Other energy infrastructure was 25% ahead of budget, driven by battery storage and sustainable resource management was also ahead with waste and control environment assets performing well. And the key point is diversification. Not every part of the portfolio will outperform in every period, but stronger performance in some areas can offset weaker conditions elsewhere. And now looking at actual generation performance as opposed to financial performance. Within renewable energy, the assets produced 1,338 gigawatt hours during the year, which is 1.2% below target, improving to 1.8% ahead after expected insurance and warranty recoveries. Wind generation improved year-on-year, although it did remain below budget before compensation. Solar performed well, 1.6% ahead, supported by strong radiation and continued PPA hedging. Crop fed AD was a strong contributor, 11% ahead. So that's a part of the portfolio that continues to perform really well for us. And that has been supported by ramp-up of Vulcan PRS1, which is our pressure injection system. Cramlington was affected by an outage overrun and boiler issues, although performance has improved following remediation. Food waste AD output improved year-on-year, although further upgrades at Riverside are planned for this current year. Energy from waste returned to service ahead of schedule and has exceeded target since restart. So overall, this is a solid operational result across the renewable energy portfolio. Turning to other energy infrastructure. So the battery storage portfolio delivered resilient performance despite tougher market conditions and more competition across revenue streams. West Garty maintained strong availability. Sandridge completed commissioning and started trading in the fourth quarter, and we completed the disposal of Lunanhead with options for Kayford still under review, although that remains a very small part of the portfolio. CNG Fuels continues to show strong momentum with fuel dispense increasing 19% year-on-year. FY '26 EBITDA was GBP 14.2 million, which is more than double the prior year, and FY '27 guidance is GBP 16 million to GBP 20 million. So growth is supported by increasing volumes, attractive certificate margins, an agreement with M&S for more than 300 bio-CNG trucks and construction of the 18th station. So CNG is a good example of the FGEN model in practice, not a power-generating asset, but a platform with different value drivers linked to fleet decarbonization, fuel demand, biomethane sourcing and certificates. And finally, on sustainable resource management. So these assets also performed well. ELWA performed strongly with landfill diversion and recycling well ahead of targets. Tay delivered reliable performance with no availability or performance deductions. The Glasshouse continued its ramp-up, with revenue and EBITDA ahead of budget. Production volumes increased significantly year-on-year and sales are broadly in line with forecasts and supplies to 8 of the 10 largest U.K. clinics is an important indicator of commercial traction within that market. Rjukan commenced commercial harvesting in July '25 and early operations have shown the facility's ability to deliver both good growth rates and harvest weights, but it has also shown that for production to reach full target volumes, certain aspects of the facility require upgrades, primarily oxygen delivery, fish transportation, feeding systems and wastewater treatment. Therefore, actions are underway to oversee the implementation of these upgrades, meaning a moderation in production volumes over the next couple of years ahead of full ramp-up. So in general, across the growth assets as a whole, we remain very confident in their potential to deliver capital growth over the coming years, particularly given the positive progress at CNG and the Glasshouse, which have both been performing either in line with or ahead of budget over the last 12 months. Trying to move on to the next slide, but I think we are being -- there we go. So on capital allocation, now this slide might be familiar to those who attended our Capital Markets Day earlier in May. This shows how FGEN's capital allocation has adapted to the market environment, and we think it's worth showing again. So the top half shows sources of capital and the bottom half shows uses. And looking back over the last 5 years to when new equity was last issued in 2021, we can see how capital allocation has had to evolve. So historically, FGEN was able to raise equity and deploy that into new investments. Today, the environment is different. So the model has shifted towards cash generation, disciplined reinvestment, debt management and shareholder returns. So you can see that sources of capital in FY '26 are lower than last year, but that is primarily due to the roll-off of the legacy high power prices fixed in previous periods, particularly in the backdrop of the Ukraine conflict. Importantly, financial performance was in line with budget. So this reflects normalization as opposed to operational weakness. And on uses of capital, dividends clearly are at the core of shareholder returns, whilst FY '26 also saw the completion of our GBP 30 million share buyback program that ran across FY '25 as well. As I've mentioned, we are continuing to invest selectively into the portfolio where returns are compelling, and that has included further funding into CNG and in the AD portfolio, carbon capture and further build-out of the pressure reduction system or PRS2, which together deliver a weighted average return in the mid-teens and so it is a very effective use of capital. So the key message here is that FGEN is increasingly self-funded. It is balancing income, balance sheet discipline and targeted investment to support long-term organic growth alongside the progressive dividend. And with that, I will now hand you over to Ed, who will firstly take us through portfolio valuation.

All right. Hi, everyone. So as Charlie just mentioned, I'll take you through a handful of slides on valuations, and then we'll go into a bit more of an in-depth dive into the portfolio itself and then some views on longer-term strategy. Before I get into all that, a quick recap on me. Hopefully, everyone knows me by now. I'm Edward Mountney here, Director at Foresight Group, one of the lead investment managers alongside Charlie. I've been doing this role for about 4 years now. Before that, I was Head of Valuations. So all in all, between those 2 roles, I've been involved with FGEN for -- well, since 2016, so 10 years now. So not quite back to IPO, but nearly there. Okay. So first up here, we have our usual valuation bridge. Key message is that the portfolio continued to demonstrate resilience with underlying value growth and active asset management offsetting a more challenging power price and regulatory backdrop. Portfolio valuation was GBP 759.1 million compared with GBP 765.7 million last year. So after allowing for GBP 19.8 million of follow-on investments, Charlie mentioned earlier, GBP 1.4 million of divestments and GBP 78.6 million of cash distributions, the rebased portfolio value was GBP 705.5 million. So against that rebased position, the portfolio delivered a 7.6% valuation uplift. Now that's an important figure because it shows underlying portfolio growth after taking into account the cash distributed out of the assets. Largest portfolio -- sorry, the largest positive driver was the balance of portfolio return, so contributing GBP 58.1 million. This was principally the normal discount rate unwind that we see every year, but also importantly reflected tangible asset level value creation. In particular, the work to extend the lives of 7 of FGEN's 11 AD or anaerobic digestion assets added GBP 8.7 million or 1.4p per share. And the new gas injection contracts signed up at Vulcan, again, Charlie referred to the PRS, pressure reduction system there earlier, added GBP 7.3 million. Now these are really good examples of active asset management, and we've been emphasizing this in recent years. So that's extracting additional value from the assets already in place within the portfolio. I'll come back to the AD extensions in a bit more in a bit. So that positive performance was partly offset by weaker external assumptions. So forecast power and gas prices reduced portfolio value by GBP 12.2 million, and that included the impact of 2 regulatory changes. So the move from RPI to CPI indexation on RO and FIT and the expected removal of carbon price support from April 2028. Together, those changes reduced NAV by 0.9p per share. There are also some asset-specific headwinds. So lower green certificate assumptions reduced value, while extended downtime and additional CapEx requirements affected our biomass facility and one of our food waste ADs, all of which were previously discussed back in the half year results. Macroeconomic assumptions were supportive, adding GBP 6.8 million, largely driven by 2026 inflation continuing to sit above expectations that we set at the start of the year. And despite elevated gilt yields, we haven't made any general macro-driven changes to discount rates as we continue to see our rates sitting well within the ranges seen by our external independent valuation adviser. With the portfolio weighted average discount rate now sitting at 9.9%, so 20 basis points up from where it was at the start of the year, simply reflecting the balance of portfolio moving slightly towards the higher returning assets with the higher discount rates. So what does that mean overall? Well, as Charlie said earlier, NAV per share moved to 105.2p. So along with the annual dividend, we delivered a positive NAV total return of 6.2% for the year. Turning to discount rates. As we've done for the past few years now, we've shown detail across technologies along with their respective asset gearing levels, which hopefully allows for simple comparison with other funds in the peer group that have differing debt structures. The only new thing here is that we've also included the weighted average discount rate applied to the growth assets shown towards the bottom of the table on the right-hand side. So that's CNG Fuels, The Glasshouse and Rjukan. That stands at 14.5%. And hopefully, this gives some context around how those assets sit versus the rest of the portfolio. Beyond that, I won't dwell on the numbers too much here, but the key message is valuation discipline remains intact. Discount rates are reviewed regularly, benchmarked against market evidence, subject to Board approval and independently reviewed. On inflation, our 2026 RPI assumption has been increased to 4%, reflecting the near-term inflation backdrop. The global inflationary environment continues to be monitored closely, but the long-term assumption remains conservative compared to gilt market implied inflation. And you can see that in the chart in the middle comparing the 2 lines there. And the right-hand side of the slide makes the real return point a bit more clearly. So of the 10-year gilt yield, around 3.3% of that is inflation, leaving roughly 1.5% of real return. By comparison, FGEN's portfolio weighted average discount rate is around 7.5% above our average long-term inflation assumptions. So the implied real return from portfolio is around 5x higher than you get on a gilt. Obviously, that's not a guarantee of performance, but it's an important valuation point. So we think our approach offers good potential for value upside, particularly given that the portfolio remains highly correlated with inflation. Finally, in this portfolio section, I said I'd come back to ADs, the life extensions, and we just wanted to draw that out a little bit more here because it's a good example of active asset management in practice. So today, our AD portfolio is valued at GBP 166 million. That represents 21% of FGEN's total portfolio. These assets process food waste, agricultural crops, residues and manure to produce biomethane, a direct substitute for fossil natural gas that can be used in the existing gas grid as well as across things like heating, industry, transport and flexible power generation. Historically, U.K. AD plants were typically only valued to the end of their RHI and FIT subsidy periods. That had been a prudent approach whilst the market awaited more clarity on those post-subsidy revenue streams. But we have seen for some time now that investors and operators no longer view high-quality biomethane infrastructure simply as subsidy-backed energy projects. So during the year, we engaged an independent biomethane specialist to undertake a portfolio-wide review of our assets, looking at feedstock security, asset condition, CapEx requirements and long-term biomethane demand. This has been backed by technical due diligence, engineering reviews and commercial modeling. The results clearly supported the view that with the right technical planning, feedstock security and commercial strategy, these assets can continue to operate economically well beyond their subsidy periods with the demand outlook supported by the role biomethane can play in decarbonizing hard-to-electrify sectors, including heavy transport, industrial heat and dispatchable generation. So as a result, we've recognized GBP 8.7 million of value -- incremental value, that's equivalent to 1.4p per share on NAV across 7 of our 11 AD investments where the life extension case is strongest. So this case study demonstrates exactly what we mean by proactive portfolio management, extending asset lives, diversifying future revenues, reinforcing FGEN's ability to deliver organic NAV growth. Okay. Now we move on to a few slides with how we look at what's inside the portfolio. And firstly, here, we refer to the 3 pillars that Charlie described earlier, but from a portfolio construction perspective. So as you've heard, renewable energy generation, 71% of that portfolio, and it remains the income bedrock. It includes wind, solar, AD, biomass, energy from waste and hydro backed by a range of incentives, including ROCs, RHI and FITs as well as contracted PPAs and some merchant exposure. This pillar gives FGEN established cash generation and strong inflation linkage, but with diversification across weather patterns, feedstocks and power and gas pricing. Other energy infrastructure in the middle there, that's 11% of the portfolio and includes energy storage and low carbon transport. This is important because it diversifies revenues away from power generation alone. Storage is exposed to merchant revenues and grid services, while CNG provides a different kind of revenue stream linked to low-carbon transport, biomethane sourcing, fuel dispensed and renewable transport certificates. Sustainable resource management on the right-hand side there, that's 18% of the portfolio. This includes concession-based waste and water assets and controlled environment investments. It provides further diversification across frameworks and end markets and includes a meaningful capital growth component through Rjukan and The Glasshouse. So the portfolio is not just diversified by technology, it's diversified by revenue source, regulatory framework, customer base and route to value creation. Portfolio analysis slide shows the same point but from a slightly different angle. So practically, all of the portfolio is now operational and construction exposure is less than 1% of the portfolio, which really just represents the status of the CNG fuel stations under construction at 31st of March as they periodically pass through construction and into operations. That is a material change compared with the position a few years ago, primarily due to the growth assets having progressed through construction and are now all fully operational and in their ramp-up phase. Geographically, the portfolio remains U.K. focused with modest exposure to Mainland Europe through Norway and Italy. And the weighted average remaining asset life has increased from around 16 years to 18.5 years with that AD life extension work, demonstrating that there may be further value in extending asset lives beyond historic subsidy horizons where the technical and market evidence supports it, noting that Cramlington, our largest asset, is still held as such. Okay. So the top 10 assets in the portfolio illustrate the breadth of technologies and sectors that we invest in. So as before, no individual asset represents more than 10% of the portfolio, and that gives us low exposure to single asset risk. Cramlington remains the largest asset, but the top 10 includes biomass, solar, wind, AD, clean transport, waste management and controlled environment assets. It's therefore a really good reflection of the wider environmental infrastructure mandate rather than a narrow renewables-only portfolio. Now turning to revenue analysis. Firstly, the chart on the left shows how underlying revenues earned by our portfolio companies evolve over time, and there's a few things to draw out here. So as in previous iterations of the chart, you'll see some growth in merchant revenue streams over time, which reflects the progress of the growth assets and the increasing revenue contribution expected as they move through ramp-up. It's important to emphasize, though, the diversification within that merchant exposure. It's not simply merchant power. It's spread across power prices as well as multiple certificate markets, including REGOs, RGGOs and RTFCs and nonenergy revenue streams such as fish and medicinal cannabis. So we're not exposed to a single price shock in a way that power-only renewables portfolios might be. As we've said, the growth assets ramp up and turn into candidates for value realization. So we would likely seek to exit and recycle proceeds into new investment. So while the chart mechanically shows merchant revenues becoming a much larger part of the revenue stack from around 2030 onwards, the reality is much more dynamic. And our strategy is to monitor realization potential from those assets and recycle proceeds into environmental infrastructure assets with the right balance of income, growth and downside protection, maintaining secured revenues at around 50% while also extending the life of the portfolio. And the chart on the right shows that careful diversification doesn't mean compromising on our inflation linkage with 51% of underlying portfolio revenues on an NPV basis already having explicit inflation linkage. So that remains an important part of the infrastructure proposition. And you can see that on the chart, it comes through across all 3 investment pillars in the portfolio. On merchant power, the strategy remains unchanged, downside protection combined with upside potential. So we typically fix prices over a period of between 3 -- sorry, 6 months out to 3 years, and the hedging approach is tailored by asset type. For instance, wind and solar generally have high levels of fixed pricing because their output is intermittent. So they're more likely to be generating at the same time everyone else is when the sun is shining or the wind is blowing. And that increased supply suppresses pricing. Whereas the baseload assets like biomass and AD, they generate evenly over the course of the day regardless of weather resource, so retain the ability to capture higher intraday prices. So for instance, when the wind isn't blowing and the sun isn't shining. So we tend to fix those out less. But overall, the portfolio still has high proportions of capacity fixed in the near term, particularly following strong gas and power prices in March, a trend we've seen continue after the year-end. So we've continued to find attractive hedging opportunities since then. Then the table on the right tries to put those hedges into context. And you can see that when we factor in our other contracted revenues, so that's things like subsidies, long-term contracts, then some 67% of total revenues have fixed pricing for 2026, with that proportion stepping down as we get further out in our hedging strategy. That gives us really good cash flow visibility across the portfolio. And even under a severe downside scenario of GBP 40 per megawatt hour and an equivalent reduction in gas prices, forecast 3-year dividend cover remains comfortable. And that's an important demonstration of revenue resilience. Okay. So this slide summarizes the key regulatory developments affecting U.K. renewables and the wider energy transition. It's obviously been a turbulent year with regular political and regulatory announcements, but it's important to remember that the overall policy backdrop remains supportive. In the U.K., Clean Power 2030 continues to provide a clear direction of travel and the decision not to proceed with zonal pricing removes a material uncertainty for asset owners. The focus is now on reformed national pricing, network charging constraints and balancing reforms, but the politicized nature of announcements hasn't helped underlying market sentiment towards renewables with the move from RPI to CPI indexation on RO and fit assets being closely followed by the expected removal of the carbon price support. And we still have fixed price certificates on watch for future RO reform. But I said earlier that these changes had less than a 1p impact on FGEN's NAV, a really good real-life illustration of why diversification is important. We have exposure to U.K. subsidy regimes, but revenues are spread across power, gas, certificates, biomethane transport, waste, wastewater and controlled environment assets, reducing reliance on any single framework. And if you think back to Charlie's slide at the start of the presentation, showing our relative outperformance versus peers over the last 12 months, we think that it's these sorts of evidence points that reinforce the value of a diversified mandate and are a key driver for why investors have been turning towards FGEN. Okay. The next couple of slides set out the company's strategy over the short, medium and long term. They develop on the themes presented at last month's Capital Markets Day, and I'd encourage anyone who would like more information on strategy to look at the website, where there's a whole section there on the CMD, including a video of the day and accompanying slides. As we have said, our core objective is to deliver long-term organic NAV growth while maintaining the progressive dividend and making effective use of the capital we already have in the company. In the short term, that means maintaining the performance of the operational assets as that underpins div cover today. In the medium term, the focus is opportunistic divestment and capital recycling, where market conditions support a clear and compelling value case. Longer term, our ambition is to build a unique scalable platform that can deliver both income and NAV growth through a self-sustaining model without reliance on equity fundraising. And our target is to deliver a minimum NAV total return of 8% to 10% per annum over time. This is an ambition, not a guarantee, but the pathway is clear, resilient cash generation, asset level value creation, selective realizations and disciplined reinvestment into attractive value-accretive environmental infrastructure assets. So bringing that strategy into the numbers. This slide is intended to show how this uniquely constructed portfolio is already supporting and will continue to support both income and growth over the longer term. The key point here is that FGEN's model is not dependent on new equity issuance to grow. The portfolio already generates meaningful cash flow. The dividend remains well covered and surplus cash, together with potential recycling from growth assets over time, gives us a route to reinvest organically. That is the self-sustaining model that we've been describing. Starting with the large purple shaded area in the chart on screen, this shows the modeled distributable cash flow from the portfolio over the next decade. We expect cash generation to remain robust over that horizon, supported by a highly cash-generative operational portfolio that gives the company the capacity to continue supporting a progressive dividend while retaining flexibility for reinvestment. The purple dotted line -- sorry, first, the green dash line across the middle of the chart, that shows the cash required to cover the current FY '27 dividend target of 8.04p per share. In FY '26, as Charlie mentioned, div cover was 1.25x and the medium expectation remains around the 1.2 to 1.3x range. That's important because the income case is not reliant on the growth assets suddenly contributing material cash flow in the near term. The dividend is supported by the established operational portfolio, renewables, AD, biomass concessions, storage and other yielding assets. So hopefully, first and foremost, this chart shows the strength of cash flows that support our progressive dividend policy. Then on top of that, we've modeled an illustrative case of reinvestment scenario, whereby we take that surplus cash that's forecast to be generated and reinvest it back into the portfolio. That's what the purple dotted line at the top is intended to illustrate. It's not a forecast, and it's also not dependent on asset sales. Rather, it shows the potential effect of recycling cash back into core environmental infrastructure at disciplined returns. In other words, the portfolio can convert operational progress into cash flow, then into reinvestment capacity and ultimately into NAV growth. The disciplined point matters. In the current market, capital allocation is just as important as asset performance. We're not looking to grow for growth's sake. The priorities are to maintain strong dividend cover, manage gearing prudently, reinvest selectively where returns are attractive and recycle capital where that creates better value for shareholders. That's consistent with how we have approached the portfolio over the last year, including value-accretive follow-on investment and continued balance sheet discipline. So the message from this slide is quite straightforward. FGEN has an income base today with visible cash flow supporting a progressive dividend. It has growth already embedded in the portfolio, and it has a credible route to fund further growth organically. That combination covered income today plus disciplined reinvestment and capital recycling over time is what underpins our ambition to deliver attractive long-term NAV total returns without relying on fundraising. Okay. I'll close by bringing the discussion back to the company level strategy and what the results demonstrate about FGEN's medium-term positioning. This has been a solid period for FGEN, striking the balance between income and growth. The operational portfolio has delivered strong cash distributions, supporting a covered dividend and a further increase in the FY '27 dividend target to 8.04p per share. We delivered a NAV total return of 6.2% in a year that is in part characterized by a series of regulatory headwinds within core renewables, which is a testament to FGEN's portfolio and diversification strategy. Gearing remains low and the balance sheet continues to be managed prudently. At the same time, we have continued to invest selectively into value-accretive opportunities within the existing portfolio as well as making further progress on the growth assets. And looking to the year ahead, our objective will revolve around those same priorities, so stable income, balance sheet discipline and realizing the potential for growth within the existing portfolio. Longer term, the ambition is a unique and scalable platform, providing both income and NAV growth within a self-sustaining model that consistently delivers a minimum 8% to 10% NAV total return per annum. We remain confident in FGEN's unique proposition. And whilst there are clearly persisting challenges in the broader sector, we're encouraged by recent momentum and are optimistic about the journey forward from here. So with that, I'll pause, and I think we open up to the floor here for questions before taking any online.

I have 2 questions. One, could you provide more context around Ed Warner's unannounced departure as the Chairman today? And then the second question on your AD asset life extension. It's very, very interesting. On -- you mentioned further upside with the 4 other ADs and the carbon capture. In your investment commitment, there's a certain commitment to AD portfolio. Has -- is that investment commitment already including these, I guess, additional investment needed? Or are these also -- are these potential further upside that would require further investments that's not currently accounted for?

So on the first part, on Ed Warner's decision to step back from the Board. I mean, Ed has been a brilliant chair for us. We've thoroughly enjoyed having him as part of the Board and working closely with us. He has another opportunity to do something outside of the listed infrastructure space. And unfortunately, he couldn't do both. So it's simply a reshuffle of his time. But we're very happy with Steph. She's worked with us for a long time now. She's going to be a brilliant chair. And the other point, the ADs, sorry. So we've done a thorough review of the entire portfolio. The value has been recognized on 7 of the 11 ADs that we've got. And I think about 4 of those ADs, we've already made capital commitments to. The rest is a sort of simple case of doing this on the 4, which I believe we're doing now and then rolling it out to the full 7. So we haven't included the cost of those additional ones within capital commitments because we haven't committed to do it yet. However, once we've proved that this works, which we're very confident we will do, we'll then move on to the other ones.

Just on the last bit of like aside from the life extension on the remaining 4, something like the carbon capture is a relatively -- I guess, it's a relatively new area to your portfolio. Can you give a range of what IRR you're considering for these like add-on investments?

Yes. So we look at the investment case for something like carbon capture, both individually stand-alone as well as what that does for our ability to unlock further value from extending the lives of the assets by reducing reliance on the RHI. And there is definitely a compelling case there that takes the IRRs well into the double digits and into the teens. So I don't think it's right to consider them on their own because this really is about reducing that reliance on the subsidies and extending the lives. Yes.

I'll just add one further thing to that. Part of -- as Ed said, part of the carbon capture investment is that when we look at post RHI value. It is increasingly going to be linked to carbon abatement. So a facility that is able to demonstrate that it is less carbon intensive than another AD facility will likely benefit from better revenue pricing in the post-RHI world. So that's why carbon capture is important now. It is a good investment in its own right with the sale of CO2 into existing markets, but it helps unlock the value extension after RHI as well.

Ashley from Winterflood. Two questions, one of which are a follow-up, just on the ADs and the lifetime extension. So the work that Bohringer has done, just sort of trying to get an understanding for the main post-RHI revenue source. So for example, when they're looking at carbon abatement, are they assuming biomethane goes into the U.K. ETS or that it's a voluntary sort of agreement? And on carbon capture, are you assuming the CO2 offtake? So when you've looked at the life extension and the NAV uplift, is that before any potential benefit from CO2 offtakes? That was the first question. Second question was just on hedging because it looks like sort of you've taken good advantage of the elevated prices for winter '26, particularly on gas. Can you give us an indication perhaps the degree for winter '27 given NBP gas prices for that period are still sort of 20% higher than they were pre- Iran?

Yes. So just taking that in reverse order. So the hedging point. So I mean, we have continued to fix out more since the 31st of March because we do see, as you say, ongoing attractive pricing. Our strategy is typically to fix a higher proportion of revenues or rather of capacity in the near term. And as you get further away, you obviously move more into a higher hedged position. But where attractive pricing exists, we absolutely look beyond that. I think that's particularly been the case for some of our ADs where we've seen very good pricing there, but we'll continue to monitor it across the entire portfolio. I don't have the exact winter '27 figure to hand, but it's certainly something the team monitor daily.

And again, taking it in reverse order, so I'll start with the CO2 question. So the value accretive investment across the period related to the carbon capture projects, that is assuming CO2 offtake revenue. So that is one element of the value accretion we've had this year. And the life extension piece is a separate value point. But obviously, there is a degree of linkage between the 2 because the more CO2 capture we can have, the better it enables that value uplift on the actual life extension itself.

I think, yes, just to add to that, I mean, there is obviously a set of assumptions that go into a model because you need to put something into the model. But the reality is when we conducted this review with the external adviser, we'd said to them explore all the different revenue opportunities that you think may come through in the future. So that might be an extension to a subsidy regime. And we've heard that if something does come through, as Charlie said before, it would likely be linked to carbon abatement or it might be corporate offtakes or it might be green premiums or it might be certificates looking across to maritime and transportation and what prices are being negotiated in Europe, which we've got good visibility in through our CNG fuels relationship. So it's a case of looking at all of those factors and saying what set of assumptions are we comfortable putting into our models right now so that when the eventual revenue stream becomes clearer, we will still have good value upside potential at that stage. So it's putting all of those together and landing on a sensible set of modeled assumptions.

Yes. And I think clearly, we're still at an early stage here. So exactly what that post-RHI world will look like, whether it's driven by green premiums, whether it's carbon abatement, whether it's ETS, it's still a bit unclear. And so when we talk about this being Phase 1 of the life extension and how we've taken a conservative approach to this so far, that reflects that uncertainty. So it's taking a risk-adjusted view on what that value could be.

I think that might be it from the room. Do we have any online?

[Operator Instructions] We'll take our first question from Will Crighton with Cavendish.

Two questions from me, please. First one is, what was the change in the values of each of the growth assets over the year? And second one, please, could you explain the variance in the year-on-year revenue and EBITDA moves? I think revenue fell about GBP 30 million. EBITDA fell GBP 50 million, so GBP 20 million difference there. I think compensation might explain some of that, but maybe only GBP 4 million, if I'm right. So if you could just go into that, please?

Okay. So on the growth assets, so we saw some value uplift at CNG Fuels because of the continued performance above budgets that were set there. Likewise, on The Glasshouse, we've been very pleased by the positive progress there. But across all 3 growth assets, we've held their valuations fairly stable this period. So we haven't really sought to accelerate the value recognition of those assets. They've each got their own milestones to achieve over the next year, and we'll continue to unlock value when those milestones are delivered. But the intention is not to sort of aggressively write them up in the near term. So we're being fairly conservative on those. On the second point, what did Will ask?

So I think, Will, are you referring to the Revenue and EBITDA?

Okay. The revenue and EBITDA, yes. Yes. So you'll have seen in our presentation there that the Cramlington biomass facility was offline for a substantial period of time as well as our ETA Energy from Waste facility in Italy. They are both meaningful revenue contributors. They obviously also have a cost base associated with them. So that unlike renewables, the revenue doesn't completely go down to the bottom line. Hence, they have a large impact on our overall revenue analysis when they are offline, but a lesser impact to cash flow once you take into account the cost base associated with them.

And I think the other point there as well, as we mentioned in the presentation, it's the legacy high price fixes that have also rolled off over the year.

But I think we've got a revenue chart also in the presentation. Hopefully, you'll see over time, we expect that revenue to build up. So the price fixes is obviously an important element, but we have other revenue streams coming in that we'd hope to more than compensate for that.

We'll take our next question from Colette Ord with DB Numis.

Great disclosures and results. I'm sure we've got lots more work to do. But just a quick one actually on discount rates, which you kindly give by segment. There's been a few upward moves elsewhere in the generation space for sort of U.K. solar and wind assets. That's still a reasonable part of your portfolio valuation as we stand today, take all of the point about future growth and where that's coming from, et cetera. But can you just talk through your sort of thoughts on holding your assumptions there given what we've seen across the broader peer group and in sort of transaction evidence?

Yes. I think if I start, I mean, there are a few things there. One, the broader visibility that Foresight has through its real asset division to be able to see transactions beyond just what FGEN is exposed to. So that is supportive of the valuations that we are holding our assets at. And secondly, I think unlike the peer group, since IPO, we've had a 6-monthly independent review of our valuations and one of the main areas that they focus on is discount rates. So they will comment directly on where we sit within the range of discount rates that they're seeing, and we sit comfortably within the middle of those ranges. So we're not seeing any data points at this stage, except for maybe some of the listed space who have their own things that they're dealing with to suggest that our discount rates need to move right now. Obviously, we'll monitor that. We're clearly in an elevated gilt environment at the moment. But right now, there is no driver for us to change that.

And I think the final point to add to that as well is on the leverage levels as well. So that's why we put out the relatively low leverage levels again that exist, particularly in our wind and solar assets. So that, yes, there's a levered discount rate and an unlevered discount rate, and we have a levered discount rate. But given that our leverage levels is much lower than what those assets could actually support, we think that is another point of -- that's another data point that makes us comfortable with our assumptions.

There are no further questions on the webinar. I will now hand back to management for closing remarks.

Well, in that case, thank you very much to everyone who made it in person and those who are able to attend online. Obviously, if anyone has any other questions, feel free to reach out to us. Otherwise, we hope to speak to everyone soon.